67762 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices 

13 15 U.S.C. 78s(b)(3)(A)(iii). 

14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 

15 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general to protect 

investors and the public interest. 

The Exchange believes that 

harmonizing the Existing Connectivity 

Rules with the colocation, connectivity, 

and direct connectivity rules of Nasdaq 

will improve efficiency and reduce the 

burden on firms as they only will need 

to be familiar with a single set of rules 

going forward governing colocation, 

connectivity, and direct connectivity. 

Because the text of the Existing 

Connectivity Rules and Nasdaq General 

8 are already the same, the proposed 

change will have no substantive impact 

on firms that colocate with or connect 

to the Exchange. 

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. The 

proposed rule change does not make 

any substantive change to Exchange 

General 8 and will not impact 

competition. 

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 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 13 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.14

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 rule-comments@

sec.gov. Please include File Number SR– 

Phlx–2018–82 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2018–82. 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 website (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 website 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 

10:00 a.m. and 3:00 p.m. Copies of the 

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 Number SR–Phlx– 

2018–82 and should be submitted on or 

before January 22, 2019. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28386 Filed 12–28–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84939; File No. SR–OCC– 

2018–015] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change 

Concerning Changes to The Options 

Clearing Corporation’s Management 

Structure 

December 21, 2018. 

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

Securities Exchange Act of 1934 

(‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule 

19b–4 thereunder,2 notice is hereby 

given that on December 20, 2018, The 

Options Clearing Corporation (‘‘OCC’’) 

filed with the Securities and Exchange 

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

the proposed rule change as described 

in Items I, II and III below, which Items 

have been prepared by OCC. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change by OCC 

would: (1) Reestablish the separation of 

the roles of Executive Chairman and 

Chief Executive Officer (‘‘CEO’’) and 

reallocate authority and responsibilities 

between the two roles; (2) remove the 

requirement from OCC’s By-Laws that 

the Board of Directors (‘‘Board’’) elect a 

Chief Administrative Officer (‘‘CAO’’) 

and delete the references to a CAO 

throughout OCC’s By-Laws, Rules, and 

charters; and (3) provide additional 

flexibility regarding the Management 

Director seat on the Board, including 

providing that such a director is not 

required. As described below, the 

proposed rule change amends multiple 

provisions of OCC’s By-Laws and Rules 

to effectuate the separation of the 

Executive Chairman and CEO roles and 

the elimination of the CAO as a required 

officer. The proposed rule change also 

amends OCC’s By-Laws to provide 

additional flexibility for the 

Management Director seat on the Board 


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3OCC’s By-Laws and Rules can be found on 

OCC’s public website: http://optionsclearing.com/ 

about/publications/bylaws.jsp. OCC’s Board and 

Board Committee Charters are also available on 

OCC’s public website: https://www.theocc.com/ 

about/. 

4Prior to the creation of an officer with the title 

of ‘‘Chief Executive Officer,’’ that function was 

performed by the President of OCC. See Securities 

Exchange Act Release No. 70076 (July 30, 2013), 78 

FR 47449 (August 5, 2013) (SR–OCC–2013–09) 

(stating that the President will also ‘‘serve as 

[CEO]’’). 

5See, e.g., Securities Exchange Act Release No. 

80531 (April 26, 2017), 82 FR 20502 (May 2, 2017) 

(SR–OCC–2017–002) (Order Approving Proposed 

Rule Change Concerning Changes to The Options 

Clearing Corporation’s Management Structure); 

Securities Exchange Act Release No. 73785 

(December 8, 2014), 79 FR 73915 (December 12, 

2014) (SR–OCC–2014–18) (Notice of Filing and 

Order Granting Accelerated Approval of a Proposed 

Rule Change to Provide that The Options Clearing 

Corporation’s President Will be its Chief Operating 

Officer, and that the President Will Not be a 

Management Director); Securities Exchange Act 

Release No. 70076 (July 20, 2013), 78 FR 47449 

(August 5, 2013) (SR–OCC–2013–09) (Order 

Approving Proposed Rule Change to Separate the 

Powers and Duties Currently Combined in the 

Officer of OCC’s Chairman in Two Offices, 

Chairman and President, and Create an Additional 

Directorship to be Occupied By the President). 

6See Securities Exchange Act Release No. 80531 

(April 26, 2017), 82 FR 20502 (May 2, 2017) (SR– 

OCC–2017–002) (Order Approving Proposed Rule 

Change Concerning Changes to The Options 

Clearing Corporation’s Management Structure). 7See Securities Exchange Act Release No. 80531 

(April 26, 2017), 82 FR 20502 (May 2, 2017) (SR– 

OCC–2017–002). The 2017 Amendments also made 

a number of administrative and clean-up edits to 

OCC’s By-Laws and Rules. Id. 

8See OCC By-Laws, Art. IV, Sec. 6(a) (‘‘The 

Executive Chairman shall also serve as the 

Corporation’s Chief Executive Officer, who shall be 

an officer responsible for all aspects of the 

Corporation’s business and the of its day to day 

affairs.’’). 

