Federal Register / Vol. 77, No. 81 / Thursday, April 26, 2012 / Notices 24999 

15See note 9. 

16The Exchange’s proposed non-Penny BATS 

Routing Fees are calculated similarly for all 

participants by adding the fee to remove liquidity 

assessed by BATS for the particular market 

participant plus a fee of $.11 per contract which 

represents clearing and other costs noted herein. 

17 15 U.S.C. 78s(b)(3)(A)(ii). 18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

increase in the BATS fee to removing 

liquidity from $0.44 per contract to 

$0.75 per contract for customer nonPenny options and from $0.44 per 

contract to $0.80 for professionals, firms 

and market makers. The Exchange 

believes it is reasonable to recoup the 

BATS remove fees plus the clearing and 

other costs to recoup Routing Fees.15

The Exchange believes that the increase 

to the Firm/Broker-Dealer/Market Maker 

non-Penny BATS Routing Fees are 

equitable and not unfairly 

discriminatory because, as previously 

mentioned, those fees would be 

similarly calculated for Customers, 

Professionals, Firms, Broker-Dealers and 

Market Makers.16 Additionally, the nonPenny BATS Routing Fees would be 

uniformly assessed for all non-Penny 

orders routed to BATS. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.17 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

No. SR–Phlx–2012–50 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street NE., Washington, DC 

20549–1090. 

All submissions should refer to File No. 

SR–Phlx–2012–50. This file number 

should be included on the subject line 

if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File No. SR–Phlx–2012– 

50 and should be submitted on or before 

May 17, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2012–10025 Filed 4–25–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66841; File No. SR–OCC– 

2012–06] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing and Order Granting 

Accelerated Approval of Proposed 

Rule Change Relating to Revised DCO 

Rules 

April 20, 2012. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on April 10, 

2012, The Options Clearing Corporation 

(‘‘OCC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change described in 

Items I and II below, which items have 

been prepared primarily by OCC. The 

Commission is publishing this Notice 

and Order to solicit comments on the 

proposed rule change from interested 

persons and to approve the proposed 

rule change on an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of Terms of Substance of the 

Proposed Rule Change 

The proposed rule change would 

ensure compliance with final 

regulations of the Commodity Futures 

Trading Commission (‘‘CFTC’’) 

applicable to derivatives clearing 

organizations (‘‘DCOs’’) that become 

effective on May 7, 2012. 

II. Self-Regulatory Organization’s 

Statement of Purpose of, and Statutory 

Basis for, the Proposed Rule Change 

In its filing with the Commission, 

OCC included statements concerning 

the purpose and basis for the proposed 

rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item III below. OCC has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of Purpose of, and Statutory 

Basis for, the Proposed Rule Change 

The purposes of the proposed changes 

to OCC’s By-Laws and Rules are (a) to 

ensure compliance with certain 

regulations recently promulgated by the 

CFTC that become effective on May 7, 

2012, and (b) to put in place a minor 

rule violation plan (‘‘MRV Plan’’), 

within the meaning of Exchange Act 


tkelley on DSK3SPTVN1PROD with NOTICES
25000 Federal Register / Vol. 77, No. 81 / Thursday, April 26, 2012 / Notices 

3 17 CFR 240.19d–1(c)(2). 

4See Exchange Act Release No. 34–66081, 77 FR 

1116 (January 9, 2012). 

Rule 19d–1(c)(2).3 The CFTC’s final 

regulations implement statutory ‘‘core 

principles’’ applicable to DCOs as those 

core principles were amended by the 

Dodd-Frank Act. 

The Final DCO Regulations 

On October 18, 2011, the CFTC held 

an open meeting at which it issued final 

regulations implementing many of the 

new statutory core principles for DCOs 

enacted under the Dodd-Frank Act. On 

December 20, 2011, OCC filed a rule 

change implementing changes designed 

to bring it into compliance with certain 

of these final regulations that went into 

effect on January 9, 2012. This rule 

filing was approved by the Commission 

on an accelerated basis on January 3, 

2012.4 The majority of the remaining 

regulations go into effect on May 7, 

2012. While OCC is already in 

compliance with most of the final 

regulations that go into effect on May 7, 

2012, OCC believes it appropriate to 

amend and clarify certain of its rules to 

ensure compliance with the CFTC’s 

rules as described herein. 

