[Federal Register Volume 80, Number 20 (Friday, January 30, 2015)]
[Notices]
[Pages 5171-5179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-01755]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74136; File No. SR-OCC-2015-02]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Concerning a Proposed 
Capital Plan for Raising Additional Capital That Would Support the 
Options Clearing Corporation's Function as a Systemically Important 
Financial Market Utility

January 26, 2015.
    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 January 14, 2015, The Options Clearing Corporation (``OCC'') 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 OCC.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ OCC also filed proposals in this proposed rule change as an 
advance notice under Section 806(e)(1) of the Payment, Clearing, and 
Settlement Supervision Act of 2010. 12 U.S.C. 5465(e)(1). See File 
No. SR-OCC-2014-813. In Items I and II below, OCC states that the 
purpose of this proposal is in part to facilitate compliance with 
the SEC Proposed Rules (as defined below) and address Principle 15 
of the Principles for Financial Market Infrastructures. The 
Commission notes that the SEC Proposed Rules are pending. The 
Commission will evaluate the proposed rule change under the Act and 
the rules currently in force thereunder.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    This proposed rule change is filed by OCC in order to set forth a 
proposed Capital Plan for raising additional capital that would support 
OCC's function as a systemically important financial market utility and 
facilitate OCC's compliance with new regulatory requirements applicable 
to systemically important financial market utilities that have been 
proposed by the Commission but have not yet been adopted.

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 such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    OCC is proposing to amend its By-Laws and other governing 
documents, and to adopt certain policies, for the purpose of 
implementing a plan for raising additional capital (``Capital Plan'') 
under which the options exchanges that own equity in OCC (``Stockholder 
Exchanges'' or ``Stockholders'') would make an additional capital 
contribution and commit to replenishment capital (``Replenishment 
Capital'') in circumstances discussed below, and would receive, among 
other things, the right to receive dividends from OCC.\4\ In addition 
to the additional capital contribution and Replenishment Capital, the 
main features of the Capital Plan are: (i) A policy establishing OCC's 
fees at a level that would be sufficient to cover OCC's estimated 
operating expenses plus a ``Business Risk Buffer'' as described below 
(``Fee Policy''), (ii) a policy establishing the amount of the annual 
refund to clearing members of OCC's fees (``Refund Policy''), and (iii) 
a policy for calculating the amount of dividends to be paid to the 
Stockholder Exchanges (``Dividend Policy''). The Capital Plan is 
proposed to be implemented on or about February 27, 2015, subject to 
all necessary regulatory approvals.\5\
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    \4\ The Capital Plan has also been filed with the Commission as 
an advance notice (SR-OCC-2014-813), which was amended and restated 
on January 14, 2015.
    \5\ The material features of the Capital Plan are summarized in 
the Term Sheet that is included as Exhibit 3 to this filing. Certain 
details of the Term Sheet may change as a result of negotiations 
between OCC and the Stockholder Exchanges or changes in financial 
figures, but OCC does not anticipate any material changes to the 
Capital Plan.
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    The Capital Plan would significantly increase OCC's capital in 
connection with its increased responsibilities as a systemically 
important financial market utility, and OCC believes that it would 
facilitate OCC's compliance with new regulatory requirements applicable 
to such systemically important financial market utilities that have 
been proposed by the Commission but have not yet been adopted.\6\ For 
purposes of its capital planning, OCC has used the working assumption 
that the new requirements contained in the Commission's proposed 
amendments to Rule 17Ad-22 of the SEC Proposed Rules will be adopted 
substantially as proposed, and the Capital Plan is intended to ensure 
OCC's ability to comply with Rule 17Ad-22, specifically paragraph 
(e)(15) thereof, when the SEC Proposed Rules become effective. In 
addition, it is intended to address Principle 15 of the Principles for 
Financial Market Infrastructures published by the Bank for 
International Settlements and the International Organization of 
Securities Commissions, which provides, among other things, that a 
financial market utility should identify, monitor and manage its 
general business risk and hold sufficient liquid net assets funded by 
equity to cover potential general business losses so that it can 
continue to operate as a going concern. The Capital Plan calls for an 
infusion of substantial additional equity capital by the Stockholder 
Exchanges to be made prior to February 27, 2015, subject to regulatory 
approval, that when added to retained earnings accumulated by OCC in 
2014 will significantly increase OCC's capital levels as compared to 
historical levels. Additionally, the Capital Plan includes the 
Replenishment Capital commitment, which would provide OCC access to 
additional equity contributed by the Stockholder Exchanges should OCC's 
equity fall close to or below the amount that OCC determines to be 
appropriate to support its business and manage business risk in 
compliance with Rule 17Ad-22, as discussed more fully below.
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    \6\ See Securities Exchange Act Release No. 71699 (March 12, 
2014), 79 FR 29507 (May 22, 2014) (``SEC Proposed Rules'').

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[[Page 5172]]

Background
    OCC is a clearing agency registered with the Commission and is also 
a derivatives clearing organization (``DCO'') regulated in its capacity 
as such by the Commodity Futures Trading Commission (``CFTC''). OCC is 
a Delaware business corporation and is owned equally by the Stockholder 
Exchanges, five national securities exchanges for which OCC provides 
clearing services.\7\ In addition, OCC provides clearing services for 
seven other national securities exchanges that trade options (``Non-
Stockholder Exchanges''). In its capacity as a DCO, OCC also provides 
clearing services to four futures exchanges.
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    \7\ The Stockholder Exchanges are: Chicago Board Options 
Exchange, Incorporated; International Securities Exchange, LLC; 
NASDAQ OMX PHLX LLC; NYSE MKT LLC; and NYSE Arca, Inc.
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    OCC has been designated systemically important by the Financial 
Stability Oversight Council pursuant to the Payment, Clearing and 
Settlement Supervision Act, and the Commission is OCC's ``Supervisory 
Agency'' under Section 803(8) of the Payment, Clearing and Settlement 
Supervision Act. OCC is therefore a ``covered clearing agency'' 
(``CCA'') as defined in proposed amendments to the Commission's Rule 
17Ad-22(a)(7) and would be required to comply with the provisions of 
proposed Rule 17Ad-22 applicable to CCA's, including paragraph (e)(15) 
thereof.\8\
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    \8\ SEC Proposed Rules at 32-33, FR 29507, 29515 (May 22, 2014).
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    Proposed Rule 17Ad-22(e)(15) provides:

