17808 Federal Register / Vol. 80, No. 63 / Thursday, April 2, 2015 / Notices 

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

2 17 CFR 240.19b–4. 

3On March 13, 2015, OCC formally withdrew the 

proposed rule change filed as SR–OCC–2014–22, as 

modified by Amendment No. 1 and Amendment 

No. 2 thereto, the substance of which OCC has 

refiled as SR–OCC–2015–009. 

4 ‘‘Financial Resources’’ means, with respect to a 

projected loss attributable to a particular Clearing 

Member or Clearing Member Group, as defined 

below, the sum of the margin deposits (less any 

excess margin a Clearing Member or Clearing 

Member Group may have on deposit at OCC) and 

deposits in lieu of margin in respect of such 

Clearing Members’ or Clearing Member Groups’ 

accounts, and the value of OCC’s Clearing Fund, 

including both the Base Amount, as defined below, 

and the prudential margin of safety, as discussed 

below. 

5 ‘‘Clearing Member Group’’ means a Clearing 

Member and any affiliated entities that control, are 

controlled by or are under common control with 

such Clearing Member. See OCC By-Laws, Article 

I, Sections 1.C.(15) and 1.M(11). 

6This proposed rule filing has also been filed as 

an advance notice filing (SR–OCC–2014–811). 

7The procedures described herein would be in 

effect until the development of a new standard 

Clearing Fund sizing methodology. Following such 

development, which will include a quantitative 

approach to calculating the ‘‘prudential margin of 

safety,’’ as discussed below, OCC will file a separate 

rule change and advance notice with the 

Commission that will include a description of the 

new methodology as well as a revised Monthly 

Clearing Fund Sizing Procedure. 

8On October 16, 2014, OCC filed an emergency 

notice with the Commission to suspend the 

effectiveness of the second sentence of Rule 

1001(a). See Securities Exchange Act Release No. 

73579 (November 12, 2014), 79 FR 68747 

(November 18, 2014) (SR–OCC–2014–807). On 

November 13, 2014, OCC filed SR–OCC–2014–21 

with the Commission to delete the second sentence 

of Rule 1001(a), preserving the suspended 

effectiveness of that sentence until such time as the 

Commission approves or disapproves SR–OCC– 

2014–21. See Securities Exchange Act Release No. 

73685 (November 25, 2014) 79 FR 71479 (December 

2, 2014) (SR–OCC–2014–21). 

9See Rule 1001(a). 

10OCC also has submitted an advance notice that 

would provide greater detail concerning conditions 

under which OCC would increase the size of the 

Clearing Fund intra-month. The change would 

permit an intra-month increase in the event that the 

five-day rolling average of projected draws are 

150% or more of the Clearing Fund’s then current 

size. See Securities Exchange Act Release No. 72804 

(August 11, 2014), 79 FR 48276 (August 15, 2014) 

(SR–OCC–2014–804). 

November 19, 2013. Urban AG’s 

common stock (ticker ‘‘AQUM’’) is 

quoted on OTC Link (previously ‘‘Pink 

Sheets’’) operated by OTC Markets 

Group, Inc. 

The Commission is of the opinion that 

the public interest and the protection of 

investors require a suspension of trading 

in the securities of Urban AG. 

Therefore, it is ordered, pursuant to 

Section 12(k) of the Securities Exchange 

Act of 1934, that trading in the 

securities of Urban AG is suspended for 

the period from 9:30 a.m. EDT on March 

31, 2015, through 11:59 p.m. EDT on 

April 14, 2015. 

By the Commission. 

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–07672 Filed 3–31–15; 4:15 pm] 

BILLING CODE CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74603; File No. SR–OCC– 

2015–009] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of a Proposed Rule Change 

To Establish Procedures Regarding 

the Monthly Resizing of its Clearing 

Fund and the Addition of Financial 

Resources 

March 27, 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 March 13, 

2015, The Options Clearing Corporation 

(‘‘OCC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I, II and III below, which Items 

have been prepared by OCC.3 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