1. Clearing Members’ Ability To Meet 

Clearing Fund Assessments 

Final CFTC Rule 39.11(d)(2)(i) states 

that a DCO must have rules ‘‘requiring 

that its clearing members have the 

ability to meet an assessment within the 

time frame of a normal end-of-day 

variation settlement cycle.’’ [Emphasis 

added.] While OCC By-Laws Article 

VIII, Section 6 provides that ‘‘whenever 

an amount is paid out of the Clearing 

Fund contribution of a Clearing Member 

* * * such Clearing Member shall be 

liable promptly to make good the 

deficiency in its contribution resulting 

from such payment,’’ it does not require 

that clearing members have the ability 

to meet an assessment within any 

particular time period. [Emphasis 

added.] OCC is therefore proposing that 

Article VIII, Section 6 of OCC’s By-Laws 

be amended to require that each clearing 

member must have, and at all times 

maintain, the ability to meet any 

clearing fund assessment by 9:00 a.m. 

Central Time on the first business day 

following the day on which OCC 

notifies the clearing member of such 

assessment. Additionally, OCC is 

proposing to amend Article VIII, Section 

7 of OCC’s By-Laws to clarify when a 

withdrawing clearing member is 

definitively deemed to no longer be a 

clearing member and hence will no 

longer be subject to charges against its 

clearing fund contribution or be 

obligated to make further contributions. 

2. Clearing Member Financial Resources 

Requirements 

CFTC Rule 39.12(a)(2)(i) states that a 

DCO must have participation 

requirements that ‘‘require clearing 

members to have access to sufficient 

financial resources to meet obligations 

arising from participation in the [DCO] 

in extreme but plausible market 

conditions.’’ [Emphasis added.] In order 

to avoid any doubt about OCC’s 

compliance with this rule, OCC is 

proposing to amend Interpretation and 

Policy .01 of Article V, Section 1 of its 

By-Laws, add a new Rule 301(d), add an 

Interpretation and Policy .11 to Rule 305 

and add an Interpretation and Policy .02 

to Rule 1102 to more closely address the 

requirements of the referenced CFTC 

Rule. 

3. Clearing Member Operational 

Capacity Requirements 

CFTC Rule 39.12(a)(3) requires a DCO 

to have participation requirements that 

‘‘require clearing members to have 

adequate operational capacity to meet 

obligations arising from participation in 

the [DCO] * * * [that] include * * * 

the ability to process expected volumes 

and values of transactions cleared by a 

clearing member within required time 

frames, including at peak times and on 

peak days; the ability to fulfill collateral, 

payment, and delivery obligations 

imposed by the [DCO]; and the ability 

to participate in default management 

activities under the rules of the [DCO] 

and in accordance with [CFTC Rule 

39.16].’’ [Emphasis added.] OCC is 

proposing to amend Article V, Section 

1, Interpretation .02, add a new Rule 

214(d), add a new Interpretation and 

Policy .12 to Rule 305, and add new 

Interpretation and Policy .02 to Rule 

1102 to more closely address the 

requirements of the referenced CFTC 

Rule. OCC is also proposing to add a 

new Rule 214(c) to require clearing 

members to have adequate personnel 

arrangement to ensure their ability to 

meet the requirements of clearing 

membership, and to provide OCC with 

a list of such personnel. 

4. Clearing Member Reporting 

Requirements 

CFTC Rule 39.12(a)(5)(i) states that a 

DCO must ‘‘require all clearing 

members, including non-futures 

commission merchants, to provide to 

the [DCO] periodic financial reports that 

contain any financial information that 

the [DCO] determines is necessary to 

assess whether participation 

requirements are being met on an 

ongoing basis.’’ Further, under Rule 

39.12(a)(5)(i)(B), a DCO must require 

non-FCM clearing members to make 

these periodic financial reports 

available to the CFTC upon request or, 

alternatively, a DCO may provide such 

financial reports directly to the CFTC 

upon CFTC request. All of OCC’s nonFCM clearing members are either 

registered U.S. broker-dealers or ‘‘nonU.S. Clearing Members’’ subject to 

comparable regulation in their home 

jurisdictions. OCC Rule 306 generally 

requires that financial reports required 

to be filed pursuant to regulations 

applicable to such clearing members 

also be filed with OCC, and Rule 306(b) 

