Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 31237 

6See SR–NYSEArca–2018–46. 

7 17 CFR 200.30–3(a)(83). 

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. 

4Amendment No. 1 replaced and superseded the 

Initial Filing in its entirety. The only substantive 

change in Amendment No. 1 was to remove OCC’s 

proposal to establish certain ‘‘evergreen’’ provisions 

for future renewals of its revolving credit facility. 

Amendment No. 1 did not change the purpose, 

basis, or terms of the proposed renewal. 

5OCC’s By-Laws and Rules can be found on 

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

about/publications/bylaws.jsp. 

6See generally Article VIII, Sections 5(a), (b) and 

(e) of OCC’s By-Laws; Interpretation and Policy .06 

to Article VIII, Section 5; OCC Rules 1102 and 

1104(b). 

the operation of the Program through 

the same date.6 In its request to extend 

the exemption, the Exchange notes that 

the participation in the Program has 

increased more recently with additional 

Retail Liquidity Providers. Accordingly, 

the Exchange has asked for additional 

time to both allow for additional 

opportunities for greater participation in 

the Program and allow for further 

assessment of the results of such 

participation. For this reason and the 

reasons stated in the Order originally 

granting the limited exemptions, the 

Commission finds that extending the 

exemption, pursuant to its authority 

under Rule 612(c) of Regulation NMS, is 

appropriate in the public interest and 

consistent with the protection of 

investors. 

Therefore, it is hereby ordered that, 

pursuant to Rule 612(c) of Regulation 

NMS, the Exchange is granted a limited 

exemption from Rule 612 of Regulation 

NMS that allows it to accept and rank 

orders priced equal to or greater than 

$1.00 per share in increments of $0.001, 

in connection with the operation of its 

Retail Liquidity Program, until 

December 31, 2018. 

The limited and temporary exemption 

extended by this Order is subject to 

modification or revocation if at any time 

the Commission determines that such 

action is necessary or appropriate in 

furtherance of the purposes of the 

Securities Exchange Act of 1934. 

Responsibility for compliance with any 

applicable provisions of the Federal 

securities laws must rest with the 

persons relying on the exemptions that 

are the subject of this Order. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–14283 Filed 7–2–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83529; File No. SR–OCC– 

2018–802] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Advance Notice of and No 

Objection to The Options Clearing 

Corporation’s Proposal To Enter Into a 

New Credit Facility Agreement 

June 27, 2018. 

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 (‘‘Act’’),3 notice is 

hereby given that on May 25, 2018, The 

Options Clearing Corporation (‘‘OCC’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) an 

advance notice as described in Items I, 

II and III below, which Items have been 

prepared by OCC. On June 26, 2018, 

OCC filed Amendment No. 1 to the 

advance notice.4 The Commission is 

publishing this notice to solicit 

comments on the advance notice from 

interested persons, and to provide 

notice that the Commission does not 

object to the changes set forth in the 

advance notice. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Advance 

Notice 

This advance notice is filed in 

connection with a proposed change to 

its operations in the form of the 

replacement of a revolving credit facility 

that OCC maintains for a 364-day term 

and that it may use (i) in anticipation of 

a potential default by or suspension of 

a Clearing Member, (ii) to meet 

obligations arising out of the default or 

suspension of a Clearing Member, (iii) to 

meet reasonably anticipated liquidity 

needs for same-day settlement as a 

result of the failure of any bank or 

securities or commodities clearing 

organization to achieve daily settlement, 

or (iv) to meet obligations arising out of 

the failure of a bank or securities or 

commodities clearing organization to 

perform its obligations due to its 

bankruptcy, insolvency, receivership or 

suspension of operations. 

All terms with initial capitalization 

not defined herein have the same 

meaning as set forth in OCC’s By-Laws 

and Rules.5

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Advance Notice 

In its filing with the Commission, 

OCC included statements concerning 

the purpose of and basis for the advance 

notice and discussed any comments it 

received on the advance notice. 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 and B below, of the most 

significant aspects of these statements. 

(A) Clearing Agency’s Statement on 

Comments on the Advance Notice 

Received From Members, Participants or 

Others 

Written comments were not and are 

not intended to be solicited with respect 

to the proposed rule change and none 

have been received. OCC will notify the 

Commission of any written comments 

received by OCC. 

