83662 Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices 

31 17 CFR 200.30–3(a)(12). 

1 12 U.S.C. 5465(e)(1). 

2 17 CFR 240.19b–4(n)(1)(i). 

3 15 U.S.C. 78a et seq. 

4See Notice of Filing infra note 5, at 85 FR 73553. 

5Securities Exchange Act Release No. 90416 

(Nov. 13, 2020), 85 FR 73553 (Nov. 18, 2020) (File 

No. SR–OCC–2020–806) (‘‘Notice of Filing’’). On 

October 20, 2020, OCC also filed a related proposed 

rule change (SR–OCC–2020–013) with the 

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

Exchange Act and Rule 19b–4 thereunder 

(‘‘Proposed Rule Change’’). 15 U.S.C. 78s(b)(1) and 

17 CFR 240.19b–4, respectively. In the Proposed 

Rule Change, which was published in the Federal 

Register on November 9, 2020, OCC seeks approval 

of proposed changes to its rules necessary to 

implement the Advance Notice. Securities 

Exchange Act Release No. 90315 (Nov. 3, 2020), 85 

FR 71384 (Nov. 9, 2020) (File No. SR–OCC–2020– 

013). The comment period for the related Proposed 

Rule Change filing closed on November 30, 2020. 

6Since the proposal contained in the Advance 

Notice was also filed as a proposed rule change, all 

public comments received on the proposal are 

considered regardless of whether the comments are 

submitted on the Proposed Rule Change or the 

Advance Notice. 

7 In Partial Amendment No. 1, OCC corrects and 

updates a confidential Exhibit 5 to the materials 

filed on October 20, 2020 regarding File No. SR– 

OCC–2020–806. Partial Amendment No. 1 corrects 

an error in the proposed rule text and updates the 

list of vendor agreements attached to the RWD Plan, 

but did not change the purpose of or basis for the 

Advance Notice. References to the Advance Notice 

from this point forward refer to the Advance Notice, 

as amended by Partial Amendment No. 1. 8Capitalized terms used but not defined herein 

have the meanings specified in OCC’s Rules and ByLaws, available at https://www.theocc.com/about/ 

publications/bylaws.jsp. 9See Securities Exchange Act Release No. 85121 

(Feb. 13, 2019), 84 FR 5157 (Feb. 20, 2019) (File No. 

SR–OCC–2015–02). 

10See Securities Exchange Act Release No. 86725 

(Aug. 21, 2019), 84 FR 44952 (Aug. 27, 2019) (File 

No. SR–OCC–2019–007). 

All submissions should refer to File 

Number SR–CboeBZX–2020–090. 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. 

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–CboeBZX–2020–090 and 

should be submitted on or before 

January 12, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–28150 Filed 12–21–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90701; File No. SR–OCC– 

2020–806] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Partial Amendment No. 1 

and Notice of No Objection To 

Advance Notice, as Modified by Partial 

Amendment No. 1, Related to 

Proposed Changes To Update the 

Options Clearing Corporation’s 

Recovery and Orderly Wind-Down Plan 

December 17, 2020. 

I. Introduction 

On October 20, 2020, the Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) advance 

notice SR–OCC–2020–806 (‘‘Advance 

Notice’’)pursuant to Section 806(e)(1) of 

Title VIII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, 

entitled Payment, Clearing and 

Settlement Supervision Act of 2010 

(‘‘Clearing Supervision Act’’) 1 and Rule 

19b–4(n)(1)(i) 2 under the Securities 

Exchange Act of 1934 (‘‘Exchange 

Act’’) 3 to make changes to OCC’s 

Recovery and Orderly Wind-Down Plan 

(‘‘RWD Plan’’).4 The Advance Notice 

was published for public comment in 

the Federal Register on November 18, 

2020,5 and the Commission has received 

no comments regarding the changes 

proposed in the Advance Notice.6 On 

November 18, 2020, OCC filed a partial 

amendment (‘‘Partial Amendment No. 

1’’) to modify the Advance Notice.7 The 

Commission is publishing this notice to 

solicit comments on Partial Amendment 

No. 1 from interested persons and, for 

the reasons discussed below, is hereby 

providing notice of no objection to the 

Advance Notice. 

