80 FR 12224 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Granting Approval of Proposed Rule Change To Formalize the ICC Operational Risk Management Framework

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 44 (March 6, 2015)

[Federal Register Volume 80, Number 44 (Friday, March 6, 2015)]
[Notices]
[Pages 12224-12225]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-05155]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74399; File No. SR-ICC-2014-19]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Granting Approval of Proposed Rule Change To Formalize the ICC 
Operational Risk Management Framework

March 2, 2015.

I. Introduction

    On November 18, 2014, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change SR-ICC-2014-19 pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The 
proposed rule change was published for comment in the Federal Register 
on December 2, 2014.\3\ The Commission received no comment letters 
regarding the proposed change. On January 16, 2015, the Commission 
extended the time period in which to either approve, disapprove, or 
institute proceedings to determine whether to disapprove the proposed 
rule change to March 2, 2015.\4\ For the reasons discussed below, the 
Commission is granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 34-73684 (Nov. 25, 
2014), 79 FR 71495 (Dec. 2, 2014) (SR-ICC-2014-19).
    \4\ Securities Exchange Act Release No. 34-74082 (Jan. 16, 
2015), 80 FR 3687 (Jan. 23, 2015) (SR-ICC-2014-19).
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II. Description of the Proposed Rule Change

    ICC is proposing to update and formalize ICC's Operational Risk 
Management Framework. According to ICC, the Operational Risk Management 
Framework is designed to create a program of risk assessment and 
oversight to identify, monitor, and manage plausible sources of 
operational risk,\5\ and to timely manage and report operational 
performance measures. ICC further states that the operational risk 
program is designed to evaluate and mitigate operations risk presented 
to ICC by its partners, related entities, and vendors. According to 
ICC, the Operational Risk Management Framework is overseen by the ICC 
Board, ICC department heads and the Chief Compliance Officer, and 
internal audit performs reviews of the operational risk management 
processes.
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    \5\ ``Operational risk'' is defined in the ICC Operational Risk 
Management Framework as the risk that deficiencies in information 
systems, internal processes, personnel, or disruptions from external 
events will result in the reduction, deterioration, or breakdown of 
services.
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    Under the Operational Risk Management Framework, the Operational 
Risk Manager has the responsibility and authority to develop and 
enforce, in consultation with the ICC Board and appropriate members of 
senior management, the operational risk program, which applies to all 
ICC activities, groups, functions and locations. The Operational Risk 
Management Framework further provides that the Operational Risk Manager 
is the owner of the Operational Risk Management Framework document, 
that the initial document and any material amendments require review 
and approval by the appropriate members of senior management and the 
ICC Board, and that the Operational Risk Manager reports to the Chief 
Compliance Officer who reports directly to the ICC Board.
    There are several components to the ICC Operational Risk Management 
Framework. ICC states that the Operational Risk Management Framework 
establishes clearly defined operational performance objectives that 
serve as benchmarks to evaluate efficiency and effectiveness, promote 
confidence among management and participants, and evaluate operational 
performance against expectations. The Operational Risk Management 
Framework states ICC's goals of identifying, monitoring, and managing 
all plausible sources of operational risk and establishing clear 
policies and procedures to address presented risk scenarios. For 
example, the Operational Risk Management Framework incorporates ICC's 
risk assessment methodology to identify and evaluate potential 
operational risks in each of its major clearing processes, as well as 
procedures for recommending controls to mitigate risks identified in 
the risk assessment. The Operational Risk Management Framework also 
contains information regarding how ICC leverages certain shared 
infrastructures within the Intercontinental Exchange, Inc. family as 
part of its operational risk management program.
    Additionally, the Operational Risk Management Framework details the 
Operational Risk Manager's responsibilities in terms of business 
continuity planning, vendor risk management, and the release of new 
products, processes, and initiatives. Under the Operational Risk 
Management Framework, the Operational Risk Manager is responsible for 
operational risk reporting, which includes reporting and addressing 
significant operational risk weaknesses or failures timely and 
appropriately (including escalation to the appropriate members of 
senior management and the ICC Audit Committee and the Board when 
necessary), and providing ongoing reporting to appropriate members of 
senior management and periodic reporting to the ICC Board and the ICC 
Audit Committee on the operational risk program and significant control 
matters.

[[Page 12225]]

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \6\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if the 
Commission finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such self-regulatory organization. Section 17A(b)(3)(F) 
of the Act \7\ requires, among other things, that the rules of a 
clearing agency are designed to promote the prompt and accurate 
clearance and settlement of securities transactions and, to the extent 
applicable, derivative agreements, contracts, and transactions, to 
assure the safeguarding of securities and funds which are in the 
custody or control of the clearing agency or for which it is 
responsible and, in general, to protect investors and the public 
interest. In addition, Rule 17Ad-22(d)(4) \8\ requires registered 
clearing agencies, among other things, to establish, implement, 
maintain, and enforce written policies and procedures reasonably 
designed to identify sources of operational risk and minimize them 
through the development and implementation of appropriate systems, 
controls, and procedures and have business continuity plans that allow 
for timely recovery of operations and fulfillment of a clearing 
agency's obligations.
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    \6\ 15 U.S.C. 78s(b)(2)(C).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ 17 CFR 240.17Ad-22(d)(4).
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    The Commission finds that the proposed rule change is consistent 
with Section 17A of the Act \9\ and the rules thereunder applicable to 
ICC. ICC's Operational Risk Management Framework establishes clear 
policies and procedures to identify and evaluate potential operational 
risks in each of its major clearing processes, and to recommend 
controls to mitigate identified risks, each of which are reasonably 
designed to identify, monitor, and manage of all plausible sources of 
operational risk. Furthermore, the Operational Risk Management 
Framework establishes clearly defined operational performance 
objectives that are expected to serve as benchmarks for evaluating 
operational efficiency and effectiveness, and to evaluate operational 
performance measurements against such objectives, each of which are 
expected to enhance ICC's ability to mitigate operational risk. 
Finally, the Operational Risk Management Framework incorporates a 
business continuity plan that is expected to allow for timely recovery 
of operations and fulfillment of ICC's obligations upon disruption. The 
Commission therefore believes that the proposed rule change is 
reasonably designed to identify sources of operational risk and 
minimize them through the development and implementation of appropriate 
systems, controls, and procedures and have business continuity plans 
that allow for timely recovery of operations and fulfillment of a 
clearing agency's obligations, consistent with the requirements of Rule 
17Ad-22(d)(4).\10\ Accordingly, the Commission believes that the 
proposed rule change is designed to promote the prompt and accurate 
settlement of securities and derivatives transactions, consistent with 
Section 17A(b)(3)(F) of the Act.\11\
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    \9\ 15 U.S.C. 78q-1.
    \10\ 17 CFR 240.17Ad-22(d)(4).
    \11\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \12\ and the 
rules and regulations thereunder.
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    \12\ 15 U.S.C. 78q-1.
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    IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (File No. SR-ICC-2014-19) be, 
and hereby is, approved.\14\
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    \13\ 15 U.S.C. 78s(b)(2).
    \14\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).

Brent J. Fields,
Secretary.
[FR Doc. 2015-05155 Filed 3-5-15; 8:45 am]
 BILLING CODE 8011-01-P