Federal Register / Vol. 80, No. 31 / Tuesday, February 17, 2015 / Notices 8383 

17 17 CFR 200.30–3(a)(12). 

1OCC initially filed a similar advance notice on 

September 17, 2014. Securities Exchange Act 

Release No. 73343 (October 14, 2014), 79 FR 62684 

(October 20, 2014), (SR–OCC–2014–805). OCC 

withdrew that advance notice on October 28, 2104. 

Securities Exchange Act Release No. 73710 

(December 1, 2014), 79 FR 72225 (December 5, 

2014), (SR–OCC–2014–805). 

2 12 U.S.C. 5465(e)(1). The 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. Therefore, OCC is 

required to comply with the Clearing Supervision 

Act and file advance notices with the Commission. 

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

3 17 CFR 240.19b–4(n)(1)(i). 

4See Securities Exchange Act Release No. 74073 

(January 15, 2015), 80 FR 3287 (January 22, 2015) 

(SR–OCC–2014–812). OCC also filed the proposal 

contained in this advance notice as a proposed rule 

change under Section 19(b)(1) of the Act and Rule 

19b–4 thereunder, which was published for 

comment in the Federal Register on December 30, 

2014. 15 U.S.C. 78s(b)(1); 17 CFR 240.19b–4. See 

Securities Exchange Act Release No. 73907 

(December 22, 2014), 79 FR 78543 (December 30, 

2014) (SR–OCC–2014–24). The Commission did not 

receive any comments on the proposed rule change. 

5ELX Futures LP (‘‘ELX’’) previously submitted 

overnight trading activity to OCC, but currently 

does not submit such trades. OCC will re-evaluate 

ELX’s risk controls in the event ELX re-institutes its 

overnight trading sessions. 

6See CFE–2014–010 at http://cfe.cboe.com/

publish/CFErulefilings/SR-CFE-2014-010.pdf. 

7Comparable controls are applied to futures and 

future option trades executed in overnight trading 

sessions currently cleared by OCC, although such 

controls have been implemented by clearing futures 

commission merchants (‘‘clearing FCMs’’) pursuant 

to Commodity Futures Trading Commission 

(‘‘CFTC’’) Regulation 1.73. This requires clearing 

FCMs to monitor for adherence to such controls 

during regular and overnight trading sessions. Some 

of these risk control measures are similar to those 

proposed by OCC for use in clearing securities 

trades in overnight trading sessions. For instance, 

OCC confirmed that CFE maintains kill switch 

capabilities. 

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 the Exchange. 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–EDGA– 

2015–07, and should be submitted on or 

before March 10, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–03078 Filed 2–13–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74241; File No. SR–OCC– 

2014–812] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of No Objection to Advance Notice 

Concerning Extended and Overnight 

Trading Sessions 

February 10, 2015. 

On December 12, 2014, The Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) advance 

notice SR–OCC–2014–812 (‘‘Advance 

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

of the Payment, Clearing, and 

Settlement Supervision Act of 2010 

(‘‘Clearing Supervision Act’’) 2 and Rule 

19b–4(n)(1)(i) under the Securities 

Exchange Act of 1934 (‘‘Exchange 

Act’’).3 The Advance Notice was 

published for comment in the Federal 

Register on January 22, 2015.4 The 

Commission did not receive any 

comments on the Advance Notice. This 

publication serves as a notice of no 

objection to the Advance Notice. 

I. Description of the Advance Notice 

Description of Change 

This advance notice was filed in 

connection with OCC’s proposed change 

to its operations concerning the 

clearance of confirmed trades executed 

in overnight trading sessions offered by 

exchanges for which OCC provides 

clearance and settlement services. OCC 

currently clears overnight trading 

activity for CBOE Futures Exchange, 

LLC (‘‘CFE’’).5 The total number of 

trades submitted to OCC from overnight 

trading sessions is nominal, typically 

less than 3,000 contracts per session. 

