80 FR 20058 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Granting Approval of Proposed Rule Change To Revise the ICC Risk Management Framework
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 71 (April 14, 2015)
Federal Register Volume 80, Issue 71 (April 14, 2015)
| Page Range | 20058-20060 | |
| FR Document | 2015-08455 |
[Federal Register Volume 80, Number 71 (Tuesday, April 14, 2015)] [Notices] [Pages 20058-20060] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-08455] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-74685; File No. SR-ICC-2014-24] Self-Regulatory Organizations; ICE Clear Credit LLC; Order Granting Approval of Proposed Rule Change To Revise the ICC Risk Management Framework April 8, 2015. I. Introduction On December 22, 2014, ICE Clear Credit LLC (``ICC'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change SR-ICC-2014-24 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 January 9, 2015.\3\ On February 20, 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 April 9, 2015.\4\ The Commission received no comment letters regarding the proposed change. For the reasons discussed below, the Commission is granting approval of the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ Securities Exchange Act Release No. 34-73980 (Jan. 5, 2015), 80 FR 1466 (Jan. 9, 2015) (SR-ICC-2014-24). \4\ Securities Exchange Act Release No. 34-74341 (Feb. 20, 2015), 80 FR 10551 (Feb. 26, 2015) (SR-ICC-2014-24). --------------------------------------------------------------------------- [[Page 20059]] II. Description of the Proposed Rule Change ICC proposes revising the ICC Risk Management Framework to incorporate risk model enhancements related to Recovery Rate Sensitivity Requirements (``RRSR''), anti-procyclicality, and ICC's Guaranty Fund (``GF'') allocation methodology. ICC also proposes revisions which are intended to remove obsolete references and ensure consistency. ICC proposes revising its Risk Management Framework to incorporate risk model parameter estimation enhancements related to the RRSR computations. ICC states that under its current ICC Risk Management Framework, recovery rate stress scenarios are explicitly incorporated in the RRSR computations and for Jump-to-Default (``JTD'') considerations. The quantity RRSR is designed to capture fluctuations due to potential changes of the market expected recovery rates. In calculating the RRSR, all instruments belonging to a Risk Factor (``RF'') or Risk Sub-Factor (``RSF'') are subjected to Recovery Rate (``RR'') stress scenarios to obtain resulting Profit/Loss (``P/L'') responses, and the worst scenario response is chosen for the estimation of the RF/RSF RRSR. The JTD analysis is designed to capture the unexpected potential losses associated with credit events for assumed single-name-specific set of RR stress values. The JTD responses are determined by using minimum and maximum RR levels. Currently, the RRSR and JTD computations use the same RR stress levels. ICC proposes separating the RR stress levels for these two computations in order to introduce more dynamic and appropriate estimations of the RR stress levels for RRSR purposes. According to ICC, the RR levels for RRSR purposes will reflect a 5-day 99% Expected Shortfall (``ES'') equivalent risk measure associated with RR fluctuations. The proposal will also, as stated by ICC, eliminate index RRSR, as index RRs are not subject to market uncertainty, but rather driven by market conventions. ICC states that the dynamic feature of the RR stress level estimations is achieved by analyzing historical time series of RRs in order to calibrate a statistical model with a time varying volatility. Under this approach, ICC calculates, the RRSR will capture the exposure to RR fluctuations over a 5-day risk horizon described by 99% ES equivalent risk measure. Additionally, ICC proposes revising its Risk Management Framework to incorporate a portfolio level anti-procyclicality analysis that features price changes observed during and immediately after the Lehman Brothers (``LB'') default. In order to achieve an anti-procyclicality of Spread Response requirements, ICC proposes consideration of explicit price scenarios derived from the greatest price decrease and increase during and immediately after the LB default. According to ICC, these scenarios capture the default of a major participant in the credit market and the market response to the event. The introduced scenarios are defined in price space to maintain the stress severity during periods of low credit spread levels and high price when the Spread Response requirements computed under the current framework are expected to be lower. Further, as explained by ICC, the price scenarios derived from the greatest price decrease and increase during and immediately after the LB default are explicitly incorporated into the GF sizing to ensure an anti-procyclical GF size behavior. ICC states that this enhancement also addresses a regulatory requirement as described in Article 30 of the Regulatory Technical Standards,\5\ European Market Infrastructure Regulations. --------------------------------------------------------------------------- \5\ Commission Delegated Regulation (EU) No. 153/2013 of 19 December 2012 Supplementing Regulation (EU) No. 648/2012 of the European Parliament and of the Council with regard to Regulatory Technical Standards on Requirements for Central Counterparties (the ``Regulatory Technical Standards''). --------------------------------------------------------------------------- Furthermore, ICC proposes enhancements to its GF allocation methodology. Currently, ICC states that the GF allocations reflect a risk ``silo'' approach, which separates each GF risk component. Under the current methodology, the allocation of GF reflects the Clearing Participants' (``CPs'') own riskiness