80826 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Notices 

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

2 17 CFR 240.19b–4. 

3See Exchange Rule 1901. 

4See Cboe Global Markets, U.S Equities Market 

Volume Summary, available at https://

markets.cboe.com/us/equities/market_share/. 

5See FINRA ATS Transparency Data, available at 

https://otctransparency.finra.org/otctransparency/ 

AtsIssueData. A list of alternative trading systems 

registered with the Commission is available at 

https://www.sec.gov/foia/docs/atslist.htm. 

6See Cboe Global Markets U.S. Equities Market 

Volume Summary, available at http://

markets.cboe.com/us/equities/market_share/. 

The Board is comprised of the 

following Administrative Judges: 

Paul S. Ryerson, Chairman, Atomic 

Safety and Licensing Board Panel, 

U.S. Nuclear Regulatory Commission. 

Washington, DC 20555–0001 

E. Roy Hawkens, Atomic Safety and 

Licensing Board Panel, U.S. Nuclear 

Regulatory Commission, Washington, 

DC 20555–0001 

Dr. Sue H. Abreu, Atomic Safety and 

Licensing Board Panel, U.S. Nuclear 

Regulatory Commission, Washington, 

DC 20555–0001 

All correspondence, documents, and 

other materials shall be filed in 

accordance with the NRC E-Filing rule. 

See 10 CFR 2.302. 

Dated December 8, 2020. 

Edward R. Hawkens, 

Chief Administrative Judge, Atomic Safety 

and Licensing Board Panel, Rockville, 

Maryland. 

[FR Doc. 2020–27362 Filed 12–11–20; 8:45 am] 

BILLING CODE 7590–01–P 

OFFICE OF PERSONNEL 

MANAGEMENT 

Federal Prevailing Rate Advisory 

Committee; Cancellation of Upcoming 

Meeting 

AGENCY: Office of Personnel 

Management. 

ACTION: Notice. 

SUMMARY: The Federal Prevailing Rate 

Advisory Committee is issuing this 

notice to cancel the December 17, 2020, 

public meeting scheduled to be held in 

Room 5A06A, Office of Personnel 

Management Building, 1900 E Street 

NW, Washington, DC. The original 

Federal Register notice announcing this 

meeting was published Monday, 

December 23, 2019, at 84 FR 70580. 

FOR FURTHER INFORMATION CONTACT: 

Madeline Gonzalez, 202–606–2858, or 

email pay-leave-policy@opm.gov. 

Office of Personnel Management. 

Alexys Stanley, 

Regulatory Affairs Analyst. 

[FR Doc. 2020–27430 Filed 12–11–20; 8:45 am] 

BILLING CODE 6325–49–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90590; File No. SR– 

PEARL–2020–32] 

Self-Regulatory Organizations; MIAX 

PEARL, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the Equities 

Fee Schedule 

December 8, 2020. 

Pursuant to the provisions of 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 December 2, 2020, MIAX PEARL, 

LLC (‘‘MIAX PEARL’’ 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 fee schedule applicable for 

MIAX PEARL Equities, an equities 

trading facility of the Exchange (the 

‘‘Fee Schedule’’).3 The proposed 

changes are scheduled to become 

operative on December 2, 2020. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal 

office, 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 Fee Schedule 

applicable to MIAX PEARL Equities to 

provide pricing for securities priced 

below $1.00 that are executed on MIAX 

PEARL Equities. 

The Exchange operates in a highly 

competitive market in which market 

participants can readily direct order 

flow to competing venues if they deem 

fee levels at a particular venue to be 

excessive or rebates/incentives to be 

insufficient. More specifically, the 

Exchange is only one of several equities 

venues (including both registered 

exchanges and various alternative 

trading systems) to which market 

participants may direct their order flow 

and execute their trades. Indeed, equity 

trading is currently dispersed across 16 

exchanges,4 31 alternative trading 

systems,5 and numerous broker-dealer 

internalizers and wholesalers, all 

competing for order flow. Based on 

publicly available information, no single 

registered equities exchange currently 

has more than approximately 20% of 

total market share.6 Thus, in such a lowconcentrated and highly competitive 

market, no single equities trading venue 

possesses significant pricing power in 

the execution of trades, and, the 

Exchange currently represents a very 

small percentage of the overall market. 