However, OCC has recently observed an 

industry trend whereby exchanges are 

offering overnight trading sessions 

beyond traditional hours. Exchanges 

offering overnight trading sessions have 

indicated to OCC that such sessions 

benefit market participants by providing 

additional price transparency and 

hedging opportunities for products 

traded in such sessions, which, in turn, 

promotes market stability.6 In light of 

this trend, OCC proposed to implement 

a framework for clearing trades executed 

in such sessions that includes: (1) 

Qualification criteria used to approve 

clearing members for overnight trading 

sessions, (2) systemic controls to 

identify trades executed during 

overnight trading sessions by clearing 

members not approved for such 

sessions, (3) enhancements to OCC’s 

overnight monitoring of trades 

submitted by exchanges during 

overnight trading sessions, (4) 

enhancements to OCC’s credit controls 

with respect to monitoring clearing 

members’ credit risk during overnight 

trading sessions, including procedures 

for contacting an exchange offering 

overnight trading sessions in order to 

invoke use of the exchange’s kill switch, 

and (5) taking appropriate disciplinary 

action against clearing members who 

attempt to clear during the overnight 

trading session without first obtaining 

requisite approvals. These changes 

(described in greater detail below) are 

designed to reduce and mitigate the 

risks associated with clearing trades 

executed in overnight trading sessions. 

In addition, the only products that will 

be eligible for clearing in overnight 

trading sessions are index options and 

index futures products. 

OCC’s framework for determining 

whether to provide clearing services for 

overnight trading sessions offered by an 

exchange is designed to work in 

conjunction with the risk controls of the 

exchange that offers overnight trading 

sessions. OCC will confirm an 

exchange’s risk controls as well as its 

staffing levels as they relate to overnight 

trading sessions to determine if OCC 

may reasonably rely on such risk 

controls to reduce the risk presented to 

OCC by the exchange’s overnight 

trading sessions. Such exchange risk 

controls will consist of: (1) Price 

reasonability checks, (2) controls to 

prevent orders from being executed 

beyond a certain percentage 

(determined by the exchange) from the 

initial execution price, (3) activity based 

protections which focus on risk beyond 

price, such as a high number of trades 

occurring in a set period of time, and (4) 

kill switch capabilities, which may be 

initiated by the exchange and can cancel 

all open quotes or all orders of a 

particular participant. OCC believes that 

confirming the existence of applicable 

pre-trade risk controls as well as 

overnight staffing at the relevant 

exchanges is essential to mitigating risks 

presented to OCC from overnight 

trading sessions.7 OCC believes that 

providing clearing services to exchanges 

offering such sessions is consistent with 


tkelley on DSK3SPTVN1PROD with NOTICES
8384 Federal Register / Vol. 80, No. 31 / Tuesday, February 17, 2015 / Notices 

8Clearing members will be required to designate 

a firm account to ensure that OCC has a general lien 

on the assets in the account and can use them to 

satisfy any obligation of the clearing member to 

OCC. 

9Clearing members approved for overnight 

trading sessions that do not meet the Additional 

Margin requirement for a given overnight trading 

session would be treated like a clearing member not 

approved for overnight trading sessions, as 

described below. 10Under OCC Rule 601, OCC has the discretion 

to fix the margin requirement for any account at an 

amount that it deems necessary or appropriate 

under the circumstances to protect the interests of 

clearing members, OCC and the public. 11As discussed in more detail below, clearing 

members that attempt to participate in overnight 

trading sessions without the necessary approval 

will be subject to a minor rule violation fine. 

OCC’s mission to provide market 

participants with clearing and risk 

management solutions that respond to 

changes in the marketplace. 

Qualification Criteria 

In order to mitigate risks associated 

with clearing for overnight trading 

sessions, clearing members that 

participate in such trading sessions will 

be required to provide contact 

information to OCC for operational and 

risk personnel available to be contacted 

by OCC during such sessions. In 

addition, OCC will require that clearing 

members participating in an overnight 

trading session post additional margin 

in a designated account in order to 

mitigate the risk that OCC cannot draft 

a clearing member’s bank account 

during an overnight trading session.8

OCC also will adopt a procedure 

whereby, on a quarterly basis, it 

confirms its record of clearing members 

eligible for overnight trading sessions 

with a similar record maintained by 

exchanges offering such overnight 

trading sessions. 

