Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Notices 80829 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b-4. 

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

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

Company-Information/Documents-and-Archives/ 

By-Laws-and-Rules. 

4OCC’s historical scenarios are intended to 

replicate historical events in current market 

conditions, which includes the set of currently 

existing securities, their prices, and volatility levels. 

These scenarios provide OCC with information 

regarding pre-defined reference points determined 

to be relevant benchmarks for assessing OCC’s 

exposure to Clearing Members and the adequacy of 

its financial resources. OCC’s hypothetical 

scenarios represent events in which market 

conditions change in ways that have not yet been 

observed. These hypothetical scenarios are derived 

using statistical methods (e.g., draws from 

estimated multivariate distributions) or created 

based on a mix of statistical techniques and expert 

judgment (e.g., a 15% decline in market prices and 

50% increase in volatility). 

5On July 26, 2018, the Commission issued a 

Notice of No Objection to an advance notice by OCC 

concerning the adoption of a new stress testing and 

Clearing Fund methodology. See Securities 

Exchange Act Release No. 83714 (July 26, 2018), 83 

FR 37570 (August 1, 2018) (SR–OCC–2018–803) 

(Notice of No Objection to Advance Notice, as 

Modified by Amendments No. 1 and 2, Concerning 

Proposed Changes to The Options Clearing 

Corporation’s Stress Testing and Clearing Fund 

Methodology). On July 27, 2018, the Commission 

approved a proposed rule change by OCC 

concerning the same proposal. See Securities 

Exchange Act Release No. 83735 (July 27, 2018), 83 

FR 37855 (August 2, 2018) (SR–OCC–2018–008) 

(Order Approving Proposed Rule Change, as 

Modified by Amendments No. 1 and 2, Related to 

The Options Clearing Corporation’s Stress Testing 

and Clearing Fund Methodology). 

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. 

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–PEARL–2020–32, and 

should be submitted on or before 

January 4, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–27385 Filed 12–11–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90603; File No. SR–OCC– 

2020–015] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change 

Concerning the Implementation of New 

Sufficiency Scenarios in The Options 

Clearing Corporation’s Stress Testing 

Inventory 

December 8, 2020. 

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 2, 2020, The 

Options Clearing Corporation (‘‘OCC’’) 

filed with the Securities and Exchange 

Commission (‘‘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 

This proposed rule change by OCC 

would implement additional stress test 

scenarios designed to test the 

sufficiency of OCC’s prefunded 

financial resources. The proposed 

changes to OCC’s Comprehensive Stress 

Testing & Clearing Fund Methodology, 

and Liquidity Risk Management 

Description (‘‘Methodology 

Description’’) are included in Exhibit 5 

of filing SR–OCC–2020–015. Material 

proposed to be added is underlined and 

material proposed to be deleted is 

marked in strikethrough text. All terms 

with initial capitalization that are not 

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 

Background 

OCC performs daily stress testing 

using a wide range of scenarios, both 

hypothetical and historical,4 designed to 

serve multiple purposes.5 OCC’s stress 

testing inventory contains scenarios 

designed to: (1) Determine whether the 

financial resources collected from all 

Clearing Members collectively are 

adequate to cover OCC’s risk tolerance 

(‘‘Adequacy Scenarios’’); (2) establish 

the monthly size of the Clearing Fund 

at an amount necessary to cover losses 

arising from the default of the two 

Clearing Member Groups that would 

potentially cause the largest aggregate 

credit exposure as a result of a 1-in-80 

year hypothetical market event (‘‘Sizing 

Scenarios’’); (3) measure the exposure of 

the Clearing Fund to the portfolios of 

individual Clearing Member Groups and 

determine whether any such exposure is 

sufficiently large as to necessitate OCC 

calling for additional resources to guard 

against potential losses under a wide 

range of stress scenarios, including 

extreme but plausible market conditions 

(‘‘Sufficiency Scenarios’’); and (4) 

monitor and assess the size of OCC’s 

prefunded financial resources against a 

wide range of stress scenarios that may 

include newly developed stress 

scenarios for evaluation as well as 

extreme but implausible scenarios 

(‘‘Informational Scenarios’’). Adequacy 

and Informational Scenarios are not 

used directly to size the Clearing Fund 

or drive calls for additional financial 

resources from OCC’s Clearing 

Members. 

Pursuant to OCC Rule 609 and OCC’s 

Clearing Fund Methodology Policy, if 

any of OCC’s Sufficiency Scenarios 

identifies exposures that exceed 75% of 

the current Clearing Fund requirement 

less deficits, OCC may require 

additional margin deposits from the 

Clearing Member Group(s) driving the 

breach. Additionally, pursuant to Rule 

1001(c) and the Clearing Fund 

Methodology Policy, if a Sufficiency 


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80830 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Notices 

6See Securities Exchange Act Release No. 87673 

(December 6, 2019), 84 FR 67981 (December 12, 

2019) (SR–OCC–2019–807) (Notice of No Objection 

To Advance Notice Related to Proposed Changes to 

The Options Clearing Corporation’s Rules, Margin 

Policy, Margin Methodology, Clearing Fund 

Methodology Policy, and Clearing Fund and Stress 

Testing Methodology To Address Specific WrongWay Risk) and Securities Exchange Act Release No. 