9See OCC By-Laws, Art. III, Sec. 7 (‘‘The 

Executive Chairman of the Corporation, by virtue of 

holding his office, shall be elected as a Management 

Director by the stockholders at each annual meeting 

of the stockholders.’’). 

10See OCC By-Laws, Art. IV, Sec. 1. 

11See OCC By-Laws, Art. IV, Sec. 1. 

and makes conforming changes to 

several OCC charters to implement the 

above amendments. 

The proposed changes to OCC’s ByLaws, Rules, and other governing 

documents (‘‘OCC Requirements’’) are 

attached as Exhibit 5A–5G. Material 

proposed to be added to the OCC 

Requirements as currently in effect is 

marked by underlining. Material 

proposed to be deleted from the OCC 

Requirements as currently in effect is 

marked by strikethrough. The proposed 

rule change, including Exhibits 5A–5G, 

is available on OCC’s website at https:// 

www.theocc.com/about/publications/ 

bylaws.jsp. All terms with initial 

capitalization that are not otherwise 

defined herein have the same meaning 

as set forth in the OCC By-Laws and 

Rules.3

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

OCC included statements concerning 

the purpose of 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 IV below. OCC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

(1) Purpose 

OCC is proposing amendments to its 

By-Laws, Rules, and certain committee 

charters to effectuate several changes to 

its governance structure. First, OCC is 

seeking to reestablish the separation of 

the Executive Chairman and CEO roles 

at OCC and allocate authority and 

responsibilities for each of the roles.4 In 

connection with this separation, the 

proposed rule change also would 

provide that having a Management 

Director on the Board, which is 

currently filled by the Executive 

Chairman/CEO, is not required. In 

addition, the proposed rule change 

would remove the requirement from 

OCC’s By-Laws that the Board elect a 

CAO and, consequently, delete the 

references to a CAO throughout OCC’s 

By-Laws, Rules, and charters. The 

purpose of the proposed rule change is 

to re-establish the separation of the 

Executive Chairman and CEO roles and 

to implement additional organizational 

changes to OCC’s governance structure, 

including providing additional 

flexibility to the Management Director 

on the Board and removing the 

requirement that the Board elect a CAO, 

that the Board has concluded would 

benefit OCC’s operation and, 

consequently, OCC’s ability to serve 

Clearing Members and the markets for 

which it clears and settles transactions 

for the reasons set forth below. Because 

the proposed rule change would 

eliminate references to the CAO 

throughout OCC’s By-Laws and Rules, 

the proposed rule change would permit 

delegation of authority by the CEO or 

Chief Operating Officer (‘‘COO’’) in 

those instances where there are only 

two named officers. In those instances, 

OCC believes that delegation is 

appropriate to ensure that authority can 

be exercised if the CEO and COO are 

unavailable. Finally, the proposed rule 

change would make conforming changes 

throughout OCC’s By-Laws, Rules, and 

certain Board charters to ensure 

consistency throughout those 

documents. 

Background 

OCC’s Board, as an integral part of its 

oversight function, may be called upon 

to evaluate OCC’s governance structure 

to assess potential ways in which that 

structure could be improved or 

enhanced. Consequently, OCC has made 

changes to its governance structure to 

promote the efficient and effective 

management of its business designed to 

support OCC’s management.5 More 

specifically, and most recently, on April 

26, 2017, the SEC approved a proposed 

rule change that made multiple changes 

to OCC’s management structure (‘‘2017 

Amendments’’).6 The 2017 

Amendments amended OCC’s By-Laws, 

Rules, Board of Directors Charter 

(‘‘Board Charter’’), Compensation and 

Performance Committee Charter (‘‘CPC 

Charter’’), Dividend Policy, and Refund 

Policy to address the organizational 

changes. At that time, the Board 

concluded that the changes represented 

enhancements to OCC’s existing 

leadership structure that would promote 

OCC’s more efficient management and 

operation. The changes were intended 

to be a temporary measure to enable 

OCC to strengthen and build out its 

senior management team under the 

direction of the Executive Chairman and 

CEO. Consequently, OCC proposed, and 

the SEC approved, a number of changes 

to OCC’s management structure, 

including: (1) Providing that the 

Executive Chairman would also serve as 

a newly-recognized CEO; (2) removing 

the President as a recognized officer of 

OCC; (3) providing that the Board would 

appoint the COO and a newly 

recognized CAO; (4) giving the COO and 

CAO authority to take certain actions or 

grant exceptions in instances where that 

authority had previously been granted 

to the President; (5) making conforming 

changes to OCC’s Board Charter, CPC 

Charter, and the Dividend and Refund 

Policies reflecting the changes; and (6) 

separating the positions of Treasurer 

and Chief Financial Officer (‘‘CFO’’).7

Following the SEC’s approval of the 

2017 Amendments, the current 

management structure of OCC as set 

forth in its By-Laws requires election by 

the Board of: (1) An Executive 

Chairman, who in this role also serves 

as CEO 8 and as a Management 

Director; 9 (2) a COO,10 and (3) a CAO.11

Under the By-Laws, the Executive 

Chairman is responsible for the control 

functions of OCC, including enterprise 

risk management, internal audit and 

compliance, and external affairs, and 


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12See OCC By-Laws, Art. IV, Sec. 6(a). 

