ICE Clear Credit LLC, a key clearing agency for credit derivatives, filed a proposed rule change with the Securities and Exchange Commission on December 1, 2025, to update its Stress Testing Framework and Liquidity Risk Management Framework. Published in the Federal Register on December 18, 2025, the notice invites public comments and outlines revisions aimed at incorporating recent market stress from U.S. tariffs. This development underscores efforts to bolster financial resilience in response to evolving economic risks, ensuring the clearing agency can handle extreme but plausible scenarios while maintaining prompt settlement of transactions.
Background and Purpose of the Proposed Changes
The proposed rule change focuses on enhancing ICC's risk management tools without altering its core clearing rules. At the heart of the updates are new stress scenarios drawn from market events in the second quarter of 2025, triggered by the enactment of new U.S. tariffs. These events caused significant spread widening and tightening in credit markets, prompting ICC to integrate them into its frameworks to better assess potential vulnerabilities.
ICC's Stress Testing Framework outlines methodologies for evaluating credit risk under various extreme conditions. It categorizes scenarios into historically observed, severity-based, hypothetically constructed, and extreme model response tests. The Liquidity Risk Management Framework complements this by addressing liquidity needs, ensuring sufficient resources for same-day settlements during crises. The revisions aim to unify these frameworks, promoting comprehensive risk oversight as required under the Securities Exchange Act of 1934.
As stated in the filing, 'The principal purpose of the proposed rule change is to revise the ICC Stress Testing Framework (STF) and ICC Liquidity Risk Management Framework (LRMF).' This reflects ICC's commitment to adapting to recent market turmoil, such as the U.S. tariffs crisis, to facilitate accurate clearance and settlement.
Key Revisions to Stress Scenarios
The core update introduces the U.S. Tariffs Crisis Scenarios into multiple sections of the Stress Testing Framework. In Section 5.1, these scenarios are added to historically observed extreme but plausible market scenarios. They include both widening and tightening variants, based on relative spread changes observed during Q2 2025. The framework explains construction in terms of spread changes and end-of-day levels, ensuring scenarios reflect real-world data.
Section 5.3 extends this to hypothetically constructed scenarios, augmenting the tariffs crisis with adverse credit events and additional loss assumptions. Similarly, Section 5.4 incorporates them into extreme model response tests by scaling up magnitudes for stress. A conforming update in Section 14 adds these to reporting obligations, enhancing transparency in stress test outcomes.
Parallel changes appear in the Liquidity Risk Management Framework. Section 3.3.2(a) details the scenarios' integration into historically observed categories, including analogues for spread construction. Table 1 in Section 3.3.3 lists them among liquidity stress tests, while Section 3.3.4 updates reporting lists. These alignments ensure consistency across ICC's risk management practices, as noted in the filing: 'ICC proposes to introduce the U.S. Tariffs Crisis Scenarios in the STF... to ensure unification of the LRMF and STF.'
Governance and Clean-Up Updates
Beyond scenarios, the proposal incorporates references to ICC's recently established Board Risk Committee, aligning with current practices. In the Stress Testing Framework, Sections 14 and 15 detail the committee's role in discussing methodology enhancements, reviewing test results, and providing recommendations on scenarios. The framework now requires annual review by this committee, alongside the Risk Committee and Board approval.
Similar updates in the Liquidity Risk Management Framework appear in Sections 1.3, 3.3.4, 4.2, and 4.3, emphasizing the committee's involvement in liquidity adequacy reporting and methodology discussions. A minor relocation of Figure 1 in Section 1.4 improves readability without altering content. These changes stem from a prior SEC-approved rule establishing the committee, as referenced in the filing: 'ICC previously filed a proposed rule change to establish the Board Risk Committee.'
Statutory Basis and Regulatory Compliance
ICC asserts the changes comply with Section 17A of the Securities Exchange Act, promoting prompt clearance, safeguarding funds, and protecting investors. They align with Rule 17Ad-22 requirements for governance transparency, risk management, credit exposure handling, and liquidity maintenance. For instance, the new scenarios support Rule 17Ad-22(e)(4)(ii) by covering a wider range of foreseeable stresses, including defaults in extreme conditions.
The filing emphasizes no impact on competition, applying uniformly to participants without affecting clearing costs or access. No comments were received prior to filing, and the SEC will decide within 45 to 90 days, potentially approving or initiating proceedings.
Implications and Perspectives
Short-term, these updates could immediately strengthen ICC's ability to monitor and mitigate risks from tariff-like disruptions, enhancing market confidence. Long-term, they may set precedents for incorporating geopolitical events into clearing frameworks, influencing other agencies.
From a regulatory perspective, the SEC's oversight ensures alignment with public interest. Market participants might view this as proactive, reducing systemic risks, while critics could argue for broader scenario diversity. Legal precedents, such as those under the Act, reinforce the need for adaptive risk models without endorsing specific views.
In summary, the proposed changes represent a targeted evolution in ICC's risk management, integrating recent crises to fortify financial stability.