OCC proposes to establish procedures 

regarding the monthly resizing of its 

Clearing Fund and the addition of 

financial resources through intra-day 

margin calls and/or an intra-month 

increase of the Clearing Fund to ensure 

that it maintains adequate financial 

resources in the event of a default of a 

Clearing Member or group of affiliated 

Clearing Members presenting the largest 

exposure to OCC. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

OCC included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. OCC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The proposed rule change is intended 

to describe the situations in which OCC 

would exercise authority under its Rules 

to ensure that it maintains adequate 

Financial Resources 4 in the event that 

stress tests reveal a default of the 

Clearing Member or Clearing Member 

Group 5 presenting the largest exposure 

would threaten the then-current 

Financial Resources. This proposed rule 

change would establish procedures 

governing: (i) OCC’s resizing of the 

Clearing Fund on a monthly basis 

pursuant to Rule 1001(a) (the ‘‘Monthly 

Clearing Fund Sizing Procedure’’); and 

(ii) the addition of Financial Resources 

through an intra-day margin call on one 

or more Clearing Members under Rule 

609 and, if necessary, an intra-month 

increase of the Clearing Fund pursuant 

to Rule 1001(a) (the ‘‘Financial Resource 

Monitoring and Call Procedure’’).6 The 

Monthly Clearing Fund Sizing 

Procedure would permit OCC to 

determine the size of the Clearing Fund 

by relying on a broader range of sound 

risk management practices than those 

historically used under Rule 1001(a).7

The Financial Resource Monitoring and 

Call Procedure would require OCC to 

collect additional Financial Resources 

in certain circumstances, establish how 

OCC calculates and collects such 

resources and provide the timing by 

which such resources would be required 

to be deposited by Clearing Members. 

Background 

OCC monitors the sufficiency of the 

Clearing Fund on a daily basis but, prior 

to emergency action taken on October 

16, 2014,8 OCC had no express authority 

to increase the size of the Clearing Fund 

on an intra-month basis.9 During 

ordinary course daily monitoring on 

October 15, 2014, and as a result of 

increased volatility in the financial 

markets in October 2014, OCC 

determined that the Financial Resources 

needed to cover the potential loss 

associated with a default of the Clearing 

Member or Clearing Member Group 

presenting the largest exposure could 

have exceeded the Financial Resources 

then available to apply to such a default. 

To permit OCC to increase the size of 

its Clearing Fund prior to the next 

monthly resizing that was scheduled to 

take place on the first business day of 

November 2014, OCC’s Executive 

Chairman, on October 16, 2014, 

exercised certain emergency powers as 

set forth in Article IX, Section 14 of 

OCC’s By-Laws 10 to waive the 

effectiveness of the second sentence of 

Rule 1001(a), which states that OCC will 


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11 12 U.S.C. 5465(e)(2). 

12See supra, note 8. 

13See Information Memorandum #35397, dated 

October 16, 2014, available on OCC’s Web site, 

http://www.theocc.com/clearing/clearinginfomemos/infomemos1.jsp. Clearing members also 

were informed that a prudential margin of safety of 

$1.8 billion would be retained until a new Clearing 

Fund sizing formula has been approved and 

implemented. 

14See Information Memorandum # 35507, dated 

October 31, 2014, available on OCC’s Web site, 

http://www.theocc.com/clearing/clearinginfomemos/infomemos1.jsp. 

15See OCC By-Laws, Article IX, Section 14(c). 

16See supra, note 8. OCC also submitted this 

proposed rule change to the Commodity Futures 

Trading Commission. 

17As noted in SR–OCC–2014–21, OCC would use 

its intra-month resizing authority only to increase 

the size of the Clearing Fund where appropriate, not 

to decrease the size of the Clearing Fund. 

18On a daily basis, OCC computes its exposure 

under the idiosyncratic and minor systemic events. 

The greater of these two exposures is that day’s 

‘‘peak exposure.’’ To calculate the ‘‘rolling five day 

average’’ OCC computes the average of the peak 

exposure for each consecutive five-day period 

observed over the prior three-month period. To 

determine the Base Amount, OCC would use the 

largest five-day rolling average observed over the 

past three-months. This methodology was used to 

determine the Base Amount of the Clearing Fund 

for November 2014 and December 2014. 

