82_FR_47037 82 FR 46844 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to ICC's Liquidity Risk Management Framework and ICC's Stress Testing Framework

82 FR 46844 - Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to ICC's Liquidity Risk Management Framework and ICC's Stress Testing Framework

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 193 (October 6, 2017)

Page Range46844-46845
FR Document2017-21540

Federal Register, Volume 82 Issue 193 (Friday, October 6, 2017) 
[Federal Register Volume 82, Number 193 (Friday, October 6, 2017)]
[Notices]
[Pages 46844-46845]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-21540]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81797; File No. SR-ICC-2017-012]


Self-Regulatory Organizations; ICE Clear Credit LLC; Order 
Approving Proposed Rule Change Relating to ICC's Liquidity Risk 
Management Framework and ICC's Stress Testing Framework

October 2, 2017.

I. Introduction

    On August 22, 2017, ICE Clear Credit LLC (``ICC'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change (SR-ICC-2017-012) 
to amend the ICC Liquidity Risk Management Framework and the ICC Stress 
Testing Framework. The proposed rule change was published for comment 
in the Federal Register on August 31, 2017.\3\ The Commission received 
no comment letters regarding the proposed change. For the reasons 
discussed below, the Commission is approving 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. 81486 (August 25, 2017), 
82 FR 41454 (August 31, 2017) (SR-ICC-2017-012) (``Notice'').
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II. Description of the Proposed Rule Change

    In connection with clearing Single Name (``SN'') credit default 
swaps (``CDS'') referencing ICC Clearing Participants (``CPs''), ICC 
has proposed changes to its Stress Testing Framework and Liquidity Risk 
Management Framework, which ICC believes will enhance its stress 
testing and liquidity stress testing practices. The proposed rule 
change would expand the stress test scenarios that ICC considers to be 
extreme but plausible by incorporating additional losses related to the 
expected loss given default of all names not explicitly assumed to 
enter a state of default in a CP's portfolio.\4\ The proposed change 
would similarly amend the stress scenarios described in ICC's Liquidity 
Risk Management Framework, which ICC stated is necessary to ensure 
consistency across its documents.\5\ The proposed change would also 
incorporate an enhanced analysis of profits and losses (``P/L'') 
arising out of General Wrong-Way Risk (``GWWR'') generated by SNs in 
the Banking and Sovereign sectors.\6\ Further, the proposed change 
would clarify ICC's current view that certain GWWR and contagion stress 
scenarios are extreme, but not plausible, and that such scenarios would 
be reviewed for informational purposes only.\7\
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    \4\ Notice, 82 FR at 41455.
    \5\ Notice, 82 FR at 41455-56.
    \6\ Notice, 82 FR at 41455.
    \7\ Id.
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    The proposed change would enhance ICC's guaranty fund sizing 
process by adding a new sensitivity analysis. This new analysis would 
contemplate the default of three CP SNs and two non-CP SNs. This 
analysis would be in addition to the current sizing approach, which 
contemplates the default of two CP SNs and three non-CP SNs. While not 
immediately requiring the collection of additional resources, ICC 
stated that the proposed change could provide a potential remedy where 
deficiencies are identified in ICC's current sizing methodology.\8\
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    \8\ Id.
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    ICC also proposes to add an interest rate sensitivity analysis in 
order to comply with CFTC Regulation 17 CFR 39.36. The proposed 
interest rate sensitivity analysis would shock the Euro and USD 
interest rate curves up and down to see which scenario would lead to 
further erosion of ICC's guaranty fund. ICC stated that this analysis 
would have no impact on its guaranty fund sizing methodology.\9\
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    \9\ Id.
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    The proposed change also includes amendments to ICC's approach to 
Specific Wrong-Way Risk (``SWWR'') P/L to expand the SWWR P/L to 
incorporate losses arising in connection with defaulting CP specific 
exposures, and also adds a description of ICC's current client stress 
testing practices. ICC stated that these changes were proposed for 
consistency with specific CFTC regulations.\10\
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    \10\ Id.
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III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \11\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization.
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    \11\ 15 U.S.C. 78s(b)(2)(C).
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    Section 17A(b)(3)(F) \12\ of the Act requires, inter alia, that the 
rules of a clearing agency be designed to assure the safeguarding of 
securities and funds which are in the custody or control of the 
clearing agency, or for which it is

