[Federal Register Volume 79, Number 231 (Tuesday, December 2, 2014)]
[Notices]
[Pages 71495-71497]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-28317]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73684; File No. SR-ICC-2014-19]
Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of
Filing of Proposed Rule Change to Formalize the ICC Operational Risk
Management Framework
November 25, 2014.
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 November 18, 2014, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 and
formalize ICC's Operational Risk Management Framework. These revisions
do not require any changes to the ICC Clearing Rules (``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 to update and formalize 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 is one of several
documents that establish the ICC Risk Management Framework. As a
central counterparty, ICC occupies an important place in the clearing
of credit default swaps and faces operational risks related to the
functioning of both personnel and systems. The ICC Operational Risk
Management Framework creates a program of risk assessment and oversight
designed to identify, monitor and manage plausible sources of
operational risk.\3\ The operational risk program established by the
Operational Risk Management Framework includes pro-active risk
identification and mitigation, along with timely management and
reporting of operational performance measures. The program applies to
all ICC activities, groups, functions and locations and is also
designed to evaluate and mitigate operations risk presented to ICC by
its partners, related entities, and vendors.
---------------------------------------------------------------------------
\3\ ``Operational risk'' is defined in the ICC Operational Risk
Management Framework as the risk that deficiencies in information
systems, internal processes, personnel, or disruptions from external
events will result in the reduction, deterioration, or breakdown of
services.
---------------------------------------------------------------------------
The Operational Risk Framework provides the Operational Risk
Manager with the full responsibility and authority to develop and
enforce, in consultation with the ICC Board and appropriate members of
senior management, the operational risk program. The ICC Board retains
responsibility for oversight of ICC's operational risk management
program. The Operational Risk Manager is the owner of the Operational
Risk Management Framework document, and the initial document and any
material amendments require review and approval by the appropriate
members of senior management and the ICC Board. The Operational Risk
Manager reports to the Chief Compliance Officer who reports directly to
the ICC Board.
[[Page 71496]]
There are several components to the ICC Operational Risk Management
Framework. The Operational Risk Management Framework establishes
clearly defined operational performance objectives that serve as
benchmarks to evaluate efficiency and effectiveness, promote confidence
among management and participants, and evaluate operational performance
against expectations. Further, the Operational Risk Management
Framework sets forth goals for risk identification, assessment, and
mitigation, which include the identification, monitoring, and
management of all plausible sources of operational risk and the
establishment of clear policies and procedures to address presented
risk scenarios. The Operational Risk Management Framework also contains
information regarding how ICC leverages certain shared infrastructures
within the Intercontinental Exchange, Inc. family as part of its
operational risk management program.
Additionally, the Operational Risk Management Framework details the
Operational Risk Manager's responsibilities in terms of business
continuity planning, vendor risk management, and the release of new
products, processes, and initiatives. The Operational Risk Manager is
also responsible for operational risk reporting, which includes
reporting and addressing significant operational risk weaknesses or
failures timely and appropriately (including escalation to the
appropriate members of senior management and the ICC Audit Committee
and the Board when necessary), and providing ongoing reporting to
appropriate members of senior management and periodic reporting to the
ICC Board and the ICC Audit Committee on the operational risk program
and significant control matters.
The operational risk management framework is overseen by the ICC
Board, ICC department heads and the Chief Compliance Officer. Internal
audit performs reviews of the operational risk management processes.
Section 17A(b)(3)(F) of the Act \4\ 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
17(A)(b)(3)(F),\5\ 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, as the ICC Operational Risk Management Framework is
designed to identify and minimize operational risk presented to the
clearing house by identifying all plausible sources of operational risk
presented to ICC and developing appropriate controls and procedures to
effectively monitor and manage operational risk. As such, the ICC
Operational Risk Management Framework facilitates ICC's ability to
promptly and accurately clear and settle its cleared CDS contracts. In
addition, the proposed revisions are consistent with the relevant
requirements of Rule 17Ad-22.\6\ The ICC Operational Risk Management
Framework is designed to identify and minimize sources of operational
risk through the development and implementation of appropriate systems,
controls, and procedures, as the Operational Risk Management Framework
provides for the creation and maintenance of a comprehensive
operational risk management program and is therefore reasonably
designed to meet the operational risk requirements of Rule 17Ad-
22(d)(4).\7\ 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 Section 17A(b)(3)(F) \8\ of the Act.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78q-1(b)(3)(F).
\5\ Id.
\6\ 17 CFR 240.17Ad-22.
\7\ 17 CFR 240.17Ad-22(d)(4).
\8\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
B. Self-Regulatory Organization'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 Operational Risk
Management Framework applies uniformly across all market participants.
Therefore, ICC does not believe the proposed rule change imposes any
burden on competition that is inappropriate in furtherance of the
purposes of the Act.
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 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 the 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-2014-19 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-2014-19. 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
[[Page 71497]]
10:00 a.m. and 3:00 p.m. Copies of such filings also will 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-2014-19
and should be submitted on or before December 23, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
---------------------------------------------------------------------------
\9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-28317 Filed 12-1-14; 8:45 am]
BILLING CODE 8011-01-P