(B) Advance Notices Filed Pursuant to 

Section 806(e) of the Payment, Clearing, 

and Settlement Supervision Act 

Description of the Proposed Change 

Background 

This advance notice is being filed in 

connection with a proposed change in 

the form of the replacement of a 

revolving credit facility that OCC 

maintains for a 364-day term and that it 

may use (i) in anticipation of a potential 

default by or suspension of a Clearing 

Member, (ii) to meet obligations arising 

out of the default or suspension of a 

Clearing Member, (iii) to meet 

reasonably anticipated liquidity needs 

for same-day settlement as a result of 

the failure of any bank or securities or 

commodities clearing organization to 

achieve daily settlement, or (iv) to meet 

obligations arising out of the failure of 

a bank or securities or commodities 

clearing organization to perform its 

obligations due to its bankruptcy, 

insolvency, receivership or suspension 

of operations (‘‘Permitted Use 

Circumstances’’). In any such Permitted 

Use Circumstance, OCC has certain 

conditional authority under its By-Laws 

and Rules to borrow or otherwise obtain 

funds from third parties using Clearing 

Member margin deposits and/or 

Clearing Fund contributions.6

OCC’s existing credit facility 

(‘‘Existing Facility’’) was implemented 

as of June 30, 2017, through the 

execution of a credit agreement among 

OCC, the administrative agent, collateral 

agent and the lenders that are parties to 

the agreement from time to time. The 

Existing Facility provides short-term 

secured borrowings in an aggregate 

principal amount of $2 billion but may 

be increased to $3 billion if OCC so 

requests and sufficient commitments 


sradovich on DSK3GMQ082PROD with NOTICES
31238 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 

7See Securities Exchange Act Release No. 81058 

(June 30, 2017), 82 FR 31370 (July 6, 2017) (SR– 

OCC–2017–803). 

8OCC has separately submitted a request for 

confidential treatment to the Commission regarding 

the Summary of Terms and Conditions, which is 

included in this filing as Exhibit 3. 

9 12 U.S.C. 5461(b). 

10 12 U.S.C. 5464(a)(2). 

11 12 U.S.C. 5464(b). 

12 17 CFR 240. 17Ad–22. See Securities Exchange 

Act Release Nos. 68080 (October 22, 2012), 77 FR 

66220 (November 2, 2012) (S7–08–11) (‘‘Clearing 

Agency Standards’’); 78961 (September 28, 2016), 

81 FR 70786 (October 13, 2016) (S7–03–14) 

(‘‘Standards for Covered Clearing Agencies’’). 

13 17 CFR 240.17Ad–22. 

14See supra note 6. 

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

16 12 U.S.C. 5464(b)(1). 

17 17 CFR 240.17Ad–22(e)(7). 

from lenders are received and accepted. 

To obtain a loan under the Existing 

Facility, OCC must pledge as collateral 

U.S. dollars, securities issued or 

guaranteed by the U.S. Government or 

the Government of Canada, Standard & 

Poor’s 500 Market Index equities, 

Exchange-Traded Funds (‘‘ETFs’’), 

American Depositary Receipts (‘‘ADRs’’) 

or certain government-sponsored 

enterprise debt securities. Certain 

mandatory prepayments or deposits of 

additional collateral are required 

depending on changes in the collateral’s 

market value. In connection with OCC’s 

past implementation of the Existing 

Facility, OCC filed an advance notice 

with the Commission on May 4, 2017, 

and the Commission published a Notice 

of No-Objection on June 30, 2017.7

Description of the Proposal 

Renewal. The Existing Facility is set 

to expire on June 29, 2018. OCC is 

currently negotiating the terms of a new 

credit facility (‘‘New Facility’’) on 

substantially similar terms as the 

Existing Facility, and the definitive 

documentation concerning the New 

Facility is expected to be substantially 

similar to the definitive documentation 

concerning the Existing Facility. The 

proposed terms and conditions that are 

expected to be applicable to the New 

Facility, subject to agreement by the 

lenders, are set forth in the Summary of 

Terms and Conditions, which is not a 

public document.8

Certain administrative changes are 

presently expected in connection with 

the New Facility that include 

representations, warranties and 

covenants related to applicable 

regulations and the provision of 

information by OCC in certain 

circumstances to the lenders and 

administrative agent in connection with 

regulatory requirements, such as ‘‘know 

your customer’’ and anti-moneylaundering regulations. The conditions 

regarding the availability of the New 

Facility, which OCC anticipates will be 

satisfied on or about June 28, 2018, 

include the execution and delivery of (i) 