19Considering only the peak exposures is a more 

conservative methodology that gives greater 

weighting to sudden increases in exposure 

experienced by Clearing Members, thus enhancing 

the responsiveness of the procedure to such sudden 

increases. By using a longer look-back period, the 

methodology would respond more slowly to 

recently observed decreases in peak exposures. 20Since the minor systemic default scenario 

contemplates two Clearing Members’ 

simultaneously defaulting and OCC maintains 

Financial Resources sufficient to cover a default by 

a Clearing Member or Clearing Member Group 

representing the greatest exposure to OCC, OCC 

does not use the minor systemic default scenario to 

determine the adequacy of the Financial Resources 

under the Financial Resource Monitoring and Call 

Procedure. 

21Rule 609 authorizes OCC to require the deposit 

of additional margin in any account at any time 

Continued 

adjust the size of the Clearing Fund 

monthly and that any resizing will be 

based on data from the preceding 

month. OCC then filed an emergency 

notice with the Commission pursuant to 

Section 806(e)(2) of the Payment, 

Clearing and Settlement Supervision 

Act of 2010 11 and increased the 

Clearing Fund size for the remainder of 

October 2014 as otherwise provided for 

in the first sentence of Rule 1001(a).12

Clearing Members were informed of 

the action taken by the Executive 

Chairman 13 and the amount of their 

additional Clearing Fund requirements, 

which were met without incident. As a 

result of these actions, OCC’s Clearing 

Fund for October 2014 was increased by 

$1.8 billion. In continued reliance on 

the emergency rule waiver and in 

accordance with the first sentence of 

Rule 1001(a), OCC set the November 

2014 Clearing Fund size at $7.8 billion, 

which included an amount determined 

by OCC to be sufficient to protect OCC 

against loss under simulated default 

scenarios (i.e., $6 billion), plus a 

prudential margin of safety (the 

additional $1.8 billion collected in 

October).14 All required contributions to 

the November 2014 Clearing Fund were 

met by affected Clearing Members. 

Under Article IX, Section 14(c), 

absent the submission of a proposed 

rule change to the Commission seeking 

approval of OCC’s waiver of the 

provisions of the second sentence of 

Rule 1001(a), such waiver would not be 

permitted to continue for more than 

thirty calendar days from the date 

thereof.15 Accordingly, on November 

13, 2014, OCC submitted SR–OCC– 

2014–21 to delete the second sentence 

of Rule 1001(a) and, by the terms of 

Article IX, Section 14(c), preserve the 

suspended effectiveness of the second 

sentence of Rule 1001(a) beyond thirty 

calendar days.16

SR–OCC–2014–21 was submitted in 

part to permit OCC to determine the size 

of its Clearing Fund by relying on a 

broader range of sound risk management 

practices than considered in basing such 

size on the average daily calculations 

under Rule 1001(a) that are performed 

during the preceding calendar month. 

The Monthly Clearing Fund Sizing 

Procedure, as described below, is based 

on such broader risk management 

practices and establishes the procedures 

OCC would use to determine the size of 

the Clearing Fund on a monthly basis. 

Similarly, SR–OCC–2014–21 was 

submitted in part to permit OCC to 

resize the Clearing Fund more 

frequently than monthly when the 

circumstances warrant an increase of 

the Clearing Fund. The Financial 

Resource Monitoring and Call 

Procedure, as described below, 

establishes the procedures that OCC 

would use to add Financial Resources 

through an intra-day margin call on one 

or more Clearing Members under Rule 

609 and, if necessary, an intra-month 

increase of the Clearing Fund pursuant 

to Rule 1001(a).17

Monthly Clearing Fund Sizing 

Procedure 

Under the Monthly Clearing Fund 

Sizing Procedure, OCC would continue 

to calculate the size of the Clearing 

Fund based on its daily stress test 

exposures under simulated default 

scenarios as described in the first 

sentence of Rule 1001(a) and resize the 

Clearing Fund on the first business day 

of each month. However, instead of 

resizing the Clearing Fund based on the 

average of the daily calculations during 

the preceding calendar month, as stated 

in the suspended second sentence of 

Rule 1001, OCC would resize the 

Clearing Fund so that it is the sum of: 