requires non-U.S. Clearing Members to 

file such financial reports with OCC at 

such times as OCC may specify. OCC 

therefore believes that the financial 

reports it currently receives from nonFCM clearing members fulfill the 

requirement of Rule 39.12(a)(5)(i). 

However, in order to avoid any doubt 

about OCC’s compliance with this rule, 

OCC is proposing to add language to 

Rule 306(a) to expressly provide that 

OCC may require clearing members to 

make financial reports for the purpose 

of assessing whether the clearing 

member is meeting OCC’s participation 

requirements on an ongoing basis. With 

respect to the requirement of Rule 

39.12(a)(5)(i)(B), OCC has determined 

that, for the convenience of its non-FCM 

clearing members, it will provide the 

financial reports filed by them to the 

CFTC (upon the CFTC’s request). OCC is 

proposing to state this policy in a new 

Interpretation and Policy .03 to OCC 

Rule 306. OCC is also proposing to 

amend Interpretation and Policy .02 to 

OCC Rule 306 to parallel the changes 

being proposed to Rule 306(a) discussed 

above. 

CFTC Rule 39.12(a)(5)(ii) requires a 

DCO to adopt rules that ‘‘require 

clearing members to provide to the 

[DCO], in a timely manner, information 

that concerns any financial or business 

developments that may materially affect 

the clearing members’ ability to 

continue to comply with participation 

requirements.’’ While OCC Rule 215 

already requires a clearing member to 

give OCC prompt written notice of any 

change of organization or ownership 

structure, and certain other OCC Rules 

have notice requirements that address 

portions of this new requirement, OCC 

is proposing to amend OCC Rule 215 to 

more closely address the requirements 

of the referenced CFTC Rule, as well as 

to expand the notice requirement in 

Rule 215(a)(4) to include changes in 

clearing member’s jurisdiction of 

organization or incorporation, in 


tkelley on DSK3SPTVN1PROD with NOTICES
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5 17 CFR 240.19d–1(c). 

6See Exchange Act Release No. 21013 (June 1, 

1984), 49 FR 23828 (June 8, 1984). 

7See OCC Rule 1201. 

addition to changes in name or form of 

business organization. OCC is also 

proposing to adopt a specific schedule 

of fines for violation of OCC Rule 215 

and to amend Rule 209 to allow OCC to 

withdraw the amounts of any fines 

payable in connection with a minor rule 

violation (as well as any fine levied in 

connection with a disciplinary 

proceeding pursuant to Chapter XII of 

the Rules), including a violation of Rule 

215, from a clearing member’s bank 

account, provided that the Clearing 

Member has not timely contested such 

fines. The proposed schedule of fines is 

based on a fine schedule that has been 

adopted by operating subsidiaries of the 

Depository Trust & Clearing 

Corporation. As proposed, fines for 

violation of amended Rule 215 would be 

between $300 and $1,500, depending on 

the number of violations within any 

rolling 24-month period and the first, 

second and third violations of Rule 215 

would constitute ‘‘minor rule 

violations’’ (see below). The fourth such 

violation would result in disciplinary 

action under Chapter XII of OCC’s Rules 

and would not constitute a minor rule 

violation. OCC believes that adopting a 

specific schedule of fines will provide 

OCC with greater ability to ensure 

compliance by clearing members. 

OCC is also proposing to amend Rule 

202 to require its clearing members to 

notify OCC of any changes to the 

representatives who are authorized to 

act on behalf of the clearing member 

and to update their certified lists of 

signatures. 