With respect to providing operational 

and risk contacts, under OCC Rule 201, 

each clearing member is required to 

maintain facilities for conducting 

business with OCC and to have a 

representative authorized in the name of 

the clearing member to take all action 

necessary for conducting business with 

OCC available at the facility during such 

hours as may be specified from time-totime by OCC. Similarly, OCC Rules 

214(c) and (d) require clearing members 

to ensure that they have the appropriate 

number of qualified personnel and to 

maintain the ability to process 

anticipated volumes and values of 

transactions. OCC will use this existing 

authority to require clearing members 

trading during overnight trading 

sessions to maintain operational and 

risk staff that may be contacted by OCC 

during such sessions. 

OCC will impose upon clearing 

members qualified to participate in 

overnight trading sessions additional 

margin requirement in an amount of the 

lesser of $10 million or 10% of the 

clearing member’s net capital 

(‘‘Additional Margin’’), which will be 

equal to the first monitoring risk 

threshold (described below) and which 

will be collected the morning before 

each overnight trading sessions. 

Clearing members must identify the 

proprietary account that would be 

charged the Additional Margin amount. 

The Additional Margin requirement is 

intended to provide OCC with 

additional margin assets should a 

clearing member’s credit risk increase 

during overnight trading sessions.9 OCC 

proposes to adopt a process whereby 

each morning OCC Financial Risk 

Management staff will assess the 

Additional Margin requirement against 

clearing members eligible to participate 

in overnight trading sessions. Clearing 

members that do not have sufficient 

excess margin on deposit with OCC to 

meet the Additional Margin amount will 

be required to deposit additional funds 

with OCC to satisfy the Additional 

Margin requirement prior to 

participating in any future overnight 

trading sessions.10 This process will be 

adopted under existing rule authority. 

Moreover, OCC also will confirm that 

an exchange offering overnight trading 

sessions has adopted a procedure 

whereby such exchange would contact 

OCC when a trader requests trading 

privileges during overnight trading 

sessions. The purpose of this contact is 

to verify that the trader’s clearing firm 

(i.e., the OCC clearing member) is 

approved for overnight trading sessions. 

If the applicable OCC clearing member 

is not approved for overnight trading 

sessions, then the clearing member must 

receive OCC’s approval for overnight 

trading sessions, or the exchange will 

not provide the trader trading privileges 

during overnight trading sessions. 

Moreover, OCC will confirm that an 

exchange offering overnight trading 

sessions has implemented a procedure 

to periodically (i.e., quarterly) validate 

its record of approved clearing firms 

against OCC’s record of clearing 

members approved for overnight trading 

sessions.11 Any discrepancies between 

the two records will be promptly 

resolved by either the clearing member 

obtaining approval from OCC for 

overnight trading sessions or by the 

exchange revoking the clearing firm’s 

trading privileges for overnight trading 

sessions. 

Systemic Controls 

OCC will implement system changes 

so that trades submitted to OCC during 

overnight trading sessions that have 

been executed by clearing members not 

approved for such trading sessions will 

be reviewed by OCC staff after 

acceptance but before being processed 

(each such trade being a ‘‘Reviewed 

Trade’’). OCC will contact the 

submitting exchange regarding each 

Reviewed Trade in order to determine if 

the trade is a valid trade. If the exchange 

determines that the Reviewed Trade was 

in error such that, as provided in Article 

VI, Section 7(c) of OCC’s By-laws, new 

or revised trade information is required 

to properly clear the transaction, OCC 

expects the exchange would instruct 

OCC to disregard or ‘‘bust’’ the trade. If 

the exchange determines that the 

Reviewed Trade was not in error, then 

OCC will clear the Reviewed Trade and 

take appropriate disciplinary action 

against the non-approved clearing 

member, as described below. OCC 

believes that clearing the Reviewed 

Trade is appropriate in order to avoid 

potentially harming the clearing 

member approved for overnight trading 

sessions that is on the opposite side of 

the transaction. 