13OCC By-Laws, Art. IV, Sec. 6(a). 

14See, e.g., OCC Rule 305, OCC Rule 309, OCC 

Rule 609A, OCC Rule 1001, OCC Rule 1002. 

15For example, starting in 2016, and throughout 

2017, OCC’s senior leadership has been staffed with 

highly qualified and experienced executives 

capable of stabilizing and strengthening OCC’s 

operations and compliance posture. These include, 

among others, the hiring of a new President and 

Chief Operating Officer (April, 2017), a Chief 

Administrative Officer (September, 2016), a Chief 

Security Officer (May, 2017), a Chief Information 

Officer (May, 2017), a Chief Financial Officer 

(December, 2016), a Chief Compliance Officer 

(December, 2016), and a new head of government 

relations (September, 2016). 

16The By-Laws currently provide that: (i) ‘‘[t]he 

Board of Directors shall also elect a Chief Operating 

Officer, who it may, in its discretion, designate as 

President of the Corporation, a Chief Administrative 

Officer, a Secretary and a Treasurer, none of whom 

need be a member of the Board of Directors at the 

time of such election’’ and (ii) ‘‘[t]he Board of 

Directors may, but need not, elect one or more Vice 

Presidents or such other officers as it may from time 

to time determine are required for the efficient 

management and operation of the Corporation.’’ See 

OCC By-Laws, Art. IV, Sec. 1 

17The proposed rule change would also make 

non-substantive changes to the use of the term 

‘‘Executive Chairman.’’ The proposed rule change 

would define the term ‘‘Executive Chairman’’ and 

amend its use in certain provisions to ensure the 

term is used consistently throughout the By-Laws 

and Rules (for example, by replacing ‘‘Executive 

Chairman of the Corporation’’ with ‘‘Executive 

Chairman’’). 

18Before the 2017 Amendments, the President 

was responsible for all aspects of OCC’s business 

that did not report directly to the Executive 

Chairman and was responsible for the day to day 

administration of OCC’s affairs in accordance with 

the directions of the Executive Chairman. 

19See supra n. 15. 

20See OCC By-Laws, Art. IV, Sec. 1. 

21See OCC By-Laws, Art. IV, Sec. 6(a). 

22OCC By-Laws, Art. IV, Sec. 6(a). 

has supervision over the officers and 

agents he appoints.12 In his role as CEO, 

the Executive Chairman is also ‘‘an 

officer responsible for all aspects of 

[OCC’s] business and the administration 

of its day to day affairs.’’ 13 These three 

positions (Executive Chairman/CEO, 

COO, and CAO) also are specifically 

identified in numerous provisions of 

OCC’s By-Laws and Rules that authorize 

these specific officers (and, in some 

instances, their delegates) to exercise 

decision-making involving various 

issues; however, because the roles of 

Executive Chairman and CEO are 

currently combined into a single 

individual, these provisions generally 

refer to that individual only in his 

capacity as Executive Chairman and do 

not use the term ‘‘Chief Executive 

Officer.’’ 14 The Board now believes that 

the OCC management team has been 

substantially enhanced with the 

installation of key new senior 

members,15 and thus the OCC is well 

positioned to return to its previous 

leadership structure. 

Proposed Changes to OCC’s Governance 

Structure 

As part of its oversight of OCC’s 

governance structure, the Board 

determined that certain aspects of the 

changes made as part of the 2017 

Amendments should be modified to 

further enhance OCC’s governance 

structure and re-separate the roles of the 

Executive Chairman and CEO. 

Specifically, OCC is proposing to 

separate the roles of the Executive 

Chairman and the CEO, and thus create 

a separate CEO role, and reallocate 

responsibilities and authority between 

the two roles. With the addition of the 

CEO as a separate officer, OCC is 

proposing to remove the requirement 

that the Board elect a CAO and to delete 

the references to a CAO throughout the 

OCC Requirements. The proposed rule 

change would not amend the Board’s 

overall authority to appoint officers; 

rather, it would create an obligation for 

the Board to elect a CEO who is separate 

from the Executive Chairman and would 

eliminate the requirement for the Board 

to elect a CAO.16 In addition, OCC is 

proposing changes to the Management 

Director provisions of the By-Laws to 

reflect the separation of the Executive 

Chairman and CEO roles and to provide 

additional flexibility in the provisions 

concerning the Management Director.17

Finally, the proposed rule change would 

amend the Board and certain committee 

charters to conform to the amendments 

to the By-Laws and Rules. 

(1) Separation of the Executive 

Chairman and CEO Roles 

The 2017 Amendments amended 

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

to provide that the Executive Chairman 

would also serve as a newly recognized 

CEO. In that capacity, the Executive 

Chairman/CEO is responsible for all 

aspects of OCC’s business and the day 

to day administration of its affairs that 

are not otherwise assigned to the COO 

or CAO.18 This approach was adopted 

as part of the 2017 Amendments in part 

to enable OCC to strengthen and build 

out its senior management team under 

the direction of the Executive Chairman 

and CEO and to provide flexibility and 

avoid concentrating responsibility in 

any single officer; thus, the COO and 

CAO assumed certain responsibilities 

that were previously assigned to the 

President. 