    Each covered clearing agency shall establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to, as applicable: . . . Identify, monitor, and manage the 
covered clearing agency's general business risk and hold sufficient 
liquid net assets funded by equity to cover potential general 
business losses so that the covered clearing agency can continue 
operations and services as a going concern if those losses 
materialize, including by:
    (i) Determining the amount of liquid net assets funded by equity 
based upon its general business risk profile and the length of time 
required to achieve recovery or orderly wind-down, as appropriate, 
of its critical operations and services if such action is taken;
    (ii) Holding liquid net assets funded by equity equal to the 
greater of either (x) six months of the covered clearing agency's 
current operating expenses, or (y) the amount determined by the 
board of directors to be sufficient to ensure a recovery or orderly 
wind-down of critical operations and services of the covered 
clearing agency, as contemplated by the plans established under 
paragraph (e)(3)(ii) of this section, and which:
    (A) shall be in addition to resources held to cover participant 
defaults or other risks covered under the credit risk standard in 
paragraph (b)(3) or paragraph (e)(4)(i)-(iii) of this section, as 
applicable, and the liquidity risk standard in paragraph (e)(7)(i) 
and (ii) of this section; and
    (B) Shall be of high quality and sufficiently liquid to allow 
the covered clearing agency to meet its current and projected 
operating expenses under a range of scenarios, including adverse 
market conditions; and
    (iii) Maintaining a viable plan, approved by the board of 
directors and updated at least annually, for raising additional 
equity should its equity fall close to or below the amount required 
under paragraph (e)(15)(ii) of this section.\9\
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    \9\ SEC Proposed Rules at 417-418, FR 29507, 29616 (May 22, 
2014).

    Over the last nine months, OCC has devoted substantial efforts to: 
(1) Develop a 5-year forward looking model of expenses; (2) quantify 
maximum recovery and wind-down costs under OCC's Recovery and Wind-Down 
Plan; (3) assess and quantify OCC's operational and business risks; (4) 
model projected capital accumulation taking into account varying 
assumptions concerning business conditions, fee levels, buffer margin 
levels and refunds; and (5) develop an effective mechanism that 
provides OCC access to replenishment capital in the event of losses 
that could cause OCC to be non-compliant with the SEC Proposed Rules. 
Incorporating the results of those efforts, the proposed amendments are 
intended to allow OCC to implement the Capital Plan and thereby provide 
OCC with the means to increase its shareholders' equity and, in 
particular, to obtain timely compliance with Rule 17Ad-22(e)(15) \10\ 
as proposed by the Commission. A more detailed discussion of the manner 
in which the Capital Plan would allow OCC to comply with Rule 17Ad-
22(e)(15) appears below.
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    \10\ SEC Proposed Rules at 222-223, FR 29507, 29547-29548 (May 
22, 2014).
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OCC's Projected Capital Requirement
    Using the methods described in detail below, OCC will annually 
determine a ``Target Capital Requirement'' consisting of (i) a 
``Baseline Capital Requirement'' equal to the greatest of (x) six 
months operating expenses for the following year, (y) the maximum cost 
of the recovery scenario from OCC's Recovery and Wind-Down Plan, and 
(z) the cost to OCC of winding down operations as set forth in the 
Recovery and Wind-Down Plan, plus (ii) a ``Target Capital Buffer'' 
linked to plausible loss scenarios from operational risk, business risk 
and pension risk. OCC has determined that its currently appropriate 
``Target Capital Requirement'' is $247 million, reflecting a Baseline 
Capital Requirement of $117 million, which is equal to six months of 
projected operating expenses, plus a Target Capital Buffer of $130 
million. This Target Capital Buffer would provide a significant capital 
cushion to offset potential business losses.
    As of December 31, 2013, OCC had total shareholders' equity of 
approximately $25 million,\11\ meaning that OCC proposes to add 
additional capital of $222 million to meet its 2015 Target Capital 
Requirement. In addition, OCC would be obligated under paragraph 
(e)(15)(iii) \12\ of proposed Rule 17Ad-22 to maintain ``a viable 
plan'' for raising additional equity should its equity fall close to or 
below the amount required under paragraph (e)(15)(ii) of the Rule; \13\ 
i.e., the Baseline Capital Requirement. OCC has determined that its 
viable plan for Replenishment Capital should provide for a 
``Replenishment Capital Amount'' which would give OCC access to 
additional capital as needed up to a maximum of the Baseline Capital 
Requirement, which is currently $117 million.\14\ Therefore, OCC's 
proposed Capital Plan would provide OCC in 2015 with ready access to 
approximately $364 million in equity capital as follows:
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    \11\ See OCC 2013 Annual Report, Financial Statements, 
Statements of Financial Condition, available on OCC's Web site, 
http://optionsclearing.com/components/docs/about/annual-reports/occ_2013_annual_report.pdf.
    \12\ SEC Proposed Rules at 418, FR 29507, 29616 (May 22, 2014).
    \13\ SEC Proposed Rules at 417, FR 29507, 29616 (May 22, 2014).
    \14\ The obligation to provide Replenishment Capital will be 
capped at $200 million, which OCC projects will sufficiently account 
for increases in its capital requirements for the foreseeable 
future.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Baseline Capital Requirement............................    $117,000,000
Target Capital Buffer...................................     130,000,000
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Target Capital Requirement..............................     247,000,000
Replenishment Capital Amount............................     117,000,000
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    Total OCC Capital Resources.........................     364,000,000
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Procedures Followed in Order to Determine Capital Requirement
    Various measures were used in determining the appropriate level of 
capital necessary to comply with the SEC Proposed Rules. An outside 
consultant conducted a ``bottom-up'' analysis of OCC's risks and 
quantified the appropriate amount of capital to be held against each 
risk. The analysis was