a credit agreement between OCC and the 

administrative agent, collateral agent 

and various lenders under the New 

Facility, (ii) a pledge agreement between 

OCC and the administrative agent or 

collateral agent, and (iii) such other 

documents as may be required by the 

parties. The definitive documentation 

concerning the New Facility is expected 

to be consistent with the Summary of 

Terms and Conditions that is provided 

as Exhibit 3, although it may include 

certain changes to business terms as 

may be necessary to obtain the 

agreement of lenders with sufficient 

funding commitments and certain 

changes as may be necessary regarding 

administrative and operational terms 

being finalized between the parties. 

Anticipated Effect on and Management 

of Risk 

Completing timely settlement is a key 

aspect of OCC’s role as a clearing agency 

performing central counterparty 

services. Overall, the New Facility 

would continue to promote the 

reduction of risks to OCC, its Clearing 

Members and the options market in 

general because it would allow OCC to 

obtain short-term funds in the Permitted 

Use Circumstances. The existence of the 

New Facility would therefore help OCC 

minimize losses in the event of a 

Permitted Use Circumstance by 

allowing it to obtain funds on extremely 

short notice to ensure clearance and 

settlement of transactions in options 

and other contracts without 

interruption. OCC believes that the 

reduced settlement risk presented by 

OCC resulting from the New Facility 

would correspondingly reduce systemic 

risk and promote the safety and 

soundness of the clearing system. By 

drawing on the New Facility, OCC 

would also be able to avoid liquidating 

margin deposits or Clearing Fund 

contributions in what would likely be 

volatile market conditions, which 

would preserve funds available to cover 

any losses resulting from the failure of 

a Clearing Member, bank or other 

clearing organization. 

Consistency With the Payment, Clearing 

and Settlement Supervision Act 

The stated purpose of the Clearing 

Supervision Act is to mitigate systemic 

risk in the financial system and promote 

financial stability by, among other 

things, promoting uniform risk 

management standards for systemically 

important financial market utilities and 

strengthening the liquidity of 

systemically important financial market 

utilities.9 Section 805(a)(2) of the 

Clearing Supervision Act 10 also 

authorizes the Commission to prescribe 

risk management standards for the 

payment, clearing and settlement 

activities of designated clearing entities, 

like OCC, for which the Commission is 

the supervisory agency. Section 805(b) 

of the Clearing Supervision Act 11 states 

that the objectives and principles for 

risk management standards prescribed 

under Section 805(a) shall be to: 

• Promote robust risk management; 

• promote safety and soundness; 

• reduce systemic risks; and 

• support the stability of the broader 

financial system. 

The Commission has adopted risk 

management standards under Section 

805(a)(2) of the Clearing Supervision 

Act and the Act in furtherance of these 

objectives and principles.12 Rule 17Ad– 

22 requires registered clearing agencies, 

like OCC, to establish, implement, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to meet certain minimum 

requirements for their operations and 

risk management practices on an 

ongoing basis.13 Therefore, the 

Commission has stated 14 that it believes 

it is appropriate to review changes 

proposed in advance notices against 

Rule 17Ad–22 and the objectives and 

principles of these risk management 

standards as described in Section 805(b) 

of the Clearing Supervision Act.15

OCC believes that the proposed 

changes are consistent with Section 

805(b)(1) of the Clearing Supervision 

Act 16 because the New Facility would 

provide OCC with continued access to 

a stable and reliable source of 

committed liquidity that can be 

accessed in a timely manner to meet its 

settlement obligations, contain losses 

and liquidity pressures and mitigate 

OCC’s liquidity risk. Accordingly, OCC 

believes the proposed changes are 

designed to (i) promote robust risk 

management; (ii) promote safety and 

soundness; and (iii) reduce systemic 

risks and promote the stability of the 

broader financial system. 

OCC believes that New Facility also is 

consistent with the requirements of Rule 

17Ad–22(e)(7) under the Act.17 Rule 

17Ad–22(e)(7) requires OCC to 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to effectively 

measure, monitor, and manage liquidity 

risk that arises in or is borne by OCC, 

including measuring, monitoring, and 

managing its settlement and funding 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 31239 

18 Id. 

19 17 CFR 240.17Ad–22(e)(7)(i). 

