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Federal Register / Vol. 86, No. 1 / Monday, January 4, 2021 / Notices obligations by the ICE Clear Europe Compliance department.
Auction Process and Results The amendments would provide that details of the auction and relevant position data will be made available through the ICE Default Management System, consistent with the ICE Clear Europe auction procedures. The amendments would also clarify that following the close of an auction for sub-portfolio, the Clearing House would publish the new trades to be booked to the winning bidders through the ICE
Default Management System. The Clearing House would no longer notify the point of contact for the winning bidders verbally. The change is intended to conform to the ICE Clear Europe auction procedures.
Default Management Testing The amendments would provide additional detail with respect to default management testing. Specifically, pursuant to the amendments, the Policy would state that the Clearing House would test and review its default procedures at least quarterly and perform simulation exercises at least annually. The default test would be conducted in coordination with Clearing Members by engaging all the internal and external stakeholders that would be involved in the default management process for example, the Clearing Risk Department, ICE Clear Europe Senior Management Team, CDS
Default Committee Members, regulators, etc.. Each default test would be planned in accordance with the ICE
Clear Europe Multi-Years Default Plan, which would list several different default scenarios that would need to be tested by the Clearing House on a regular basis. The ICE Clear Europe Senior Management Team would be responsible for approving the scope of the annual default test by choosing different scenarios outlined in the Plan.
The Plan and changes to it would need to be approved by the Executive Risk Committee.
b Statutory Basis ICE Clear Europe believes that the proposed amendments to the CDS
Default Management Policy and the CDS
Procedures are consistent with the requirements of Section 17A of the Act 3
and the regulations thereunder applicable to it. In particular, Section 17Ab3F 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, the safeguarding of securities and funds in the custody or control of the clearing agency or for which it is responsible, and the protection of investors and the public interest.
The proposed changes to the CDS
Procedures and CDS Default Management Policy are designed to strengthen ICE Clear Europes tools to manage Clearing Member defaults with respect to CDS contracts. The CDS
Default Committee, which relies on seconded representatives of Clearing Members, is a key aspect of the Clearing Houses procedures for addressing Clearing Member defaults, including by facilitating the ability of the Clearing House to hedge or liquidate positions of the defaulter. The amendments would update and clarify the requirements for a Clearing Member to be eligible to serve on the CDS Default Committee as well as clarify the procedures to be used by the CDS Default Committee if such Clearing Member is unable to fulfill its upcoming rotation obligation. The clarifications and other changes to the Policy and Procedures enhance readability and ensure that the Policy and Procedures remain clear and up-todate. Through better managing risks in default scenarios and promoting market stability, the proposed amendments promote the stability of the clearing house and the prompt and accurate clearance and settlement of cleared contracts. The enhanced risk management is therefore also generally consistent with the protection of investors and the public interest in the safe operation of the Clearing House.
ICE Clear Europe would not expect the amendments to affect the safeguarding of securities and funds in ICE Clear Europes custody or control or for which it is responsible. Accordingly, the amendments satisfy the requirements of Section 17Ab3F.5
In addition, ICE Clear Europe believes the amendments satisfy Rule 17Ad 22e13,6 which requires the covered clearing agency to ensure that it has the authority and operational capacity to take timely action to contain losses and liquidity demands and continue to meet its obligations by, at a minimum, requiring the covered clearing agencys participants and, when practicable, other stakeholders to participate in the testing and review of its default procedures, including any close-out procedures, at least annually. As
discussed above, the proposed amendments would enhance ICE Clear Europes default management capabilities. Specifically, ICE Clear Europe believes that the updated, and more clearly defined requirements for Clearing Members to become eligible to participate in the CDS Default Committee will better ensure that the committee is staffed with appropriate representatives. The other amendments better ensure that such members have appropriate resources for their role on the committee working and that there is a process in place should a member need to delay the start of its tenure on the committee for permissible reasons.
Amendments to the Policy would also ensure that the Clearing House review its default procedures at least quarterly and perform simulation exercises at least annually and that such tests would be conducted in coordination with Clearing Members as well as the internal and external stakeholders involved in the default management process. The amendments overall strengthen ICE
Clear Europes ability to contain losses in a manner consistent with the requirements of Rule 17Ad22e13.7
Rule 17Ad22e3i 8 requires clearing agencies to maintain a sound risk management framework that identifies, measures, monitors and manages the range of risks that it faces.
The amendments to the CDS Default Management Policy and the CDS
Procedures are intended to update and state more clearly the criteria for representation on the CDS Default Committee and provide for enhanced review and testing of the default management processes. The amendments will thus strengthen the management of default risks, and risk management more generally. In ICE
Clear Europes view, the amendments are therefore consistent with the requirements of Rule 17Ad22e3i.9
B Clearing Agencys Statement on Burden on Competition ICE Clear Europe does not believe the proposed amendments would have any impact, or impose any burden, on competition not necessary or appropriate in furtherance of the purposes of the Act. The amendments are being adopted to update and clarify the ICE Clear Europe CDS Default Management Policy and ICE Clear Europe CDS Procedures and will apply to all CDS Clearing Members. ICE Clear Europe does not expect that the proposed changes will adversely affect 7 17

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