83 FR 27360 - Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating to Formalization of the ICC Model Validation Framework

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 113 (June 12, 2018)

Page Range		27360-27362
FR Document		2018-12550
Federal Register, Volume 83 Issue 113 (Tuesday, June 12, 2018)
[Federal Register Volume 83, Number 113 (Tuesday, June 12, 2018)]
[Notices]
[Pages 27360-27362]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-12550]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83386; File No. SR-ICC-2018-004]


Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of 
Filing of Proposed Rule Change Relating to Formalization of the ICC 
Model Validation Framework

June 6, 2018.
    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 May 23, 2018, 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 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. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The principal purpose of the proposed rule change is to formalize 
the ICC Model Validation Framework. This change does not require any 
revisions to the ICC Clearing Rules.

II. Clearing Agency'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.

[[Page 27361]]

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

(a) Summary of Proposed Changes
    ICC proposes to formalize the ICC Model Validation Framework, which 
sets forth ICC's model validation procedures. ICC has developed a 
proprietary risk management system that models the risk of credit 
default swap based portfolios and determines appropriate Initial Margin 
and Guaranty Fund requirements. The risk management system is composed 
of risk modeling components (``Model Components'') which employ a 
combination of statistical analysis of credit spread time series and 
stress test simulation scenarios to address different risk drivers. The 
risk drivers addressed by the Model Components constitute the 
foundation of total Initial Margin and Guaranty Fund requirements for 
cleared portfolios. The ICC Model Validation Framework provides 
assurances as to the appropriateness of its risk requirements. ICC's 
Risk Oversight Officer is the ICC Model Validation Framework owner and 
is responsible to the ICC President for the successful operation and 
maintenance of the ICC Model Validation Framework.
    ICC considers both new Model Components and enhancements to Model 
Components as part of its Model Validation Framework (collectively, 
``Model Change''). New Model Components consider risk drivers that are 
not currently included in the risk management system; enhanced Model 
Components improve upon the methodologies used by the risk management 
system to consider a given risk driver or drivers. ICC classifies Model 
Changes as either Materiality A or Materiality B, depending on how 
substantially the Model Change affects the risk management system's 
assessment of risk for the related risk driver or drivers. The ICC 
Chief Risk Officer and the ICC Risk Oversight Officer will review all 
enhancements to ICC's risk management system and decide which 
enhancements qualify as Model Changes, and which qualifying 
enhancements should be classified as Materiality A versus Materiality 
B. Materiality A Model Changes receive a higher control standard than 
Materiality B Model Changes. The ICC Risk Committee reviews the 
materiality classifications and provides feedback as necessary.
    The ICC Model Validation Framework sets forth the process for 
selecting Model Validators and describes the independent validator 
criteria, including technical expertise and independence requirements. 
The ICC Model Validation Framework also describes the Model Inventory 
which is maintained by the ICC Risk Department and which contains key 
information about all ICC Model Components and Model Changes. The ICC 
Risk Oversight Officer will review the model inventory at least 
quarterly to ensure that it contains accurate and up to date 
information relating to ICC's Model Components and Model Changes.
    The ICC Model Validation Framework consists of four controls: 
Initial validation; ongoing monitoring and validation; investigation; 