20 Id. 

21 17 CFR 240.17Ad–22(e)(7)(ii). 

22 17 CFR 240.17Ad–22(a)(14). 

23 17 CFR 240.17Ad–22(e)(7)(ii). 

24 12 U.S.C. 5464(b)(1). 

25 17 CFR 240.17Ad–22(e)(7). 26 12 U.S.C. 5465(e)(1)(I). 

flows on an ongoing and timely basis, 

and its use of intraday liquidity, as 

specified in the rule.18

In particular, Rule 17Ad–22(e)(7)(i) 

under the Act 19 directs that OCC meet 

this obligation by, among other things, 

‘‘[m]aintaining sufficient liquid 

resources at the minimum in all relevant 

currencies to effect same-day . . . 

settlement of payment obligations with 

a high degree of confidence under a 

wide range of foreseeable stress 

scenarios that includes, but is not 

limited to, the default of the participant 

family that would generate the largest 

aggregate payment of obligation for 

[OCC] in extreme but plausible market 

conditions.’’ 

As described above, the New Facility 

would provide OCC with a readily 

available liquidity resource that would 

enable it to, among other things, 

continue to meet its obligations in a 

timely fashion in a Permitted Use 

Circumstance and as an alternative to 

selling Clearing Member collateral 

under what may be stressed and volatile 

market conditions. For these reasons, 

OCC believes that the proposal is 

consistent with Rule 17Ad–22(e)(7)(i).20

Rule 17Ad–22(e)(7)(ii) under the Act 

requires OCC to establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

hold qualifying liquid resources 

sufficient to satisfy payment obligations 

owed to Clearing Members.21 Rule 

17Ad–22(a)(14) of the Act defines 

‘‘qualifying liquid resources’’ to include, 

among other things, lines of credit 

without material adverse change 

provisions, that are readily available 

and convertible into cash.22 As with the 

Existing Facility, the New Facility 

would not be subject to any material 

adverse change provision and would 

continue to be designed to permit OCC 

to, among other things, help ensure that 

OCC has sufficient, readily-available 

qualifying liquid resources to meet the 

cash settlement obligations of its largest 

Clearing Member Group. Therefore, 

OCC believes that the proposal is 

consistent with Rule 17Ad– 

22(e)(7)(ii).23

For the foregoing reasons, OCC 

believes that the proposed changes are 

consistent with Section 805(b)(1) of the 

Clearing Supervision Act 24 and Rule 

17Ad–22(e)(7) 25 under the Act. 

Accelerated Commission Action 

Requested 

Pursuant to Section 806(e)(1)(I) of the 

Clearing Supervision Act,26 OCC 

requests that the Commission notify 

OCC that it has no objection to the New 

Facility not later than Tuesday, June 26, 

2018, which is two business days prior 

to the expected June 28, 2018, 

availability of the New Facility. OCC 

requests Commission action by this date 

to ensure that there is no period that 

OCC operates without this essential 

liquidity resource, given its importance 

to OCC’s borrowing capacity in 

connection with its management of 

liquidity and settlement risk and timely 

completion of clearance and settlement. 

III. Date of Effectiveness of the Advance 

Notice and Timing for Commission 

Action 

The proposed change may be 

implemented if the Commission does 

not object to the proposed change 

within 60 days of the later of (i) the date 

the proposed change was filed with the 

Commission or (ii) the date any 

additional information requested by the 

Commission is received. OCC shall not 

implement the proposed change if the 

Commission has any objection to the 

proposed change. 

The Commission may extend the 

period for review by an additional 60 

days if the proposed change raises novel 

or complex issues, subject to the 

Commission providing the clearing 

agency with prompt written notice of 

the extension. A proposed change may 

be implemented in less than 60 days 

from the date the advance notice is 

filed, or the date further information 

requested by the Commission is 

received, if the Commission notifies the 

clearing agency in writing that it does 

not object to the proposed change and 

authorizes the clearing agency to 

implement the proposed change on an 

earlier date, subject to any conditions 

imposed by the Commission. 

OCC shall post notice on its website 

of proposed changes that are 

implemented. The proposal shall not 

take effect until all regulatory actions 

required with respect to the proposal are 

completed. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the advance notice is 

consistent with the Clearing 

Supervision 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–2018–802 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549. 

