81 FR 16245 - Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change To Revise the ICC Operational Risk Management Framework

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 58 (March 25, 2016)

[Federal Register Volume 81, Number 58 (Friday, March 25, 2016)]
[Notices]
[Pages 16245-16247]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-06747]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77413; File No. SR-ICC-2016-003]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change To Revise the ICC Operational Risk 
Management Framework

March 21, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that 
on March 10, 2016, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared primarily by ICC. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The principal purpose of the proposed rule change is to update 
ICC's Operational Risk Management Framework. These revisions do not 
require any changes to the ICC Clearing Rules.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, ICC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. ICC has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of these statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    ICC proposes updates to the ICC Operational Risk Management 
Framework. ICC believes such revisions will facilitate the prompt and 
accurate clearance and settlement of securities transactions and 
derivative agreements, contracts, and transactions for which it is 
responsible. The proposed revisions are described in detail as follows.
    The ICC Operational Risk Management Framework details ICC's dynamic 
and independent program of risk assessment and oversight, managed by 
the Operational Risk Manager (``ORM''), which aims to reduce 
operational incidents, encourage process and control improvement, bring 
transparency to operational performance standard monitoring, and 
fulfill regulatory obligations. ICC proposes organizational changes to 
its Operational Risk Management Framework related to its operational 
risk management processes.
    ICC has revised the Operational Risk Management Framework to frame 
its existing operational risk program and processes around an 
operational risk lifecycle, designed to highlight certain aspects of 
the processes and present the processes in a more efficient manner. The 
operational risk lifecycle utilized by ICC has five components: 
Identify, assess, monitor, mitigate and report. Each of these lifecycle 
components are first defined generally in the document then applied to 
each of ICC's two operational risk processes: Risk assessment; and 
performance objectives setting and monitoring. Specifically, the 
content for each risk process has been reorganized to fall into each of 
the operational risk lifecycle components (i.e., identify, assess, 
monitor, mitigate, and report). For completion purposes,

[[Page 16246]]