[[Page 5173]]

comprehensive across risk types, including credit, market, pension, 
operational, and business risk. Based on internal operational risk 
scenarios and loss modeling at or above the 99% confidence level, OCC's 
operational risk was quantified at $226 million and pension risk at $21 
million, resulting in the total Target Capital Requirement of $247 
million. Business risk was addressed by taking into consideration that 
OCC has the ability to fully offset potential revenue volatility and 
manage business risk to zero by adjusting the levels at which fees and 
refunds are set and by adopting a ``Business Risk Buffer'' of 25% when 
setting fees. Other risks, such as counterparty risk and on-balance 
sheet credit and market risk, were considered to be immaterial for 
purposes of requiring additional capital based on means available to 
OCC to address those risks that did not require use of OCC's capital. 
As discussed in more detail below in the context of OCC's Fee Policy, 
the Business Risk Buffer of 25% is achieved by setting OCC's fees at a 
level intended to achieve target annual revenue that will result in a 
25% buffer for the year after paying all operating expenses.
    An analysis was also performed to identify OCC's risk in terms of 
the regulatory requirements set forth in proposed Rule 17Ad-
22(e)(15)(ii).\15\ This analysis estimated that, currently, OCC's 
maximum recovery costs would be $100 million and projected wind-down 
costs would be $73 million. OCC's projected expenses for 2015 are $234 
million, so that six months projected expenses are $234 million/2 = 
$117 million. The greater of recovery or wind-down costs and six months 
of operating expenses is therefore $117 million, and OCC's Baseline 
Capital Requirement (minimum regulatory requirement) is therefore $117 
million. OCC then computed the appropriate amount of a Target Capital 
Buffer from operational risk, business risk, and pension risk. This 
resulted in a determination that the current Target Capital Buffer 
should be $130 million. Thus, the Target Capital Requirement is $117 
million + $130 million = $247 million.
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    \15\ SEC Proposed Rules at 417, FR 29507, 29616 (May 22, 2014).
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Overview of, and Basis for, OCC's Proposal to Acquire Additional Equity 
Capital
    In order to meet its Target Capital Requirement, and after 
consideration of available alternatives, OCC's Board approved a 
proposal from OCC's Stockholder Exchanges under which OCC would meet 
its Target Capital Requirement of $247 million in early 2015 as 
follows:

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------------------------------------------------------------------------
Shareholders' Equity as of 1/1/2014.................         $25,000,000
Shareholders Equity Accumulated Through Retained              72,000,000
 Earnings \16\......................................
Additional Contribution from Stockholder Exchanges..         150,000,000
                                                     -------------------
    Target Capital Requirement......................         247,000,000
    Replenishment Capital Amount....................         117,000,000
                                                     -------------------
        Total OCC Capital Resources.................         364,000,000
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    \16\ See Proposed Rule Change by The Options Clearing 
Corporation to Reflect the Elimination of a Discount to the Clearing 
Fee Schedule, Securities Exchange Act Release No. 71769 (March 21, 
2014), 79 FR 17214 (March 27, 2014) (SR-OCC-2014-05) (Filing for 
immediate effectiveness of a proposed rule change with the 
Commission to reinstate OCC's permanent clearing fee schedule for 
securities options and securities futures that became effective May 
1, 2007 (``Permanent Schedule Reinstatement Filing'')). The $72 
million is after giving effect to the approximately $40 million 
refund referred to below.
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    The additional contribution of the Stockholder Exchanges would be 
made in respect of their Class B Common Stock on a pro rata basis. The 
Stockholder Exchanges will also commit to provide additional equity 
capital up to the Replenishment Capital Amount, which is currently $117 
million, in the event Replenishment Capital is needed. While the 
Replenishment Capital Amount will increase as the Baseline Capital 
Requirement increases, it would be capped at a total of $200 million 
that could be outstanding at any point in time. OCC has estimated that 
the Baseline Capital Requirement would not exceed this amount before 
2022. When the limit is being approached, OCC would revise the Capital 
Plan as needed to address future needs. In consideration for their 
capital contributions and replenishment commitments, the Stockholder 
Exchanges will receive dividends as described in the Dividend Policy 
discussed below for so long as they remain stockholders and maintain 
their contributed capital and commitment to replenish capital up to the 
Replenishment Capital Amount, subject to the $200 million cap.
Fee, Refund, and Dividend Policies
    Upon reaching the Target Capital Requirement, the Capital Plan and 
the proposed Fee Policy require OCC to set its fees at a level that 
utilizes a Business Risk Buffer of 25%. The purpose of this Business 
Risk Buffer is to ensure that OCC accumulates sufficient capital to 
cover unexpected fluctuations in operating expenses, business capital 
needs, and regulatory capital requirements. Furthermore, the Capital 
Plan requires OCC to maintain Fee, Refund, and Dividend Policies, 
described in more detail below, which are designed to ensure that OCC's 
shareholders' equity remains well above the Baseline Capital 
Requirement. The proposed Fee, Refund, and Dividend Policies are 
attached to this filing as Exhibits 5A, 5B, and 5C respectively. The 
required Business Risk Buffer of 25% is below OCC's 10-year historical 
pre-refund average buffer of 31%. The target will remain 25% so long as 
OCC's shareholders' equity remains above the Target Capital Requirement 
amount. The reduction in buffer margin from OCC's 10-year average of 
31% to 25% reflects OCC's commitment to continue to operate as an 
industry utility and ensuring that market participants benefit as much 
as possible from OCC's operational efficiencies in the future. This 
reduction will permit OCC to charge lower fees to market participants 
rather than maximizing refunds to clearing members and dividend 
distributions to Stockholder Exchanges. OCC will review its fee 
schedule on a quarterly basis to manage revenue as closely to this 
target as possible.\17\ For example, if the Business Risk Buffer is 
materially above 25% after the first quarter of a particular year, OCC 
may decrease fees for the remainder of the year, and conversely if the 
Business Risk Buffer is materially below 25% after the first quarter, 
OCC may increase fees for the remainder of the year.
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    \17\ If OCC's fee schedule needs to be changed in order to 
achieve the 25% Business Risk Buffer, OCC would file a proposed rule 
change seeking approval of the revised fee schedule.