II. Background 8

The Advance Notice concerns 

changes to OCC’s RWD Plan. As 

described in greater detail below, OCC 

proposes to (1) update the RWD Plan to 

reflect changes to OCC’s capital 

structure resulting from the disapproval 

of OCC’s previously approved ‘‘Capital 

Plan’’ 9 and the subsequent approval of 

OCC’s ‘‘Capital Management Policy,’’ 10

and (2) implement changes identified 

during OCC’s annual review of the RWD 

Plan. The changes arise out of OCC’s 

annual review of the RWD Plan and 

include factual updates (e.g., market 

share and contract volume data) and 

streamlined discussions in the RWD 

Plan (e.g., replacement of detailed 

overview of OCC’s risk management 

program with a more concise summary). 

Capital Management Policy Updates. 

As a result of the implementation of the 

Capital Management Policy, OCC is 

proposing changes to Chapters 2, 5, and 

6 of its RWD Plan. In Chapter 2, OCC 

is proposing to revise its discussion of 

fee management for consistency with 

the Capital Management Policy. In 

Chapter 5, OCC is proposing to (i) 

replace its discussion of the 

Replenishment Plan established under 

the disapproved Capital Plan with a 

discussion of the replenishment 

structure adopted under the Capital 

Management Policy; (ii) replace 

references to the discretionary use of 

OCC’s current and/or retained earnings 

with references to the mandatory 

contribution—immediately following 

the use of margin, deposits in lieu of 

margin and the Clearing Fund deposits 

of the suspended Clearing Member—of 

OCC’s current and retained earnings 

greater than 110% of OCC’s annuallyestablished ‘‘Target Capital 

Requirement;’’ (iii) update the 

description of how OCC could increase 

the minimum required cash 


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Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices 83663 

11See Securities Exchange Act Release No. 89014 

(Jun. 4, 2020), 85 FR 35446 (Jun. 10, 2020) (File No. 

SR–OCC–2020–003). 

12See 12 U.S.C. 5461(b). 

13 12 U.S.C. 5464(a)(2). 

14 12 U.S.C. 5464(b). 

15 12 U.S.C. 5464(c). 

16 17 CFR 240.17Ad–22. See Securities Exchange 

Act Release No. 68080 (Oct. 22, 2012), 77 FR 66220 

(Nov. 2, 2012) (S7–08–11). See also Covered 

Clearing Agency Standards, 81 FR 70786. The 

Commission established an effective date of 

December 12, 2016 and a compliance date of April 

11, 2017 for the Covered Clearing Agency 

Standards. OCC is a ‘‘covered clearing agency’’ as 

defined in Rule 17Ad–22(a)(5). 

17 17 CFR 240.17Ad–22. 

contribution to the Clearing Fund to 

reflect enhancements to OCC’s liquidity 

risk management framework that the 

Commission approved in 2020; 11 and 

(iv) include a discussion of the 

mandatory contribution of any unvested 

portions of OCC’s Executive Deferred 

Compensation Plan (‘‘EDCP’’) in 

proportion to any charges against the 

mutualized portion of OCC’s Clearing 

Fund. OCC also proposes to revise the 

list of ‘‘Recovery Trigger Events’’ in 

Chapter 5 to: (a) Delete one of the 

Recovery Trigger Events that was 

derived from a defined term in the 

Capital Plan; (b) consolidate two other 

Recovery Trigger Events into a single, 

operational loss-related recovery trigger; 

and (c) add a qualification onto an 

existing liquidity loss-related recovery 

trigger. In Chapter 6, OCC is proposing 

to update discussion of the tools by 

which OCC could recapitalize in certain 

recovery and wind-down scenarios. 

Further, OCC is proposing to revise the 

list of Wind-Down Plan Trigger Events 

(‘‘WDP Triggers’’). Specifically, OCC 

proposes to consolidate two current 

WDP Triggers into a single WDP Trigger 

related to OCC’s financial resource 

requirements and to consolidate two 

other WDP Triggers into a single WDP 

Trigger related to operational 

disruption. Similar to the changes OCC 

proposes in Chapter 5, the changes 

proposed in Chapter 6 would be 

designed to reflect OCC’s current 

replenishment plan under the Capital 

Management Policy. 

