80 FR 81384 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To Revise the ICC Risk Management Framework and ICC Treasury Operations Policies and Procedures, and Adopt the ICC Risk Management Model Description Document
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 249 (December 29, 2015)
Federal Register Volume 80, Issue 249 (December 29, 2015)
| Page Range | 81384-81386 | |
| FR Document | 2015-32649 |
[Federal Register Volume 80, Number 249 (Tuesday, December 29, 2015)] [Notices] [Pages 81384-81386] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-32649] [[Page 81384]] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76733; File No. SR-ICC-2015-017] Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change To Revise the ICC Risk Management Framework and ICC Treasury Operations Policies and Procedures, and Adopt the ICC Risk Management Model Description Document December 22, 2015. I. Introduction On October 20, 2015, ICE Clear Credit LLC (``ICC'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19b(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change (SR-ICC-2015-017) to reorganize the ICC Risk Management Framework (``RMF'') in response to a recommendation from the Commodity Futures Trading Commission (``CFTC'') regarding improvements related to the governance of ICC's risk management documentation. The proposed rule change was published for comment in the Federal Register on November 9, 2015.\3\ The Commission did not receive comments on the proposed rule change. For the reasons discussed below, the Commission is approving the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ Securities Exchange Act Release No. 34-76331 (Nov. 3, 2015), 80 FR 69261 (Nov. 9, 2015) (SR-ICC-2015-017). --------------------------------------------------------------------------- II. Description of the Proposed Rule Change ICC has proposed reorganizing the RMF in response to a recommendation from the CFTC regarding improvements to the governance of ICC's risk management documentation. Specifically, ICC has proposed organizational and clarifying edits to the RMF and the Treasury Operations Policies and Procedures, and has proposed adopting a new Risk Management Model Description Document. ICC has represented that these revisions do not require any changes to the ICC Clearing Rules (``Rules''). ICC will move the Collateral Assets Risk Management Framework appendix from the RMF to the Treasury Operations Policies and Procedures. Accordingly, ICC will update references throughout the RMF to the Collateral Assets Risk Management Framework appendix to refer instead to the Treasury Operations Policies and Procedures. ICC will move appendices containing technical risk management information (formerly, RMF Appendices 3-5) to the new ICC Risk Management Model Description Document. Accordingly, ICC will update references throughout the RMF to these appendices to refer to the Risk Management Model Description Document. ICC will also make general updates and edits throughout the RMF for clarity and consistency. Such edits will include correcting verb tenses, adopting consistent abbreviations, and adjusting sentence order to assure logical presentation and word flow, and using more succinct language. ICC has represented that the edits are not substantive and do not affect the nature of ICC's risk management program. Within the Overview section of the RMF, ICC will refine the Business Overview details to more accurately describe the business operations of Intercontinental Exchange, Inc. and ICC. ICC will edit the Governance and Organization section of the RMF to more fully describe which topics the Risk Committee is responsible to advise the Board. The list of documents reviewed by the Risk Committee on at least an annual basis will be revised to include the ICC Risk Management Model Description Document, the ICC Treasury Operations Policies and Procedures, and the ICC Liquidity Risk Management Framework. The Risk Working Group (``RWG'') description will be updated to note that the group consists of risk personnel from ICC Clearing Participants (``CPs''), and to clarify that the RWG is responsible for reviewing ICC's risk philosophy and recommending changes to ICC's RMF. The validation function of the risk philosophy and tolerance will be removed from the list of RWG responsibilities as, according to ICC, such functions are the ultimate responsibility of the Board. The Advisory Committee description will be updated to note that the committee is comprised of representatives of up to twelve clients/ customers of ICC CPs (ICC has represented that currently there are twelve client/customer members). The CDS Default Committee description will be updated to note that the committee is comprised of representatives from ICC CPs on a rotating basis and to remove reference to a duty to provide feedback on ICC's RMF and parameters because the CDS Default Committee is only convened upon the declaration of a default. The committee description will be enhanced to note that, as the CDS Default Committee assists ICC in determining and managing Minimum Target Prices for auctioned portfolios related to a default, the committee oversees necessary auction(s) as well as the process to re-establish a matched book. The Risk Management Organization section will be updated to remove outdated language stating that the Risk Management Department conducts an annual review of ICC's Risk Management Framework Policy Statement and submits proposed changes to the RWG, Risk Committee, and Board. Further, the section will be updated to