[[Page 46845]]

responsible. Rule 17Ad-22(b)(3) \13\ requires, inter alia, that a 
registered clearing agency acting as a central counterparty for 
security-based swaps shall establish, implement, maintain, and enforce 
written policies and procedures reasonably designed to maintain 
sufficient financial resources to withstand, at a minimum, a default by 
the two participant families to which it has the largest exposures in 
extreme but plausible market conditions, in its capacity as a central 
counterparty for security-based swaps.
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ 17 CFR 240.17Ad-22(b)(3).
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    The Commission finds that the proposed rule change, which enhances 
ICC's Stress Testing Framework and Liquidity Risk Management Framework, 
is consistent with section 17A \14\ of the Act and Rule 17Ad-22 \15\ 
thereunder. As noted above, in response to the clearing of SN CDS 
referencing CPs, the proposed change would expand the range of stress 
tests that ICC considers to be extreme but plausible. The Commission 
has reviewed the Notice and ICC's rules, policies, and procedures, and 
believes that the expanded range of extreme but plausible scenarios, 
supplemented by the information that will be provided by certain 
additional GWWR and contagion stress scenarios considered to be extreme 
but implausible, enhance ICC's processes for estimating the amount of 
financial resources ICC should collect.
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    \14\ 15 U.S.C. 78q-1.
    \15\ 17 CFR 240.17Ad-22.
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    Additionally, while adoption of the sensitivity analyses described 
above will not immediately require ICC to collect additional financial 
resources, it will provide ICC with additional risk management 
information. Further, ICC stated that at least in some cases, one of 
the newly added analyses could provide a potential remedy where 
deficiencies are identified in ICC's current sizing methodology.\16\ 
Consequently, the Commission believes that the proposed rule change is 
reasonably designed to ensure that ICC maintains sufficient financial 
resources in accordance with the requirements of Rule 17Ad-22(b)(3) and 
will thereby enhance ICC's ability to safeguard the securities and 
funds of CPs in the event of participant defaults. As a result, the 
Commission finds that the proposed change is consistent with the 
requirements of section 17A of the Act and the relevant provisions of 
Rule 17Ad-22.
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    \16\ Notice, 82 FR at 41455.
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IV. Conclusion

    It is therefore ordered pursuant to section 19(b)(2) of the Act 
that the proposed rule change (SR-ICC-2017-012) be, and hereby is, 
approved.\17\
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    \17\ 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).
    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21540 Filed 10-5-17; 8:45 am]
BILLING CODE 8011-01-P