All submissions should refer to File 

Number SR–OCC–2018–802. 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 advance notice that 

are filed with the Commission, and all 

written communications relating to the 

advance notice 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 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–2018–802 and should 

be submitted on or before July 24, 2018. 

V. Commission Findings and Notice of 

No Objection 

Although the Clearing Supervision 

Act does not specify a standard of 

review for an advance notice, its stated 

purpose is instructive: To mitigate 

systemic risk in the financial system 

and promote financial stability by, 

among other things, promoting uniform 

risk management standards for 

systemically important financial market 

utilities and strengthening the liquidity 


sradovich on DSK3GMQ082PROD with NOTICES
31240 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 

27 12 U.S.C. 5461(b). 

28 12 U.S.C. 5464(a)(2). 

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

30 Id. 

31 12 U.S.C. 5464(a)(2). 

32See 17 CFR 240.17Ad–22. 

33 Id. 

34 12 U.S.C. 5464(b). 

35 Id. 

36See 17 CFR 240.17Ad–22(e)(7). 

37 12 U.S.C. 5464(b). 

38 Id. 

39The Financial Stability Oversight Council 

designated OCC a systemically important financial 

market utility on July 18, 2012. See Financial 

Stability Oversight Council 2012 Annual Report, 

Appendix A, http://www.treasury.gov/initiatives/ 

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

40 Id. 

41 17 CFR 240.17Ad–22(e)(7). 

42 Id. 

43 17 CFR 240.17Ad–22(e)(7)(i). 

44 17 CFR 240.17Ad–22(e)(7). 

45 Id. 

46 17 CFR 240.17Ad–22(e)(7)(i). 

of systemically important financial 

market utilities.27 Section 805(a)(2) of 

the Clearing Supervision Act authorizes 

the Commission to prescribe risk 

management standards for the payment, 

clearing, and settlement activities of 

designated clearing entities and 

financial institutions engaged in 

designated activities for which it is the 

supervisory agency or the appropriate 

financial regulator.28 Section 805(b) of 

the Clearing Supervision Act 29 states 

that the objectives and principles for the 

risk management standards prescribed 

under Section 805(a) shall be to: 

• Promote robust risk management; 

• promote safety and soundness; 

• reduce systemic risks; and 

• support the stability of the broader 

financial system.30

The Commission has adopted risk 

management standards under Section 

805(a)(2) of the Clearing Supervision 

Act 31 and Section 17A of the Act (‘‘Rule 

17Ad–22’’).32 Rule 17Ad–22 requires 

registered clearing agencies to establish, 

implement, maintain, and enforce 

written policies and procedures that are 

reasonably designed to meet certain 

minimum requirements for their 

operations and risk management 

practices on an ongoing basis.33

Therefore, it is appropriate for the 

Commission to review changes 

proposed in advance notices against 

Rule 17Ad–22 and the objectives and 

principles of the risk management 

standards described in Section 805(b) of 

the Clearing Supervision Act.34 As 

discussed below, the Commission 

believes that the proposal in this 

advance notice is consistent with the 

objectives and principles described in 

Section 805(b) of the Clearing 

Supervision Act,35 and in Rule 17Ad–22 

under the Act, particularly Rule 17Ad– 

22(e)(7).36

A. Consistency With Section 805(b) of 

the Clearing Supervision Act 

The Commission believes that the 

changes proposed in the advance notice 

are consistent with Section 805(b) of the 

Clearing Supervision Act because they: 

(i) Promote robust risk management; (ii) 

are consistent with promoting safety 

and soundness; and (iii) are consistent 

with reducing systemic risks and 

promoting the stability of the broader 

financial system. 