Annual Review Updates. As a result 

of its annual review and update process, 

OCC is proposing changes to Chapters 2, 

3, 5, 6, 7, and 8 of its RWD Plan. In 

Chapter 2, OCC is proposing to update 

(i) market share and contract volume 

data; (ii) lists of the securities options 

exchanges and other markets for which 

OCC provides clearing services; (iii) 

organizational charts, headcount 

numbers, discussions of OCC’s 

management structure and descriptions 

of management roles and 

responsibilities; (iv) updated 

descriptions of OCC’s Board’s 

responsibilities and procedures, lists of 

Board members and descriptions of 

OCC’s Board committees’ roles and 

responsibilities; and (v) graphs of total 

monthly deposits to OCC’s Clearing 

Fund. OCC is also proposing revisions 

to reflect certain program changes that 

have occurred at OCC since the initial 

approval of the RWD Plan in 2018 (e.g., 

changes to cross-margining 

arrangements, credit facilities, 

investment counterparties, and vendors) 

as well as changes to OCC’s retirement 

plan obligations. In Chapter 3, the RWD 

Plan lists OCC’s internal support 

functions. OCC is proposing the 

addition of two new internal support 

functions to that list and the removal of 

the Office of the Corporate Executive 

from the list. The net result of the 

proposed changes would bring the total 

number of internal support functions 

listed from fourteen to sixteen. OCC also 

proposes to update the descriptions of 

all OCC’s internal support functions so 

they align with OCC’s internal 

descriptions of such functions. 

In Chapter 6, OCC is proposing to (i) 

update references to OCC’s internal 

support functions; and (ii) certain 

references to headcount. In Chapter 7, 

OCC is proposing to update staff titles 

to reflect changes in related office titles. 

In Chapter 8, OCC is proposing to 

update lists of (i) Clearing Members; (ii) 

Board participation; (iii) settlement 

bank and letter of credit bank; (iv) 

OCC’s vendors and service providers; 

(v) updates to the extreme hypothetical 

scenarios designed by OCC that, if such 

scenarios occurred, could cause OCC to 

activate the RWD Plan; and (vi) key 

agreements. 

Administrative and Streamlining 

Changes. In addition to the updates 

described above, OCC is also proposing 

several administrative and streamlining 

changes throughout the RWD Plan. OCC 

proposes to align the executive 

summary and overview section of the 

RWD Plan with the changes described 

above. OCC also proposes moving 

annual report excerpts from Chapter 2 to 

an appendix to the RWD Plan, replace 

the current overview of OCC’s risk 

management program with a more 

concise summary, and update a 

summary description of OCC’s 

interconnections with external vendors 

and a list of vendors that provide OCC 

critical technology and information 

reporting services. In Chapter 4, OCC 

proposes to update certain factual 

references and make other minor 

changes to reflect the use of a single 

term for Critical Services that are 

currently identified separately. OCC 

also proposes to revise the mapping of 

Critical Services to Support Functions 

in Chapter 4 to reflect the categorization 

of Support Functions as either 

‘‘primary,’’ ‘‘secondary,’’ or ‘‘noncritical.’’ In Chapter 5, OCC proposes to 

(i) clean up references to its by-laws that 

are now rules; (ii) consolidate two 

recovery triggers into a single, 

operational loss-related recovery trigger; 

and (iii) add qualifying language to an 

existing liquidity loss-related recovery 

trigger. 

III. Commission Findings and Notice of 

No Objection 

Although the Clearing Supervision 

Act does not specify a standard of 

review for an advance notice, the stated 

purpose of the Clearing Supervision Act 

is instructive: To mitigate systemic risk 

in the financial system and promote 

financial stability by, among other 

things, promoting uniform risk 

management standards for SIFMUs and 

strengthening the liquidity of SIFMUs.12

Section 805(a)(2) of the Clearing 

Supervision Act authorizes the 

Commission to prescribe regulations 

containing risk management standards 

for the payment, clearing, and 

settlement activities of designated 

clearing entities engaged in designated 

activities for which the Commission is 

the supervisory agency.13 Section 805(b) 

of the Clearing Supervision Act 

provides the following objectives and 

principles for the Commission’s risk 

management standards prescribed under 

Section 805(a): 14

• To promote robust risk 

management; 

• to promote safety and soundness; 

• to reduce systemic risks; and 

• to support the stability of the 

broader financial system. 