remove reference to the Risk Management Department being responsible for ICC's intellectual capital and personnel, while creating, implementing and maintaining ICC's risk management policies. ICC will make edits to the Product Summary section of the RMF. ICC will clarify language to refer to Index CDS Instruments (as opposed to Index Products), Single Name CDS Instruments (as opposed to Single Name CDS), and reference entities (as opposed to companies). The Index CDS instruments section will be revised to remove reference to the International Index Company. The Single Name CDS Instruments section will be modified to refine language concerning what constitutes a credit event. The list of attributes defining a CDS contract will be enhanced to include Maturity, as well as reference Notional Amount, as opposed to Notional Principal. Reference to the terms of the contracts being prescribed by the ICC Rules and Participant Agreement will be removed. The Risk Factors, Risk Sub-Factors and Instruments section will be revised to enhance the definition of Risk Sub-Factor to refer to a specific single name reference obligation seniority and doc clause combination. ICC will make edits to the Systemic Risk Management Approach section of the RMF, which includes Waterfall Levels 1 through 5. ICC will revise Waterfall Level 1: Membership Criteria to remove reference, within the Operational Criteria, to employee participation on industry committees (e.g. ISDA, DTCC, etc.). Furthermore, the ongoing monitoring of participants section will be enhanced to state: (i) intraday monitoring includes intraday CDS market levels and potential equity price movements, as well as news from Bloomberg and other information sources; and (ii) daily monitoring and analysis includes prior day's final pays by CPs, daily change in Initial Margin (``IM''), margin deficits, unrealized intraday profits/losses for cleared portfolios, risk impact of new intraday [[Page 81385]] trades on cleared portfolios, daily end-of-day (``EOD'') levels, CPs' Guaranty Fund (``GF'') obligations, CPs' day-over-day change in GF requirements relative to each firms prior day levels, and CPs' day- over-day change in GF requirements relative to the total GF balance. ICC will remove from the ongoing monitoring of participants section review the following components: Daily prices and spreads (including missed EOD submissions), daily EOD prices (including missed prices), prior day's and intraday total IM as a percentage of CP's or CP's guarantor's capital, collateral pricing report for missing prices, and collateral deposits no longer in compliance with ICC's acceptable collateral policy. ICC asserts that such elements are included in the enhanced daily monitoring and analysis section or have been deemed no longer relevant to the monitoring process. Further, ICC will clarify that the Risk Management Department reviews weekly stress test results for extreme risk event scenarios to ensure sufficient margin cover under market conditions, as opposed to drastic market conditions. The Participant Withdrawal subsection will be revised to remove reference to ICC's right of One Time Assessment and instead refer more generally to ICC's power of assessment. ICC will revise the Waterfall Level 2: Initial Margin description to clarify that ICC's IM requirements consist of a set of individual components that account for various risks and that the methodology includes consideration of hypothetical scenarios for those components. ICC will add language to the Spread Response Requirements section to note that the hypothetical prices used in calculating the instrument spread response risk IM requirement reflect the time-to-maturity horizon reduced by one day. ICC will revise the distributions and related parameters subsection to refer to the more specific feature Mean Absolute Deviation (``MAD'') as opposed to the more general term ``scale.'' ICC will remove reference to a set Exponentially Weighted Moving Average decay factor, as ICC asserts the factor is dynamic, subject to review and changed by the Risk Department in consultation with the Risk Committee. ICC will also remove outdated language regarding the initial setting of Auto Regressive process for first order parameters. ICC will revise the description of the considered scenarios to provide a mathematical description of how the considered scenarios are constructed based on statistical analysis of historical time series. The term structure scenario construction will now be clearly defined in terms of 99% Value-at-Risk equivalent risk measures for different tenors, and the cross-tenor correlation structure will be estimated from time series analysis. ICC will revise the term ``contracting'' to ``tightening'' in the context of spread behavior to, according to ICC, provide conformity to more commonly used credit market terminology. Within the Recovery Rate (``RR'') Sensitivity Requirements subsection, ICC will clarify that two additional single name-specific stress-test RRs are considered in determining the requirements. ICC will revise Waterfall Level 3: Mark-to-Market Margin description. Specifically, ICC will revise the methodology section to remove specific calculations regarding the methodology and instead refer to the ICC EOD Price Discovery Policies and Procedures, which ICC asserts contain a more fulsome methodology description. ICC will revise Waterfall Level 4: Intra-day Risk Monitoring/ Special Margin Call Execution to clarify language describing the calculation of prices to determine the adequacy of collected IM