and independent periodic review. Before going live with a Model Change, 
ICC must successfully complete an initial validation of the conceptual 
soundness of the methodology and the proposed ongoing monitoring and 
validation approach. All Model Changes are subject to internal initial 
validation. In addition, Materiality A Model Changes are subject to an 
additional independent initial validation.
    Ongoing monitoring and validation provides assurances that ICC has 
appropriately configured and calibrated the risk management system, 
including any recent Model Change, and that the risk management system 
is achieving the desired level of performance. The ongoing monitoring 
and validation control consists of three areas: Parameter setting, 
execution monitoring, and outcome analysis.
    If ongoing monitoring and validation identifies features of the 
risk management system that might indicate a Model Component weakness, 
ICC investigates and identifies the root cause. If a model weakness is 
discovered during investigation, the ICC Chief Risk Officer informs the 
ICC Risk Committee of the ongoing monitoring and validation results 
which triggered the investigation. If ICC is satisfied that the 
identified features do not represent a model weakness, the ICC Chief 
Risk Officer will present the results of the investigation 
demonstrating no model weakness exists. If ICC identifies a model 
weakness during the investigation, the ICC Chief Risk Officer will 
present the results of the investing demonstrating a model weakness, 
and ICC will remediate the identified weakness through an appropriate 
Model Change, which passes through the ICC Model Validation Framework 
starting with an Initial validation.
    The ICC Chief Risk Officer provides support and information to 
allow the independent validators to perform periodic reviews of all ICC 
Model Components and related practices at least once in every calendar 
year. At ICC's choosing, the scope of an independent periodic review 
may cover all Model Components used by the risk management system, or a 
subset of Model Components, as long as all Model Components are 
included in one or more independent periodic reviews each year. The 
independent periodic review will demonstrate that the Model Components 
remain fit for purpose; that the Model Components assumptions are 
valid; that ICC has adequately addressed any medium priority open items 
from Model Change initial validations and any other implementation 
conditions; and that ICC has been complying with its ongoing monitoring 
and validation requirements and the Model Components are performing 
without any significant weakness. The deliverables from the independent 
periodic review must include a report from the independent validator 
providing a summary of the completed evaluation and details of any 
remaining open items, classified by priority. The ICC Chief Risk 
Officer will present the periodic review to the ICC Risk Committee and 
describe ICC's plans in relation to any open high or medium priority 
items in the report.
(b) Statutory Basis
    Section 17A(b)(3)(F) of the ActHD1\3\ requires, among other things, 
that the rules of a clearing agency be designed to promote the prompt 
and accurate clearance and settlement of securities transactions, and 
to the extent applicable, derivative agreements, contracts and 
transactions and to comply with the provisions of the Act and the rules 
and regulations thereunder. ICC believes that the proposed rule change 
is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to ICC, in particular, to Section 
17A(b)(3)(F),\4\ because ICC believes that the proposed rule change 
will promote the prompt and accurate clearance and settlement of 
securities transactions, derivatives agreements, contracts, and 
transactions. The ICC Model Validation Framework provides assurances as 
to the appropriateness of changes to ICC's risk models, including the 
appropriateness of risk requirements. As such, the proposed rule change 
is designed to promote the prompt and accurate clearance and settlement 
of securities transactions, derivatives agreements, contracts, and 
transactions within the meaning of