(i) An amount equal to the peak five-day 

rolling average of Clearing Fund draws 

observed over the preceding three 

calendar months of daily idiosyncratic 

default and minor systemic default 

scenario calculations based on OCC’s 

daily Monte Carlo simulations (‘‘Base 

Amount’’) and (ii) a prudential margin 

of safety determined by OCC and 

currently set at $1.8 billion.18

OCC believes that the proposed 

Monthly Clearing Fund Sizing 

Procedure provides a sound and 

prudent approach to ensure that the 

Financial Resources are adequate to 

protect against the largest risk of loss 

presented by the default of a Clearing 

Member or Clearing Member Group. By 

virtue of using only the peak five-day 

rolling average and by extending the 

look-back period, the proposed Monthly 

Clearing Fund Sizing Procedure is both 

more responsive to sudden increases in 

exposure and less susceptible to 

recently observed decreases in exposure 

that would reduce the overall sizing of 

the Clearing Fund, thus mitigating 

procyclicality.19 Furthermore, the 

prudential margin of safety provides an 

additional buffer to absorb potential 

future exposures not previously 

observed during the look-back period. 

The proposed Monthly Clearing Fund 

Sizing Procedure would be 

supplemented by the Financial 

Resource Monitoring and Call 

Procedure, described below, to provide 

further assurance that the Financial 

Resources are adequate to protect 

against such risk of loss. 

Financial Resource Monitoring and Call 

Procedure 

Under the Financial Resource 

Monitoring and Call Procedure, OCC 

would use the same daily idiosyncratic 

default calculation as under the 

Monthly Clearing Fund Sizing 

Procedure to monitor daily the 

adequacy of the Financial Resources to 

withstand a default by the Clearing 

Member or Clearing Member Group 

presenting the largest exposure under 

extreme but plausible market 

conditions.20 If such a daily 

idiosyncratic default calculation 

projected a draw on the Clearing Fund 

(a ‘‘Projected Draw’’) that is at least 75% 

of the Clearing Fund maintained by 

OCC, OCC would be required to issue an 

intra-day margin call pursuant to Rule 

609 against the Clearing Member or 

Clearing Member Group that caused 

such a draw (‘‘Margin Call Event’’).21


tkelley on DSK3SPTVN1PROD with NOTICES
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during any business day by any Clearing Member 

for, inter alia, the protection of OCC, other Clearing 

Members or the general public. Clearing Members 

must meet a required deposit of intra-day margin 

in immediately available funds at a time prescribed 

by OCC or within one hour of OCC’s issuance of 

debit settlement instructions against the bank 

account(s) of the applicable Clearing Member(s), 

thereby ensuring the prompt deposit of additional 

Financial Resources. 

22 ‘‘Capping’’ the intra-day margin call avoids 

placing a ‘‘liquidity squeeze’’ on the subject 

Clearing Member(s) based on exposures presented 

by a hypothetical stress test, which would have the 

potential for causing a default on the intra-day 

margin call. Back testing results determined that 

such calls would have been made against Clearing 

Members that are large, well-capitalized firms, with 

more than sufficient resources to satisfy the call for 

additional margin with the proposed limitations. 

23The Risk Committee would be notified, and 

could take action to address potential Financial 

Resource deficiencies, in the event that a Projected 

Draw resulted in a Margin Call Event and as a result 

of the 500/100 Limitation the margin call was less 

than the Exceedance Above Base Amount, but the 

Projected Draw was not so large as to result in an 

increase in the Clearing Fund as discussed below. 

24The back testing analysis performed assumed a 

single Clearing Member caused the exceedance. 

Subject to a limitation described below, 

the amount of the margin call would be 

the difference between the Projected 

Draw and the Base Clearing Fund 

(‘‘Exceedance Above Base Amount’’). In 

the case of a Clearing Member Group 

that causes the Exceedance Above Base 

Amount, the Exceedance Above Base 

Amount would be pro-rated among the 

individual Clearing Members that 

compose the Clearing Member Group 

based on each individual Clearing 

Member’s proportionate share of the 

‘‘total risk’’ for such Clearing Member 

Group as defined in Rule 1001(b), i.e., 

the margin requirement with respect to 

all accounts of the Clearing Member 

Group exclusive of the net asset value 

of the positions in such accounts 

aggregated across all such accounts. 