intraday. Specifically, as part of the calculation, ICC will utilize bid-offer quotes which will be automatically fed into the ICC risk management intraday monitoring system. ICC will revise Waterfall Level 5: Guaranty Fund description. The ICC GF is designed to provide adequate funds to cover losses associated with the default of the two CPs, as well as any affiliated CPs (i.e. any other CP that owns, is owned by, or is under common ownership with such a CP) with the greatest potential uncollateralized losses. ICC will add language to note that the set of all affiliated CPs is considered as a CP affiliate group. Within the Waterfall Level 5 description, ICC will revise language to reinforce this CP affiliate group concept. Within the Guaranty Fund Calculation for Clearing Participants subsection, ICC will remove reference to summary concepts of uncollateralized loss given default, uncollateralized spread response losses, uncollateralized basis risk losses, and uncollateralized interest rate losses, previously used in describing the computations of the stress scenario losses. ICC will more precisely define the factors considered within the GF calculation and related stress test scenarios as the following: occurrence of multiple credit events, uncollateralized loss-given-default from self-referencing positions, adverse spread scenarios, adverse index-single-name basis widening, adverse interest rate scenarios, and anti procyclicality. ICC will add language to the Guaranty Fund Allocation subsection of the RMF to state that the CP's total uncollateralized GF stress loss is the difference between the sum of the stress loss given default, GF stress spread response, GF stress basis risk and interest rate losses and the sum of the IM idiosyncratic jump-to-default requirements, IM spread response requirement, IM basis and interest risk requirement. ICC will revise the General Wrong Way Risk and Contagion Measures subsection to remove technical information that was moved to the Risk Management Model Description Document. ICC will revise the Position Concentration Limits subsection of the Risk Limits and Controls section to clarify that ICC's concentration charge is designed to increase a CP's IM requirement toward the risk of maximum loss and ultimately, at the extreme, toward the full expected notional amount of liability of the sold protection or the present value of the amount of coupon payments for bought protection. ICC will summarize language referring to the notional liability of the protection sold or the full value of coupon payments to refer more generally to loss associated with the portfolio. ICC will revise the Model Time Horizon subsection to note that the standard risk horizon can be increased by the ICC Risk Management Department during banking holiday periods to reflect ICC's limited ability to execute margin calls without Risk Committee consultation. ICC will further revise the Position Concentration Thresholds subsection to clarify that, if at any point, either the margin requirements or concentration charges grow to be a concern, ICC has the authority to execute special or intraday margin calls, and/or to increase the rate at which the concentration charges grow. ICC will revise the Stress Testing subsection of the Back Testing and Stress Testing section to remove specific assumptions associated with the various stress scenarios used in the daily risk management process. For proprietary reasons, these specific assumptions will now be included in ICC's Stress Testing Framework. ICC will also clarify that the Risk Management Department presents stress results at the monthly Risk Committee meetings, as well as recommendations about next steps and recommendations to add or retire stress tests. ICC will make edits to the Default Treatment section to remove outdated language stating that ICC seconds [[Page 81386]] traders eligible to serve on the ICE Clear Europe Default Management Committee. ICC will remove language regarding the auctioning of multi- currency portfolios for stylistic reasons, as the following sentences provide the information in a more accessible format. ICC will revise the Cash Settlement subsection of the Settlement section to remove outdated language stating that ICC will evaluate a transition to a central bank model for U.S. cash if available. ICC will make edits to the Market Investment Risk Management section of the RMF. Specifically, ICC will delete redundant language regarding ICC's investment policy that can be found in the ICC Treasury Operations Policies and Procedures. ICC will enhance the ICC Clearing Participant Risk Management Questionnaire appendix to add more specific details that better capture the intent of the questions contained within. ICC will revise the Overview section of the Clearing Participant Default Management Procedures appendix to refer more generally to ICC's default management procedures, as opposed to offering specific details provided elsewhere within the appendix. ICC will also revise the CDS Default Committee subsection to remove language stating that the CDS Default Committee Members are responsible for determining and adjusting minimum target prices for auctions. ICC will add language to the Hedging and Liquidation subsection to note that the CDS Default Committee is responsible for assisting ICC with respect to liquidating and hedging positions with the Non-Defaulting CPs, in consultation with the Chief Risk Officer. ICC will clarify the Auction Procedures/ Competitive Bidding section to state that the auction bidding process will be open