8011-01p
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100274; File No. SR-ICC-2024-003]
Self-Regulatory Organizations; ICE Clear Credit LLC; Order Approving Proposed Rule
Change Relating to the ICC Collateral Risk Management Framework
June 5, 2024.
I. Introduction
On April 16, 2024, ICE Clear Credit LLC (“ICC”) filed with the Securities and Exchange
Commission (“Commission”), pursuant to Section 19(b)(2) of the Securities Exchange Act of
1934 (the “Act”)1 and Rule19b-4 thereunder,2 a proposed rule change to revise its Collateral Risk
Management Framework (“CRMF”). The proposed rule change was published for comment in
the Federal Register on April 26, 2024.3 The Commission did not receive comments regarding
the proposed rule change. For the reasons discussed below, the Commission is approving the
proposed rule change.
II. Description of the Proposed Rule Change
ICC is registered with the Commission as a clearing agency for the purpose of clearing
credit default swaps (“CDS”) contracts. The CRMF describes ICC’s risk management
methodology for the collateral it accepts from Clearing Participants to collateralize their
individual credit exposure to ICC, including a description of ICC’s quantitative risk management
approach that accounts for the risk associated with fluctuations of collateral asset prices (i.e.,
“haircuts”). Collateral used to cover obligations are subject to a “haircut” assessment, where the
assets are priced and posted at a discount to account for certain market risks. The current CRMF

15 U.S.C. 78s(b)(1).

17 CFR 240.19b-4.

Self-Regulatory Organizations; ICE Clear Credit LLC; Notice of Filing of Proposed Rule Change Relating
to the ICC Collateral Risk Management Framework; Exchange Act Release No. 100008 (Apr. 22, 2024),
89 FR 32496 (Apr. 26, 2024) (File No. SR-ICC-2024-003) (“Notice”).

contemplates two risk measures for the haircut model approach--a 2-day 99.9% Value-at-Risk
(“VaR”) and a 5-day Expected Shortfall (“ES”)--and requires ICC to use the measure that
produces the more conservative result. Based on a comprehensive review of its risk calculations
and data, ICC has determined that VaR has never produced the more conservative measurement
and, therefore, ICC has always used the ES measurement instead of VaR.4 These risk
calculations and data also show that ES will continue to produce more conservative results
compared to VaR in essentially all circumstances going forward.
Based on these results, the purpose of the proposed rule change is to amend ICC’s CRMF
to permit ICC to rely solely on the ES to establish its haircut factors for the purposes of pricing
and posting collateral. To do so, the proposed rule change would remove all references to the
VaR from the CRMF.
The proposed rule change also would remove, renumber, and revise certain figures in the
CRMF. The current CRMF contains various charts, graphs, and other figures (collectively,
“Figures”) by which ICC displays the data used to establish the relevant measurements,
including Figures relevant to both the VaR and ES measurements. To effectively remove all
references to VaR from the CRMF, the proposed rule change also would remove and revise
certain Figures as necessary to effectuate the removal of VaR from the CRMF. Specifically, in
connection with the deletion of the 2-day 99.9% VaR risk measure, the proposed rule change
would remove Figures 11, 12, 26, 27, 28, 29, 38, and 39 because those figures relate to the VaR
risk measure, including 1-day 99.9% VaR which was used to calculate the VaR risk measure. As
a consequence of deleting those figures, the proposed rule change would renumber the remaining
figures.

See Notice, supra note 3, at 32496. ICC has provided responses to Commission requests for collateral risk
data and analysis as part of its confidential Exhibit 3 to File No. SR-ICC-2024-003. The confidential
collateral risk data that ICC provided to the Commission as part of this filing shows the risk calculations
conducted by ICC.

ICC has further determined that altering certain Figures within the CRMF would better
illustrate the data used to establish the remaining applicable ES risk measure. As discussed
below, the changes are consistent with the current practice of the ICC under its current CRMF, or
are being amended for illustrative purposes, and therefore will have no practical impact.
Therefore, the proposed rule change would revise certain figures to correct the label on
the y-axis from percentage to bps and to make other typographical fixes, specifically Figures 16,
17, 20, 21, 28 and 30 (as renumbered). It would also correct the label on the x-axis in certain
figures. Specifically, the proposed rule change would revise Figures 12, 13, and 26 (as
renumbered), to correct the label on the x-axis from percentage to bps. In doing so, the proposed
rule change would re-scale those figures to reflect the change from percentage to bps. While the
change from percentage to bps does not affect the data underlying the figures, the change affects
the presentation of these figures because the scale will be larger as 1 bps equals 1/100 of a
percentage point.
The proposed rule change would similarly re-scale Figure 5 to make the x-axis bps and
would also adjust the bin size of Figure 5, which relates, illustratively, to the thickness of the
bars in the figure. The phrase “bin size” in risk data refers to the width of intervals used to group
similar data points when analyzing risk. A change in bin size, while not changing the data, can
apportion the data more widely or more narrowly across a figure within newly created intervals.
As the distributions change, so could the trend lines across the intervals change.
Finally, ICC has corrected certain other deficiencies by updating a footnote to a current
link on its website, and in correcting small typographical errors elsewhere in the CRMF.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act requires the Commission to approve a proposed rule
change of a self-regulatory organization if it finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations thereunder applicable to the