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[[Page 5174]]

    The Capital Plan would allow OCC to refund approximately $40 
million from 2014 fees to clearing members in 2015 and to reduce fees 
in an amount to be determined by the Board, effective in the second 
quarter 2015. OCC will announce new fee levels early in 2015 and will 
make them effective following notification to clearing members and any 
necessary approval by the Commission. OCC will endeavor to provide 
clearing members with no less than 60-day advance notice of the 
effectiveness of changes to fee levels, particularly those that result 
in increases to fee levels. No dividends will be declared until 
December 2015 and no dividends will be paid until 2016.
    Changes to the Fee, Refund, or Dividend Policies will require the 
affirmative vote of two-thirds of the directors then in office and 
approval of the holders of all of OCC's outstanding Class B Common 
Stock. The formulas for determining the amount of refunds and dividends 
under the Refund and Dividend Policies, respectively, which are 
described in more detail below, assume that refunds are tax-deductible 
but that dividends are not. The Refund and Dividend Policies would each 
provide that in the event that refunds payable under the Refund Policy 
are not tax deductible, the policies would be amended to restore the 
relative economic benefits between the recipients of the refunds and 
the Stockholder Exchanges.
Fee Policy
    Under the Fee Policy, in setting fees each year, OCC would 
calculate an annual revenue target based on a forward twelve months 
expense forecast divided by the difference between one and the Business 
Risk Buffer of 25%, i.e., OCC will divide the expense forecast by .75. 
Establishing a Business Risk Buffer at 25% would allow OCC to manage 
the risk that fees would generate less revenue than expected due to 
lower-than-expected trading volume or other factors, or that expenses 
would be higher than projected. The Fee Policy also will include 
provisions from existing Article IX, Section 9 of the By-Laws to the 
effect that the fee schedule may also include additional amounts 
necessary to (i) maintain such reserves as are deemed reasonably 
necessary by the Board to provide facilities for the conduct of OCC's 
business and to conduct development and capital planning activities in 
connection with OCC's services to the options exchanges, Clearing 
Members and the general public, and (ii) accumulate such additional 
surplus as the Board may deem advisable to permit OCC to meet its 
obligations to Clearing Members and the general public; however, these 
provisions will be invoked only in extraordinary circumstances and to 
the extent that the Board has determined that the required amount of 
such additional reserves or additional surplus will exceed the full 
amount that is expected to be accumulated through the Business Risk 
Buffer (prior to payment of refunds or dividends) so OCC's fees will 
ordinarily be based on its projected operating expenses and the 
Business Risk Buffer of 25%.
    Under the Capital Plan, OCC would calculate its annual revenue 
target as follows:

Annual Revenue Target = Forward 12 Months Expense Forecast/(1-.25).

    Because OCC's clearing fee schedules typically reflect different 
rates for different categories of transactions, fee projections would 
include projections as to relative volume in each such category. The 
clearing fee schedule would therefore be set to achieve a blended or 
average rate per contract sufficient, when multiplied by total 
projected contract volume, to achieve the Annual Revenue Target. Under 
extraordinary circumstances, OCC would then add any amount determined 
to be necessary for additional reserves or surplus and divide the 
resulting number by the projected contract volume to determine the 
applicable average fee per cleared contract needed to achieve the 
additional amounts required. Consistent with past practice, OCC would 
notify clearing members of the fees that would be applicable for any 
particular period by describing the change in an information memorandum 
distributed to all clearing members. Consistent with past practice, OCC 
would also notify regulators of the fees that would be applicable for 
any particular period by filing an amendment to its Schedule of Fees as 
a proposed rule change for immediate effectiveness under Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(2) thereunder.\18\
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    \18\ See, e.g., the Permanent Schedule Reinstatement Filing, 
supra n. 13; Proposed Rule Change by The Options Clearing 
Corporation to Reduce the Per Contract Clearing Fee for Routing 
Trades Executed in Accordance with the Options Order Protection and 
Locked/Crossed Market Plan to $.01 per Contract, Securities Exchange 
Act Release No. 68025 (October 12, 2012), 77 FR 63398 (October 16, 
2012) (SR-OCC-2012-18).
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Refund Policy
    Under the Refund Policy, except at a time when Replenishment 
Capital is outstanding as described below, OCC would declare a refund 
to Clearing Members in December of each year, beginning in 2015, in an 
amount equal to 50% of the excess, if any, of (i) pre-tax income for 
the year in which the refund is declared over (ii) the sum of (x) the 
amount of pre-tax income after the refund necessary to produce after-
tax income for such year sufficient to maintain shareholders' equity at 
the Target Capital Requirement for the following year plus (y) the 
amount of pre-tax income after the refund necessary to fund any 
additional reserves or additional surplus not already included in the 
Target Capital Requirement. Such refund will be paid in the year 
following the declaration after the issuance of OCC's audited financial 
statements, provided that (i) the payment does not result in total 
shareholders' equity falling below the Target Capital Requirement, and 
(ii) such payment is otherwise permitted by applicable Delaware law and 
applicable federal laws and regulations. OCC would not be able to pay a 
refund on a particular date unless dividends were paid on the same 
date. If Replenishment Capital has been contributed and remains 
outstanding, OCC would not pay refunds until such time as the Target 
Capital Requirement is restored through the accumulation of retained 
earnings. Refunds in accordance with the Refund Policy would resume 
once the Target Capital Requirement is restored and all Replenishment 
Capital is repaid in full, provided that the restoration of the Target 
Capital Requirement and the repayment of Replenishment Capital occurred 
within 24 months of the issuance date of the Replenishment Capital. If, 
within 24 months of the issuance date of any Replenishment Capital, 
such Replenishment Capital has not been repaid in full or shareholders' 
equity has not been restored to the Target Capital Requirement, OCC 
would no longer pay refunds to clearing members, even if the Target 
Capital Requirement is restored and all Replenishment Capital is repaid 
at a later date.
Dividend Policy
    The Dividend Policy would provide that, except at a time when 
Replenishment Capital is outstanding as described below, OCC would 
declare a dividend on its Class B Common Stock in December of each year 
in an aggregate amount equal to the excess, if any, of (i) after-tax 
income for the year, after application of the Refund Policy (unless the 
Refund Policy has been eliminated, in which case the refunds shall be 
deemed to be $0) over (ii) the sum of (A) the amount required to be 
retained in order to maintain total shareholders'