Overnight Monitoring 

OCC will implement additional 

overnight monitoring in order to better 

monitor clearing members’ credit risk 

during overnight trading sessions. Such 

monitoring of credit risk is similar to 

existing OCC practices concerning 

futures cleared during overnight trading 

hours and includes automated processes 

within OCC’s ENCORE clearing system 

to measure, by clearing member: (i) The 

aggregate mark-to-market amounts of a 

clearing member’s positions, including 

positions created during overnight 

trading, based on current prices using 

OCC’s Portfolio Revaluation system, (ii) 

the aggregate incremental margin 

produced by all positions resulting from 

transactions executed during overnight 

trading, and (iii) with respect to options 

cleared during overnight trading hours, 

the aggregate net trade premium 

positions resulting from trades executed 

during overnight trading (each of these 

measures being a ‘‘Credit Risk 

Number’’). Hourly credit reports would 

be generated by ENCORE containing the 

Credit Risk Numbers expressed in terms 

of both dollars and, except for the markto-market position values, as a 

percentage of net capital for each 

clearing member trading during 

overnight trading sessions. The Credit 

Risk Numbers are the same information 

used by OCC staff to evaluate clearing 

member exposure during regular trading 

hours and, in addition to OCC’s 

knowledge of its clearing members’ 

businesses, are effective measures of the 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 31 / Tuesday, February 17, 2015 / Notices 8385 

12OCC’s Member Services staff will also receive 

alerts in order to contact clearing members as may 

be necessary. 

13Total risk charge is a number derived from 

STANS outputs and is the sum of expected 

shortfall, stress test charges and any add-on charges 

computed by STANS. STANS is OCC’s proprietary 

margin methodology. 

14 In addition, OCC Rule 601 provides OCC with 

the authority to fix the margin requirement for any 

account or any class of cleared contracts at such 

amount as it deems necessary or appropriate under 

the circumstances to protect the respective interests 

of clearing members, OCC, and the public. 

15Clearing members frequently deposit margin at 

OCC in excess of requirements. 

risk presented to OCC by each clearing 

member. OCC’s Operations staff will 

review such reports as they are 

generated and, in the event that any of 

the Credit Risk Numbers for positions 

established by a clearing member during 

an overnight trading session exceed 

established thresholds, staff will alert 

OCC’s Market Risk staff 12 of the 

exceedance in accordance with 

established procedures, as described 

below. 

Market Risk staff will follow a 

standardized process concerning such 

exceedances, including escalation to 

OCC’s management, if required by such 

process. Given the nominal volume of 

trades executed in overnight trading 

sessions that are presently submitted for 

clearance, OCC does not contemplate 

changes in its current staffing levels that 

support overnight clearing activities at 

this time, however, OCC will 

periodically assess and adjust such 

staffing levels as appropriate. As part of 

the overnight clearing activities, OCC 

has, however, designated an on-call 

Market Risk duty officer who would be 

responsible for reviewing issues that 

arise when clearing for overnight 

trading session and determining what 

measures to be taken as well as 

additional escalation, if necessary. 

With respect to OCC’s escalation 

thresholds, if any Credit Risk Number of 

a clearing member approved for 

overnight trading sessions is $10 million 

or more, or any Credit Risk Number 

equals 10% or more of the clearing 

member’s net capital, OCC’s Operations 

staff will be required to provide email 

notification to Market Risk and Member 

Services staff. If any Credit Risk Number 

of a clearing member not approved for 

overnight trading sessions is $10 million 

or more, or any Credit Risk Number 

equals 10% or more of the clearing 

member’s net capital, OCC’s Operations 

will also notify Market Risk and 

Member Services staff as well as its 

senior management. Such departments 

will take action to prevent additional 

trading by the non-approved clearing 

member, including contacting the 

exchange to invoke use of the 

exchange’s kill switch. 