in proportion to each GF risk component size and the increase or decrease of the ``silo'' size. Therefore, GF allocations can significantly fluctuate in response to position changes in the portfolios of the CPs that drive the GF size. ICC proposes modifying its methodology so that the GF allocations reflect the CPs' total uncollateralized losses across all GF risk components. According to ICC, under the proposed approach, the GF allocations are independent of the distribution of the uncollateralized losses across various GF risk components or ``silos'' and the fluctuation of each CP's uncollateralized losses within various GF risk components or ``silos.'' Additionally, ICC added clarifying language regarding how the GF computations are performed with explicit currency dependent expressions. ICC also proposes certain non-substantive changes to the Risk Management Framework to address CFTC recommendations. Specifically, ICC proposes amending the Risk Management Framework to reflect ICC's current approach towards portfolio diversification, by unifying diversification and hedge thresholds and explicitly setting both to be equal to the lowest estimated sector Kendall Tau correlation coefficient. ICC also proposes clarifying language regarding how ICC meets its liquidity requirements. Additionally, ICC proposes non-substantive changes throughout the framework to correct obsolete references. Specifically, ICC is removing language stating that the Chief Risk Officer is a dual employee of both ICC and its sister company, The Clearing Corporation. ICC is also removing language stating that The Clearing Corporation is the provider of risk management services to ICC. Furthermore, ICC is removing references to the ``U.K. Financial Services Authority'' and replacing with references to the ``U.K. Prudential Regulatory Authority.'' Finally, ICC is adding ``The European Securities and Markets Authority'' to the sample list of competent authorities for capital adequacy regulation listed in the framework. ICC also proposes non-substantive changes throughout the Risk Management Framework to ensure consistency. ICC is updating the mission statement contained within the document to be consistent with ICC's Board-approved mission statement. Also, ICC is modifying the frequency by which the Risk Department monitors various risk metrics from a quarterly basis to a monthly basis to reflect actual business practices. 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 [[Page 20060]] settlement of securities transactions and, to the extent applicable, derivative agreements, contracts, and transactions and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \6\ 15 U.S.C. 78s(b)(2)(C). \7\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- The Commission finds that the proposed rule change is consistent with Section 17A of the Act \8\ and the rules thereunder applicable to ICC, including the requirements of Rule 17Ad-22.\9\ The Commission believes that the part of the proposal separating the RR stress levels for the JTD and RRSR computations would use a more robust and quantitative driven approach for establishing the RR stress scenarios, resulting in more dynamic and appropriate estimations of the RR stress levels for RRSR purposes. The Commission finds that the incorporation of the Lehman Brothers default price scenarios into the computation of the Spread Response requirements enhances the anti-procyclical feature of ICC's risk methodology. The Commission further finds that the proposed rule change that modifies the current GF allocation methodology to reflect the CPs' total uncollateralized losses across all GF components regardless of the fluctuation of the CPs' uncollateralized losses with respect to each GF component would result in more stable attributions of GF contributions to individual CP/client portfolios. Finally, the Commission finds that the proposed non- substantive and clarification changes are each designed to more accurately reflect ICC's current practices. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78q-1. \9\ 17 CFR 240.17Ad-22. --------------------------------------------------------------------------- Therefore, the Commission believes that the proposal is designed to promote the prompt and accurate clearance and settlement of securities transactions and derivative agreements, contracts and transactions cleared by ICC and, in general, to protect investors and the public interest, consistent with Section 17A(b)(3)(F) of the Act \10\ and Rules 17Ad-22(b)(1), (2) and (3).\11\ --------------------------------------------------------------------------- \10\ 15 U.S.C. 78q-1(b)(3)(F). \11\ 17 CFR 240.17Ad-22(b)(1), (2) and (3). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78q-1. --------------------------------------------------------------------------- It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\13\ that the proposed rule change (File No. SR-ICC-2014-24) be, and hereby is, approved.\14\ --------------------------------------------------------------------------- \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\ --------------------------------------------------------------------------- \15\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-08455 Filed 4-13-15; 8:45 am] BILLING CODE 8011-01-P
![20058 Federal Register / Vol. 80, No. 71 / Tuesday, April 14, 2015 / Notices
Factory, Inc. (The) is no longer an based in Ohio. The company is quoted private. World Racing Group, Inc. is a
operating business. Dream Factory, Inc. on OTC Link under the ticker symbol Delaware corporation based in North
(The) was a Nevada corporation based NIVM. Carolina. The company is quoted on
in Texas. The company is quoted on 15. It appears to the Securities and OTC Link under the ticker symbol
OTC Link under the ticker symbol Exchange Commission that Naylor Pipe WRGP.