[[Page 27362]]

Section 17A(b)(3)(F) \5\ of the Act. The proposed rule change will also 
satisfy the requirements of Rule 17Ad-22.\6\ In particular, the 
proposed rule change sets forth ICC's model validation procedures, 
including the evaluation of the performance of ICC's risk models and 
related parameters and assumptions by a qualified and independent Model 
Validator, consistent with the requirements of Rule 17Ad-22(b)(4).\7\
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
    \4\ Id.
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ 17 CFR 240.17Ad-22.
    \7\ 17 CFR 240.17Ad-22(b)(4).
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(B) Clearing Agency's Statement on Burden on Competition

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

(C) Clearing Agency'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 up to 90 days (i) as the 
Commission may designate 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-2018-004 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-2018-004. 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 website (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 website 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 website at https://www.theice.com/clear-credit/regulation. All comments received will be posted without change. 
Persons submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-ICC-2018-004 and should be 
submitted on or before July 3, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12550 Filed 6-11-18; 8:45 am]
 BILLING CODE 8011-01-P
27360 Federal Register / Vol. 83, No. 113 / Tuesday, June 12, 2018 / Notices

investors and the public interest, it appears to the Commission that such You should submit only information
provided that the self-regulatory action is: (i) Necessary or appropriate in that you wish to make available
organization has given the Commission the public interest; (ii) for the protection publicly. All submissions should refer
written notice of its intent to file the of investors; or (iii) otherwise in to File Number SR–ICC–2018–005 and
proposed rule change at least five furtherance of the purposes of the Act. should be submitted on or before July 3,
business days prior to the date of filing If the Commission takes such action, the 2018.
of the proposed rule change or such Commission shall institute proceedings For the Commission, by the Division of
shorter time as designated by the to determine whether the proposed rule Trading and Markets, pursuant to delegated
Commission,10 the proposed rule should be approved or disapproved. authority.16
change has become effective pursuant to Eduardo A. Aleman,
IV. Solicitation of Comments
Section 19(b)(3)(A) of the Act 11 and Assistant Secretary.
Rule 19b–4(f)(6) 12 thereunder. Interested persons are invited to
submit written data, views, and [FR Doc. 2018–12551 Filed 6–11–18; 8:45 am]
A proposed rule change filed under
Rule 19b–4(f)(6) 13 normally does not arguments concerning the foregoing, BILLING CODE 8011–01–P

become operative prior to 30 days after including whether the proposed rule
the date of its filing. Pursuant to Rule change is consistent with the Act.
19b–4(f)(6)(iii),14 however, the Comments may be submitted by any of SECURITIES AND EXCHANGE
Commission may designate a shorter the following methods: COMMISSION
time if such action is consistent with the Electronic Comments [Release No. 34–83386; File No. SR–ICC–
protection of investors and the public 2018–004]
interest. ICC has requested that the • Use the Commission’s internet
Commission waive the five-day pre- comment form (http://www.sec.gov/ Self-Regulatory Organizations; ICE
filing requirement and the 30-day rules/sro.shtml); or Clear Credit LLC; Notice of Filing of
operative delay so that ICC may • Send an email to rule-comments@ Proposed Rule Change Relating to
implement the proposed rule change by sec.gov. Please include File Number SR– Formalization of the ICC Model
the effective date of the GDPR (May 25, ICC–2018–005 on the subject line. Validation Framework
2018). The Commission notes that the Paper Comments
proposed rule change is limited to June 6, 2018.
Send paper comments in triplicate to Pursuant to Section 19(b)(1) of the
revising Rule 407 to facilitate
Secretary, Securities and Exchange Securities Exchange Act of 1934
compliance with the requirements of the
Commission, 100 F Street NE, (‘‘Act’’) 1 and Rule 19b–4 thereunder,2
GDPR, including committing ICC to
Washington, DC 20549–1090. notice is hereby given that on May 23,
keeping Personal Data confidential and
clarifying that ICC’s policies on use of All submissions should refer to File 2018, ICE Clear Credit LLC (‘‘ICC’’) filed
personal data will now primarily be Number SR–ICC–2018–005. This file with the Securities and Exchange
stated in a privacy notice. The proposed number should be included on the Commission (‘‘Commission’’) the
rule change does not (i) significantly subject line if email is used. To help the proposed rule change as described in
affect the protection of investors or the Commission process and review your Items I, II and III below, which Items
public interest; (ii) impose any comments more efficiently, please use have been prepared by ICC. The
significant burden on competition; or only one method. The Commission will Commission is publishing this notice to
(iii) affect the safeguarding of funds or post all comments on the Commission’s solicit comments on the proposed rule
securities in the custody or control of internet website (http://www.sec.gov/ change from interested persons.
ICC or for which it is responsible. rules/sro.shtml). Copies of the
submission, all subsequent I. Clearing Agency’s Statement of the
Waiver of the five-day pre-filing Terms of Substance of the Proposed
requirement and the 30-day operative amendments, all written statements
with respect to the proposed rule Rule Change
delay would allow ICC to implement the
proposed rule change by the effective change that are filed with the The principal purpose of the
date of the GDPR and therefore comply Commission, and all written proposed rule change is to formalize the
with EU law. Therefore, the communications relating to the ICC Model Validation Framework. This
Commission believes that waiving the proposed rule change between the change does not require any revisions to
five-day pre-filing requirement and the Commission and any person, other than the ICC Clearing Rules.
30-day operative delay is consistent those that may be withheld from the
public in accordance with the II. Clearing Agency’s Statement of the
with the protection of investors and the Purpose of, and Statutory Basis for, the
public interest and designates the provisions of 5 U.S.C. 552, will be
available for website viewing and Proposed Rule Change
proposed rule change as operative upon
filing.15 printing in the Commission’s Public In its filing with the Commission, ICC
At any time within 60 days of the Reference Room, 100 F Street NE, included statements concerning the
filing of the proposed rule change, the Washington, DC 20549, on official purpose of and basis for the proposed
Commission summarily may business days between the hours of rule change and discussed any
temporarily suspend such rule change if 10:00 a.m. and 3:00 p.m. Copies of such comments it received on the proposed
filings will also be available for rule change. The text of these statements
10 ICC has satisfied this requirement. inspection and copying at the principal may be examined at the places specified
sradovich on DSK3GMQ082PROD with NOTICES