87718 (December 11, 2019), 84 FR 68992 (December 

17, 2019) (SR–OCC–2019–010) (Order Approving 

Proposed Rule Change Related to Proposed Changes 

to the Options Clearing Corporation’s Rules, Margin 

Policy, Margin Methodology, Clearing Fund 

Methodology Policy, and Clearing Fund and Stress 

Testing Methodology To Address Specific WrongWay Risk). 

7 15 U.S.C. 78q–1. 

8 15 U.S.C. 78q–1(b)(3)(F). 

9 Id. 

10 17 CFR 240.17Ad–22(e)(4)(iii). 

11 17 CFR 240.17Ad–22(e)(4)(vi)(A). 

12 17 CFR 240. 17Ad–22(e)(4)(iii). 13 17 CFR 240.17Ad–22(e)(4)(iii) and (vi)(A). 14 15 U.S.C. 78q-1(b)(3)(I). 15OCC has provided data and analysis concerning 

the proposed rule change in Confidential Exhibit 3 

to SR–OCC–2020–015. 

Scenario identifies a Clearing Fund 

draw for any one or two Clearing 

Member Groups that exceeds 90% of the 

current Clearing Fund size (after 

subtracting any monies deposited as a 

result of a margin call in accordance 

with a breach of the 75% threshold), 

OCC has the authority to reset the size 

of the Clearing Fund on an intra-month 

basis to ensure that it continues to 

maintain sufficient prefunded financial 

resources. 

Proposed Change 

OCC proposes to elevate four of its 

current Informational Scenarios to 

Sufficiency Scenarios. The proposed 

Sufficiency Scenarios are historical 

scenarios designed to represent recent 

market events from March 2020. 

Specifically, the proposed scenarios 

would include price shocks 

representing the most extreme market 

decline and rally moves in March 2020 

and would include variations on these 

scenarios designed to account for 

specific-wrong way risk exposures 

arising from cleared positions on issued 

exchange traded notes (‘‘ETNs’’).6 In 

their current status as Informational 

Scenarios, the March 2020 scenarios do 

not drive the size of the Clearing Fund 

or calls for additional resources. 

However, as Sufficiency Scenarios, they 

would be used to measure the exposure 

of OCC’s Clearing Fund to the portfolios 

of individual Clearing Member Groups 

and determine whether any such 

exposure is sufficiently large as to 

necessitate OCC calling for additional 

resources in the form of margin or an 

intra-month re-sizing of the Clearing 

Fund. The proposed rule change would 

enable OCC to test the sufficiency of its 

financial resources under a wider range 

of relevant stress scenarios and respond 

quickly when OCC believes additional 

financial resources are necessary. The 

proposed rule change would thereby 

improve OCC’s ability to measure, 

monitor and manage its credit exposures 

to its participants and enhance OCC’s 

ability to manage risks in its role as a 

systemically important financial market 

utility. 

(2) Statutory Basis 

OCC believes the proposed rule 

change is consistent with Section 17A of 

the Exchange Act 7 and the rules 

thereunder applicable to OCC. Section 

17A(b)(3)(F) of the Exchange Act 8

requires, among other things, that the 

rules of a clearing agency be designed to 

promote the prompt and accurate 

clearance and settlement of securities 

and derivatives transactions and, in 

general, protect investors and the public 

interest. The proposed rule change 

would enhance OCC’s framework for 

measuring, monitoring, and managing 

its credit risks. Specifically, the 

proposed rule change would enable 

OCC to test the sufficiency of its 

prefunded financial resources under a 

wider range of stress scenarios and 

respond quickly when OCC believes the 

collection of additional financial 

resources is necessary. The ability to 

appropriately size and test the 

sufficiency of prefunded financial 

resources is critical to ensuring that 

OCC can continue to provide prompt 

and accurate clearance and settlement of 

securities and derivatives transactions 

in the event of a Clearing Member 

default and manage the risks associated 

with its role as a systemically important 

financial market utility. Accordingly, 

OCC believes the proposed rule change 

is consistent with the requirements of 

Section 17A(b)(3)(F) of the Act.9

Rule 17Ad–22(e)(4)(iii) 10 requires, in 

part, that a covered clearing agency 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to effectively 