[[Page 5175]]

equity at the Target Capital Requirement for the following year, plus 
(B) the amount of any additional reserves or additional surplus not 
already included in the Target Capital Requirement. Such dividend will 
be paid in the year following the declaration after the issuance of 
OCC's audited financial statements, provided that (i) the payment does 
not result in total shareholders' equity falling below the Target 
Capital Requirement, and (ii) such payment is otherwise permitted by 
applicable Delaware law and applicable federal laws and regulations. If 
Replenishment Capital has been contributed and remains outstanding, OCC 
would not pay dividends until such time as the Target Capital 
Requirement is restored.
OCC's Status as an Industry Utility
    OCC has always been operated on an ``industry utility'' model. The 
Stockholder Exchanges have heretofore contributed only minimal capital 
to OCC.\19\ OCC's By-Laws currently require that OCC set its clearing 
fees at a level that is designed to cover operating expenses and to 
maintain such reserves and accumulate such additional capital as are 
deemed reasonably necessary for OCC to meet its obligations to its 
clearing members and the public. Clearing fees that are collected in 
excess of these amounts are refunded annually on a pro rata basis to 
the clearing members who paid them. Under this model, OCC has never 
paid dividends to the Stockholder Exchanges. However, OCC has paid 
significant refunds to clearing members each year. OCC is aware that a 
portion--possibly a significant portion--of those refunds are not 
passed through by the clearing members to their end user customers. 
Accordingly, by adopting an approach that includes paying dividends to 
the Stockholder Exchanges that have invested a significant amount of 
additional capital ($150 million) but that also reduces the historical 
pre-refund average buffer of 31% by adopting a Business Risk Buffer of 
25%, OCC believes that the proposed approach maintains, and perhaps 
better aligns with, an industry utility model.
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    \19\ OCC's common stock and paid in capital total $2,659,999. 
See OCC 2013 Annual Report, Financial Statements, Statements of 
Financial Condition, available on OCC's Web site, http://optionsclearing.com/components/docs/about/annual-reports/occ_2013_annual_report.pdf.
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    Given the very large increase in capital that OCC has determined to 
be appropriate in order to assure compliance with regulatory 
requirements and meet the increased responsibilities imposed upon it as 
a systemically important financial market utility, OCC has determined 
that the best alternative available to it is to obtain a substantial 
further capital contribution from the Stockholder Exchanges. This 
cannot be accomplished without modification of the past practice of not 
providing dividends to stockholders. Accordingly, it is necessary for 
OCC to establish the new Fee Policy, Refund Policy, and Dividend 
Policy. Because of the Business Risk Buffer being set at 25%, the 
combination of the Fee, Refund, and Dividend Policies will effectively 
cap the dividends to be paid to the Stockholder Exchanges at a level 
that the Board (with the advice of outside financial experts) has 
determined results in a reasonable rate of return on contributed 
capital, particularly in comparison to the implied cost of capital to 
the clearing members and their customers of instead pursuing an 
approach which required the accumulation of retained earnings through 
higher fees and no refunds for several years. OCC will continue to 
refund a significant percentage of excess clearing fees to clearing 
members, thereby benefiting both clearing members and, to the extent 
that refunds are passed through by the clearing members to their end 
user customers, their customers. The Capital Plan therefore effectively 
preserves OCC's industry utility model of providing its services in an 
efficient manner, but enhances the benefits to the end user customers 
by charging lower initial fees as a result of the decrease in the 
buffer margin from OCC's 10-year average of 31% to 25%.
    Clearing members and customers will benefit from the proposed 
Capital Plan because it will allow OCC to continue to provide clearing 
services at low cost. As noted, OCC expects that this capital infusion 
from stockholders will enable OCC to provide a significant refund of 
2014 fees. OCC further expects that its current clearing fees will be 
reduced significantly based on the Business Risk Buffer of 25% 
beginning in 2015 with refunds restored, and that these lower fees will 
continue for the foreseeable future.
    Stockholder Exchanges will benefit from the dividend return they 
receive and, perhaps more importantly, they will be assured that OCC 
will be in a position to provide clearing services for their markets on 
an on-going basis within the same basic structure that has served these 
markets well since their inception and without the need to radically 
change the structure to address potential demands of outside equity 
investors. Non-Stockholder Exchanges will also benefit by continuing to 
receive OCC's clearing services for their products on the same basis as 
they presently do.\20\
---------------------------------------------------------------------------

    \20\ Non-Stockholder Exchanges contribute capital by purchasing 
a promissory note in the principal amount of $1,000,000. See Section 
2 of Article VIIB of OCC's By-Laws. The required capital 
contribution of Non-Stockholder exchanges will not change under the 
Capital Plan.
---------------------------------------------------------------------------

    OCC also believes that the Capital Plan will better align the 
interests of Stockholder Exchanges and clearing members with respect to 
expenses, since changes to the level of operating expenses directly 
affect the Target Capital Requirement. In sum, OCC believes that the 
present proposal represents a fair and reasonable balancing of the 
interests of the Stockholder Exchanges, the other exchanges for which 
OCC provides clearing services, clearing members, customers, and the 
general public while providing an immediate infusion of capital and a 
structure within which OCC can meet its obligations to the public as a 
systemically important financial market utility, as well as the 
requirements under the SEC Proposed Rules.
Replenishment Capital Plan
    OCC proposes to put in place a Replenishment Capital Plan whereby 
OCC's Stockholder Exchanges are obligated to provide on a pro rata 
basis a committed amount of Replenishment Capital should OCC's total 
shareholders' equity fall below the hard trigger (as defined below). 
The aggregate committed amount for all five Stockholder Exchanges in 
the form of Replenishment Capital that could be accessed at any time 
would be capped at the excess of (i) the lesser of (A) the Baseline 
Capital Requirement, which is currently $117 million, at the time of 
the relevant funding or (B) $200 million, over (ii) amounts of 
outstanding Replenishment Capital (``Cap''). The $200 million figure in 
the Cap formula takes into account projected growth in the Baseline 
Capital Requirement for the foreseeable future. The commitment to 
provide Replenishment Capital would not be limited by time, but only by 
the Cap. Replenishment Capital could be called in whole or in part 
after the occurrence of a ``hard trigger'' event described below, 
subject to the Cap. If the Baseline Capital Requirement approaches or 
exceeds $200 million, the Board can consider, as part of its annual 
review of the Replenishment Capital Plan that is required by the SEC 
Proposed Rules, alternative arrangements to obtain replenishment 
capital in excess of the $200 million