Section 805(c) provides, in addition, 

that the Commission’s risk management 

standards may address such areas as 

risk management and default policies 

and procedures, among other areas.15

The Commission has adopted risk 

management standards under Section 

805(a)(2) of the Clearing Supervision 

Act and Section 17A of the Exchange 

Act (the ‘‘Clearing Agency Rules’’).16

The Clearing Agency Rules require, 

among other things, each covered 

clearing agency to establish, implement, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to meet certain minimum 

requirements for its operations and risk 

management practices on an ongoing 

basis.17 As such, it is appropriate for the 

Commission to review advance notices 

against the Clearing Agency Rules and 

the objectives and principles of these 

risk management standards as described 


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83664 Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices 

18 12 U.S.C. 5464(b). 

19 17 CFR 240.17Ad–22(e)(3)(ii). 

20 12 U.S.C. 5464(b). 

21See Financial Stability Oversight Council 

(‘‘FSOC’’) 2012 Annual Report, Appendix A, 

available at https://www.treasury.gov/initiatives/ 

fsoc/Documents/2012%20Annual%20Report.pdf. 

22See Securities Exchange Act Release No. 83918 

(Aug. 23, 2018), 83 FR 44091, 44094 (Aug. 29, 2018) 

(File No. SR–OCC–2017–021); Securities Exchange 

Release No. 83928 (Aug. 23, 2018), 83 FR 44109, 

44112 (Aug. 29, 2018) (File No. SR–OCC–2017– 

810). 

23See id. 

24See Securities Exchange Act Release No. 85121 

(Feb. 13, 2019), 84 FR 5157 (Feb. 20, 2019) (File No. 

SR–OCC–2015–02). 

25See Securities Exchange Act Release No. 86725 

(Aug. 21, 2019), 84 FR 44952 (Aug. 27, 2019) (File 

No. SR–OCC–2019–007). 

26See Securities Exchange Act Release No. 34– 

78961 (Oct. 13, 2016), 81 FR 70786, 70808 (Oct. 13, 

2016) (File No. S7–03–14). 

27For example, OCC is proposing to update its 

market share and contract volume data, lists of the 

securities options exchanges and other markets for 

which OCC provides clearing services, 

organizational charts, and headcount numbers. OCC 

also proposes to replace the detailed overview of 

OCC’s risk management program with a more 

concise summary. 

28 12 U.S.C. 5464(b). 

29 12 U.S.C. 5464(b). 

30 17 CFR 240.17Ad–22(e)(3)(ii). 

31See Securities Exchange Act Release No. 83918 

(Aug. 23, 2018), 83 FR 44091, 44095 (Aug. 29, 2018) 

(File No. SR–OCC–2017–021); Securities Exchange 

Release No. 83928 (Aug. 23, 2018), 83 FR 44109, 

44113 (Aug. 29, 2018) (File No. SR–OCC–2017– 

810). 

32 17 CFR 240.17Ad–22(e)(3)(ii). 

in Section 805(b) of the Clearing 

Supervision Act. As discussed below, 

the Commission believes the changes 

proposed in the Advance Notice are 

consistent with the objectives and 

principles described in Section 805(b) of 

the Clearing Supervision Act,18 and in 

the Clearing Agency Rules, in particular 

Rule 17Ad–22(e)(3)(ii).19

A. Consistency With Section 805(b) of 

the Clearing Supervision Act 

The Commission believes that the 

proposal contained in OCC’s Advance 

Notice is consistent with the stated 

objectives and principles of Section 

805(b) of the Clearing Supervision Act. 