DRMF. Co. has been taken private. Naylor Pipe The Commission is of the opinion that
6. It appears to the Securities and Co. is an Illinois corporation based in the public interest and the protection of
Exchange Commission that Dynatem, Illinois. The company is quoted on OTC investors require a suspension of trading
Inc. has been taken private. Dynatem, Link under the ticker symbol NAYP. in the securities of the above-listed
Inc. is a California corporation based in 16. It appears to the Securities and companies.
California. The company is quoted on Exchange Commission that Omega Therefore, it is ordered, pursuant to
OTC Link under the ticker symbol Ventures, Inc. is no longer an operating Section 12(k) of the Securities Exchange
DYTM. business. Omega Ventures, Inc. was a Act of 1934, that trading in the
7. It appears to the Securities and Nevada corporation based in Florida. securities of the above-listed companies
Exchange Commission that Employers The company is quoted on OTC Link is suspended for the period from 9:30
General Insurance Group is no longer an under the ticker symbol OMVN. a.m. EDT on April 10, 2015, through
operating business. Employers General 17. It appears to the Securities and 11:59 p.m. EDT on April 23, 2015.
Insurance Group is a Delaware Exchange Commission that On Stage
corporation based in Texas. The Entertainment, Inc. has been taken By the Commission.
company is quoted on OTC Link under private. On Stage Entertainment, Inc. is Jill M. Peterson,
the ticker symbol EGIG. a Nevada corporation based in Nevada. Assistant Secretary.
8. It appears to the Securities and The company is quoted on OTC Link [FR Doc. 2015–08621 Filed 4–10–15; 11:15 am]
Exchange Commission that K-tel under the ticker symbol ONST. BILLING CODE 8011–01–P
International, Inc. has been taken 18. It appears to the Securities and
private. K-tel International, Inc. is a Exchange Commission that Pachinko
Minnesota corporation based in Canada. World, Inc. is no longer an operating SECURITIES AND EXCHANGE
The company is quoted on OTC Link business. Pachinko World, Inc. was a COMMISSION
under the ticker symbol KTLI. Nevada corporation based in California.
9. It appears to the Securities and The company is quoted on OTC Link [Release No. 34–74685; File No. SR–ICC–
Exchange Commission that Maintenance under the ticker symbol PCHW. 2014–24]
Depot, Inc. is no longer an operating 19. It appears to the Securities and
business. Maintenance Depot, Inc. was a Exchange Commission that Polyair Inter Self-Regulatory Organizations; ICE
Florida corporation based in Florida. Pack Inc. has been taken private. Polyair Clear Credit LLC; Order Granting
The company is quoted on OTC Link Inter Pack Inc. is a Canadian entity Approval of Proposed Rule Change To
under the ticker symbol MDPO. based in Canada. The company is Revise the ICC Risk Management
10. It appears to the Securities and quoted on OTC Link under the ticker Framework
Exchange Commission that Manifold symbol PPKZ.
Capital Corp. is no longer an operating 20. It appears to the Securities and April 8, 2015.