11 15 U.S.C. 78s(b)(3)(A). office of ICE Clear Credit and on ICE in Item IV below. ICC has prepared
12 17 CFR 240.19b–4(f)(6). Clear Credit’s website at https:// summaries, set forth in sections (A), (B),
13 17 CFR 240.19b–4(f)(6).
www.theice.com/clear-credit/regulation. and (C) below, of the most significant
14 17 CFR 240.19b–4(f)(6)(iii).
All comments received will be posted aspects of these statements.
15 For purposes only of waiving the five-day pre-
without change. Persons submitting
filing requirement and the 30-day operative delay,
the Commission has considered the proposed rule
comments are cautioned that we do not 16 17 CFR 200.30–3(a)(12).
change’s impact on efficiency, competition, and redact or edit personal identifying 1 15 U.S.C. 78s(b)(1).
capital formation. See 15 U.S.C. 78c(f). information from comment submissions. 2 17 CFR 240.19b–4.

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27362 Federal Register / Vol. 83, No. 113 / Tuesday, June 12, 2018 / Notices

Section 17A(b)(3)(F) 5 of the Act. The • Send an email to rule-comments@ DEPARTMENT OF STATE
proposed rule change will also satisfy sec.gov. Please include File Number SR–
[Public Notice 10438]
the requirements of Rule 17Ad–22.6 In ICC–2018–004 on the subject line.
particular, the proposed rule change sets Notice of Determinations; Culturally
forth ICC’s model validation procedures, Paper Comments
Significant Objects Imported for
including the evaluation of the Send paper comments in triplicate to Exhibition Determinations: ‘‘John
performance of ICC’s risk models and Singer Sargent and Chicago’s Gilded
Secretary, Securities and Exchange
related parameters and assumptions by Age’’ Exhibition
Commission, 100 F Street NE,
a qualified and independent Model
Validator, consistent with the Washington, DC 20549–1090. SUMMARY: Notice is hereby given of the
requirements of Rule 17Ad–22(b)(4).7 All submissions should refer to File following determinations: I hereby
Number SR–ICC–2018–004. This file determine that certain objects to be
(B) Clearing Agency’s Statement on
number should be included on the included in the exhibition ‘‘John Singer
Burden on Competition
subject line if email is used. To help the Sargent and Chicago’s Gilded Age,’’
ICC does not believe the proposed imported from abroad for temporary
Commission process and review your
rule change would have any impact, or exhibition within the United States, are
impose any burden, on competition. comments more efficiently, please use
only one method. The Commission will of cultural significance. The objects are
The ICC Model Validation Framework imported pursuant to loan agreements
applies uniformly across all market post all comments on the Commission’s
with the foreign owners or custodians.
participants. Therefore, ICC does not internet website (http://www.sec.gov/
I also determine that the exhibition or
believe the proposed rule change rules/sro.shtml). Copies of the
display of the exhibit objects at The Art
impose any burden on competition that submission, all subsequent Institute of Chicago, in Chicago, Illinois,
is inappropriate in furtherance of the amendments, all written statements from on or about July 1, 2018, until on
purposes of the Act. with respect to the proposed rule or about September 30, 2018, and at
change that are filed with the possible additional exhibitions or
(C) Clearing Agency’s Statement on
Commission, and all written venues yet to be determined, is in the
Comments on the Proposed Rule
Change Received From Members, communications relating to the national interest. I have ordered that
Participants or Others proposed rule change between the Public Notice of these determinations be