Specifically, as discussed below, the 

Commission believes that the changes 

proposed in the Advance Notice are 

consistent with promoting robust risk 

management, promoting safety and 

soundness, reducing systemic risks, and 

supporting the stability of the broader 

financial system.20

The Commission believes that the 

proposed changes to OCC’s RWD Plan 

are consistent with promoting robust 

risk management, in particular risks 

arising out of severe financial or 

operational stress that could be 

presented to OCC as well as promoting 

safety and soundness, reducing systemic 

risk, and supporting the broader 

financial system. As a central 

counterparty and SIFMU,21 it is 

imperative for OCC to have a plan in 

place to address extreme stresses or 

crises with the aim of maintaining 

OCC’s viability and ability to provide 

critical services. In the event that OCC’s 

recovery efforts are not successful, the 

RWD Plan would seek to increase the 

possibility that a resolution of OCC’s 

operations could be conducted in an 

orderly manner. The Commission 

continues to believe that OCC specifying 

the steps that it would take in either a 

recovery or orderly wind-down would 

enhance OCC’s ability to address 

circumstances specific to an extreme 

stress event.22 The Commission also 

continues to believe that, by increasing 

the likelihood that recovery would be 

orderly, efficient, and successful, the 

RWD Plan enhances OCC’s ability to 

maintain the continuity of its critical 

services (including clearance and 

settlement services) during, through, 

and following periods of extreme stress 

giving rise to the need for recovery.23

As described above, OCC proposes to 

(1) update the RWD Plan to reflect 

changes to OCC’s capital structure 

resulting from the disapproval of OCC’s 

previously approved ‘‘Capital Plan’’ 24

and the subsequent approval of OCC’s 

‘‘Capital Management Policy,’’ 25 and (2) 

implement changes identified during 

OCC’s annual review of the RWD Plan. 

Consistent with the Commission’s prior 

statements regarding disclosure of 

documents describing a covered 

clearing agency’s recovery and winddown plans, the Commission believes 

that such recovery and wind-down 

plans should be updated regularly or 

more frequently as necessary.26 OCC 

also proposes to update and streamline 

the data and descriptions provided in 

the RWD Plan.27 The Commission 

believes that keeping the RWD Plan 

updated with current information, and 

refining the descriptions to make it 

more concise, makes it a more accurate 

and useful document. As such, the 

Commission believes that the proposal 

would promote both robust risk 

management and safety and soundness, 

reduce systemic risk, and support the 

broader financial system consistent with 

Section 805(b) of the Clearing 

Supervision Act.28

Accordingly, and for the reasons 

stated above, the Commission believes 

the changes proposed in the Advance 

Notice are consistent with Section 

805(b) of the Clearing Supervision 

Act.29

B. Consistency With Rule 17Ad– 

22(e)(3)(ii) Under the Exchange Act 

Rule 17Ad–22(e)(3)(ii) under the 

Exchange Act requires that a covered 

clearing agency establish, implement, 

maintain, and enforce written policies 

and procedures reasonably designed to 

maintain a sound risk management 

framework for comprehensively 

managing legal, credit, liquidity, 

operational, general business, 

investment, custody, and other risks 

that arise in or are borne by the covered 

clearing agency, which includes plans 

for the recovery and orderly wind-down 

of the covered clearing agency 

necessitated by credit losses, liquidity 

shortfalls, losses from general business 

risk, or any other losses.30

The Commission continues to believe 

that the RWD Plan (i) clearly describes 

OCC’s recovery tools, which enhance 

OCC’s ability to recover from credit 

losses, liquidity shortfalls, general 

business risk losses, or other losses, 

consistent with Rule 17Ad–22(e)(3)(ii); 

and (ii) supports OCC’s ability to use 

risk management and recovery tools 

effectively to bring about a recovery by 

identifying in advance which tools may 

be most effective for different situations 

or needs, consistent with Rule 17Ad– 

22(e)(3)(ii).31 As described above, the 

RWD Plan sets forth OCC’s plans to 

recover or wind-down its operations as 

a result of severe financial or 

operational stress in an orderly fashion. 

The proposed updates will make the 

information provided in the RWD Plan 

more accurate and useful. The revised 

RWD Plan would, in turn, provide a 

more accurate and usable playbook for 

OCC or source of information for a 

resolution authority. Accordingly, the 

Commission believes that the proposed 

changes to the RWD Plan are consistent 

with Rule 17Ad–22(e)(3)(ii) under the 

Exchange Act.32

IV. Conclusion 

It is therefore noticed, pursuant to 

Section 806(e)(1)(I) of the Clearing 

Supervision Act, that the Commission 

does not object to Advance Notice (SR– 

OCC–2020–806) and that OCC is 

authorized to implement the proposed 

change as of the date of this notice or 

the date of an order by the Commission 

approving proposed rule change SR– 

OCC–2020–013, as modified by Partial 

Amendment No. 1, whichever is later. 

By the Commission. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2020–28258 Filed 12–21–20; 8:45 am] 

BILLING CODE 8011–01–P 


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