[[Page 5176]]

committed under the Replenishment Capital Plan. In addition, the Refund 
Policy and the Dividend Policy will provide that, in the absence of 
obtaining any such alternative arrangements, the amount of the 
difference will be subtracted from amounts that would otherwise be 
available for the payment of refunds and dividends.
    Replenishment Capital contributed to OCC under the Replenishment 
Capital Plan would take the form of a new class of common stock 
(``Class C Common Stock'') of OCC to be issued to the Stockholder 
Exchanges solely in exchange for Replenishment Capital contributions.
    The Replenishment Capital Plan would be part of OCC's overall 
Capital Plan. In implementing the Replenishment Capital Plan, OCC's 
management would monitor OCC's levels of shareholders' equity to 
identify certain triggers, or reduced capital levels, that might 
require action. OCC has identified two key triggers--a soft trigger and 
a hard trigger--and proposes that OCC take certain steps upon the 
occurrence of either as described in more detail below.
    The ``soft trigger'' for re-evaluating OCC's capital would occur if 
OCC's shareholders' equity falls below the sum of (i) the Baseline 
Capital Requirement and (ii) 75% of the Target Capital Buffer. The soft 
trigger would be a warning sign that OCC's capital had fallen to a 
level that required attention and responsive action to prevent it from 
falling to unacceptable levels. Upon a breach of the soft trigger, 
OCC's senior management and the Board would review alternatives to 
increasing capital, and take appropriate action as necessary, including 
increasing fees or decreasing expenses, to restore shareholders' equity 
to the Target Capital Requirement.
    The ``hard trigger'' for making a mandatory Replenishment Capital 
call would occur if shareholders' equity falls below 125% of the 
Baseline Capital Requirement (``Hard Trigger Threshold''). The hard 
trigger would be a sign that corrective action more significant and 
with a more immediate impact than increasing fees or decreasing 
expenses should be taken to increase OCC's capital, either as part of a 
recovery plan or a wind down plan for OCC's business. OCC's 
shareholders' equity would have to fall more than $100 million below 
the fully funded capital amount described above in order for the Hard 
Trigger Threshold to be breached. As a result, OCC views the breach of 
the Hard Trigger Threshold as unlikely and occurring only as a result 
of a significant, unexpected event. Upon a breach of the Hard Trigger 
Threshold, the Board would have to determine whether to attempt a 
recovery, a wind-down of OCC's operations or a sale or similar 
transaction, subject in each case to any necessary stockholder consent. 
If the Board decides to wind-down OCC's operations, OCC would access 
the Replenishment Capital in an amount sufficient to fund the wind-
down, as such amount would be determined by the Board, and subject to 
the Cap described above. If the Board decides to attempt a recovery of 
OCC's capital and business, OCC would access the Replenishment Capital 
in an amount sufficient to return shareholders' equity to an amount 
equal to $20 million above the Hard Trigger Threshold, subject to the 
Cap described above.
    While Replenishment Capital is outstanding, no refunds or dividends 
would be paid and, if any Replenishment Capital remains outstanding for 
more than 24 months or the Target Capital Requirement is not restored 
during that period, changes would be made to how OCC calculates refunds 
and dividends, as described in more detail above under Refund Policy 
and Dividend Policy. In addition, while Replenishment Capital is 
outstanding, OCC would first utilize the entire amount of Available 
Funds to repurchase, on a pro rata basis from each Stockholder, to the 
extent permitted by applicable Delaware and federal law and 
regulations, outstanding shares of Class C Common Stock as soon as 
practicable after completion of the financial statements following the 
end of each calendar quarter at a price equal to the original amount 
paid for such shares, plus an additional ``gross up'' amount to 
compensate the holders of the Class C Common Stock for taxes on 
dividend income (if any) that they may have to recognize as a result of 
such repurchase.\21\ For this purpose, ``Available Funds'' would equal, 
as of the end of any calendar quarter, the excess, if any, of (x) 
shareholders' equity over (y) the Minimum Replenishment Level. The 
``Minimum Replenishment Level'' would mean $20 million above the Hard 
Trigger Threshold, so that OCC's shareholders' equity would remain at 
or above the Minimum Replenishment Level after giving effect to the 
repurchase. Furthermore, under the Dividend and Refund Policies, 
refunds and dividends would be suspended until such time as the Target 
Capital Requirement is restored.
---------------------------------------------------------------------------

    \21\ Based on current federal rates, if the full amount of the 
payment is classified as a dividend and the recipient is entitled to 
a dividends received deduction, this gross up is estimated to be 
approximately 12% of the payment.
---------------------------------------------------------------------------

Amendments to Governing Documents
    In order to implement the Capital Plan, OCC proposes to make 
amendments to its By-Laws and Restated Certificate of Incorporation and 
amend and restate its Stockholders Agreement.
Amendments to By-Laws
    OCC is proposing various amendments to the By-Laws in order to 
implement the Capital Plan. Specifically, OCC proposes to amend the 
definition of Equity Exchange in Article I, Section 1 to take into 
account the potential ownership of Class C Common Stock by the 
Stockholder Exchanges.
    Article II, Section 3 would be amended to change the definition of 
quorum such that a majority of outstanding common stock entitled to 
vote at a meeting of Stockholders either in person or by proxy would 
constitute a quorum for any such meeting of the Stockholders. In 
addition, OCC proposes to amend Article II, Section 5 to allow for the 
potential issuance of Class C Common Stock, which will not have voting 
rights except as required by applicable law.
    Article VIIA, Section 2, would be amended to (i) provide for the 
potential issuance of Class C Common Stock in consideration for 
Replenishment Capital provided by Stockholder Exchanges, (ii) permit, 
consistent with the proposed amendments to the Stockholders Agreement, 
the transfer of shares of common stock to another Stockholder, and 
(iii) reflect the right of other Stockholders, consistent with the 
proposed amendments to the Stockholders Agreement, to purchase the 
shares of common stock of another Stockholder. Article VIIA, Section 3, 
would be amended to conform to the changes to Article VIIA, Section 2.
    OCC proposes amendments to Article VIII, Section 5(d), to require 
that a Board decision to utilize OCC's retained earnings to compensate 
for a loss or deficiency to the Clearing Fund would require unanimous 
consent from the holders of Class A Common Stock and Class B Common 
Stock. This proposed amendment is intended to protect Stockholders from 
an action taken without their consent that could increase their 
likelihood of being required to provide Replenishment Capital. 
Similarly, Article XI, Section 1 would also be amended to account for 
the possible issuance of the non-voting Class C Common Stock consistent 
with the Restated Certificate of Incorporation