for an ICC specified minute window, as opposed to a specific 15-minute window. ICC will remove the Collateral Assets Risk Management Framework Appendix 7 from the RMF and add it as an appendix to the ICC Treasury Operations Policies and Procedures. Accordingly, references within the Treasury Operations Policies and Procedures to the RMF will be updated. Additionally, ICC will update its list of banking relationships contained within the document. ICC will also make conforming and non- material edits to the document. Finally, ICC will create the Risk Management Model Description Document, which includes the technical risk information previously included in Appendices 3 to 5 of the RMF as well as information previously included in explanatory risk documents. Technical risk information, previously included in explanatory risk documents, will be incorporated consistently throughout the new Risk Management Model Description Document. The inclusion of such information does not constitute a substantive change to the RMF, as it serves to enhance the transparency of the technical details of the current implementation described in the previous RMF. In the Risk Management Model Description Document, ICC will provide additional technical information to improve the understanding and/or replication of the models. ICC will also provide improved logical connections among all model components, which, ICC asserts, should contribute to developing a general intuition for ICC's risk approach. ICC represents that material changes to the Risk Management Model Description Document will be approved by ICC's Board of Managers and submitted, in the appropriate form to regulators consistent with other documents constituting ICC's RMF. The Risk Management Model Description Document will include a technical description of ICC's Initial Margin methodology (Recovery Rate Sensitivity Risk Analysis; Loss Given Default Risk Analysis; Liquidity Risk Analysis; Large Position Risk Analysis; Jump-To-Default Risk Analysis; Interest Rate Sensitivity Risk Analysis; Basic Risk Analysis; Spread Risk Analysis; Multi-Currency Portfolio Treatment; and Portfolio Loss Boundary Condition) and ICC's Guaranty Fund methodology (Guaranty Fund Size Estimation; Guaranty Fund Requirements and Periodic Adjustments; and General Wrong Way Risk and Contagion Stress Tests). Within the Spread Risk Analysis section, where ICC previously had listed explicit risk factors within the RMF, ICC will replace such explicit risk factors with the underlying formulas used in deriving such factors. III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act \4\ directs the Commission to approve a proposed rule change of a self-regulatory organization if the Commission finds that the 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 \5\ 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. --------------------------------------------------------------------------- \4\ 15 U.S.C. 78s(b)(2)(C). \5\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- The Commission finds that the proposed rule change is consistent with the requirements of Section 17A of the Act \6\ and the rules and regulations thereunder applicable to ICC. The proposed rule change is designed to clarify ICC's risk management policies through the proposed revisions to the RMF and associated changes to the Treasury Operations Policies and Procedures. Additionally, the Risk Management Model Description Document should reflect the consolidation of certain technical risk documents into one singular document, further clarifying these technical issues. The Commission therefore believes that the proposed revisions to the RMF and Treasury Operations Policies and Procedures, as well as creation of the Risk Management Model Description Document, are designed to promote the prompt and accurate clearance and settlement of securities transactions and, to the extent applicable, derivatives agreements, contracts, and transactions in accordance with Section 17A(b)(3)(F) of the Act.\7\ --------------------------------------------------------------------------- \6\ 15 U.S.C. 78q-1. \7\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- 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 \8\ and the rules and regulations thereunder. --------------------------------------------------------------------------- \8\ 15 U.S.C. 78q-1. --------------------------------------------------------------------------- It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\9\ that the proposed rule change (File No. SR-ICC-2015-017) be, and hereby is, approved.\10\ --------------------------------------------------------------------------- \9\ 15 U.S.C. 78s(b)(2). \10\ 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.\11\ --------------------------------------------------------------------------- \11\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-32649 Filed 12-28-15; 8:45 am] BILLING CODE 8011-01-P
![81384 Federal Register / Vol. 80, No. 249 / Tuesday, December 29, 2015 / Notices
SECURITIES AND EXCHANGE appendix to refer instead to the Committee assists ICC in determining
COMMISSION Treasury Operations Policies and and managing Minimum Target Prices
Procedures. ICC will move appendices for auctioned portfolios related to a
[Release No. 34–76733; File No. SR–ICC–
2015–017]
containing technical risk management default, the committee oversees
information (formerly, RMF Appendices necessary auction(s) as well as the
Self-Regulatory Organizations; ICE 3–5) to the new ICC Risk Management process to re-establish a matched book.