However, in the case of an individual 

Clearing Member or a Clearing Member 

Group, the margin call would be subject 

to a limitation under which it could not 

exceed the lower 22 of: (a) $500 million, 

or (b) 100% of a Clearing Member’s net 

capital. Such limitation would be 

measured in aggregate with any funds 

remaining on deposit with OCC 

deposited by the same Clearing Member 

pursuant to a Margin Call Event within 

the same monthly period, as applicable 

until collection of all funds to satisfy the 

next regular monthly Clearing Fund 

resizing (the ‘‘500/100 Limitation’’).23

Upon satisfaction of the margin call, 

OCC would use its authority under Rule 

608 to preclude the withdrawal of such 

additional margin amount until it 

collects all of the funds determined by 

the next Monthly Clearing Fund Sizing 

Procedure. Based on three years of back 

testing data, OCC determined that it 

would have had Margin Call Events in 

10 of the months during this time 

period. For each of these months, the 

maximum call amount would have been 

equal to $500 million, with one 

exception in which the maximum call 

amount for the month was $7.7 

million.24 After giving effect to the intraday margin calls, i.e., by increasing the 

Financial Resources by $500 million, 

there was only one Margin Call Event 

where there was an observed stress test 

exceedance of the Financial Resources. 

To address this one observed 

instance, the Financial Resource 

Monitoring and Call Procedure also 

would require OCC to increase the size 

of the Clearing Fund (‘‘Clearing Fund 

Intra-month Increase Event’’) if a 

Projected Draw exceeds 90% of the 

Clearing Fund, after applying any funds 

then on deposit with OCC from the 

applicable Clearing Member or Clearing 

Member Group pursuant to a Margin 

Call Event. The amount of such increase 

(‘‘Clearing Fund Increase’’) would be the 

greater of: (a) $1 billion; or (b) 125% of 

the difference between (i) the Projected 

Draw, as reduced by the deposits 

resulting from the Margin Call Event 

and (ii) the Clearing Fund. Each 

Clearing Member’s proportionate share 

of the Clearing Fund Increase would 

equal its proportionate share of the 

variable portion of the Clearing Fund for 

the month in question as calculated 

pursuant to Rule 1001(b). 

OCC would notify the Risk Committee 

of the Board of Directors (the ‘‘Risk 

Committee’’), Clearing Members and 

appropriate regulatory authorities of the 

Clearing Fund Increase on the business 

day on which the Clearing Fund Intramonth Increase Event occurred. This 

ensures that OCC management 

maintains authority to address any 

potential Financial Resource 

deficiencies when compared to its 

Projected Draw estimates. The Risk 

Committee would then determine 

whether the Clearing Fund Increase was 

sufficient, and would retain authority to 

increase the Clearing Fund Increase or 

the margin call made pursuant to a 

Margin Call Event in its discretion. 

Clearing Members would be required to 

meet the call for additional Clearing 

Fund assets by 9:00 a.m. CT on the 

second business day following the 

Clearing Fund Intra-Month Increase 

Event. OCC believes that this collection 

process ensures additional Clearing 

Fund assets are promptly deposited by 

Clearing Members following notice of a 

Clearing Fund Increase, while also 

providing Clearing Members with a 

reasonable period of time to source such 

assets. Based on OCC’s back testing 

results, after giving effect to the intraday margin call in response to a Margin 

Call Event plus the prudential margin of 

safety, the Financial Resources would 

have been sufficient upon implementing 

the one instance of a Clearing Fund 

Intra-month Increase Event. 

OCC believes the Financial Resource 

Monitoring and Call Procedure strikes a 

prudent balance between mutualizing 

the burden of requiring additional 

Financial Resources and requiring the 

Clearing Member or Clearing Member 

Group causing the increased exposure to 

bear such burden. As noted above, in 

the event of a Margin Call Event, OCC 

limits the margin call until collection of 

all funds to satisfy the next regular 

monthly resizing to an aggregate of $500 

million, or 100% of a Clearing Member’s 

net capital in order to avoid putting an 

undue liquidity strain on any one 

Clearing Member. However, where a 

Projected Draw exceeds 90% of OCC’s 

Clearing Fund, OCC must act to ensure 

that it has sufficient Financial 

Resources, and determined that it 

should mutualize the burden of the 

additional Financial Resources at this 

threshold through a Clearing Fund 

Increase. OCC believes that this balance 

would provide OCC with sufficient 

Financial Resources without increasing 

the likelihood that its procedures 

would, based solely on stress testing 

results, cause a liquidity strain on any 

on Clearing Member that could result in 

such member’s default. 