If any Credit Risk Number of a 

clearing member approved for overnight 

trading sessions is $50 million or more, 

or equals 25% or more of the clearing 

member’s net capital, Operations staff 

will be required to contact, by 

telephone: (i) Market Risk and Member 

Services, (ii) the applicable exchange for 

secondary review, and (iii) the clearing 

member’s designated contacts. The oncall Market Risk duty officer also will 

consider if additional action is 

necessary, which may include 

contacting a designated executive officer 

in order to issue an intra-day margin 

call, increase the clearing member’s 

margin requirement in order to prevent 

the withdrawal of a specified amount of 

excess margin collateral, if any, the 

clearing member has on deposit with 

OCC, or contacting the exchange in 

order to invoke the use of its kill switch. 

If any Credit Risk Number is $75 

million or more, or equals 50% or more 

of the clearing member’s net capital, 

Operations staff will be required to 

contact, by telephone, Market Risk staff, 

the on-call Market Risk duty officer, and 

a designated executive officer. Such 

officer will be responsible for reviewing 

the situation and determining whether 

to implement credit controls, which are 

described in greater detail below and 

include: Issuing an intra-day margin 

call, increasing a clearing member’s 

margin requirement in order to prevent 

the withdrawal of a specified amount of 

excess margin collateral, if any, the 

clearing member has on deposit with 

OCC, whether further escalation is 

warranted in order for OCC to take 

protective measures pursuant to OCC 

Rule 305, or contact the exchange in 

order to invoke use of its kill switch. 

OCC stated that it chose the above 

described escalation thresholds based 

on its analysis of historical overnight 

trading activity across the futures 

industry. OCC believes that these 

thresholds strike an appropriate balance 

between effective risk monitoring and 

operational efficiency. 

Credit Controls 

In order to address credit risk 

associated with trading during overnight 

trading sessions, and as described 

above, OCC will collect Additional 

Margin from clearing members as well 

as monitor and analyze the impact that 

positions established during such 

sessions have on a clearing member’s 

overall exposure. Should the need arise 

based on threshold breaches described 

above, and pursuant to OCC Rule 609, 

OCC may require the deposit of 

additional margin (‘‘intra-day margin’’) 

by any clearing member that increases 

its incremental risk as a result of trading 

activity during overnight trading 

sessions. Accordingly, a clearing 

member’s positions established during 

such sessions will be incorporated into 

OCC’s intra-day margin process. Should 

a clearing member’s exposure 

significantly increase while settlement 

banks are not open to process an intraday margin call, OCC has the authority 

under OCC Rule 601 to increase a 

clearing member’s margin requirement 

which will restrict its ability to 

withdraw excess margin collateral. The 

implementation of these measures is 

discussed more fully below. 

In the event that a clearing member’s 

exposure during overnight trading 

sessions causes a clearing member to 

exceed OCC’s intra-day margin call 

threshold for overnight trading sessions, 

OCC will require the clearing member to 

deposit intra-day margin equal to the 

increased incremental risk presented by 

the clearing member. Specifically, if a 

clearing member has a total risk 

charge 13 exceeding 25% (a reduction of 

the usual figure of 50%), as computed 

overnight by OCC’s STANS system, and 

a loss of greater than $50,000 from an 

overnight trading session(s), as 

computed by Portfolio Revaluation, 

OCC will initiate an intra-day margin 

call. OCC will know at approximately 

8:30 a.m. (Central Time) if an intra-day 

margin call on a clearing member will 

be initiated based on breaches of these 

thresholds. This ‘‘start of business’’ 

margin call is in addition to daily 

margin OCC collects from clearing 

members pursuant to OCC Rule 605, any 

intra-day margin call that OCC may 

initiate as a result of regular trading 

sessions, or special margin call that OCC 

may initiate. 

In addition to, or instead of, requiring 

additional intra-day margin, OCC Rule 

601 14 and OCC’s Clearing Member 

Margin Call Policy will work together to 

authorize Market Risk staff to increase a 

clearing member’s margin requirement 

which may be in an amount equal to an 

intra-day margin call.15 (Any increased 

margin requirement will remain in 

effect until the next business day.) This 

action will immediately prevent 

clearing members from withdrawing any 

excess margin collateral (in the amount 

of the increased margin requirement) 

the clearing member has deposited with 

OCC. With respect to clearing trades 

executed in overnight trading sessions, 

and in the event OCC requires 

additional margin from a clearing 

member, Market Risk staff may use 

increased margin requirements as a 

means of collateralizing the increase in 


tkelley on DSK3SPTVN1PROD with NOTICES
8386 Federal Register / Vol. 80, No. 31 / Tuesday, February 17, 2015 / Notices 

16Clearing members will be able to substitute the 

locked-up collateral during normal time frames (i.e., 

6:00 a.m. to 5:00 p.m. (Central Time) for equity 

securities). 17See OCC Rule 1201(b). 