[[Page 5177]]

as discussed below, and to require unanimous Stockholder approval for 
any future amendments to the new provision of Article VIII, Section 
5(d) described above.
    Article IX, Section 9, would be amended in three ways. First, the 
concept of the Business Risk Buffer would be incorporated into Article 
IX, Section 9(a). Second, Article IX, Section 9, would be amended to 
provide that OCC would only add amounts for reserves and surpluses in 
addition to the Business Risk Buffer in extraordinary circumstances and 
only to the extent that the Board has determined that the required 
amount of additional reserves and surplus is expected to exceed the 
full amount that is anticipated to be accumulated through the Business 
Risk Buffer prior to payment of refunds and dividends. Third, Article 
IX, Section 9, would be amended to expressly reference the potential 
payment of dividends in accordance with the Dividend Policy.
Amendments to Restated Certificate of Incorporation
    OCC is proposing to amend its Restated Certificate of Incorporation 
in order to implement the Capital Plan. The proposed amendment to the 
restated Certificate of Incorporation is attached to this filing as 
Exhibit 5D. Article IV would be amended in multiple locations to (i) 
reduce the number of authorized shares of Class A Common Stock and 
Class B Common Stock to the number of shares currently outstanding, and 
the number of series of Class B Common Stock, to reflect the fact that 
there are only five Stockholder Exchanges, (ii) to eliminate a 
provision under which additional shares of Class A Common Stock and 
Class B Common Stock could be authorized in certain circumstances 
without a separate vote of each series of Class B Common Stock, (iii) 
create Class C Common Stock as non-voting stock, (iv) set a par value 
for Class C Common Stock of $1,000 per share, (v) provide for 
distribution upon a liquidation or dissolution of OCC to holders of 
Class A, Class B, and Class C Common Stock, pro rata on a pari passu 
basis, the amount of the par value of their shares, and (vi) remove 
restrictions on the transfer of shares of Class B Common Stock to more 
than one entity in order to address the possible exercise by another 
Stockholder of its right of first refusal under the Amended and 
Restated Stockholders Agreement. Additionally, Article IV would be 
amended to make clear that the prohibition on OCC's creating or issuing 
rights or options to purchase OCC stock set forth in Article IV would 
not restrict the ability of OCC to enter into the Replenishment Capital 
Plan. Finally, technical changes would be made to Article VI in 
connection with the creation of Class C Common Stock as non-voting 
stock.
Amendments to Stockholders Agreement
    OCC is proposing various amendments to the Stockholders Agreement 
to make technical changes relating to the additional contributions of 
capital to be made by the Stockholder Exchanges under the Capital Plan 
and the potential issuance of Class C Common Shares. The proposed 
Amended and Restated Stockholders Agreement is attached to this filing 
as Exhibit 5E. In part, the amendments to the Stockholders Agreement 
would provide Stockholders with a secondary right of refusal to be 
exercised if a Stockholder wished to sell its shares and OCC chose not 
to exercise its existing right of first refusal to purchase those 
shares. This change was considered necessary because after the 
additional contributions of capital by the Stockholder Exchanges under 
the Capital Plan, shares of Class B Common Stock will be significantly 
more valuable, making it less likely that OCC would be able to exercise 
its right of first refusal. Providing the non-selling Stockholder 
Exchanges with a secondary right of first refusal would increase the 
chances that a selling Stockholder Exchange would find a purchaser for 
its shares from among OCC's existing owners. Because OCC's Stockholders 
Agreement has already been amended several other times, for convenience 
OCC is also proposing to amend and restate the Stockholders Agreement 
to incorporate all previous amendments and the new amendments into a 
single comprehensive agreement.
    Each of the proposed new amendments to the Stockholders Agreement 
is described below, in the order they appear in the agreement. OCC 
proposes a technical amendment to Section 1 of the Stockholders 
Agreement to refer to the definitions of Class A Common Stock, Class B 
Common Stock, and Class C Common Stock in the Restated Certificate of 
Incorporation and By-Laws. OCC proposes an amendment to Section 3 which 
would delete an obsolete reference to a plan relating to OCC's original 
reorganization into a common clearing facility for all options 
exchanges. OCC proposes a technical amendment to Section 5(a) to add a 
reference to the procedures for Stockholder Exchanges to acquire shares 
pursuant to their secondary rights of first refusal in certain 
situations that will be set out in amended Section 10(e). OCC is 
proposing an amendment to Section 5(b) providing that the Stockholder 
Exchanges may not sell or transfer less than all of their shares 
without the consent of OCC. OCC seeks to prevent a partial sale by a 
Stockholder Exchange of a portion of its shares of Class A Common 
Stock, Class B Common Stock, or Class C Common Stock to avoid 
difficulties that could arise for OCC if, as a result of a partial 
sale, voting rights, dividend rights, and replenishment capital were 
spread across Stockholder Exchanges on a non pro rata basis. Section 
5(b) would further clarify that if OCC consented to a partial sale the 
Stockholder Exchanges' right of first refusal would still apply, and 
that a Stockholder Exchange could sell shares of Class C Common Stock 
to OCC without selling its shares of Class A Common Stock and Class B 
Common Stock. OCC proposes to amend Section 6(a) to provide 
Stockholders, upon the non-exercise of OCC's right of first refusal, a 
secondary right of first refusal to purchase shares of other 
Stockholders in certain circumstances discussed above, and to establish 
procedures governing the exercise of this right. Section 6(b) would be 
amended to explicitly state that OCC can assign its rights under the 
Stockholders Agreement to purchase shares of a Stockholder Exchange in 
the event of such Stockholder Exchange's bankruptcy or insolvency, and 
to create an exception from the right of first refusal for transfers to 
certain affiliates of a Stockholder that meet the exchange eligibility 
requirements set forth in the By-Laws. Section 6(c) would be amended to 
make any transfer or encumbrance of shares in violation of the 
Stockholders Agreement, either voluntarily or by operation of law, 
void. Section 6(d) would be amended to explicitly state that OCC can 
assign its rights under the Stockholders Agreement to repurchase shares 
of any Stockholder that ceases to be qualified to participate in OCC 
pursuant to the By-Laws. The revised Section 6(c) would take the place 
of current Section 6(e), which would be deleted. Section 6(e) currently 
provides that such a pledge or transfer would automatically be deemed 
to create a transfer of the shares to OCC. OCC proposes conforming 
amendments to Section 6(f), Section 6(g), Section 7, and Section 8 to 
provide for the new Stockholder Exchange right of first refusal. OCC 
proposes deleting Section 9 to remove the right of Stockholders to 
require OCC to purchase their shares of stock.