OCC believes that at this time it 

would benefit from a separation of the 

functions of the Executive Chairman 

and CEO roles. Since the 

implementation of the 2017 

Amendments, OCC has taken significant 

steps to enhance its senior management 

team so that it has a broad range of 

knowledge, skills, and experience and 

an alignment of officers’ responsibilities 

with their skills and experience.19 As a 

result, OCC believes it would now 

benefit further from re-separating the 

Executive Chairman and CEO roles. 

Under the proposed rule change, the 

Executive Chairman would retain 

responsibility for facilitating Board 

leadership and management oversight as 

well as overseeing the work of internal 

audit, public affairs, and government 

relations, while the CEO would oversee 

all of OCC’s business, operational and 

corporate support functions, with key 

operational and corporate support 

functions reporting indirectly to the 

CEO through the COO function. The 

proposed rule change would provide 

several benefits to OCC. For example, 

the separation of the Executive 

Chairman and CEO would provide for 

an effective counterbalance in the 

management and oversight of OCC and 

allow for a broader range of skill, 

experience and perspectives between 

the roles of Executive Chairman and 

CEO. In addition, the separation of these 

roles would enable the Executive 

Chairman to serve a valuable advisory 

role in assisting the CEO with strategic 

plan development as well as 

management succession planning by 

assisting in developing, coaching and 

mentoring members of the senior 

management team in a separate capacity 

than that of the CEO. 

Article IV of the By-Laws generally 

sets forth the selection and authorities 

of OCC’s officers and the Executive 

Chairman. Section 1 establishes the 

selection of the Executive Chairman by 

the Board, and provides that the 

Executive Chairman ‘‘shall be elected by 

the Board of Directors from among the 

full-time employees of the 

Corporation.’’ 20 Because, as currently 

structured, the Executive Chairman also 

serves as CEO by virtue of his role as 

Executive Chairman, there is no 

separate provision in the By-Laws for 

selection or appointment of a CEO. 

Under the By-Laws, the Executive 

Chairman is responsible for the control 

functions of OCC, including enterprise 

risk management, internal audit and 

compliance, and external affairs, and 

has supervision over the officers and 

agents he appoints.21 In his role as CEO, 

the Executive Chairman is also ‘‘an 

officer responsible for all aspects of 

[OCC’s] business and . . . its day to day 

affairs.’’ 22

The proposed rule change would 

amend Sections 6 and 8 of Article IV of 

the By-Laws to separate these functions 


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23Because the Executive Chairman would be less 

involved in day to day operational issues, the 

proposed rule change removes the requirement that 

the Executive Chairman must be selected from 

‘‘among the full-time employees of OCC’’ to require 

only that the Executive Chairman be selected from 

‘‘among the employees of OCC.’’ This amendment 

would allow the Executive Chairman to be a parttime employee. 

24Although the Chief Audit Executive will report 

administratively to the Executive Chairman, he or 

she will report functionally to the Audit Committee 

of the Board pursuant to the Audit Committee 

charter. 

25Although the Chief Compliance Officer would 

report administratively to the CEO, he or she would 

continue to report functionally to the Audit 

Committee of the Board pursuant to the committee’s 

charter. Similarly, the Chief Risk Officer would 

report administratively to the CEO; however, he or 

she would continue to report functionally to the 

Risk Committee of the Board pursuant to the Risk 

Committee charter. 26See OCC By-Laws, Art. IV, Sec. 8. 

and divide them between the Executive 

Chairman and the CEO. Under the 

proposed rule change, the Executive 

Chairman would be less involved in day 

to day management decisions of the 

type more typically made by an 

executive but would retain his role visa`-vis the Board.23 In addition, the 

Executive Chairman would retain 

responsibility over internal audit, public 

affairs, and government relations.24 The 

CEO will be responsible for all aspects 

of the OCC’s business and of its day to 

day affairs, including enterprise risk 

management and compliance, and 

would be responsible for all aspects of 

the business of the Corporation that do 

not report directly to the Executive 

Chairman.25 The COO would administer 

the day to day affairs and business of 

the Corporation in accordance with the 

directions of the CEO. 

In addition to establishing separate 

By-Law provisions addressing the 

selection and roles of the Executive 

Chairman and CEO, there are numerous 

provisions throughout OCC’s By-Laws 

and Rules that the proposed rule change 

would amend to change the list of 

officers authorized to act under the 

relevant provision. In each case, the 

proposed rule change would remove the 

CAO from the list of officers because the 

office of CAO would no longer be 

required by OCC’s By-Laws. In some 

instances, the Executive Chairman will 

continue to be listed as an authorized 

individual; in other instances, the 

reference to the Executive Chairman 

would be replaced by the CEO. 

Specifically, the proposed rule change 

would replace the reference to the 

Executive Chairman with the CEO in the 

following By-Law and Rule provisions: 

• Approval of a bank or trust company 

as an approved custodian (By-Laws, 

Art. I, Sec. 1) 

• Ability to delegate authority to 

Designated Officers (By-Laws, Art. I, 

Sec. 1) 

• Temporary appointment of a 

controller/chief accounting officer 

(By-Laws, Art. IV, Sec. 12) 

• Temporary approval of a Clearing 

Member application if expedited 

treatment is requested (By-Laws, Art. 