18See 12 U.S.C. 5461(b). 

19 Id. 

20 12 U.S.C. 5464(a)(2). 

21 12 U.S.C. 5464(b). 

22 17 CFR 240.17Ad–22. 

23The Clearing Agency Standards are 

substantially similar to the risk management 

standards established by the Board of Governors of 

the Federal Reserve System governing the 

operations of designated financial market utilities 

that are not clearing entities and financial 

institutions engaged in designated activities for 

which the Commission or the Commodity Futures 

Trading Commission is the Supervisory Agency. 

incremental risk a clearing member 

incurred during such sessions without 

having to wait for banks to open to 

process an intra-day margin call.16 Such 

action may be taken by OCC instead of, 

or in addition to, issuing an intra-day 

margin call depending on the amount of 

excess margin a clearing member has on 

deposit with OCC and the amount of the 

incremental risk presented by such 

clearing member. OCC believes that the 

expansion of its intra-day margin call 

process as described in the preceding 

paragraph, including OCC’s ability to 

manually increase clearing members’ 

margin requirements, will mitigate the 

risk that OCC is under-collateralized as 

a result of overnight trading hours. 

Moreover, a designated executive 

officer may call an exchange offering 

overnight trading sessions to invoke the 

use of its kill switch. The kill switch 

prevents a clearing member (or the 

market participant clearing through a 

clearing member) from executing trades 

on the exchange during a given 

overnight trading session or, if needed, 

stop all trading during a given overnight 

trading session. Finally, pursuant to 

OCC Rule 305, the Executive Chairman 

or the President of OCC, in certain 

situations, has the authority to impose 

limitations and restrictions on the 

transactions, positions, and activities of 

a clearing member. This authority will 

be used, as needed, in the event a 

clearing member accumulates 

significant credit risk during overnight 

trading sessions, or a clearing member’s 

activities during such trading sessions 

otherwise warrant OCC taking 

protective action. 

Rule Enforcement Actions 

In order to deter clearing members 

from attempting to participate in 

overnight trading sessions without 

authorization as well as appropriately 

enforce the above described processes, 

OCC will ensure that any attempt by a 

clearing member to participate in 

overnight trading sessions without first 

obtaining the necessary approval will 

result in the initiation of a rule 

enforcement action against such 

clearing member. As described above, 

clearing members not approved for 

overnight trading sessions that trade 

during such overnight sessions will 

have their trades reviewed by OCC staff. 

Clearing members that attempt to 

participate in overnight trading sessions 

but do not obtain the necessary approval 

to do so will be subject to a minor rule 

violation fine.17 In addition, if a clearing 

member’s operational or risk contacts 

for overnight trading sessions were 

unavailable had OCC attempted to 

contact such individuals, the clearing 

member will be subject to a minor rule 

violation fine. OCC has existing 

processes in place to monitor for 

clearing member violations of OCC’s 

rules and such processes also will apply 

to clearing member activity during 

overnight trading sessions. 

Effect That OCC Anticipates on and 

Management of Risk 

Clearing transactions executed in 

overnight trading sessions may increase 

risk presented to OCC due to the period 

of time between trade acceptance and 

settlement, the staffing levels at clearing 

members during such trading sessions, 

and the deferment of executing intraday margin calls until banking 

settlement services are operational. 

However, OCC will expand its risk 

management practices in order to 

mitigate these risks by implementing, 

and expanding, the various tools 

discussed above. For example, OCC will 

enhance its monitoring practices in 

order to closely monitor clearing 

members’ credit risk from trades placed 

during overnight trading sessions as 

well as implement processes so that 

OCC takes appropriate action when 

such credit risk exceeds certain limits. 