46844 Federal Register / Vol. 82, No. 193 / Friday, October 6, 2017 / Notices This meeting will be webcast live at SECURITIES AND EXCHANGE Banking and Sovereign sectors.6 the Web address—http://www.nrc.gov/. COMMISSION Further, the proposed change would clarify ICC’s current view that certain Week of October 30, 2017—Tentative [Release No. 34–81797; File No. SR–ICC– GWWR and contagion stress scenarios 2017–012] There are no meetings scheduled for are extreme, but not plausible, and that the week of October 30, 2017. Self-Regulatory Organizations; ICE such scenarios would be reviewed for Clear Credit LLC; Order Approving informational purposes only.7 Week of November 6, 2017—Tentative Proposed Rule Change Relating to The proposed change would enhance ICC’s Liquidity Risk Management ICC’s guaranty fund sizing process by There are no meetings scheduled for adding a new sensitivity analysis. This Framework and ICC’s Stress Testing the week of November 6, 2017. Framework new analysis would contemplate the Week of November 13, 2017—Tentative default of three CP SNs and two non-CP October 2, 2017. SNs. This analysis would be in addition There are no meetings scheduled for I. Introduction to the current sizing approach, which the week of November 13, 2017. contemplates the default of two CP SNs On August 22, 2017, ICE Clear Credit * * * * * and three non-CP SNs. While not LLC (‘‘ICC’’) filed with the Securities immediately requiring the collection of The schedule for Commission and Exchange Commission additional resources, ICC stated that the meetings is subject to change on short (‘‘Commission’’), pursuant to section proposed change could provide a notice. For more information or to verify 19(b)(1) of the Securities Exchange Act potential remedy where deficiencies are the status of meetings, contact Denise of 1934 (‘‘Act’’) 1 and Rule 19b–4 identified in ICC’s current sizing McGovern at 301–415–0681 or via email thereunder,2 a proposed rule change methodology.8 at Denise.McGovern@nrc.gov. (SR–ICC–2017–012) to amend the ICC Liquidity Risk Management Framework ICC also proposes to add an interest * * * * * and the ICC Stress Testing Framework. rate sensitivity analysis in order to The proposed rule change was comply with CFTC Regulation 17 CFR The NRC Commission Meeting published for comment in the Federal 39.36. The proposed interest rate Schedule can be found on the Internet Register on August 31, 2017.3 The sensitivity analysis would shock the at: http://www.nrc.gov/public-involve/ Commission received no comment Euro and USD interest rate curves up public-meetings/schedule.html. and down to see which scenario would letters regarding the proposed change. * * * * * lead to further erosion of ICC’s guaranty For the reasons discussed below, the The NRC provides reasonable Commission is approving the proposed fund. ICC stated that this analysis would accommodation to individuals with rule change. have no impact on its guaranty fund disabilities where appropriate. If you sizing methodology.9 II. Description of the Proposed Rule The proposed change also includes need a reasonable accommodation to Change amendments to ICC’s approach to participate in these public meetings, or need this meeting notice or the In connection with clearing Single Specific Wrong-Way Risk (‘‘SWWR’’) transcript or other information from the Name (‘‘SN’’) credit default swaps P/L to expand the SWWR P/L to (‘‘CDS’’) referencing ICC Clearing incorporate losses arising in connection public meetings in another format (e.g., Participants (‘‘CPs’’), ICC has proposed with defaulting CP specific exposures, braille, large print), please notify changes to its Stress Testing Framework and also adds a description of ICC’s Kimberly Meyer, NRC Disability and Liquidity Risk Management current client stress testing practices. Program Manager, at 301–287–0739, by ICC stated that these changes were Framework, which ICC believes will videophone at 240–428–3217, or by enhance its stress testing and liquidity proposed for consistency with specific email at Kimberly.Meyer-Chambers@ stress testing practices. The proposed CFTC regulations.10 nrc.gov. Determinations on requests for rule change would expand the stress test reasonable accommodation will be III. Discussion and Commission scenarios that ICC considers to be made on a case-by-case basis. Findings extreme but plausible by incorporating * * * * * additional losses related to the expected Section 19(b)(2)(C) of the Act 11 loss given default of all names not directs the Commission to approve a Members of the public may request to explicitly assumed to enter a state of proposed rule change of a self- receive this information electronically. default in a CP’s portfolio.4 The regulatory organization if it finds that If you would like to be added to the such proposed rule change is consistent proposed change would similarly distribution, please contact the Nuclear with the requirements of the Act and the amend the stress scenarios described in Regulatory Commission, Office of the rules and regulations thereunder ICC’s Liquidity Risk Management Secretary, Washington, DC 20555 (301– applicable to such organization. Framework, which ICC stated is 415–1969), or email necessary to ensure consistency across Section 17A(b)(3)(F) 12 of the Act Brenda.Akstulewicz@nrc.gov or its documents.5 The proposed change requires, inter alia, that the rules of a Patricia.Jimenez@nrc.gov. would also incorporate an enhanced clearing agency be designed to assure Dated: October 4, 2017. analysis of profits and losses (‘‘P/L’’) the safeguarding of securities and funds arising out of General Wrong-Way Risk which are in the custody or control of asabaliauskas on DSKBBXCHB2PROD with NOTICES Denise L. McGovern, (‘‘GWWR’’) generated by SNs in the the clearing agency, or for which it is Policy Coordinator, Office of the Secretary. [FR Doc. 2017–21755 Filed 10–4–17; 4:15 pm] 1 15 6 Notice, 82 FR at 41455. U.S.C. 78s(b)(1). BILLING CODE 7590–01–P 2 17 7 Id. CFR 240.19b–4. 3 Securities Exchange Act Release No. 81486 8 Id. 9 Id. (August 25, 2017), 82 FR 41454 (August 31, 2017) (SR–ICC–2017–012) (‘‘Notice’’). 10 Id. 4 Notice, 82 FR at 41455. 11 15 U.S.C. 78s(b)(2)(C). 5 Notice, 82 FR at 41455–56. 12 15 U.S.C. 78q–1(b)(3)(F). VerDate Sep<11>2014 18:40 Oct 05, 2017 Jkt 244001 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 E:\FR\FM\06OCN1.SGM 06OCN1