Commission and any person, other than published in the Federal Register.
Written comments relating to the those that may be withheld from the FOR FURTHER INFORMATION CONTACT:
proposed rule change have not been public in accordance with the
solicited or received. ICC will notify the Elliot Chiu, Attorney-Adviser, Office of
provisions of 5 U.S.C. 552, will be the Legal Adviser, U.S. Department of
Commission of any written comments
available for website viewing and State (telephone: 202–632–6471; email:
received by ICC.
printing in the Commission’s Public section2459@state.gov). The mailing
III. Date of Effectiveness of the Reference Room, 100 F Street NE, address is U.S. Department of State,
Proposed Rule Change and Timing for Washington, DC 20549, on official L/PD, SA–5, Suite 5H03, Washington,
Commission Action business days between the hours of DC 20522–0505.
Within 45 days of the date of 10:00 a.m. and 3:00 p.m. Copies of such SUPPLEMENTARY INFORMATION: The
publication of this notice in the Federal filings will also be available for foregoing determinations were made
Register or within such longer period inspection and copying at the principal pursuant to the authority vested in me
up to 90 days (i) as the Commission may office of ICE Clear Credit and on ICE by the Act of October 19, 1965 (79 Stat.
designate if it finds such longer period Clear Credit’s website at https:// 985; 22 U.S.C. 2459), E.O. 12047 of
to be appropriate and publishes its www.theice.com/clear-credit/regulation. March 27, 1978, the Foreign Affairs
reasons for so finding or (ii) as to which All comments received will be posted Reform and Restructuring Act of 1998
the self-regulatory organization without change. Persons submitting (112 Stat. 2681, et seq.; 22 U.S.C. 6501
consents, the Commission will: comments are cautioned that we do not note, et seq.), Delegation of Authority
(A) By order approve or disapprove No. 234 of October 1, 1999, and
redact or edit personal identifying
such proposed rule change, or Delegation of Authority No. 236–3 of
(B) institute proceedings to determine information from comment submissions.
You should submit only information August 28, 2000.
whether the proposed rule change
should be disapproved. that you wish to make available Marie Therese Porter Royce,
publicly. All submissions should refer Assistant Secretary for Educational and
IV. Solicitation of Comments to File Number SR–ICC–2018–004 and Cultural Affairs, Department of State.
Interested persons are invited to should be submitted on or before July 3, [FR Doc. 2018–12588 Filed 6–11–18; 8:45 am]
submit written data, views, and 2018. BILLING CODE 4710–05–P
arguments concerning the foregoing, For the Commission, by the Division of
including whether the proposed rule Trading and Markets, pursuant to delegated
change is consistent with the Act. authority.8
DEPARTMENT OF STATE
Comments may be submitted by any of [Public Notice 10441]
Eduardo A. Aleman,
the following methods:
Assistant Secretary.
Electronic Comments 30-Day Notice of Proposed Information
sradovich on DSK3GMQ082PROD with NOTICES

[FR Doc. 2018–12550 Filed 6–11–18; 8:45 am] Collection: Six DDTC Information
• Use the Commission’s internet BILLING CODE 8011–01–P Collections
comment form (http://www.sec.gov/
rules/sro.shtml); or Notice of request for public
ACTION:
comments.
5 15 U.S.C. 78q–1(b)(3)(F).
6 17 CFR 240.17Ad–22. SUMMARY: The Department of State has
7 17 CFR 240.17Ad–22(b)(4). 8 17 CFR 200.30–3(a)(12). submitted the information collection

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Document Created: 2018-06-12 00:47:18
Document Modified: 2018-06-12 00:47:18
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		83 FR 27360