The purpose of this proposed fee 

change is for business and competitive 

reasons. As a new entrant into the 

equities market, the Exchange initially 

adopted a fee structure that provided 

that orders in securities priced below 

$1.00 would be free that executed at 

MIAX PEARL Equities, regardless of 

whether they add or remove liquidity to 

encourage market participants to submit 

orders to the Exchange. The Exchange 

now proposes to charge a standard fee 

of 0.30% of the total dollar value of any 

transaction in securities priced below 

$1.00 that removes liquidity from MIAX 

PEARL Equities. The Exchange also 

proposes to provide a standard rebate of 

0.30% of the total dollar value of any 

transaction in securities priced below 


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Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Notices 80827 

7The term ‘‘Equity Member’’ means a Member 

authorized by the Exchange to transact business on 

MIAX PEARL Equities. See Exchange Rule 1901. 

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

9 15 U.S.C. 78f(b)(4) and (5). 

10See SR–MEMX–2020–14 (filed November 30, 

2020), available at https://info.memxtrading.com/ 

wp-content/uploads/2020/11/SR-MEMX-2020- 

14.pdf. 

11See, e.g., the Cboe EDGX equities trading fee 

schedule on its public website (available at https:// 

markets.cboe.com/us/equities/membership/fee_

schedule/edgx/), which reflects a rebate of $0.00009 

per share for liquidity-adding transactions in 

securities priced below $1.00 per share; the NYSE 

Arca equities trading fee schedule on its public 

website (available at https://www.nyse.com/ 

publicdocs/nyse/markets/nysearca/NYSE_Arca_

Marketplace_Fees.pdf), which reflects a rebate of 

$0.00004 per share for liquidity-adding transactions 

in securities priced below $1.00 per share. 

12See supra note 10. 

13See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005) (File 

No. S7–10–04) (‘‘Regulation NMS’’). 

14See Securities Exchange Act Release No. 82873 

(March 14, 2018), 83 FR 13008 (March 26, 2018) 

(File No. S7–05–18) (Transaction Fee Pilot for NMS 

Stocks). 

15See Cboe Global Markets, U.S Equities Market 

Volume Summary, available at https://

markets.cboe.com/us/equities/market_share/. 

16See FINRA ATS Transparency Data, available 

at https://otctransparency.finra.org/ 

otctransparency/AtsIssueData. A list of alternative 

trading systems registered with the Commission is 

available at https://www.sec.gov/foia/docs/ 

atslist.htm. 

$1.00 that adds displayed or nondisplayed liquidity to MIAX PEARL 

Equities. 

The proposed rebate for executed 

orders that add liquidity in securities 

priced below $1.00 is intended to 

increase order flow in securities priced 

below $1.00 to MIAX PEARL Equities 

by incentivizing Equity Members 7 to 

increase the liquidity-providing orders 

in securities priced below $1.00 they 

submit to MIAX PEARL Equities, which 

would support price discovery on MIAX 

PEARL Equities and provide additional 

liquidity for incoming orders. The 

proposed fee for executed orders that 

remove liquidity from MIAX PEARL 

Equities is intended to be a direct offset 

of the rebate provided for executed 

orders that add liquidity in securities 

priced below $1.00 so that MIAX 

PEARL Equities may remain revenue 

neutral with respect to such transactions 

while attempting to compete with other 

venues to attract this order flow. 

The proposed fee change will become 

effective on December 2, 2020. The 

Exchange does not propose any other 

changes to the MIAX PEARL Equities 

Fee Schedule. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 

consistent with Section 6(b) of the Act 8

in general, and furthers the objectives of 

Section 6(b)(4) of the Act 9 in particular, 

in that it is an equitable allocation of 

reasonable fees and other charges among 

its members and issuers and other 

persons using its facilities. As discussed 

above, the Exchange operates in a highly 

fragmented and competitive market. The 

Commission has repeatedly expressed 

its preference for competition over 

regulatory intervention in determining 

prices, products, and services in the 

securities markets. Market participants 

can readily direct order flow to 

competing venues if they deem fee 

levels at a particular venue to be 

excessive or rebates/incentives to be 

insufficient. The Exchange believes that 

the Fee Schedule reflects a simple and 

competitive pricing structure, which is 

designed to incentivize market 

participants to add aggressively priced 

displayed liquidity and direct their 

order flow to the Exchange. The 

Exchange believes the proposed rebate 

and fee structure for orders that add or 

remove liquidity in securities priced 

below $1.00 would incentivize 

submission of additional liquidity in 

securities priced below $1.00, thereby 

promoting price discovery and deepen 

liquidity, enhancing order execution 

opportunities for all Equity Members 

and investors. 

