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Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Notices
intended to codify and formalize the Clearing Houses approach to setting the key parameters used in the CDS risk model, conducting related sensitivity analyses of the impact of such parameters and reviewing such parameters on an ongoing basis. As such, the Parameters Procedures support ICE Clear Europes ability to maintain sufficient margin requirements and enhance ICE Clear Europes approach to identifying potential parameter changes that are appropriate to maintain the operation of the risk model and thereby ensure that the Clearing House continues to maintain sufficient financial resources to withstand defaults by Clearing Members. Therefore, the amendments to the Documents, and the adoption of the Parameters Procedures, will help ICE
Clear Europe ensure that it maintains adequate financial resources to support its CDS operations, enhance the stability of the Clearing House and overall promote the prompt and accurate clearance and settlement of securities transactions and, derivative agreements, contracts, and transactions, the safeguarding of securities and funds in ICE Clear Europes custody or control or for which ICE Clear Europe is responsible, and the public interest in the sound operation of clearing agencies. Accordingly, the amendments are consistent with the requirements of Section 17Ab3F.6
For similar reasons, the amendments and the Parameters Procedures also are consistent with relevant requirements of Rule 17Ad22. Rule 17Ad22e3i 7
requires clearing agencies to maintain a sound risk management framework that identifies, measures, monitors and manages the range of risks that it faces.
The various amendments throughout the Documents as well as the new Parameters Procedures document are all intended to clarify the operation of ICE
Clear Europes risk management systems and provide for enhanced stress testing.
They provide greater clarity with respect to various risk management tools, ensure that COVID19 and other extreme but plausible stress scenarios are accounted for and ensure current governance practices are clearly set out, all of which facilitate ICE Clear Europes compliance with Rule 17Ad22e3i.8
In addition, ICE Clear Europe believes that the adoption of the Parameters Procedures are consistent with the relevant requirements of Rule 17Ad 22e4viB,9 which requires ICE
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Clear Europe to identify, measure, monitor and manage its credit exposures to participants and those arising from its payment, clearing, and settlement processes, including by testing the sufficiency of its total financial resources available to meet the minimum financial resource requirements, including by conducting a comprehensive analysis of underlying parameters and assumptions on at least a monthly basis. The Parameters Procedures would also provide a clear framework for ICE Clear Europe to estimate and review the model core parameter settings and perform and review sensitivity analyses related to certain parameter settings on at least a monthly basis. The amendments to the CDS Stress Testing Policy will, as discussed above, enhance the stress testing of the Clearing House by incorporating a wider range of extreme scenarios including those reflecting recent market events in stress testing, which are reviewed on at least a monthly basis. Other amendments would clarify how the Clearing Risk Department would address a scenario or portfolio in the standard set of stress scenarios no longer being applicable, or being superseded by new scenarios or portfolios, where the Clearing Risk Department wishes to retire or modify the outdated scenario or portfolio or add a new scenario. The amendments serve to promote the soundness of the Clearing Houses risk management model and system and ensure that the Clearing House possesses the ability to manage the risks associated with discharging its responsibilities, consistent with the requirements of Rule 17Ad22e4viB.10
Rules 17Ad22e2i and v 11
requires that clearing agencies provide for governance arrangements that are clear and transparent and specify clear and direct lines of responsibility.
References to the roles of certain committees and departments with respect to reviews and approvals throughout the Documents have been updated to better reflect existing practice with respect to the roles of groups. Where appropriate, references to the MRGF, which sets out further governance details, have been added throughout the documents. The amendments provide additional clarity with respect to Clearing House governance and lines of responsibility consistent with Rules 17Ad22e2i and v.12

Rule 17Ad22e6iv 13requires that clearing agencies cover their credit exposures to participants by establishing a risk-based margin system that uses reliable sources of timely price data and uses procedures and sound valuation models for addressing circumstances in which pricing data are not readily available or reliable.
Amendments to the CDS Model Risk Description would more clearly state the procedures for determining relevant prices should input data not be available from back-up sources, further strengthening ICE Clear Europes strategies to ensure it has access to reliable sources of timely price data in compliance with this requirement. The amendments would also provide further detail regarding the treatment of data collected and the backfilling of missing data. The amendments to the CDS Risk Policy would also strengthen the quality of intraday prices through enhanced intraday monitoring through additional comparisons of intraday prices with other ICE CDS clearing houses and third-party providers. Together, the amendments strengthen ICE Clear Europes compliance with Rule 17Ad 22e6iv.14
Rules 17Ad22e6i to iii 15
require that clearing agencies establish a risk-based margin system that i considers, and produces margin levels commensurate with, the risks and particular attributes of each relevant product, portfolio, and market; ii marks participant positions to market and collects margin, including variation margin or equivalent charges if relevant, at least daily and includes the authority and operational capacity to make intraday margin calls in defined circumstances; and iii calculates margin sufficient to cover its potential future exposure to participants in the interval between the last margin collection and the close out of positions following a participant default. The proposed amendments would provide more detail regarding the IM
methodology set out in the CDS Risk Policy, facilitating the maintenance of sufficient margin levels. The CDS Risk Policy amendments would also provide that in the event that ICE Clear Europe is accepting sizable positions through the weekly back-loading process in the context of margin calls, it will precollect IM and mark-to-market changes, instead of just IM, to further ensure sufficient margin collection.
Amendments to the IM methodology in the CDS Risk Model Description would
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