OCC also will use its existing authority 

to require adequate clearing member 

staffing during such trading sessions, in 

order to mitigate the operational risk 

associated with clearing members 

trading while they are not fully staffed. 

These risk management functions will 

work in tandem with risk controls, 

including the implementation of kill 

switch capabilities, adopted by the 

exchanges operating overnight trading 

sessions or by clearing FCMs, as 

applicable. 

In addition to the above, OCC will 

adapt existing processes so that such 

processes can be used to mitigate risk 

associated with overnight trading 

sessions. Specifically, OCC will exercise 

its authority to issue margin calls and 

prevent the withdrawal of excess margin 

on deposit at OCC, as a result of activity 

during such trading sessions as a means 

of reducing risk. OCC also will 

implement a systemic function to 

identify trades executed during 

overnight trading sessions by clearing 

members not approved for such trading 

sessions for further review prior to 

allowing such trades to proceed further 

through OCC’s clearance processing, 

and therefore mitigate the risk of losses 

from erroneous trades. Finally, OCC will 

be able to assess the need to take 

protective action pursuant to OCC Rule 

305 as a result of clearing member 

activity during such sessions. 

II. Discussion and Commission 

Findings 

Although the Clearing Supervision 

Act does not specify a standard of 

review for an advance notice, the 

Commission believes that the stated 

purpose of the Clearing Supervision Act 

is instructive.18 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.19

Section 805(a)(2) of the Clearing 

Supervision Act 20 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. Section 805(b) of the 

Clearing Supervision Act 21 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. 

The Commission has adopted risk 

management standards under Section 

805(a)(2) of the Clearing Supervision 

Act (‘‘Clearing Agency Standards’’).22

The Clearing Agency Standards became 

effective on January 2, 2013, and require 

registered clearing agencies that perform 

central counterparty services 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.23 As 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 31 / Tuesday, February 17, 2015 / Notices 8387 

See Financial Market Utilities, 77 FR 45907 (August 

2, 2012). 

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

25 12 U.S.C. 5464(b). 26 12 U.S.C. 5465(e)(1)(I). 

such, it is appropriate for the 

Commission to review advance notices 

against these Clearing Agency 

Standards, and the objectives and 

principles of these risk management 

standards as described in Section 805(b) 

of the Clearing Supervision Act.24

The Commission believes that the 

proposal in this Advance Notice is 

designed to further the objectives and 

principles of Section 805(b) of the 

Clearing Supervision Act.25 The 

Commission notes that clearing 

transactions executed in overnight 

trading sessions may present additional 

risks to OCC and the markets in general; 

specifically, overnight trading sessions 

may create risk due to the gap between 

trade acceptance and settlement, the 

staffing levels at clearing members and 

OCC during such trading sessions, and 

the inability of clearing members to 

transfer funds to satisfy margin during 

overnight hours. However, OCC’s 

proposal is designed in a manner that 

should adequately monitor for the risks 

presented by accepting trades for 

clearance and settlement during these 

extended and overnight sessions, and 

should adequately mitigate these risks. 

As part of that design, OCC proposed 

to limit to the product set eligible for 

overnight trading sessions to index 

options and index futures products and 

to institute qualification criteria for 

determining whether to provide clearing 

services for overnight trading sessions 

offered by a particular exchange. These 

qualification criteria include price 

reasonability checks, controls to prevent 

orders from being executed at prices 

beyond a certain percentage of the 

initial execution price, activity based 

protections focused on risk beyond 

price, such as a high number of trades 

occurring in a set period of time, and 

kill switch capabilities. Limiting the 

eligible product set as well as 

confirming risk management controls by 

participating exchanges also should 

help promote robust risk management 

and safety, and soundness of the 

clearance of overnight trades. 

