The Securities and Exchange Commission approved a proposed rule change by ICE Clear Credit LLC on January 26, 2026, allowing revisions to the clearing agency's Stress Testing Framework and Liquidity Risk Management Framework. This development, detailed in Federal Register Volume 91, Number 19, introduces new stress scenarios inspired by market disruptions from U.S. tariffs enacted in the second quarter of 2025. ICE Clear Credit, a registered clearing agency focused on credit default swap contracts, seeks to bolster its defenses against systemic risks and liquidity shortfalls through these updates. The approval underscores ongoing efforts to adapt risk management practices to evolving market conditions, ensuring the stability of clearing operations amid potential economic shocks.
Background and Key Players
ICE Clear Credit LLC operates as a central counterparty for clearing credit default swaps, managing risks from participant defaults and market volatility. The proposed rule change, filed on December 1, 2025, under Section 19(b)(1) of the Securities Exchange Act of 1934, targets enhancements to two core documents: the Stress Testing Framework and the Liquidity Risk Management Framework. No alterations to ICC's Clearing Rules are required.
Key players include ICE Clear Credit's Risk Department, which maintains predefined stress scenarios, and the Securities and Exchange Commission, which reviewed the proposal without receiving public comments. The updates reflect ICC's response to recent events, specifically the U.S. Tariffs Crisis, characterized by observed relative spread increases and decreases in CDS markets. As noted in the Federal Register notice, these scenarios are calibrated to historical data from the second quarter of 2025, providing a basis for testing extreme but plausible market outcomes.
This move aligns with ICC's broader risk management evolution. For context, a prior SEC approval in 2023 (Release No. 34-98496) refined the Stress Testing Framework, highlighting ICC's pattern of periodic updates to address emerging threats like market volatility and interest rate fluctuations.
Details of the Proposed Changes
The core revision introduces the U.S. Tariffs Crisis Scenarios across multiple categories in both frameworks. In the Stress Testing Framework, Section 5.1 now includes these scenarios under Historically Observed Extreme but Plausible Market Scenarios, featuring widening and tightening cases based on observed spread changes. Section 5.3 extends them to Hypothetically Constructed scenarios by adding adverse credit events and loss conditions. Section 5.4 incorporates them into Extreme Model Response Tests with amplified spread shocks.
Similar amendments appear in the Liquidity Risk Management Framework. Section 3.3.2(a) adds descriptions of the scenarios, emphasizing calibration to 2025 data, while Section 3.3.3 updates Table 1 for liquidity stress testing. These changes ensure alignment between credit risk and liquidity risk assessments, using a unified set of scenarios to evaluate potential resource shortfalls.
Governance updates also feature prominently. ICC recently established a Board Risk Committee, as referenced in a 2025 SEC release (No. 103161). The frameworks now detail this committee's role in reviewing stress test results, methodology enhancements, and annual document reviews. For instance, Section 14 of the Stress Testing Framework specifies discussions with the committee on risk deficiencies, while Section 15 mandates timely communication of results and recommendations. Parallel changes in the Liquidity Risk Management Framework, such as in Sections 1.3 and 4.3, integrate the committee into liquidity adequacy reporting and oversight.
Clean-up revisions enhance readability, including relocating Figure 1 in the Liquidity Risk Management Framework to follow its narrative description, without altering the figure's content.
Legal and Regulatory Consistency
The SEC found the changes consistent with Section 17A(b)(3)(F) of the Exchange Act, which requires clearing agencies to promote prompt settlement and safeguard funds. Approval also aligns with Rule 17Ad-22(e)(2) for clear governance, Rule 17Ad-22(e)(3) for sound risk management, Rule 17Ad-22(e)(4) for credit exposure testing, and Rule 17Ad-22(e)(7) for liquidity risk management.
These rules emphasize daily stress testing with predetermined parameters, which the new scenarios support by augmenting existing methodologies. The SEC's analysis highlights how the updates could identify resource insufficiencies, prompting ICC to bolster financial or liquidity buffers. No direct legal precedents are cited in the notice, but the decision builds on prior approvals, such as the 2023 framework refinement, reinforcing a regulatory emphasis on adaptive risk practices.
Implications and Perspectives
Short-term implications include improved daily monitoring of ICC's resources against tariff-related volatility, potentially reducing the risk of participant defaults cascading into broader market issues. Long-term, these scenarios may set a precedent for incorporating real-time economic events into clearing frameworks, encouraging other agencies to update their models similarly.
From a regulatory perspective, the approval reflects the SEC's support for proactive risk management without overhauling rules, balancing innovation with stability. Clearing participants might view the changes as enhancing confidence in ICC's operations, though some could argue for more frequent scenario updates to capture rapid geopolitical shifts. Critics, including potential market observers, might question whether hypothetical enhancements fully capture unpredictable events, yet the frameworks' structure allows for ongoing refinements.
The updates do not endorse any viewpoint but illustrate a collaborative approach between ICC and regulators to mitigate systemic risks.
Forward-Looking Conclusion
This SEC approval marks a step toward more resilient clearing practices by integrating recent market lessons into ICC's frameworks. Key takeaways include the value of scenario-based testing in managing credit and liquidity risks. Potential next steps involve ICC monitoring the effectiveness of these scenarios through regular reviews and reporting to the Board Risk Committee. Ongoing debates may center on the adequacy of historical calibrations for future crises, with challenges arising from evolving global trade dynamics. Trajectories could include further scenario expansions or integrations with emerging technologies for real-time risk assessment, ensuring ICC adapts to an increasingly volatile financial landscape.