5. Clearing Member Customer Initial 

Margin 

CFTC Rule 39.13(g)(8)(ii) states that a 

DCO must ‘‘require its clearing members 

to collect customer initial margin * * * 

from their customers, for nonhedge 

positions, at a level that is greater than 

100 percent of the [DCO’s] initial margin 

requirements with respect to each 

product and swap portfolio. The [DCO] 

shall have reasonable discretion in 

determining the percentage by which 

customer initial margins must exceed 

the [DCO’s] initial margin requirements 

with respect to particular products or 

swap portfolios.’’ [Emphasis added.] 

Additionally, CFTC Rule 39.13(g)(8)(iii) 

requires each DCO to ‘‘require its 

clearing members to ensure that their 

customers do not withdraw funds from 

their accounts with such clearing 

members unless the net liquidating 

value plus the margin deposits 

remaining in a customer’s account after 

such withdrawal are sufficient to meet 

the customer initial margin 

requirements with respect to all 

products and swap portfolios held in 

such customer’s account which are 

cleared by the [DCO].’’ OCC is 

proposing to adopt a new Rule 602 

(which had previously been reserved) in 

order to implement the requirements of 

CFTC Rule 39.13(g)(8)(ii) and (iii). 

6. Initial Margin—Pledged Assets 

CFTC Rule 39.13(g)(14) states that ‘‘if 

a [DCO] permits its clearing members to 

pledge assets for initial margin while 

retaining such assets in accounts in the 

names of such clearing members, the 

[DCO] shall ensure that such assets are 

unencumbered and that such pledge has 

been validly created and validly 

perfected in the relevant jurisdiction.’’ 

While OCC Rule 604(b)(4)(ii) allows 

pledged assets to be provided as margin 

under certain circumstances, OCC is 

proposing to add a new Interpretation 

and Policy .07 to Rule 604 to explicitly 

state that all assets pledged to OCC, for 

whatever purpose, must be free of any 

lien or other encumbrance senior to 

OCC’s lien. OCC does not believe that 

this is a substantive amendment to its 

Rules, as OCC already takes measures to 

ensure that its lien over assets provided 

as initial margin is senior to all other 

liens or other encumbrances over such 

assets. OCC is proposing this 

amendment in order to avoid any doubt 

as to its compliance with the referenced 

CFTC Rule. 

7. Clearing Member Risk Management 

Requirements 

CFTC Rule 39.13(h)(5)(i) requires a 

DCO to adopt rules that: ‘‘(A) require its 

clearing members to maintain current 

written risk management policies and 

procedures, which address the risks that 

such clearing members may pose to the 

[DCO]; (B) ensure that it has the 

authority to request and obtain 

information and documents from its 

clearing members regarding their risk 

management policies, procedures, and 

practices, including, but not limited to, 

information and documents relating to 

the liquidity of their financial resources 

and their settlement procedures; and (C) 

require its clearing members to make 

information and documents regarding 

their risk management policies, 

procedures, and practices available to 

the [CFTC] upon [CFTC] request.’’ OCC 

is proposing to adopt a new Rule 311 

entitled ‘‘Clearing Member Risk 

Management’’ requiring clearing 

members to maintain risk management 

policies and procedures meeting the 

requirements of CFTC Rule 

39.13(h)(5)(i)(A), granting OCC the 

authority to request and obtain 

information and documents from 

clearing members regarding their risk 

management policies, procedures and 

practices, and requiring clearing 

members to make information and 

documents regarding their risk 

management policies, procedures and 

practices available to the CFTC upon its 

request. 

8. Daily Settlements 

CFTC Rule 39.14(b) requires that a 

DCO ‘‘effect a settlement with each 

clearing member at least once each 

business day’’ and that it ‘‘have the 

authority and operational capacity to 

effect a settlement with each clearing 

member, on an intraday basis, either 

routinely, when thresholds specified by 

the DCO are breached, or in times of 

extreme market volatility.’’ OCC Rule 

1301(c) provides OCC with the authority 

to effect intraday settlements and 

Interpretation and Policy .01 of Rule 

1301 states OCC’s policy of not 

requiring intraday variation payments 

while reserving OCC’s right to require 

such payments from time to time as 

appropriate. However, for purposes of 

conforming OCC’s Rules more closely to 

the regulatory language, OCC is 

proposing to revise Interpretation and 

Policy .01 of Rule 1301 to clarify that 

intraday variation payments will not be 

required ‘‘in the ordinary course’’ and to 

state that circumstances under which 

OCC may assert its right to require 

intraday variation payments may 

include, but are not limited to, breach 

of any threshold set by OCC or during 

times of extreme market volatility. 

