New SEC ruling: ICE Clear Credit LLC; Order Approving Proposed Rule Change Relating to the ICC Recovery Plan and the ICC Wind-Down Plan.
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| Author       | Source       | 
| :-------------: |:-------------:|
|  [u/valtani](https://www.reddit.com/user/valtani/) | [Reddit](https://www.reddit.com/r/Superstonk/comments/ndh8m1/new_sec_ruling_ice_clear_credit_llc_order/) | 

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[Discussion 🦍](https://www.reddit.com/r/Superstonk/search?q=flair_name%3A%22Discussion%20%F0%9F%A6%8D%22&restrict_sr=1)

*Ok, this may be huge or it may mean nothing depending how you interpret the content of this ruling, so I will go ahead and summarize this because I think it's relevant to GME.*

<https://www.federalregister.gov/documents/2021/05/14/2021-10173/self-regulatory-organizations-ice-clear-credit-llc-order-approving-proposed-rule-change-relating-to>

This is a 22 page SEC approval of the proposed changes brought up by ICE Clear Credit LCC ("ICC"), a covered clearing agency. So what is a *Covered clearing agency?* It is a registered clearing agency that provides the services of a central counterparty or central securities depository. In order to address counterparty risk, members must provide collateral to ICE Trust [ICE Clear Credit LLC since July 16, 2011] to cover their obligations under cleared CDS (credit derivatives). Members must also make initial and ongoing contributions to a guaranty fund that can be used by ICE Trust in the event of a member default (Forrester et al 2009).

As published on their website, "*Financial resources held at the clearing house, including margin and clearing member guaranty funds, total more than $33 billion.*

*ICE Clear Credit's current margin on deposit is $46,399,000,000. In the event of a default, only the margin of the defaulting clearing participant and defaulting customer may be used for default management. In the event the resources of a defaulting clearing participant are insufficient to cure the default, the below financial res*ources are available to ICE Clear Credit: Minimum Total Assets available $3,213,000,000".

Back to the SEC approval. ICC was asking the SEC to update and formalize the ICC Recovery Plan and the ICC Wind-Down Plan in case of credit losses, liquidity shortfalls, losses from general business risk, or any other losses in the event that it comes under severe stress. The Recovery Plan discusses the tools that are available to ICC to address a situation where ICC experiences liquidity shortfalls triggered by a default of one or more CPs (Citadel and Co?) and has insufficient liquid resources in the proper currency to meet payments obligations. . The first step of the recover plan starts with the Default Committee, which is responsible for assisting ICC during the execution of certain default management and recovery procedures and convenes upon the declaration of default. They basically meet as soon as s*** hits the fan (in this case, a hedge fund/member gets margin called).

Their proposed Wind-Down plan provides a plan for orderly wind-down of ICC in the event the actions described in the Recovery Plan fail. If ICC runs out of money, the obligations are transferred to another clearinghouse, or ICC is sold to another entity.

This is the summary of the 22 page ruling and hopefully others can offer their insights on this.

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**Relevant comment by [u/Criand](https://www.reddit.com/user/Criand/)**

Yessir! This is ICC-005 that we've seen in other threads (not to be confused with DTC-005). From my understanding it is already in effect as of Friday, May 14, 11:59PM EST. Literally last minute filing. Copy/pasting from another thread:

This is basically the DTC-004 equivalent for ICC (another clearing house that handles credit default swaps). This is their unwinding plan in the event of extreme market stress in order to remain afloat by wiping out members with high risk positions.

Something really cool is they'll not only wipe out members who default on a certain security, they'll wipe out similar positions in that same security of all their other members IF it's high risk/stress to the market. E.g. if a member defaults due to their position in GME, then they'll cascade that to all other members who hold those positions on GME and tell them to get rid of it. This could inevitably lead to more defaulting members.

They also JUST pushed through ICC-007 which handles haircuts and is going to tighten the noose on members collateral. It's easier for them to have a defaulting member in a stressful market situation if the collateral is poorly backed (cough BBB- grade bonds by citadel for example can't be used). They can also apply higher haircuts based on how risky certain securities are. E.g. if GME is super high risk, they'll need more liquidity.

So it sounds like ICC is getting ready for member defaults, if they haven't already happened.