Federal Register / Vol. 82, No. 193 / Friday, October 6, 2017 / Notices 46845 responsible. Rule 17Ad–22(b)(3) 13 proposed rule change (SR–ICC–2017– change is available on the Exchange’s requires, inter alia, that a registered 012) be, and hereby is, approved.17 Web site at www.nyse.com, at the clearing agency acting as a central For the Commission by the Division of principal office of the Exchange, and at counterparty for security-based swaps Trading and Markets, pursuant to delegated the Commission’s Public Reference shall establish, implement, maintain, authority.18 Room. and enforce written policies and Eduardo A. Aleman, procedures reasonably designed to II. Self-Regulatory Organization’s Assistant Secretary. Statement of the Purpose of, and maintain sufficient financial resources [FR Doc. 2017–21540 Filed 10–5–17; 8:45 am] to withstand, at a minimum, a default Statutory Basis for, the Proposed Rule by the two participant families to which BILLING CODE 8011–01–P Change it has the largest exposures in extreme In its filing with the Commission, the but plausible market conditions, in its SECURITIES AND EXCHANGE self-regulatory organization included capacity as a central counterparty for COMMISSION statements concerning the purpose of, security-based swaps. and basis for, the proposed rule change The Commission finds that the [Release No. 34–81791; File No. SR–NYSE– and discussed any comments it received proposed rule change, which enhances 2017–50] on the proposed rule change. The text ICC’s Stress Testing Framework and Self-Regulatory Organizations; New of those statements may be examined at Liquidity Risk Management Framework, York Stock Exchange LLC; Notice of the places specified in Item IV below. is consistent with section 17A 14 of the Filing and Immediate Effectiveness of The Exchange has prepared summaries, Act and Rule 17Ad–22 15 thereunder. As Proposed Rule Change To Amend Its set forth in sections A, B, and C below, noted above, in response to the clearing Price List To Permit Affiliated Member of the most significant parts of such of SN CDS referencing CPs, the Organizations That Are Supplemental statements. proposed change would expand the Liquidity Providers A. Self-Regulatory Organization’s range of stress tests that ICC considers Statement of the Purpose of, and the to be extreme but plausible. The October 2, 2017. Statutory Basis for, the Proposed Rule Commission has reviewed the Notice Pursuant to section 19(b)(1) 1 of the Change and ICC’s rules, policies, and Securities Exchange Act of 1934 (the procedures, and believes that the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 1. Purpose expanded range of extreme but plausible notice is hereby given that, on The Exchange proposes to amend its scenarios, supplemented by the September 25, 2017, New York Stock Price List to permit affiliated member information that will be provided by Exchange LLC (‘‘NYSE’’ or the organizations that are SLPs on the certain additional GWWR and contagion ‘‘Exchange’’) filed with the Securities Exchange to obtain the most favorable stress scenarios considered to be and Exchange Commission (the rate when (1) at least one affiliate extreme but implausible, enhance ICC’s ‘‘Commission’’) the proposed rule satisfies the quoting requirements for processes for estimating the amount of change as described in Items I, II, and SLPs in assigned securities, and (2) the financial resources ICC should collect. III below, which Items have been combined SLPs’ aggregate volumes Additionally, while adoption of the prepared by the self-regulatory