identify, measure, monitor, and manage 

its credit exposures to participants and 

those arising from its payment, clearing, 

and settlement processes, including by 

maintaining additional financial 

resources (beyond those collected as 

margin) at the minimum to enable it to 

cover a wide range of foreseeable stress 

scenarios that include, but are not 

limited to, the default of the participant 

family that would potentially cause the 

largest aggregate credit exposure for the 

covered clearing agency in extreme but 

plausible market conditions. Rule 

17Ad–22(e)(4)(vi)(A) 11 further requires, 

in part, that such policies and 

procedures are reasonably designed to 

test the sufficiency of the covered 

clearing agency’s total financial 

resources available to meet the 

minimum financial resource 

requirements under Rule 17Ad– 

22(e)(4)(iii) 12 by conducting stress 

testing of its total financial resources 

once each day using standard 

predetermined parameters and 

assumptions. As described above, the 

proposed rule change would enable 

OCC to test the sufficiency of its 

prefunded financial resources under a 

wider range of stress scenarios and 

respond quickly to collect additional 

financial resources from its Clearing 

Members if the Sufficiency Scenario 

exposures breach the predetermined 

thresholds established in OCC’s Rules 

and Clearing Fund Methodology Policy. 

Moreover, the proposed Sufficiency 

Scenarios were constructed in 

accordance with OCC’s existing 

Methodology Description using 

standard predetermined parameters and 

assumptions. As a result, OCC believes 

the proposed rule change is designed to 

further OCC’s compliance with the 

requirements of Rules 17Ad–22(e)(4)(iii) 

and (vi)(A).13

The proposed rule change is not 

inconsistent with the existing rules of 

OCC, including any other rules 

proposed to be amended. 

(B) Clearing Agency’s Statement on 

Burden on Competition 

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

Act 14 requires that the rules of a 

clearing agency not impose any burden 

on competition not necessary or 

appropriate in furtherance of the 

purposes of the Exchange Act. While the 

proposed rule change could have an 

impact on certain Clearing Members, 

OCC does not believe that the proposed 

rule change would impose any burden 

on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. OCC’s analysis to 

date indicates that the proposed 

Sufficiency Scenarios generate stress 

test exposures that are generally in line 

with its current, most impactful 

Sufficiency Scenarios.15 OCC notes, 

however, that the results of these 

proposed scenarios may vary depending 

on the composition of each individual 

Clearing Member’s portfolio at a given 

point in time. As a result, the proposed 

scenarios could from time to time result 

in more frequent or larger sufficiency 

stress test margin calls. 

The implementation of the new 

Sufficiency Scenarios would enable 

OCC to test the sufficiency of its 


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Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Notices 80831 

16 17 CFR 240.17Ad–22(e)(4). 

17See supra note 5. 

18See supra note 15. 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

financial resources under a wider range 

of relevant stress scenarios and respond 

quickly when OCC believes additional 

financial resources are required. The 

proposed changes are designed to 

improve OCC’s ability to measure, 

monitor and manage its credit exposures 

to its participants consistent with its 

regulatory requirements under Rule 

17Ad–22(e)(4) 16 and to enhance OCC’s 

ability to manage risks in its role as a 

systemically important financial market 

utility. Moreover, the proposed 

Sufficiency Scenarios were constructed 

in accordance with OCC’s approved 

stress testing methodology using 

standard predetermined parameters and 

assumptions.17 The proposed 

Sufficiency Scenarios are historical 

scenarios designed to represent recent 

market events from March 2020, which 

constitute a significant and relevant 

period of market stress and volatility. As 

noted above, OCC’s analysis to date 

indicates that the proposed Sufficiency 

Scenarios generate stress test exposures 

that are generally in line with 

expectations and with OCC’s current, 

most impactful Sufficiency Scenarios 

based on a reflection of current Clearing 

Member portfolio exposures.18

However, these scenarios provide 

diversification in terms of the shocks 

applied to individual names, which may 

result in meaningful differences if 

Clearing Member exposures change, and 

would help capture risks that OCC’s 

current inventory of Sufficiency 

Scenarios might not capture in different 

market conditions. Accordingly, OCC 

believes that any impact on competition 

or OCC’s Clearing Members would be 

necessary and appropriate in 

furtherance of the protection of 

investors and the public interest under 

the Act. 

For the foregoing reasons, OCC 

believes that the proposed rule change 

is in the public interest, would be 

consistent with the requirements of the 

Exchange Act applicable to clearing 

agencies, and would not impact or 

impose a burden on competition. 

(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 Exchange 

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–2020–015 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–2020–015. 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/CompanyInformation/Documents-and-Archives/ 

By-Laws-and-Rules#rule-filings. 

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–2020–015 and should 

be submitted on or before December 29, 

2020. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–27394 Filed 12–11–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90600; File No. SR– 

EMERALD–2020–17] 

Self-Regulatory Organizations; MIAX 

Emerald, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Its Fee 

Schedule To Adopt Port Fees and 

Increase Certain Network Connectivity 

Fees 

December 8, 2020. 

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 November 

25, 2020, MIAX Emerald, LLC (‘‘MIAX 

Emerald’’ or ‘‘Exchange’’), filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

as described in Items I, II, and III below, 

which Items have been prepared by the 

Exchange. 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 

The Exchange is filing a proposal to 

amend the MIAX Emerald Fee Schedule 

(the ‘‘Fee Schedule’’). 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/emerald, at MIAX’s principal 


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