business. Manifold Capital Corp. was a Exchange Commission that Setech, Inc. I. Introduction
Delaware corporation based in New has been taken private. Setech, Inc. is a
York. The company is quoted on OTC Delaware corporation based in On December 22, 2014, ICE Clear
Link under the ticker symbol MANF. Tennessee. The company is quoted on Credit LLC (‘‘ICC’’) filed with the
11. It appears to the Securities and OTC Link under the ticker symbol Securities and Exchange Commission
Exchange Commission that McM Corp. SETC. (‘‘Commission’’) the proposed rule
has been taken private. McM Corp. is a 21. It appears to the Securities and change SR–ICC–2014–24 pursuant to
North Carolina corporation based in Exchange Commission that Seven J Section 19(b)(1) of the Securities
North Carolina. The company is quoted Stock Farm, Inc. has been taken private. Exchange Act of 1934 (‘‘Act’’) 1 and Rule
on OTC Link under the ticker symbol Seven J Stock Farm, Inc. is a Texas 19b–4 thereunder.2 The proposed rule
MMOR. corporation based in Texas. The change was published for comment in
12. It appears to the Securities and company is quoted on OTC Link under the Federal Register on January 9,
Exchange Commission that Mt. Carmel the ticker symbol SVJJ. 2015.3 On February 20, 2015, the
Public Utility Co. has been taken 22. It appears to the Securities and Commission extended the time period
private. Mt. Carmel Public Utility Co. is Exchange Commission that TransCor in which to either approve, disapprove,
an Illinois corporation based in Illinois. Waste Services, Inc. has been taken or institute proceedings to determine
The company is quoted on OTC Link private. TransCor Waste Services, Inc. is whether to disapprove the proposed
under the ticker symbol MCPB. a Florida corporation based in Florida. rule change to April 9, 2015.4 The
13. It appears to the Securities and The company is quoted on OTC Link Commission received no comment
Exchange Commission that Muskoka under the ticker symbol TRCW. letters regarding the proposed change.
Flooring Corp. is no longer an operating 23. It appears to the Securities and For the reasons discussed below, the
business. Muskoka Flooring Corp. was a Exchange Commission that Valley Commission is granting approval of the
Delaware corporation based in Systems, Inc. (VSI Liquidation Corp.) is proposed rule change.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Delaware. The company is quoted on no longer an operating business. Valley
OTC Link under the ticker symbol Systems, Inc. (VSI Liquidation Corp.) 1 15 U.S.C. 78s(b)(1).
MSKA. was a Delaware corporation based in 2 17 CFR 240.19b–4.
14. It appears to the Securities and Georgia. The company is quoted on OTC 3 Securities Exchange Act Release No. 34–73980
Exchange Commission that National (Jan. 5, 2015), 80 FR 1466 (Jan. 9, 2015) (SR–ICC–
Link under the ticker symbol VSLC. 2014–24).
Investment Managers, Inc. has been 24. It appears to the Securities and 4 Securities Exchange Act Release No. 34–74341
taken private. National Investment Exchange Commission that World (Feb. 20, 2015), 80 FR 10551 (Feb. 26, 2015) (SR–
Managers, Inc. is a Florida corporation Racing Group, Inc. has been taken ICC–2014–24).
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![20060 Federal Register / Vol. 80, No. 71 / Tuesday, April 14, 2015 / Notices
settlement of securities transactions proposed rule change (File No. SR–ICC– DATE(S): Submit comments directly to
and, to the extent applicable, derivative 2014–24) be, and hereby is, approved.14 the Office of Management and Budget
agreements, contracts, and transactions For the Commission, by the Division of (OMB) up to May 14, 2015.
and, in general, to protect investors and Trading and Markets, pursuant to delegated ADDRESSES: Direct comments to the
the public interest. authority.15 Department of State Desk Officer in the
The Commission finds that the Brent J. Fields, Office of Information and Regulatory
proposed rule change is consistent with Secretary. Affairs at the Office of Management and
Section 17A of the Act 8 and the rules [FR Doc. 2015–08455 Filed 4–13–15; 8:45 am] Budget (OMB). You may submit
thereunder applicable to ICC, including BILLING CODE 8011–01–P
comments by the following methods:
the requirements of Rule 17Ad–22.9 The • Email: oira_submission@
Commission believes that the part of the omb.eop.gov. You must include the DS
proposal separating the RR stress levels form number, information collection
for the JTD and RRSR computations SMALL BUSINESS ADMINISTRATION title, and the OMB control number in
would use a more robust and Surrender of License of Small the subject line of your message.
quantitative driven approach for Business Investment Company • Fax: 202–395–5806. Attention: Desk
establishing the RR stress scenarios, Officer for Department of State.