The Commission believes that the 

changes proposed in the advance notice 

are consistent with promoting robust 

risk management, in particular 

management of liquidity risk presented 

to OCC. Renewing and maintaining a 

credit facility for this purpose and in the 

manner proposed by OCC would 

diversify the liquidity resources that 

OCC may use to resolve a Member 

default. As such, the Commission 

believes that the proposal would 

promote robust risk management 

practices at OCC, consistent with 

Section 805(b) of the Clearing 

Supervision Act.37

The Commission also believes that the 

changes proposed in the advance notice 

are consistent with promoting safety 

and soundness. As described above, the 

currently proposed credit facility would 

provide OCC with an additional 

liquidity resource in the event of a 

Member default. This liquidity would 

promote safety and soundness for 

Members because it would provide OCC 

with a readily available liquidity 

resource that would enable OCC to 

continue to meet its respective 

obligations in a timely fashion in the 

event of a Member default, thereby 

helping to contain losses and liquidity 

pressures from that default. As such, the 

Commission believes it is consistent 

with promoting safety and soundness as 

contemplated in Section 805(b) of the 

Clearing Supervision Act.38

In addition, the Commission believes 

that the proposal contained in the 

advance notice is consistent with 

reducing systemic risks and promoting 

the stability of the broader financial 

system. As mentioned above, allowing 

OCC to enter into the currently 

proposed credit facility would enable 

OCC, which has been designated a 

systemically important FMU,39 to 

maintain an additional liquidity 

resource that OCC may access to help 

manage a Member default and avoid a 

gap in availability of this liquidity 

resource. Accordingly, the Commission 

believes that the proposal would help to 

reduce the systemic risk of OCC, which 

in turn would help to support the 

stability of the broader financial system, 

consistent with Section 805(b) of the 

Clearing Supervision Act.40

B. Consistency With Rule 17Ad–22(e)(7) 

The Commission believes that the 

proposed changes associated with the 

New Facility are consistent with the 

requirements of Rule 17Ad–22(e)(7) 

under the Act.41 This rule requires that 

a covered clearing agency establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to ‘‘effectively 

measure, monitor, and manage the 

liquidity risk that arises in or is borne 

by [it], including measuring, 

monitoring, and managing its settlement 

and funding flows on an ongoing and 

timely basis, and its use of intraday 

liquidity.’’ 42

In particular, Rule 17Ad–22(e)(7)(i) 

directs that a covered clearing agency 

meet this obligation by, among other 

things, ‘‘[m]aintaining sufficient liquid 

resources at the minimum in all relevant 

currencies to effect same-day . . . 

settlement of payment obligations with 

a high degree of confidence under a 

wide range of foreseeable stress 

scenarios that includes, but is not 

limited to, the default of the participant 

family that would generate the largest 

aggregate payment obligation for the 

covered clearing agency in extreme but 

plausible conditions.’’ 43

The Commission believes that the 

changes proposed by the advance notice 

are consistent with the requirements of 

Rules 17Ad–22(e)(7) under the Act.44

Rule 17Ad–22(e)(7) requires OCC to 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to effectively 

measure, monitor, and manage liquidity 

risk that arises in or is borne by OCC, 

including measuring, monitoring, and 

managing its settlement and funding 

flows on an ongoing and timely basis, 

and its use of intraday liquidity, as 

specified in the rule.45

In particular, Rule 17Ad–22(e)(7)(i) 

under the Act 46 requires that registered 

clearing agencies establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

‘‘effectively measure, monitor, and 

manage the liquidity risk that arises in 

or is borne by [it], including measuring, 

monitoring, and managing its settlement 

and funding flows on an ongoing and 

timely basis, and its use of intraday 

liquidity by . . . [m]aintaining 

sufficient liquid resources at the 

minimum in all relevant currencies to 

effect same-day . . . settlement of 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 31241 

47 17 CFR 240.17Ad–22(e)(7)(ii). 

48 17 CFR 240.17Ad–22(a)(14). 

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

2 17 CFR 240.19b–4. 

3Recently, the Exchange added a shell structure 

to its Rulebook with the purpose of improving 

efficiency and readability and to align its rules 

closer to those of its five sister exchanges: The 

Nasdaq Stock Market, LLC; Nasdaq PHLX LLC; 

Nasdaq ISE, LLC; Nasdaq GEMX, LLC; and Nasdaq 

MRX, LLC (together with BX, the ‘‘Affiliated 

Exchanges’’). See Securities Exchange Act Release 

No. 82174 (November 29, 2017), 82 FR 57492 

(December 5, 2017) (SR–BX–2017–054). 

4See Securities Exchange Act Release No. 34– 

82628 (Feb. 5, 2018). 83 FR 5818 (Feb. 9, 2018) (SR– 

BX–2018–006). 

payment obligations with a high degree 

of confidence under a wide range of 

foreseeable stress scenarios that 

includes, but is not limited to, the 

default of the participant family that 

would generate the largest aggregate 

payment of obligation for the covered 

clearing agency in extreme but plausible 

conditions.’’ 