In addition, OCC’s proposed 

framework also incorporates a number 

of mechanisms designed to further 

control the risks posed by overnight 

trading, including (i) clearing member 

qualification criteria, (ii) systemic 

controls to identify trades executed by 

clearing members not approved for 

overnight trading, (iii) enhancements to 

OCC’s overnight monitoring of trades 

submitted by exchanges during 

overnight trading sessions, (iv) 

enhancements to OCC’s credit controls 

with respect to monitoring clearing 

members’ credit risk during overnight 

trading sessions, and (v) disciplinary 

actions for unapproved clearing 

members who attempt to clear during 

overnight trading sessions. 

Particularly, OCC’s overnight 

monitoring and escalation, including 

requiring additional intra-day margin, 

increasing a clearing member’s margin 

requirement, and/or invoking an 

exchange’s kill switch should serve to 

help mitigate the risks posed by the 

inability of clearing members to transfer 

funds to satisfy margin during overnight 

hours due to the, lack of availability of 

bank payment systems in the overnight 

hours and the period of time between 

trade acceptance and settlement. 

Moreover, requiring and enforcing 

adequate staffing at clearing members as 

well as at OCC through a designated an 

on-call Market Risk duty officer should 

help to mitigate the risks of overnight 

clearing. Accordingly, the Commission 

believes that the proposal should 

promote robust risk management, 

promote safety and soundness in the 

marketplace, reduce systemic risks, and 

support the stability of the broader 

financial system as it provides OCC 

with a range of mechanisms that help 

mitigate the risks posed by clearance 

trades from extended and overnight 

trading sessions. 

III. Conclusion 

It is therefore noticed, pursuant to 

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

Supervision Act,26 that the Commission 

does not object to advance notice 

proposal (SR–OCC–2014–812) and that 

OCC is authorized to implement the 

proposal as of the date of this notice or 

the date of an order by the Commission 

approving a proposed rule change that 

reflects rule changes that are consistent 

with this advance notice proposal (SR– 

OCC–2014–24), whichever is later. 

By the Commission. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–03097 Filed 2–13–15; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

Notice of Release From Conveyance 

Deed Obligations for Superior 

Municipal Airport, Superior, Pinal 

County, Arizona 

AGENCY: Federal Aviation 

Administration, DOT. 

ACTION: Notice of request to release 

airport land. 

SUMMARY: The Federal Aviation 

Administration (FAA) proposes to rule 

and invites public comment on the 

application for a release of 

approximately 15.09 acres of airport 

property at Superior Municipal Airport, 

Superior, Pinal County, Arizona from all 

conditions contained in the Conveyance 

Deed since the parcel of land is not 

needed for airport purposes. The 

property will be sold for its fair market 

value and the proceeds used for an 

airport purpose. The reuse of the land 

for a roadway improvement project by 

the State of Arizona represents a 

compatible land use that will not 

interfere with the airport, thereby 

protecting the interests of civil aviation. 

DATES: Comments must be received on 

or before March 19, 2015. 

FOR FURTHER INFORMATION CONTACT: 

Comments on the request may be mailed 

or delivered to the FAA at the following 

address: Mike N. Williams, Manager, 

Airports District Office, Federal Register 

Comment, Federal Aviation 

Administration, Phoenix Airports 

District Office, 3800 N. Central Avenue, 

Suite 1025, Phoenix, Arizona 85012. In 

addition, one copy of the comment 

submitted to the FAA must be mailed or 

delivered to David E. Edwards, Right of 

Way Project Coordinator, Arizona 

Department of Transportation, 205 

South 17th Avenue, MD 612E, Phoenix, 

Arizona 85007–3212. 

SUPPLEMENTARY INFORMATION: In 

accordance with the Wendell H. Ford 

Aviation Investment and Reform Act for 

the 21st Century (AIR 21), Public Law 

10–181 (Apr. 5, 2000; 114 Stat. 61), this 

notice must be published in the Federal 

Register 30 days before the Secretary 

may waive any condition imposed on a 

federally obligated airport by surplus 

property conveyance deeds or grant 

agreements. 

The following is a brief overview of 

the request: 

The Town of Superior, Pinal County, 

Arizona requested a release from the 

conditions contained in the Conveyance 

Deed for approximately 15.09 acres of 

airport land. The property is located on 

the north side of the airport adjacent to 


tkelley on DSK3SPTVN1PROD with NOTICES