satisfy the adding liquidity volume sensitivity analyses described above organization. The Commission is requirements for SLP tiered and non- will not immediately require ICC to publishing this notice to solicit tiered rates. collect additional financial resources, it comments on the proposed rule change The proposed changes would be will provide ICC with additional risk from interested persons. applicable to all SLP transactions, management information. Further, ICC regardless of price of the security. I. Self-Regulatory Organization’s stated that at least in some cases, one of The Exchange proposes to implement Statement of the Terms of Substance of the newly added analyses could provide these changes to its Price List effective the Proposed Rule Change a potential remedy where deficiencies September 25, 2017. are identified in ICC’s current sizing The Exchange proposes to amend its methodology.16 Consequently, the Price List to permit affiliated member Proposed Rule Change Commission believes that the proposed organizations that are Supplemental SLPs are eligible for certain credits rule change is reasonably designed to Liquidity Providers (‘‘SLPs’’) on the when adding liquidity to the Exchange. ensure that ICC maintains sufficient Exchange to obtain the most favorable The amount of the credit is currently financial resources in accordance with rate when (1) at least one affiliate determined by the ‘‘tier’’ for which the the requirements of Rule 17Ad–22(b)(3) satisfies the quoting requirements for SLP qualifies, which is based on the and will thereby enhance ICC’s ability SLPs in assigned securities, and (2) the SLP’s level of quoting and ADV of to safeguard the securities and funds of combined SLPs’ aggregate volumes liquidity added by the SLP in assigned CPs in the event of participant defaults. satisfy the adding liquidity volume securities. As a result, the Commission finds that requirements for SLP tiered and non- Currently, SLP Tier 3 provides that the proposed change is consistent with tiered rates. The Exchange proposes to when adding liquidity to the NYSE in the requirements of section 17A of the implement the proposed changes on securities with a share price of $1.00 or Act and the relevant provisions of Rule September 25, 2017.4 The proposed rule more, an SLP is eligible for a credit of 17Ad–22. $0.0023 per share traded if the SLP (1) asabaliauskas on DSKBBXCHB2PROD with NOTICES 17 In approving the proposed rule change, the IV. Conclusion Commission considered the proposal’s impact on meets the 10% average or more quoting efficiency, competition, and capital formation. 15 requirement in an assigned security It is therefore ordered pursuant to U.S.C. 78c(f). pursuant to Rule 107B and (2) adds section 19(b)(2) of the Act that the 18 17 CFR 200.30–3(a)(12). liquidity for all assigned SLP securities 1 15 U.S.C. 78s(b)(1). 13 17 CFR 240.17Ad–22(b)(3). 2 15 U.S.C. 78a. withdrew such filing on September 13, 2017, and 14 15 U.S.C. 78q–1. 3 17 CFR 240.19b–4. refiled the same day (SR–NYSE–2017–48). SR– 15 17 CFR 240.17Ad–22. 4 The Exchange originally filed to amend the NYSE–48 [sic] was subsequently withdrawn and 16 Notice, 82 FR at 41455. Price List on August 31, 2017 (SR–NYSE–2017–46), replaced by this filing. VerDate Sep<11>2014 18:40 Oct 05, 2017 Jkt 244001 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 E:\FR\FM\06OCN1.SGM 06OCN1


Document Created: 2017-10-06 00:09:25
Document Modified: 2017-10-06 00:09:25
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 46844 
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