As described above, the currently 

proposed credit facility would provide 

OCC with a readily available liquidity 

resource that would enable OCC to 

continue to meet its respective 

obligations in a timely fashion in the 

event of a Member default, thereby 

helping to contain losses and liquidity 

pressures from that default. 

Additionally, the currently proposed 

credit facility would allow OCC to avoid 

a gap in liquidity coverage and better 

allow OCC to continually maintain 

sufficient liquidity resources. Therefore, 

the Commission believes that the 

proposal is consistent with Rule 17Ad– 

22(e)(7)(i). 

Rule 17Ad–22(e)(7)(ii) under the Act 

requires OCC to establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

hold qualifying liquid resources 

sufficient to satisfy payment obligations 

owed to clearing members.47 Rule 

17Ad–22(a)(14) of the Act defines 

‘‘qualifying liquid resources’’ to include, 

among other things, lines of credit 

without material adverse change 

provisions, that are readily available 

and convertible into cash.48 As 

described above, the currently proposed 

credit facility would permit OCC to 

enter into a single credit facility 

designed to help ensure that OCC has 

sufficient, readily-available qualifying 

liquid resources to meet the cash 

settlement obligations of its largest 

family of affiliated members. Therefore, 

the Commission believes that the 

proposal is consistent with Rule 17Ad– 

22(e)(7)(ii). 

VI. Conclusion 

It is therefore noticed, pursuant to 

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

Supervision Act, that the Commission 

does not object to the advance notice 

SR–OCC–2018–802 and OCC can and 

hereby is authorized to implement the 

change as of the date of this notice. 

By the Commission. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–14233 Filed 7–2–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83535; File No. SR–BX– 

2018–024] 

Self-Regulatory Organizations; Nasdaq 

BX, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Relocate the 

Exchange’s Rules Pertaining to CoLocation and Direct Connectivity 

June 28, 2018. 

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 June 13, 

2018, Nasdaq BX, Inc. (‘‘BX’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

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 proposes to relocate the 

Exchange’s rules pertaining to colocation and direct connectivity, which 

are presently at Rules 7034 and 7051, to 

Sections 1 and 2, respectively, under a 

new General 8 (‘‘Connectivity’’) heading 

within the Exchange’s new rulebook 

shell, entitled ‘‘General Equity and 

Options Rules.’’ The Exchange also 

proposes to correct an error in Rule 

7051(b). 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://nasdaqbx.cchwallstreet.com/, at 

the principal office of the Exchange, 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 Exchange proposes to relocate its 

rules governing co-location and direct 

connectivity services, which presently 

comprise Rules 7034 and 7051, 

respectively. The Exchange proposes to 

establish, within its new rulebook 

shell,3 a new General 8 heading, entitled 

‘‘Connectivity,’’ to renumber Rule 7034 

as Section 1 thereunder, and to 

renumber Rule 7051 as Section 2 

thereunder. The Exchange furthermore 

proposes to amend Rules 7011, 7025, 

7030, and Options Rules Chapter XV to 

update cross references therein to Rules 

7034 and 7051, as applicable. The 

Exchange also proposes to update 

internal cross-references in the 

renumbered Rules. 

The Exchange considers it appropriate 

to relocate these Rules to better organize 

its Rulebook. The other Affiliated 

Exchanges intend to propose similar 

reorganizations of their co-location and 

direct connectivity rules so that these 

rules will be harmonized among all of 

the Affiliated Exchanges. 

The relocation of the co-location and 

direct connectivity rules is part of the 

Exchange’s continued effort to promote 

efficiency and conformity of its 

processes with those of its Affiliated 

Exchanges. The Exchange believes that 

moving the co-location and direct 

connectivity rules to their new location 

will facilitate the use of the Rulebook by 

Members of the Exchange who are 

members of other Affiliated Exchanges. 

In addition to the above, the Exchange 

proposes to correct an error in Rule 

7051(b), entitled ‘‘Direct Circuit 

Connection to Third Party Services.’’ 

The Exchange recently amended Rule 

7051 in an attempt to harmonize it with 

the corresponding rules of the other 

Affiliated Exchanges.4 However, the 

Exchange recently discovered one 

remaining unintended discrepancy that 

it now proposes to remedy. The other 

Affiliated Exchanges waive installation 

and ongoing monthly fees for 10Gb 

Ultra and 1 GB Ultra direct circuit 


sradovich on DSK3GMQ082PROD with NOTICES