9. Implementation of the MRV Plan 

In 1984, the SEC adopted 

amendments to Rule 19d–1(c) under the 

Act 5 that allow self-regulatory 

organizations to adopt, with SEC 

approval, plans for the disposition of 

minor violations of rules.6

OCC’s rules currently give OCC the 

ability to censure, suspend, expel or 

limit the activities, functions or 

operations of any Clearing Member for 

any violation of OCC’s By-Laws or 

Rules. OCC may also impose fines on 

Clearing Members for such violations.7

OCC’s Rules have not historically 

distinguished between those violations 

of the Rules and By-Laws that are minor 

and do not call for the full procedural 

regime applicable to other violations 

and those that are not minor. With the 

amendments being proposed to Rule 

215, and the inclusion of a specific fine 

schedule for violations of Rule 215, OCC 

now believes it is appropriate to put in 

place an MRV Plan in Rule 1201(b) that 


tkelley on DSK3SPTVN1PROD with NOTICES
25002 Federal Register / Vol. 77, No. 81 / Thursday, April 26, 2012 / Notices 

8 17 CFR 240.19d–1(c)(2). 

9 15 U.S.C. 78q–1(b)(3)(G). 

10 15 U.S.C. 78q–1(b)(3)(H). 

11 17 CFR 240.15c3–1. 

12 15 U.S.C. 78s(b). 13 15 U.S.C. 78q–1. In approving this proposed 

rule change, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 14 15 U.S.C. 78q–1(b)(3)(F). 

will meet the definition of a ‘‘minor rule 

violation plan’’ in Exchange Act Rule 

19d–1(c)(2).8 OCC will specify which 

violations of the By-Laws or Rules will 

constitute minor rule violations. OCC 

currently proposes to designate only a 

violation of Rule 215 as a minor rule 

violation. A Clearing Member that 

wishes to contest a minor rule violation 

may do so by providing written notice 

to OCC. Upon contesting a minor rule 

violation, the violation will be deemed 

to no longer be a minor rule violation 

and will be subject to the full provisions 

of OCC’s Chapter XII rules with respect 

to disciplinary proceedings, including 

the procedures provided therein for 

answering charges levied against a 

Clearing Member, which give Clearing 

Members the right to a hearing and to 

be represented by counsel at such 

hearing. Verbatim transcripts of any 

such hearing are prepared by OCC. 

Section 17A(b)(3)(G) of the Act 9

requires that the rules of a clearing 

agency provide that its members be 

appropriately disciplined for violation 

of any provision of the rules of the 

clearing agency by expulsion, 

suspension, limitation of activities, 

functions, and operations, fine, censure, 

or any other fitting sanction. Section 

17A(b)(3)(H) of the Act 10 requires, 

among other things, that the rules of a 

clearing agency, in general, provide a 

fair procedure with respect to the 

disciplining of members. OCC believes 

that adopting an MRV Plan furthers the 

statutory objective of providing a fair 

procedure for disciplining Clearing 

Members, and will provide OCC with 

the ability to impose a meaningful 

sanction for those rule violations that do 

not necessarily rise to a level meriting 

a full disciplinary proceeding under 

Chapter XII of the Rules. Accordingly, 

the proposed changes promote the 

prompt and accurate clearance and 

settlement of securities transactions and 

are therefore consistent with the 

requirements of the Exchange Act and 

the rules and regulations promulgated 

thereunder applicable to OCC. 

10. Other Amendments 

Several of OCC’s By-Laws and Rules 

include now-dated references to the 

National Association of Securities 

Dealers, which OCC has corrected to 

refer instead to the Financial Industry 

Regulatory Authority. In addition, OCC 

Rule 307 includes references to a 

paragraph of Exchange Act Rule 

15c3–1 11 that, while correct when Rule 

307 was adopted, have since become 

incorrect due to the reorganization of 

that rule. OCC is amending its By-Laws 

and Rules to correct the foregoing 

references. 