ICC added information regarding the `assess' and `report' component of 
the risk assessment process. Specifically, ICC assesses each of its 
risk scenarios to determine the inherent risk rating associated with 
the occurrence of an event or incident, as well as assess the 
effectiveness of any relevant risk controls. Further, in the `report' 
component, ICC clarified that the ORM presents operational risk 
reporting to an internal committee which includes members of senior 
management. The responsibilities of the ORM, which were previously 
listed out in the document, were incorporated into the risk lifecycles. 
The ORM will continue to provide management and staff with advice and 
guidance related to the development of controls designed to increase 
performance and reduce processing risk, as part of the `mitigate' risk 
lifecycle component. Similarly, the responsibilities of senior 
management, which were previously listed out in the document, were 
incorporated into the risk lifecycles.
    ICC has categorized those aspects of the operational risk 
management program which do not fall within this lifecycle as 
``Operational Risk Focus Areas.'' These risk focus areas include: 
Business continuity planning and disaster recovery; vendor assessment; 
new products and initiatives; information security; and technology 
control functions. ICC has reorganized the order of these risk focus 
areas to better distinguish which functions may, with oversight by the 
ORM, be outsourced to Intercontinental Exchange, Inc. (``ICE, Inc.'') 
or performed by departments dedicated to that particular risk area.
    ICC has made several clarifying and organizational enhancements to 
the various risk focus area descriptions. Further, specific details 
contained within other ICC policies and procedures were removed and 
described more generally within the Operational Risk Management 
Framework, in an effort to reduce redundancy amongst ICC policies and 
procedures. ICC continues to maintain business continuity planning and 
disaster recovery as two separate programs with separate and distinct 
components; however, ICC has grouped the description of these programs 
together for purposes of the Operational Risk Management Framework. ICC 
enhanced the ``Vendor Assessment'' risk focus area description to note 
that the ORM is responsible for conducting a service provider risk 
assessment for critical vendors, and to list the specific steps taken 
as part of such risk assessment. ICC also enhanced the ``Information 
Security'' risk focus area description to note that the ICE, Inc. 
Information Security Department conducts its own risk assessments 
related to information security and physical security/environmental 
controls, pursuant to internal policies which are maintained by an ICE, 
Inc. internal committee. Information regarding the Firm Wide Incident 
Management Program was included in the new `Technology Controls 
Section.' ICC enhanced the `Technology Control Functions' risk focus 
area description to note that the ICC Systems Operations team is 
responsible for executing daily clearing functions within established 
service expectations and performing incident management. ICC described 
this incident management process generally within the framework, and 
removed more detailed aspects of the program which are contained in 
specific program documentation.
    General information regarding the development and enforcement of a 
firm-wide operational risk framework was removed, as the revised 
framework more clearly lays out in each particular section who is 
responsible for the development and enforcement of that component of 
the operational risk management framework. Information regarding the 
human resource reporting line of the ORM and specific references to 
titles of documents utilized as part of the risk assessment process 
were removed. As the Vendor Risk Management policy was retired and 
encompassed within the Operational Risk Management Framework, reference 
to the policy was removed from the document. ICC removed internal audit 
responsibilities from the Operational Risk Management Framework as such 
responsibilities are contained within internal audit documentation.
    The overall governance of the Operational Risk Framework has been 
updated to reflect current practices. Specifically, material amendments 
are reviewed by the Risk Committee, and approved by the Board. The 
Board reviews the Operational Risk Management Framework at least 
annually.
    Other non-material changes were made to the framework to enhance 
readability. Previously, ICC included regulatory requirements and 
industry guidance information within the framework; this information 
has been moved to a separate appendix to the framework. Further, 
information regarding Regulation Systems, Compliance, and Integrity has 
been added for completeness. Certain information regarding governance 
and governing committees has been resituated to the reporting section 
of the relevant operational risk lifecycle. Similarly, information 
regarding the roles and responsibilities of the ORM and senior 
management has been resituated to the appropriate section the 
operational risk lifecycle.
    Section 17A(b)(3)(F) of the Act \3\ requires, among other things, 
that the rules of a clearing agency be designed to protect investors 
and the public interest and to comply with the provisions of the Act 
and the rules and regulations thereunder. ICC believes that the 
proposed rule changes are consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to ICC, in 
particular, to Section 17(A)(b)(3)(F),\4\ because ICC believes that the 
proposed rule changes will protect investors and the public interest, 
as the reorganization of ICC's existing operational risk processes 
around the operational risk lifecycle promotes readability and 
efficiency, and alleviates potential confusion throughout the 
Operational Risk Management Framework. In addition, the proposed 
revisions are consistent with the relevant requirements of Rule 17Ad-
22.\5\ The changes to the ICC Operational Risk Management Framework 
further ensure that ICC, through its operational risk program, is able 
to identify sources of operational risk and minimize them through the 
development of appropriate systems, control, and procedures. Thus, the 
changes are reasonably designed to meet the operational risk 
requirements of Rule 17Ad-22(d)(4).\6\ As such, the proposed changes 
are designed to promote the prompt and accurate clearance and 
settlement of securities transactions, derivatives agreements, 
contracts, and transactions within the meaning of Section 17A(b)(3)(F) 
\7\ of the Act.
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
    \4\ Id.
    \5\ 17 CFR 240.17Ad-22.
    \6\ 17 CFR 240.17Ad-22(d)(4).
    \7\ Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    ICC does not believe the proposed rule changes would have any 
impact, or impose any burden, on competition. The ICC Operational Risk 
Management Framework applies uniformly across all market participants. 
Therefore, ICC does not believe the proposed rule changes impose any 
burden on competition that is inappropriate in furtherance of the 
purposes of the Act.

[[Page 16247]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments relating to the proposed rule change have not been 
solicited or received. ICC will notify the Commission of any written 
comments received by ICC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-ICC-2016-003 on the subject line.

Paper Comments

    Send paper comments in triplicate to Secretary, Securities and 
Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-ICC-2016-003. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filings will also be available 
for inspection and copying at the principal office of ICE Clear Credit 
and on ICE Clear Credit's Web site at https://www.theice.com/clear-credit/regulation.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-ICC-2016-003 
and should be submitted on or before April 15, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Brent J. Fields,
Secretary.
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    \8\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-06747 Filed 3-24-16; 8:45 am]
 BILLING CODE 8011-01-P