V, Sec. 1) 

• Limited delegation of authority to 

approve Clearing Member 

applications (By-Laws, Art. V, Sec. 2) 

• Authority to extend the deadline to 

meet membership conditions (ByLaws, Art. V, Sec. 3.01) 

• Ability to impose exercise restrictions 

(By-Laws, Art. VI, Sec. 17.01) 

• Restricting certain Clearing Member 

transactions, positions, and activities 

(Rule 305) 

• Imposing limitations on Managing 

Clearing Members with insufficient 

net capital (Rule 309) 

• Temporarily approving a facilities 

management agreement (Rule 309.01, 

309.02) 

• Imposing limitations or restrictions on 

Appointed Clearing Members with 

insufficient net capital (Rule 309A) 

• Temporarily accepting a letter of 

credit that does not meet rule 

requirements as a margin asset under 

unusual circumstances (Rule 604) 

• Permitting filing of an exercise notice 

after the deadline to correct a bona 

fide error (Rule 801) 

• Requiring reports regarding exercise 

allocation under certain 

circumstances (Rule 804) 

• Remitting a filing fee (Rule 805) 

• Extending or postponing the time for 

delivery to a date regarding 

settlements to be made through the 

facilities of the correspondent clearing 

corporation (Rule 901) 

• Extending or postponing the time for 

delivery on broker-to-broker 

settlements (Rule 903) 

• Determining whether good cause 

exists for failure to deliver or receive 

(Rule 1309) 

• Extending or postponing the exercise 

settlement date for Treasury security 

options (Rule 1402) 

• Determining whether good cause 

exists for a failure to match (Rule 

1405) 

• Advancing or postponing the exercise 

settlement date for foreign currency 

options (Rule 1604) 

• Determining whether good cause 

exists for failure to deliver or pay (Rule 

1610). 

These provisions generally involve 

more routine day to day business 

decisions or are, by their terms, 

temporary. Consequently, OCC believes 

these provisions are therefore more 

appropriately authorized by a member 

of management such as the CEO or COO 

rather than at the Board level by the 

Executive Chairman. 

With respect to other provisions, the 

proposed rule change would add the 

CEO as an authorized officer but would 

not remove the authority of the 

Executive Chairman to act. These 

provisions include: 

• Those related to declaring and acting 

in an emergency (By-Laws, Art. III, 

Sec. 15; Art. IX, Sec. 14) 

• the ability to appoint officers, 

including Vice Presidents (By-Laws, 

Art. IV, Secs. 2, 3 and 9) 

• the suspension of Clearing Members 

(By-Laws, Art. IV, Sec. 6) 

• signing OCC share certificates (ByLaws, Art. IX, Sec. 12) 

• extending settlements (Rule 505) 

• waiving margin in extraordinary 

circumstances (Rule 609A) 

• increasing the size or amount of cash 

in the clearing fund (Rules 1001, 

1002) 

• determining reasonable methods to 

borrow or obtain funds using clearing 

fund assets (Rule 1006) 

• determining not to liquidate a 

Clearing Member’s assets (Rule 1104) 

• the use of private auctions to liquidate 

a suspended Clearing Member’s assets 

(Rule 1104.02) 

• determining not to liquidate a 

suspended Clearing Member’s assets 

or take protective actions (Rule 1106). 

OCC believes that these provisions 

should continue to include the 

Executive Chairman as an authorized 

individual to maintain appropriate 

flexibility in these critical decisions, 

which primarily involve emergency or 

other exigent circumstances, 

determinations around OCC’s 

management structure, and other 

activities generally outside of OCC’s day 

to day activities (e.g., signing OCC share 

certificates), so that management has the 

capacity to carry out OCC’s affairs in 

such circumstances even if a particular 

officer is absent or is otherwise unable 

to perform his or her duties. 

(2) Elimination of a Mandatory CAO 

In addition to separating the roles of 

the Executive Chairman and CEO, the 

proposed rule change would eliminate 

the requirement in the By-Laws for the 

Board to elect a CAO. As part of the 

2017 Amendments, the By-Laws require 

the Board to elect both a COO and a 

CAO.26 The 2017 Amendments added 

the requirement of a CAO in part to 

ensure flexibility and avoid 


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27See Securities Exchange Act Release No. 80531 

(April 26, 2017), 82 FR 20502 (May 2, 2017) (SR– 

OCC–2017–002) (Order Approving Proposed Rule 

Change Concerning Changes to The Options 

Clearing Corporation’s Management Structure). 

28OCC By-Laws, Art. IV, Sec. 1. 

29OCC notes that such delegations would 

therefore be limited to Senior Vice Presidents and 

Executive Vice Presidents of OCC. 

30See OCC By-Laws, Art. III, Sec. 1 (‘‘The Board 

of Directors of the Corporation shall be composed 

of nine Member Directors, the number of Exchange 

Directors fixed by or pursuant to Section 6 of this 

Article III, five Public Directors, and one 

Management Director.’’); see also OCC By-Laws, 

Art. III, Sec. 7 (‘‘The Executive Chairman of the 

Corporation, by virtue of holding his office, shall be 

elected as a Management Director by the 

stockholders at each annual meeting of the 

stockholders.’’). 