OCC believes the proposed changes 

are consistent with the requirements of 

the Act. OCC, as a DCO, is required to 

implement the proposed changes to 

comply with recent changes to CFTC 

regulations. OCC notes that the policies 

of the CEA with respect to clearing are 

comparable to a number of the policies 

underlying the Act, such as promoting 

market transparency for derivatives 

markets, promoting the prompt and 

accurate clearance of transactions, and 

protecting investors and the public 

interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

OCC does not believe that the 

proposed rule change will have any 

impact or impose any burden on 

competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

OCC has not solicited and does not 

intend to solicit comments regarding 

this proposed rule change. OCC has not 

received any unsolicited written 

comments from interested parties. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

• Electronic comments may be 

submitted by using the Commission’s 

Internet comment form (http:// 

www.sec.gov/rules/sro.shtml), or send 

an email to rule-comments@sec.gov. 

Please include File No. SR–OCC–2012– 

06 on the subject line. 

• Paper comments should be sent in 

triplicate to Elizabeth M. Murphy, 

Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–OCC–2012–06. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549 on official 

business days between the hours of 

10 a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of OCC 

and on OCC’s Web site at http:// 

www.optionsclearing.com/components/ 

docs/legal/rules_and_bylaws/ 

sr_occ_12_06.pdf. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–OCC– 

2012–06 and should be submitted on or 

before May 17, 2012. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of 

Proposed Rule Change 

Section 19(b) of the Act 12 directs the 

Commission to approve a proposed rule 

change of a self-regulatory organization 

if it finds that such proposed rule 

change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

such organization. The Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act, in particular the requirements of 

Section 17A of the Act, and the rules 

and regulations thereunder applicable to 

OCC.13 Specifically, the Commission 

finds that the proposed rule change is 

consistent with Section 17A(b)(3)(F) of 

the Act which requires, among other 

things, that the rules of a clearing 

agency be designed to assure the 

safeguarding of securities and funds 

which are in the custody and control of 

the clearing agency because the 

proposed rule change should allow OCC 

to better monitor the financial status 

and risk management procedures of its 

clearing members.14 In addition, the 

Commission finds that the proposed 

rule change implementing a minor rule 

violation plan is consistent with the 


tkelley on DSK3SPTVN1PROD with NOTICES
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15 15 U.S.C. 78q–1(b)(3)(G). 

16 15 U.S.C. 78q–1(b)(3)(H). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 66497 

(March 1, 2012) 77 FR 13668. 

4See Rule 604(a). 

5See Rule 604(g). 

6See Rule 604(e). 

7See Rule 604(d). 

8See Rule 1(t). 

9The term ‘‘investment banking or securities 

business’’ means the business, carried on by a 

broker or dealer, of underwriting or distributing 

issues of securities, or of purchasing securities and 

offering the same for sale as a dealer, or of 

purchasing and selling securities upon the order 

and for the account of others. See Rule 1(m). Of 

course, the federal securities laws may require 

broker-dealers to become members of the FINRA in 

order to perform some of these functions. See e.g., 

15 U.S.C. 78o(b)(8). 

10WebCRD is FINRA’s automated Central 

Registration Depository. 

11Supplementary Material .04 of Rule 604. 

12The requirement does not cover members 

whose activities are limited to the Exchange’s 

options trading floor and who are registered 

pursuant to Rule 620(a), as well as associated 

persons whose activities are limited to the 

Exchange’s options trading floor and are registered 

pursuant to Rule 620(b). 

13These functions include handling and 

executing electronic and phoned-in orders on the 

trading floor, as well as providing markets, both 

verbally and electronically. 