[[Page 5178]]

    OCC proposes to amend Section 10(a) of the Stockholders Agreement 
to provide that the purchase price paid upon exercise of purchase 
rights by OCC or the Stockholder Exchanges would be equal to the lowest 
of (i) the book value of the shares to be purchased, (ii) the total 
capital contribution of the selling Stockholder and (iii) in the case 
of exercise of a right of first refusal, the price originally offered 
for such shares. OCC proposes other technical amendments to Sections 
10(a), 10(b) and 10)(c) of the Stockholders Agreement concerning the 
purchase price formula, procedures, and timing for OCC's repurchase 
rights of shares (or, if applicable, the purchase of a Stockholder's 
shares by another Stockholder) pursuant to the terms of the 
Stockholders Agreement. Section 10(d) would be amended such that any 
consideration to be paid by OCC upon the exercise of a right of first 
refusal would be subordinated to all other claims of all other 
creditors of OCC, and to prohibit OCC from declaring or paying any 
dividends, acquiring for value any shares of stock or distributing 
assets to any Stockholder Exchange, except with regard to required 
purchases or redemptions of shares of Class C Common Stock or payments 
of dividends in accordance with the Dividend Policy. OCC proposes to 
amend current Section 10(e) by moving its provisions addressing the 
subordination of payments by OCC and non-payment of dividends under 
certain circumstances into the proposed Section 10(d) as discussed 
above. OCC proposes technical amendments to current Section 10(g), 
proposed Section 10(e) concerning the process under which OCC would 
acquire shares upon exercise of its right of first refusal. OCC also 
proposes to move technical provisions of the current Section 10(f) 
concerning the payment of such shares into Section 10(e). Section 10(f) 
would then be amended to address procedures for Stockholders that 
exercise their right of first refusal.
    Section 11 of the Stockholders Agreement would be amended in order 
to make a Stockholder's right to transfer shares dependent upon the 
non-exercise of OCC's and other Stockholders' right of first refusal to 
the purchase of such Stockholder's shares. Additionally, Section 11 
would be amended to provide that the transfer of a Stockholder's shares 
under that section would not be effective without the transferee's 
assuming the rights and obligations under the Stockholders Agreement, 
certain joinders to the Stockholders Agreement and other agreements 
between OCC and Stockholders. Section 14(a) would be amended to make 
reference to the Stockholders Agreement. Section 14(b) would be amended 
to make a technical change relating to the legend on OCC's stock 
certificates. Section 15 would be amended to update the mailing 
addresses of the Stockholder Exchanges for written notices and formal 
communications. Section 16(c) would be amended to clarify that a 
Stockholder Exchange would be able to assign its rights under the 
Stockholders Agreement only to a party to whom it would be permitted to 
transfer its shares. In addition, Section 16(c) would be amended to 
provide that OCC may only assign its repurchase rights under Section 
6(b) or Section 6(d) of the Stockholders Agreement. OCC would be able 
to assign such rights with respect to all or a portion of the shares of 
stock owned by a Stockholder Exchange, and would be required to provide 
the non-selling Stockholder Exchanges with a right of first refusal in 
connection with any such contemplated assignment comparable to the 
secondary right of first refusal applicable with respect to a voluntary 
sale by a Stockholder Exchange and described above. Sections 16(f) and 
16(g) would be amended to effectuate the amendment and restatement of 
the existing Stockholders Agreement.
2. Statutory Basis
    OCC believes the proposed rule change is consistent with Section 
17A(b)(3)(F) of the Securities Exchange Act of 1934, as amended 
(``Act''),\22\ and the rules and regulations thereunder, because by 
implementing the Capital Plan, OCC would ensure that it could continue 
to promptly and accurately clear and settle securities transactions 
even if it suffered significant operational losses. By ensuring that it 
maintains sufficient capital and that it can replenish the capital in 
the event it falls below desirable levels, the Capital Plan would also 
enable OCC to maintain safe and secure obligations, in compliance with 
Rule 17Ad-22(d)(6).\23\ The proposed Capital Plan would also, as 
discussed in more detail above, ensure OCC's compliance with new 
regulatory requirements proposed by the Commission seeking to promote 
the safe and reliable operation of registered clearing agencies, and in 
particular proposed subsection (e)(15) of Rule 17Ad-22.\24\ The 
proposed rule change is not inconsistent with the existing rules of 
OCC, including any other rules proposed to be amended.
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    \22\ 15 U.S.C. 78q-1(b)(3)(F).
    \23\ 17 CFR 240.17Ad-22(d)(6).
    \24\ SEC Proposed Rules at 156, FR 29507, 29616 (May 22, 2014).
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any 
burden on competition.\25\ OCC believes that the proposed rule change 
would not unfairly inhibit access to OCC's services or disadvantage or 
favor any particular user in relationship to another user because the 
proposed changes relate to OCC's plan for raising and maintaining 
adequate capital from its owner exchanges, and therefore do not affect 
clearing members' or others' access to OCC's services or the nature of 
these services.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

    For the foregoing reasons, OCC believes that the proposed rule 
change is in the public interest, would be consistent with the 
requirements of the Act applicable to clearing agencies and would not 
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 such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.\26\
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    \26\ OCC also filed proposals in this proposed rule change as an 
advance notice under Section 806(e)(1) of the Payment, Clearing, and 
Settlement Supervision Act of 2010. 12 U.S.C. 5465(e)(1). See supra 
note 3.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and

[[Page 5179]]

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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2755524b420a44484a4a424953546754424409404851"><span class="__cf_email__" data-cfemail="4a383f262f67292527272f243e390a392f29642d253c">[email protected]</span></a>. Please include 
File Number SR-OCC-2015-02 on the subject line.

Paper Comments

    <bullet> 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-2015-02. 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 Web site (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 Web site 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 
Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_15_02.pdf. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-OCC-2015-02 and should be submitted on or before 
February 20, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-01755 Filed 1-29-15; 8:45 am]
BILLING CODE 8011-01-P


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