Clear Credit LLC; Order Approving Model Description Document. The Risk Management Organization
Proposed Rule Change To Revise the Accordingly, ICC will update references section will be updated to remove
ICC Risk Management Framework and throughout the RMF to these appendices outdated language stating that the Risk
ICC Treasury Operations Policies and to refer to the Risk Management Model Management Department conducts an
Procedures, and Adopt the ICC Risk Description Document. annual review of ICC’s Risk
Management Model Description ICC will also make general updates Management Framework Policy
Document and edits throughout the RMF for clarity Statement and submits proposed
and consistency. Such edits will include changes to the RWG, Risk Committee,
December 22, 2015. correcting verb tenses, adopting and Board. Further, the section will be
I. Introduction consistent abbreviations, and adjusting updated to remove reference to the Risk
sentence order to assure logical Management Department being
On October 20, 2015, ICE Clear Credit presentation and word flow, and using responsible for ICC’s intellectual capital
LLC (‘‘ICC’’) filed with the Securities more succinct language. ICC has and personnel, while creating,
and Exchange Commission represented that the edits are not implementing and maintaining ICC’s
(‘‘Commission’’), pursuant to Section substantive and do not affect the nature risk management policies.
19b(1) of the Securities Exchange Act of of ICC’s risk management program. ICC will make edits to the Product
1934 (‘‘Act’’) 1 and Rule 19b–4 Within the Overview section of the Summary section of the RMF. ICC will
thereunder,2 a proposed rule change RMF, ICC will refine the Business clarify language to refer to Index CDS
(SR–ICC–2015–017) to reorganize the Overview details to more accurately Instruments (as opposed to Index
ICC Risk Management Framework describe the business operations of Products), Single Name CDS
(‘‘RMF’’) in response to a Intercontinental Exchange, Inc. and ICC. Instruments (as opposed to Single Name
recommendation from the Commodity ICC will edit the Governance and CDS), and reference entities (as opposed
Futures Trading Commission (‘‘CFTC’’) Organization section of the RMF to more to companies). The Index CDS
regarding improvements related to the fully describe which topics the Risk instruments section will be revised to
governance of ICC’s risk management Committee is responsible to advise the remove reference to the International
documentation. The proposed rule Board. The list of documents reviewed Index Company. The Single Name CDS
change was published for comment in by the Risk Committee on at least an Instruments section will be modified to
the Federal Register on November 9, annual basis will be revised to include refine language concerning what
2015.3 The Commission did not receive the ICC Risk Management Model constitutes a credit event. The list of
comments on the proposed rule change. Description Document, the ICC Treasury attributes defining a CDS contract will
For the reasons discussed below, the Operations Policies and Procedures, and be enhanced to include Maturity, as
Commission is approving the proposed the ICC Liquidity Risk Management well as reference Notional Amount, as
rule change. Framework. The Risk Working Group opposed to Notional Principal.
II. Description of the Proposed Rule (‘‘RWG’’) description will be updated to Reference to the terms of the contracts
Change note that the group consists of risk being prescribed by the ICC Rules and
personnel from ICC Clearing Participant Agreement will be removed.