14Trading floor personnel, and members on the 

trading floor, would, however, be subject to new 

principal registration requirements, described 

below. 

requirements of Section 17A(b)(3)(G) of 

the Act, which requires that the rules of 

a clearing agency provide that its 

members be appropriately disciplined 

for violation of any provision of the 

rules of the clearing agency by 

expulsion, suspension, limitation of 

activities, functions, and operations, 

fine, censure, or any other fitting 

sanction,15 as well as Section 

17A(b)(3)(H) which, among other things, 

requires that the rules of a clearing 

agency provide a fair procedure with 

respect to the disciplining of 

participants.16

In its filing, OCC requested that the 

Commission approve this proposed rule 

change on an accelerated basis for good 

cause shown. OCC cites as the reason 

for this request OCC’s operation as a 

DCO, which is subject to regulation by 

the CFTC under the CEA. This rule 

change is being made according to 

regulations promulgated by the CFTC, 

which were previously subject to notice 

and comment. Not approving this 

request on an accelerated basis would 

have a significant impact on OCC’s 

operations as a DCO. 

The Commission finds good cause for 

approving the proposed rule change 

prior to the 30th day after the date of 

publication of notice in the Federal 

Register because the proposed rule 

change allows OCC to implement the 

regulations of another federal regulatory 

agency, the CFTC, in accordance with 

those regulations’ effective date. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act, that the 

proposed rule change (SR–OCC–2012– 

06) is approved on an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2012–10028 Filed 4–25–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66840; File No. SR–Phlx– 

2012–23] 

Self-Regulatory Organizations; 

NASDAQ OMX Phlx LLC; Order 

Approving Proposed Rule Change To 

Amend Registration, Qualification, and 

Continuing Education Requirements 

for Associated Persons 

April 20, 2012. 

I. Introduction 

On February 16, 2012, NASDAQ OMX 

Phlx LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’), 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1, and Rule 19b–4 2 thereunder, 

a proposed rule change to amend and 

extend registration, qualification, and 

continuing education requirements for 

associated persons of members. The 

proposed rule change was published for 

comment in the Federal Register on 

March 7, 2012.3 The Commission 

received no comment letters on the 

proposal. This order approves the 

proposed rule change. 

II. Description of the Proposal 

Representative Registration 

Exchange Rule 604 applies to all 

member organizations and generally 

requires the Series 7 examination for 

Registered Representatives,4 Principals,5

off-floor traders 6 and persons 

compensated directly or indirectly for 

the solicitation or handling of business 

in securities who are not otherwise 

required to register with the Exchange 

by Rule 604(a).7 Rule 604(f) provides 

that members and persons associated 

with member organizations who are 

registered with the Exchange for the 

purpose of trading NMS Stocks 8

through the facilities of the Exchange, 

which is the PSX platform, are subject 

to the provisions of Rule 604(g) and (h) 

governing principal and representative 

registration, respectively. Rule 604(h) is 

applicable today only to PSX users 

pursuant to Rule 604(f). The Exchange 

proposes to move the requirements in 

Rule 604, and expand on those 

requirements, in proposed Rules 611, 

612 and 613. 

Rule 604(h) governs the registration of 

representatives with the Exchange. 

Specifically, Rule 604(h)(1) requires that 

all persons engaged or to be engaged in 

the investment banking or securities 

business 9 of a member organization 

who are to function as representatives 

be registered through WebCRD 10 in the 

category of registration appropriate to 

the function they will perform.11 Before 

their registration can become effective, 

they must pass the Series 7 

examination. The Exchange proposes to 

delete Rule 604 and adopt broader 

registration requirements in proposed 

Rule 613. Provisions contained in Rule 

604(h) would be moved to Rule 613, 

Representative Registration, in 

substantially the same form, except with 

respect to trading floor personnel 

subject to Rule 620. 

Proposed Rule 613(a) would require 

all persons engaged or to be engaged in 

the investment banking or securities 

business of a member organization who 

are to function as representatives to be 

registered through WebCRD as specified 

in Rule 613(e).12 Trading floor 

personnel whose activities 13 are limited 

to the trading floor would continue to be 

required to register pursuant to Rule 620 

and qualify by passing the Exchange’s 

Trading Floor Qualification 

Examination.14 In addition, amended 

Rule 620 would require all trading floor 

personnel, including clerks, interns, and 

any other associated persons of a 

member organization who are not 

required to register pursuant to Rule 

620(a) to register on Form U4 through 

WebCRD. Thus, the same registration 

information would be available 


tkelley on DSK3SPTVN1PROD with NOTICES