organization.5 Under the Commission’s Rules of Practice, the “burden to demonstrate that a
proposed rule change is consistent with the Exchange Act and the rules and regulations issued
thereunder . . . is on the self-regulatory organization [‘SRO’] that proposed the rule change.”6
The description of a proposed rule change, its purpose and operation, its effect, and a
legal analysis of its consistency with applicable requirements must all be sufficiently detailed
and specific to support an affirmative Commission finding,7 and any failure of an SRO to
provide this information may result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the Exchange Act and the
applicable rules and regulations.8 Moreover, “unquestioning reliance” on an SRO’s
representations in a proposed rule change is not sufficient to justify Commission approval of a
proposed rule change.9
After carefully considering the proposed rule change, the Commission finds that the
proposed rule change is consistent with the requirements of the Exchange Act and the rules and
regulations thereunder applicable to ICC. More specifically, the Commission finds that
the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act10 and Rules 17Ad22(e)(5) thereunder.11
a. Consistency with Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of ICC be
designed to promote the prompt and accurate clearance and settlement of securities transactions

15 U.S.C. 78s(b)(2)(C).

Rule 700(b)(3), Commission Rules of Practice, 17 CFR 201.700(b)(3).

Id.

Id.

Susquehanna Int’l Group, LLP v. Securities and Exchange Commission, 866 F.3d 442, 447 (D.C. Cir.
2017) (“Susquehanna”).

15 U.S.C. 78q-1(b)(3)(F).

17 CFR 240.17Ad-22(e)(5).

and, to the extent applicable, derivative agreements, contracts, and transactions.12 Based on the
review of the record, and for the reasons described below, ICC’s proposed updates in the manner
described above are consistent with the prompt and accurate clearance and settlement of
securities transactions, derivatives agreements, contracts, and transactions.
The proposed rule change is consistent with Section 17A(b)(3)(F) of the Act because it
would clarify the CRMF by eliminating an unnecessary risk measurement. The use of ES as a
risk measurement to establish haircut factors for pricing collateral is already a part of ICC’s risk
methodology, and ICC has determined that this calculation will always be more conservative
than, and thus always used in lieu of, a VaR risk measurement. The confidential risk calculations
and data provided by ICC and reviewed by the Commission demonstrate that ES has always
been the most conservative methodology for setting collateral haircut factors when compared to
VaR and that it is reasonable to expect that, going forward, ES will continue to be the most
conservative methodology for setting collateral haircut factors in essentially all circumstances.
Therefore, there would be no actual change in the actual haircut calculation when ICC applies its
risk methodology after the proposed rule change is effectuated. Removing VaR as a risk
measurement would help avoid the impression that ICC uses both VaR and ES, and therefore
would make the CRMF clearer and easier to apply in practice.
Having policies and procedures that clearly and accurately document the way ICC
measures risk associated with fluctuations of collateral asset prices is an important component to
the effectiveness of ICC’s risk management system and supports ICC’s ability to maintain
adequate financial resources and collateral management resources. The proposed rule change is,
consequently, consistent with the prompt and accurate clearance and settlement of securities

15 U.S.C. 78q-1(b)(3)(F).

transactions, derivatives agreements, contracts, and transactions, within the meaning of Section
17A(b)(3)(F) of the Act.13
b. Consistency with Rule 17Ad-22(e)(5) of the Act
Rule 17Ad-22(e)(5) under the Act requires ICC to establish, implement, maintain and
enforce written policies and procedures reasonably designed to limit the assets it accepts as
collateral to those with low credit, liquidity, and market risks, and set and enforce appropriately
conservative haircuts and concentration limits if it requires collateral to manage its or its
participants' credit exposure.14 Based on the review of the record, and for the reasons described
below, ICC’s proposed revisions are consistent with Rule 17Ad-22(e)(5).
As noted above, while ICC’s current CRMF indicates that it will use either VaR or ES to
establish haircut factors for the purposes of pricing and posting collateral, in practice ES has
always produced the more conservative results and therefore ICC has never utilized VaR to set
and enforce the haircut factors it uses to price collateral. By removing VaR from CRMF and
definitively identifying ES as the exclusive risk methodology that ICC will use to set and enforce
the haircut factors it uses to price collateral going forward, the proposed revisions will make the
CRMF more clear and transparent as a risk management framework and help facilitate ICC’s
efficient and effective pricing of Clearing Member collateral. Adjusting the Figures in the
CRMF to better illustrate the data used by ICC will likewise enhance the clarity and transparency
of ICC’s risk methodology, and improve ICC’s ability to communicate and explain its risk for
establishing haircut factors for the purposes of pricing and posting collateral.
Accordingly, the proposed rule change is consistent with the requirements of Rule 17Ad22(e)(5) under the Act.15

15 U.S.C. 78q-1(b)(3)(F).

17 CFR 240.17Ad-22(e)(5).

17 CFR 240.17Ad-22(e)(5).

IV. Conclusion
On the basis of the foregoing, the Commission finds that the proposed rule change is
consistent with the requirements of the Act, and in particular, with the requirements of Section
17A(b)(3)(F)16 of the Act and Rule 17Ad-22(e)(5) thereunder.17
IT IS THEREFORE ORDERED pursuant to Section 19(b)(2) of the Act18 that the
proposed rule change (SR-ICC-2024-003), be, and hereby is, approved.19
For the Commission, by the Division of Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-12686 Filed: 6/10/2024 8:45 am; Publication Date: 6/11/2024]

15 U.S.C. 78q-1(b)(3)(F).

17 CFR 240.17Ad-22(e)(5).

15 U.S.C. 78s(b)(2).

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).

17 CFR 200.30-3(a)(12).