ICC has proposed reorganizing the Participants (‘‘CPs’’), and to clarify that The Risk Factors, Risk Sub-Factors and
RMF in response to a recommendation the RWG is responsible for reviewing Instruments section will be revised to
from the CFTC regarding improvements ICC’s risk philosophy and enhance the definition of Risk Sub-
to the governance of ICC’s risk recommending changes to ICC’s RMF. Factor to refer to a specific single name
management documentation. The validation function of the risk reference obligation seniority and doc
Specifically, ICC has proposed philosophy and tolerance will be clause combination.
organizational and clarifying edits to the removed from the list of RWG ICC will make edits to the Systemic
RMF and the Treasury Operations responsibilities as, according to ICC, Risk Management Approach section of
Policies and Procedures, and has such functions are the ultimate the RMF, which includes Waterfall
proposed adopting a new Risk responsibility of the Board. The Levels 1 through 5. ICC will revise
Management Model Description Advisory Committee description will be Waterfall Level 1: Membership Criteria
Document. ICC has represented that updated to note that the committee is to remove reference, within the
these revisions do not require any comprised of representatives of up to Operational Criteria, to employee
changes to the ICC Clearing Rules twelve clients/customers of ICC CPs participation on industry committees
(‘‘Rules’’). (ICC has represented that currently there (e.g. ISDA, DTCC, etc.). Furthermore,
ICC will move the Collateral Assets are twelve client/customer members). the ongoing monitoring of participants
Risk Management Framework appendix The CDS Default Committee description section will be enhanced to state: (i)
from the RMF to the Treasury will be updated to note that the intraday monitoring includes intraday
Operations Policies and Procedures. committee is comprised of CDS market levels and potential equity
asabaliauskas on DSK5VPTVN1PROD with NOTICES
Accordingly, ICC will update references representatives from ICC CPs on a price movements, as well as news from
throughout the RMF to the Collateral rotating basis and to remove reference to Bloomberg and other information
Assets Risk Management Framework a duty to provide feedback on ICC’s sources; and (ii) daily monitoring and
1 15
RMF and parameters because the CDS analysis includes prior day’s final pays
U.S.C. 78s(b)(1).
2 17
Default Committee is only convened by CPs, daily change in Initial Margin
CFR 240.19b–4.
3 Securities Exchange Act Release No. 34–76331 upon the declaration of a default. The (‘‘IM’’), margin deficits, unrealized
(Nov. 3, 2015), 80 FR 69261 (Nov. 9, 2015) (SR– committee description will be enhanced intraday profits/losses for cleared
ICC–2015–017). to note that, as the CDS Default portfolios, risk impact of new intraday
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![81386 Federal Register / Vol. 80, No. 249 / Tuesday, December 29, 2015 / Notices
traders eligible to serve on the ICE Clear Appendices 3 to 5 of the RMF as well other things, that the rules of a clearing
Europe Default Management Committee. as information previously included in agency are designed to promote the
ICC will remove language regarding the explanatory risk documents. Technical prompt and accurate clearance and
auctioning of multi-currency portfolios risk information, previously included in settlement of securities transactions
for stylistic reasons, as the following explanatory risk documents, will be and, to the extent applicable, derivative
sentences provide the information in a incorporated consistently throughout agreements, contracts, and transactions.
more accessible format. the new Risk Management Model
ICC will revise the Cash Settlement Description Document. The inclusion of The Commission finds that the
subsection of the Settlement section to such information does not constitute a proposed rule change is consistent with
remove outdated language stating that substantive change to the RMF, as it the requirements of Section 17A of the
ICC will evaluate a transition to a serves to enhance the transparency of Act 6 and the rules and regulations
central bank model for U.S. cash if the technical details of the current thereunder applicable to ICC. The
available. implementation described in the proposed rule change is designed to
ICC will make edits to the Market previous RMF. In the Risk Management clarify ICC’s risk management policies
Investment Risk Management section of Model Description Document, ICC will through the proposed revisions to the
the RMF. Specifically, ICC will delete provide additional technical RMF and associated changes to the
redundant language regarding ICC’s information to improve the Treasury Operations Policies and
investment policy that can be found in understanding and/or replication of the Procedures. Additionally, the Risk
the ICC Treasury Operations Policies models. ICC will also provide improved Management Model Description
and Procedures. logical connections among all model Document should reflect the
ICC will enhance the ICC Clearing components, which, ICC asserts, should consolidation of certain technical risk
Participant Risk Management contribute to developing a general documents into one singular document,
Questionnaire appendix to add more intuition for ICC’s risk approach.
specific details that better capture the further clarifying these technical issues.