31OCC notes that there would be no changes to 

its Technology Committee Charter. 

32 15 U.S.C. 78q–1. 

33 15 U.S.C. 78q–1(b)(3)(A). 

concentration of authority and 

responsibility in any one officer.27 As 

discussed above, with the separation of 

the Executive Chairman and CEO roles 

to establish a separate CEO, the need for 

a CAO to ensure sufficient flexibility is 

no longer necessary. Consequently, the 

proposed rule change would eliminate 

the requirement for the Board to elect a 

CAO; however, OCC notes that the 

Board would retain authority under the 

existing By-Laws to ‘‘elect one or more 

Vice Presidents or such other officers as 

it may from time to time determine are 

required for the efficient management 

and operation of the Corporation.’’ 28

Finally, in those instances where the 

elimination of the CAO role reduces the 

number of named authorized 

individuals to two, the proposed rule 

change would allow the CEO and COO 

to delegate authority to certain 

‘‘Designated Officers’’ if the CEO and 

COO were unavailable to exercise the 

authority. In these cases, the Designated 

Officer must be of the rank of Senior 

Vice President or higher 29 and 

delegated by either the CEO or COO. 

OCC believes delegation in these 

instances to senior officers of the 

Corporation is appropriate to ensure 

that the authority can be exercised if 

necessary in the event the CEO and 

COO are both unavailable. 

The ability to have multiple officers 

(and, in some instances, their delegates) 

authorized to take action and assume 

responsibility helps to ensure that 

responsibility is not concentrated in any 

one officer, that OCC’s affairs are carried 

out efficiently, and that management 

has the capacity to continue carrying 

out OCC’s business and day to day 

affairs even if a particular officer is 

absent or is otherwise unable to perform 

his or her duties. Consequently, 

although the proposed rule change 

would eliminate the CAO as a required 

officer, the separation of the Executive 

Chairman and CEO roles would create 

another officer; thus, there will 

generally remain multiple officers 

authorized to act and assume 

responsibility (i.e., the CEO and COO), 

which will retain the current level of 

flexibility. 

(3) Amendments to the Management 

Director Provisions in OCC’s By-Laws 

Article III of OCC’s By-Laws mandates 

that the Board include one 

‘‘Management Director’’ and that the 

Executive Chairman be elected to fill 

that seat.30 In light of the changes to the 

role of the Executive Chairman as part 

of the proposed rule change, OCC is also 

proposing to provide flexibility with 

respect to this Board seat. Although the 

concept of a Management Director 

would be retained, the proposed rule 

change would amend the By-Laws to 

provide a wider degree of flexibility. 

Specifically, the proposed rule change 

would amend the By-Laws to: (1) Allow, 

but not require, a Management Director 

on the Board; and (2) eliminate the 

requirement that the Management 

Director also be the Executive 

Chairman. 

OCC believes that these changes 

would create more flexibility for filling 

the role of Management Director and 

could more easily accommodate 

potential future scenarios, for example, 

if the Management Director seat shifts 

from the Executive Chairman to the 

CEO. 

(4) Conforming Changes to Certain OCC 

Charters and Policies 

In connection with the proposed 

changes described above, OCC is also 

proposing to make certain conforming 

amendments to the following charters: 

(1) Board Charter; (2) Audit Committee 

Charter (‘‘AC Charter’’); (3) CPC Charter; 

(4) Governance and Nominating 

Committee Charter (‘‘GNC Charter’’); 

and (5) Risk Committee Charter (‘‘RC 

Charter’’).31

OCC is proposing to amend the Board 

Charter to remove the references to the 

CAO and to conform provisions 

regarding the Executive Chairman and 

CEO to reflect the separation of those 

roles and the revised duties each has 

pursuant to the amendments in the 

proposed rule change and to reflect the 

removal of the CEO’s role in certain 

Board matters due the CEO position no 

longer being linked to the position of 

Executive Chairman. In addition, OCC is 

proposing to conform the description of 

the Management Director in the Board 

Charter to the changes described in the 

proposed rule change. 

OCC is also proposing to amend the 

AC Charter to conform provisions 

regarding the Executive Chairman and 

CEO to reflect the separation of those 

roles and the revised duties each has 

pursuant to the amendments in the 

proposed rule change. OCC is proposing 

to clarify in the AC Charter that, 

following the separation of the 

Executive Chairman and CEO roles, 

OCC’s Chief Compliance Officer would 

report administratively to the CEO and 

functionally to the Audit Committee, 

and OCC’s Chief Audit Executive would 

report administratively to the Executive 

Chairman and functionally to the Audit 

Committee. The proposed changes 

would further clarify that the Audit 

Committee would consult with the 

Executive Chairman in reviewing the 

performance of the Internal Audit 

function and the Chief Audit Executive 

and consult with the CEO in reviewing 

the performance of the Compliance 

function and Chief Compliance Officer. 

OCC is also proposing to amend the 

CPC Charter and the GNC Charter to 

conform provisions regarding the 

Executive Chairman and CEO to reflect 

the separation of those roles and the 

revised duties each has pursuant to the 

amendments in the proposed rule 

change and to reflect the elimination of 

CAO as a required officer of OCC. 