resulting in more dynamic and Pursuant to the authority granted to FOR FURTHER INFORMATION CONTACT:
appropriate estimations of the RR stress the United States Small Business Direct requests for additional
levels for RRSR purposes. The Administration under the Small information regarding the collection
Commission finds that the incorporation Business Investment Act of 1958, as listed in this notice, including requests
of the Lehman Brothers default price amended, under Section 309 of the Act for copies of the proposed collection
scenarios into the computation of the and Section 107.1900 of the Small instrument and supporting documents,
Spread Response requirements Business Administration Rules and to Derek Rivers, Bureau of Consular
enhances the anti-procyclical feature of Regulations (13 CFR 107.1900) to Affairs, Overseas Citizens Services (CA/
ICC’s risk methodology. The function as a small business investment OCS/PMO), U.S. Department of State,
Commission further finds that the company under the Small Business SA–17, 10th Floor, Washington, DC
proposed rule change that modifies the Investment Company License No. 03/ 20036 or at RiversDA@state.gov.
current GF allocation methodology to 03–0252 issued to MidCap Financial SUPPLEMENTARY INFORMATION:
reflect the CPs’ total uncollateralized SBIC, L.P., said license is hereby • Title of Information Collection:
losses across all GF components declared null and void. Evacuee Manifest and Promissory Note.
regardless of the fluctuation of the CPs’ United States Small Business • OMB Control Number: 1405–0211.
uncollateralized losses with respect to Administration. • Type of Request: Extension of a
each GF component would result in Dated: April 8, 2015. currently approved collection.
more stable attributions of GF Javier E. Saade, • Originating Office: Bureau of
contributions to individual CP/client Consular Affairs, Overseas Citizens
Associate Administrator for Investment and
portfolios. Finally, the Commission Innovation. Services (CA/OCS).
finds that the proposed non-substantive
[FR Doc. 2015–08504 Filed 4–13–15; 8:45 am] • Form Number: DS–5528.
and clarification changes are each
BILLING CODE 8025–01–P
• Respondents: U.S. citizens, U.S.
designed to more accurately reflect non-citizen nationals, lawful permanent
ICC’s current practices. residents, and third country nationals
Therefore, the Commission believes applying for emergency loan assistance
that the proposal is designed to promote DEPARTMENT OF STATE during an evacuation.
the prompt and accurate clearance and [Public Notice: 9097] • Estimated Number of Respondents:
settlement of securities transactions and 525.
derivative agreements, contracts and 30-Day Notice of Proposed Information • Estimated Number of Responses:
transactions cleared by ICC and, in Collection: Evacuee Manifest and 525.
general, to protect investors and the Promissory Note • Average Hours per Response: 20
public interest, consistent with Section minutes.
17A(b)(3)(F) of the Act 10 and Rules ACTION:Notice of request for public • Total Estimated Burden: 175 hours.
17Ad–22(b)(1), (2) and (3).11 comment and submission to OMB of • Frequency: On Occasion.
proposed collection of information. • Obligation to Respond: Required to
IV. Conclusion Obtain Benefits.
SUMMARY: The Department of State has We are soliciting public comments to
On the basis of the foregoing, the
submitted the information collection permit the Department to:
Commission finds that the proposal is
described below to the Office of • Evaluate whether the proposed
consistent with the requirements of the
Management and Budget (OMB) for information collection is necessary for
Act and in particular with the
approval. In accordance with the the proper functions of the Department.
requirements of Section 17A of the
Paperwork Reduction Act of 1995 we • Evaluate the accuracy of our
Act 12 and the rules and regulations
are requesting comments on this estimate of the time and cost burden for
thereunder.
collection from all interested this proposed collection, including the
asabaliauskas on DSK5VPTVN1PROD with NOTICES
It is therefore ordered, pursuant to individuals and organizations. The
Section 19(b)(2) of the Act,13 that the validity of the methodology and
purpose of this Notice is to allow 30 assumptions used.
days for public comment. • Enhance the quality, utility, and
8 15 U.S.C. 78q–1.
9 17 CFR 240.17Ad–22.
clarity of the information to be
14 In approving the proposed rule change, the
10 15 U.S.C. 78q–1(b)(3)(F). collected.
Commission considered the proposal’s impact on
11 17 CFR 240.17Ad–22(b)(1), (2) and (3).
efficiency, competition and capital formation. 15 • Minimize the reporting burden on
12 15 U.S.C. 78q–1. U.S.C. 78c(f). those who are to respond, including the
13 15 U.S.C. 78s(b)(2). 15 17 CFR 200.30–3(a)(12). use of automated collection techniques
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Document Created: 2015-12-18 11:10:10
Document Modified: 2015-12-18 11:10:10
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 80 FR 20058 |
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