ICC represents that material changes
intent of the questions contained The Commission therefore believes that
to the Risk Management Model
within. the proposed revisions to the RMF and
Description Document will be approved
ICC will revise the Overview section by ICC’s Board of Managers and Treasury Operations Policies and
of the Clearing Participant Default submitted, in the appropriate form to Procedures, as well as creation of the
Management Procedures appendix to regulators consistent with other Risk Management Model Description
refer more generally to ICC’s default documents constituting ICC’s RMF. The Document, are designed to promote the
management procedures, as opposed to Risk Management Model Description prompt and accurate clearance and
offering specific details provided Document will include a technical settlement of securities transactions
elsewhere within the appendix. ICC will description of ICC’s Initial Margin and, to the extent applicable, derivatives
also revise the CDS Default Committee methodology (Recovery Rate Sensitivity agreements, contracts, and transactions
subsection to remove language stating Risk Analysis; Loss Given Default Risk in accordance with Section 17A(b)(3)(F)
that the CDS Default Committee Analysis; Liquidity Risk Analysis; Large of the Act.7
Members are responsible for Position Risk Analysis; Jump-To-Default
determining and adjusting minimum Risk Analysis; Interest Rate Sensitivity IV. Conclusion
target prices for auctions. ICC will add Risk Analysis; Basic Risk Analysis; On the basis of the foregoing, the
language to the Hedging and Spread Risk Analysis; Multi-Currency
Liquidation subsection to note that the Commission finds that the proposal is
Portfolio Treatment; and Portfolio Loss consistent with the requirements of the
CDS Default Committee is responsible Boundary Condition) and ICC’s
for assisting ICC with respect to Act and in particular with the
Guaranty Fund methodology (Guaranty
liquidating and hedging positions with requirements of Section 17A of the Act 8
Fund Size Estimation; Guaranty Fund
the Non-Defaulting CPs, in consultation Requirements and Periodic and the rules and regulations
with the Chief Risk Officer. ICC will Adjustments; and General Wrong Way thereunder.
clarify the Auction Procedures/ Risk and Contagion Stress Tests). It is therefore ordered, pursuant to
Competitive Bidding section to state Within the Spread Risk Analysis Section 19(b)(2) of the Act,9 that the
that the auction bidding process will be section, where ICC previously had listed proposed rule change (File No. SR–ICC–
open for an ICC specified minute explicit risk factors within the RMF, ICC 2015–017) be, and hereby is,
window, as opposed to a specific 15- will replace such explicit risk factors approved.10
minute window. with the underlying formulas used in
ICC will remove the Collateral Assets For the Commission, by the Division of
deriving such factors. Trading and Markets, pursuant to delegated
Risk Management Framework Appendix
7 from the RMF and add it as an III. Discussion and Commission authority.11
appendix to the ICC Treasury Findings Brent J. Fields,
Operations Policies and Procedures. Section 19(b)(2)(C) of the Act 4 directs Secretary.
Accordingly, references within the the Commission to approve a proposed [FR Doc. 2015–32649 Filed 12–28–15; 8:45 am]
Treasury Operations Policies and rule change of a self-regulatory BILLING CODE 8011–01–P
Procedures to the RMF will be updated. organization if the Commission finds
Additionally, ICC will update its list of
asabaliauskas on DSK5VPTVN1PROD with NOTICES
that the proposed rule change is 6 15 U.S.C. 78q–1.
banking relationships contained within consistent with the requirements of the 7 15 U.S.C. 78q–1(b)(3)(F).
the document. ICC will also make Act and the rules and regulations 8 15 U.S.C. 78q-1.
conforming and non-material edits to thereunder applicable to such self- 9 15 U.S.C. 78s(b)(2).
the document. regulatory organization. Section 10 In approving the proposed rule change, the
Finally, ICC will create the Risk 17A(b)(3)(F) of the Act 5 requires, among Commission considered the proposal’s impact on
Management Model Description efficiency, competition and capital formation. 15
Document, which includes the technical 4 15 U.S.C. 78s(b)(2)(C). U.S.C. 78c(f).
risk information previously included in 5 15 U.S.C. 78q–1(b)(3)(F). 11 17 CFR 200.30–3(a)(12).
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Document Created: 2015-12-29 10:15:26
Document Modified: 2015-12-29 10:15:26
| 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 81384 |
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