Finally, OCC is proposing to amend 

the RC Charter to conform provisions 

regarding the Executive Chairman and 

CEO to reflect the separation of those 

roles and the revised duties each has 

pursuant to the amendments in the 

proposed rule change. OCC is proposing 

to clarify in the RC Charter that, 

following the separation of the 

Executive Chairman and CEO roles, 

OCC’s Chief Risk Officer will report 

administratively to the CEO and 

functionally to the Risk Committee. 

(2) Statutory Basis 

OCC believes the proposed rule 

change is consistent with Section 17A of 

the Act 32 and the rules thereunder 

applicable to OCC. Section 17A(b)(3)(A) 

of the Act requires, among other things, 

that a clearing agency be so organized 

and have the capacity to be able to 

facilitate the prompt and accurate 

clearance and settlement of securities 

transactions and derivative agreements, 

contracts, and transactions for which it 

is responsible.33 Rule 17Ad–22(e)(2) 

further requires, in part, that each 

registered clearing agency have 

governance arrangements that are clear 


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Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices 67767 

34 17 CFR 17Ad–22(e)(2). 

35See supra n. 15. 

36OCC By-Laws, Art. IV, Sec. 1. 

37 15 U.S.C. 78q–1(b)(3)(A). 

38 17 CFR 17Ad–22(e)(2)(i) and (v). 

39 17 CFR 17Ad–22(e)(2). 

40 15 U.S.C. 78q–1(b)(3)(I). 

and transparent and that specify clear 

and direct lines of responsibility.34

OCC believes that the proposed rule 

change is consistent with Section 

17A(b)(3)(A) of the Act and the rules 

thereunder because it is designed to 

ensure that OCC is so organized and has 

the capacity to be able to facilitate the 

prompt and accurate clearance and 

settlement of securities transactions and 

derivative agreements, contracts, and 

transaction for which it is responsible. 

By implementing certain leadership 

changes intended to promote OCC’s 

efficient management and operation, 

OCC believes it enhances its 

organization and its ability to operate 

effectively and efficiently. Specifically, 

OCC believes that by reallocating certain 

responsibilities currently held by the 

Executive Chairman/CEO to two 

individuals, those responsibilities 

would be less concentrated in a single 

individual. As noted above, since the 

implementation of the 2017 

Amendments, OCC has taken significant 

steps to enhance its senior management 

team OCC has taken significant steps to 

enhance its senior management team so 

that it has a broad range of knowledge, 

skills, and experience and an alignment 

of officers’ responsibilities with their 

skills and experience.35 As a result, OCC 

believes it would now benefit further 

from re-separating the Executive 

Chairman and CEO roles so that the 

Executive Chairman would remain 

focused on facilitating Board leadership 

and management oversight as well as 

overseeing the work of internal audit, 

while the CEO would oversee all of 

OCC’s business, operational and 

corporate support functions, with key 

operational and corporate support 

functions reporting indirectly to the 

CEO through the COO function. OCC 

believes the proposed separation of the 

Executive Chairman and CEO would 

provide for an effective counterbalance 

in the management and oversight of 

OCC and allow for a broader range of 

skill, experience and perspectives 

between the roles of Executive 

Chairman and CEO. In addition, the 

separation of these roles would enable 

the Executive Chairman to serve a 

valuable advisory role in assisting the 

CEO with strategic plan development as 

well as management succession 

planning by assisting in developing, 

coaching and mentoring members of the 

senior management team in a separate 

capacity than that of the CEO. 

Moreover, by separating the Executive 

Chairman and CEO roles to establish a 

separate CEO, OCC believes it is no 

longer necessary for its By-Laws to 

explicitly require a CAO to ensure 

sufficient flexibility in its management 

structure. OCC notes that the Board 

would retain authority under the 

existing By-Laws to ‘‘elect one or more 

Vice Presidents or such other officers as 

it may from time to time determine are 

required for the efficient management 

and operation of the Corporation.’’ 36

Additionally, in those instances where 

the elimination of the CAO role reduces 

the number of named authorized 

individuals to two, the proposed rule 

change would allow the CEO and COO 

to delegate authority to certain 

delegated officers if the CEO and COO 

were unavailable to exercise the 

authority. In these cases, the Designated 

Officer must be of the rank of Senior 

Vice President or higher and delegated 

by either the CEO or COO. OCC believes 

delegation in these instances to senior 

officers of the Corporation is 

appropriate to ensure that the authority 

can be exercised if necessary in the 

event the CEO and COO are both 

unavailable. 

As discussed above, in light of the 

changes to the role of the Executive 

Chairman as part of the proposed rule 

change, OCC is also proposing to 

provide flexibility with respect to the 

Management Director seat on the Board. 

The proposed rule change would 

provide a wider degree of flexibility by 

allowing, but not requiring, a 

Management Director on the Board and 

eliminating the requirement that the 

Management Director also be the 

Executive Chairman. These changes 

would create more flexibility for filling 

the role of Management Director and 

more easily accommodate potential 

future scenarios. 