In particular, the Exchange believes 

that the proposed rebate for orders that 

add liquidity in securities priced below 

$1.00 is reasonable because it would 

incentivize Equity Members to direct 

more order flow in securities priced 

below $1.00 to the Exchange. The 

Exchange notes that one other exchange 

provides the same rebate as proposed 

herein,10 and other exchanges provide 

rebates for liquidity-adding transactions 

in securities priced below $1.00, but 

that these are denominated in dollar 

amounts per share rather than a 

percentage of the total dollar amount of 

the transaction.11 The Exchange expects 

that the proposed rebate for orders that 

add liquidity in securities priced below 

$1.00 would typically result in a higher 

overall credit for a given transaction 

than the rebates offered by other 

exchanges, although the Exchange notes 

that it may also result in a lower overall 

credit for such transactions depending 

on the number of shares traded and the 

total dollar value of the transaction. The 

Exchange also believes that the 

proposed fee for orders that remove 

liquidity in securities priced below 

$1.00 is reasonable because it is in line 

with the fees charged by other 

exchanges for liquidity-removing 

transactions in securities priced below 

$1.00.12

The Exchange believes that, given the 

competitive environment in which 

MIAX PEARL Equities currently 

operates, the proposed pricing structure, 

with an offsetting fee and rebate for 

executions of transactions in securities 

priced below $1.00 is a reasonable 

attempt to increase liquidity in 

securities priced below $1.00 on MIAX 

PEARL Equities and improve the MIAX 

PEARL Equities’ market share relative to 

its competitors while remaining revenue 

neutral with respect to such 

transactions. 

The Exchange also believes that the 

proposed fee and rebate structure 

applicable to executions of transactions 

in securities priced below $1.00 is 

equitably allocated and not unfairly 

discriminatory because it applies 

equally to all Equity Members and is 

reasonably related to the value of MIAX 

PEARL Equities’ market quality 

associated with higher volume. A 

number of Equity Members currently 

transact in securities priced below $1.00 

and they, along with additional Equity 

Members that choose to direct order 

flow in securities priced below $1.00 to 

the Exchange, would all qualify for the 

proposed fee and rebate. The Exchange 

believes that maintaining or increasing 

the proportion of transactions in 

securities priced below $1.00 that are 

executed on MIAX PEARL Equities 

would benefit all investors by 

deepening the MIAX PEARL Equities’ 

liquidity pool, which would support 

price discovery, promote market 

transparency and improve investor 

protection, further rendering the 

proposed changes reasonable and 

equitable. 

Further, the Commission and the 

courts have repeatedly expressed their 

preference for competition over 

regulatory intervention in determining 

prices, products, and services in the 

securities markets. In Regulation NMS, 

while adopting a series of steps to 

improve the current market model, the 

Commission highlighted the importance 

of market forces in determining prices 

and SRO revenues and, also, recognized 

that current regulation of the market 

system ‘‘has been remarkably successful 

in promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 13

As the Commission itself recognized, 

the market for trading services in NMS 

stocks has become ‘‘more fragmented 

and competitive.’’ 14 Indeed, equity 

trading is currently dispersed across 16 

exchanges,15 31 alternative trading 

systems,16 and numerous broker-dealer 

internalizers and wholesalers, all 

competing for order flow. Based on 


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80828 Federal Register / Vol. 85, No. 240 / Monday, December 14, 2020 / Notices 

17See supra note 6. 18See supra note 13. 

19 15 U.S.C. 78s(b)(3)(A)(ii). 

20 17 CFR 240.19b–4(f)(2). 

publicly-available information, no 

single exchange currently has more than 

20% market share (whether including or 

excluding auction volume).17 Therefore, 

no exchange possesses significant 

pricing power in the execution of equity 

order flow. More specifically, the 

Exchange only recently launched 

trading operations on September 25, 

2020, and thus has a market share of 

approximately less than 1% of executed 

volume of equities trading. 

The Exchange has designed its 

proposed pricing structure for securities 

priced below $1.00 to balance the need 

to attract order flow as a new exchange 

entrant with the desire to continue to 

provide a simple pricing structure to 

market participants. The Exchange 

believes its proposed pricing structure 

for securities priced below $1.00 

structure enables the Exchange to 

compete for order flow. The Exchange 

believes that the ever-shifting market 

share among the exchanges from month 

to month demonstrates that market 

participants can shift order flow, or 

discontinue or reduce use of certain 

categories of products, in response to fee 

changes. With respect to nonmarketable 

orders which provide liquidity on an 

exchange, Equity Members can choose 

from any one of the 16 currently 

operating registered exchanges to route 

such order flow. Accordingly, 

competitive forces reasonably constrain 

exchange transaction fees that relate to 

orders that would provide displayed 

liquidity on an exchange. Stated 

otherwise, changes to exchange 

transaction fees can have a direct effect 

on the ability of an exchange to compete 

for order flow. Given this competitive 

environment, the Exchange’s proposed 

pricing structure for securities priced 

below $1.00 represents a reasonable 

attempt to attract order flow to a new 

exchange entrant. 

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. Rather, the 

Exchange believes that the proposed 

change would encourage the submission 

of additional order flow to a public 

exchange, thereby promoting market 

depth, execution incentives and 

enhanced execution opportunities, as 

well as price discovery and 

transparency for all Equity Members 

and non-Equity Members. As a result, 

the Exchange believes that the proposed 

change furthers the Commission’s goal 

in adopting Regulation NMS of fostering 

competition among orders, which 

promotes ‘‘more efficient pricing of 

individual stocks for all types of orders, 

large and small.’’ 18

The Exchange does not believe that 

the proposed pricing structure for 

securities priced below $1.00 will 

impose any burden on intermarket 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. To the contrary, the 

Exchange believes that the proposed 

pricing structure will increase 

competition and is intended to draw 

volume to the Exchange. The Exchange 

believes that the ever-shifting market 

share among the exchanges from month 

to month demonstrates that market 

participants can shift order flow or 

discontinue to reduce use of certain 

categories of products, in response to 

new or different pricing structures being 

introduced into the market. 

Accordingly, competitive forces 

constrain the Exchange’s transaction 

fees and rebates, and market 

participants can readily trade on 

competing venues if they deem pricing 

levels at those other venues to be more 

favorable. As a new exchange, the 

Exchange faces intense competition 

from existing exchanges and other nonexchange venues that provide markets 

for equities trading. 

Further, while pricing incentives do 

cause shifts of liquidity between trading 

centers, market participants make 

determinations on where to provide 

liquidity or route orders to take liquidity 

based on factors other than pricing, 

including technology, functionality, and 

other considerations. Consequently, the 

Exchange believes that the degree to 

which its proposed pricing structure for 

securities priced below $1.00 could 

impose any burden on competition is 

extremely limited, and does not believe 

that such pricing structure would 

burden competition of Equity Members 

or competing venues in a manner that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

The Exchange does not believe that 

the proposed pricing structure for 

securities priced below $1.00 will 

impose any burden on intramarket 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act because the 

proposed pricing structure for securities 

priced below $1.00 will apply equally to 

all Equity Members. The proposed 

pricing structure for securities priced 

below $1.00 is intended to encourage 

market participants to add liquidity to 

the Exchange by providing a rebate that 

is comparable to those offered by other 

exchanges, which the Exchange believes 

will help to encourage Equity Members 

to send orders to the Exchange to the 

benefit of all Exchange participants. As 

the proposed pricing structure for 

securities priced below $1.00 are 

equally applicable to all market 

participants, the Exchange does not 

believe there is any burden on 

intramarket competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor 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,19 and Rule 

19b–4(f)(2) 20 thereunder. 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– 

PEARL–2020–32 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–PEARL–2020–32. This file 

number should be included on the 

subject line if email is used. To help the 


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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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