For the reasons set forth above, OCC 

believes the proposed rule change is 

designed to ensure that OCC is so 

organized and has the capacity to be 

able to facilitate the prompt and 

accurate clearance and settlement of 

securities transactions and derivative 

agreements, contracts, and transaction 

for which it is responsible consistent 

with the requirements of Section 

17A(b)(3)(A) of the Act.37

Rule 17Ad–22(e)(2) requires covered 

clearing agencies to maintain written 

policies and procedures reasonably 

designed to, among other things, 

provide for governance arrangements 

that are clear and transparent and 

specify clear and direct lines of 

responsibility.38 The proposed rule 

change would amend OCC’s By-Laws, 

Rules, and charters, which are publicly 

available documents, to provide 

explicit, clear, and transparent 

statements of the responsibilities and 

authority of the newly separated 

Executive Chairman and CEO roles (and 

the elimination of a required CAO) and 

direct reporting lines thereunder within 

the overall management structure of 

OCC. For example, the proposed rule 

change would explicitly state that the 

Executive Chairman would oversee the 

work of internal audit, public affairs, 

and government relations, while the 

CEO would oversee all of OCC’s 

business, operational and corporate 

support functions, with key operational 

and corporate support functions 

reporting indirectly to the CEO through 

the COO function. Moreover, in those 

instances where the elimination of the 

CAO role reduces the number of 

individuals authorized to take certain 

actions, the proposed rule change would 

provide a clear and transparent 

mechanism for the CEO and COO to 

delegate authority to certain Designated 

Officers if the CEO and COO were 

unavailable to exercise the authority. 

Additionally, the proposed changes to 

provide additional flexibility regarding 

the Management Director role would 

also be clearly and transparently 

described in OCC’s By-Laws and Board 

Charter. As a result, OCC believes the 

proposed rule change is reasonably 

designed to provide for governance 

arrangements that are clear and 

transparent and specify clear and direct 

lines of responsibility in accordance 

with Rule 17Ad–22(e)(2).39

(B) Clearing Agency’s Statement on 

Burden on Competition 

Section 17A(b)(3)(I) of the Exchange 

Act 40 requires that the rules of a 

clearing agency not impose any burden 

on competition not necessary or 

appropriate in furtherance of the Act. 

OCC does not believe that the proposed 

rule change would impose any burden 

on competition. The proposed rule 

change would implement certain 

leadership changes within OCC’s 

management to separate the Executive 

Chairman and CEO roles and to remove 

the CAO as a required officer. This 

proposed rule change would not inhibit 

access to OCC’s services or disadvantage 

of favor any particular user in 

relationship to another. As a result, OCC 

believes the proposed rule change 

would not impact or impose a burden 

on competition. 


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67768 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Notices 

41 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(iii). 

4 17 CFR 240.19b–4(f)(6). 

5See Securities Exchange Act Release Nos. 79162 

(October 26, 2016), 81 FR 75875 (November 1, 2016) 

(Notice); 79884 (January 26, 2017), 82 FR 8968 

(February 2, 2017) (Approval Order) (SR–BatsBZX– 

2016–61). 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants or Others 

Written comments on the proposed 

rule change were not and are not 

intended to be solicited with respect to 

the proposed rule change and none have 

been received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self- regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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 rule-comments@

sec.gov. Please include File Number SR– 

OCC–2018–015 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–OCC–2018–015. 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 website (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 website 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 

10:00 a.m. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of OCC and on OCC’s website at 

https://www.theocc.com/about/ 

publications/bylaws.jsp. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. 

All submissions should refer to File 

Number SR–OCC–2018–015 and should 

be submitted on or before January 22, 

2019. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.41

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28385 Filed 12–28–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84927; File No. SR– 

CboeBZX–2018–090] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend the 

Halt Auction Process 

December 21, 2018. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on December 

18, 2018, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange filed the 

proposal as a ‘‘non-controversial’’ 

proposed rule change pursuant to 

Section 19(b)(3)(A)(iii) of the Act 3 and 

Rule 19b–4(f)(6) thereunder.4 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe BZX Exchange, Inc. (‘‘BZX’’ or 

the ‘‘Exchange’’) is filing with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) a proposed rule 

change to amend the Halt Auction 

process. The text of the proposed rule 

change is attached as Exhibit 5. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://www.cboe.com/ 

AboutCBOE/CBOELegalRegulatory

Home.aspx), at the Exchange’s Office of 

the Secretary, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of 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 IV below. The 

Exchange 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 the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend the Halt Auction 

process used to re-open BZX listed 

securities following certain Regulatory 

Halts. In 2017, the Exchange amended 

its Halt Auction process for re-opening 

a security following a Trading Pause 

initiated pursuant to the Plan to 

Address Extraordinary Market 

Volatility—i.e., the ‘‘Limit Up-Limit 

Down’’ or ‘‘LULD’’ Plan.5 Specifically, 

the Exchange modified its rules such 

that initial Halt Auction Collars 

following a Trading Pause would be 

calculated using a new methodology 

based on the Price Band that triggered 

the Trading Pause, and instituted a 

process for extending the auction and 

further widening the collars if necessary 

to accommodate buy or sell pressure 


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