The following examples illustrate the 

manner in which the Financial Resource 

Monitoring and Call Procedure would 

be applied. All assume that the Clearing 

Fund size is $7.8 billion, $6 billion of 

which is the Base Amount and $1.8 

billion of which is the prudential 

margin of safety. The 75% threshold in 

these examples is $5.85 billion. 

Example 1: Single CM 

Under OCC’s stress testing the 

Projected Draw attributable to Clearing 

Member ABC, a Clearing Member with 

no affiliated Clearing Members and net 

capital of $500 million, is $6.4 billion, 

or 82% of the Clearing Fund. OCC 

would make a margin call for $400 

million, which represents the 

Exceedance Above Base Amount. In this 

case the 500/100 Limitation would not 

be applicable because the Exceedance 

Above Base Amount is less than $500 

million and 100% of the Clearing 

Member’s net capital. The Clearing 

Member would be required to meet the 

$400 million call within one hour 

unless OCC prescribed a different time, 

and OCC would retain the $400 million 

until collection of all the funds to satisfy 


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

26 17 CFR 240.17Ad-22(b)(3). 

27 15 U.S.C. 78-q1(b)(3)(I). 

the next monthly Clearing Fund sizing 

calculation. 

If, on a different day within the same 

month, CM ABC’s Projected Draw 

minus the $400 million already 

deposited with OCC results in an 

Exceedance above Base Amount, 

another Margin Call Event would be 

triggered, with the amount currently 

deposited with OCC applying toward 

the 500/100 Limitation. 

Example 2: Clearing Member Group 

Under OCC’s stress testing the 

Projected Draw attributable to Clearing 

Member Group DEF, comprised of two 

Clearing Members each with net capital 

of $800 million, is $6.2 billion, or 79% 

of OCC’s Clearing Fund. OCC would 

initiate a margin call on Clearing 

Member Group DEF for $200 million. 

The call would be allocated to the two 

Clearing Members that compose the 

Clearing Member Group based on each 

Clearing Member’s risk margin 

allocation. In this case the 500/100 

Limitation would not be applicable 

because the Exceedance Above Base 

Amount is less than $500 million and 

100% of net capital. The margin call 

would be required to be met within one 

hour of the call unless OCC prescribed 

a different time. For example, in the 

case where one Clearing Member 

accounts for 75% of the risk margin for 

the Clearing Member Group, that 

Clearing Member would be allocated 

$150 million of the call and the other 

Clearing Member, accounting for 25% of 

the risk margin for the Clearing Member 

Group, would be allocated $50 million 

of the call. The funds would remain 

deposited with OCC until collection of 

all the funds to satisfy the next monthly 

Clearing Fund sizing calculation. 

Example 3: Clearing Member Group 

With $500 Million Cap 

Under OCC’s stress testing the 

Projected Draw attributable to Clearing 

Member Group GHI, comprised of two 

Clearing Members each with net capital 

of $800 million, is $6.8 billion, or 87% 

of the Clearing Fund. The Exceedance 

Above Base Amount would be $800 

million, allocated to the two Clearing 

Members that compose the Clearing 

Member Group based on each Clearing 

Member’s risk margin allocation. Using 

the 75/25 risk margin allocation from 

Example 2, one Clearing Member would 

be allocated $600 million and the other 

Clearing Member would be allocated 

$200 million. The first Clearing Member 

would be required to deposit $500 

million with OCC, which is the lowest 

of $500 million, that member’s net 

capital, or that member’s share of the 

Exceedance Above Base Amount, and 

the other Clearing Member would be 

required to deposit $200 million with 

OCC. After collecting the additional 

margin, OCC would determine whether 

the Projected Draw would exceed 90% 

of the Clearing Fund after reducing the 

Projected Draw by the additional 

margin. This calculation would divide a 

Projected Draw of $6.1 billion, which is 

the original Projected Draw of $6.8 

billion reduced by the additional 

margin, by the Clearing Fund of $7.8 

billion. The resulting percentage of 78% 

would be below the 90% threshold, and 

accordingly there would not be a 

Clearing Fund Intra-month Increase 

Event. 

Example 4: Margin Call and Increase in 

Size of Clearing Fund 

Under OCC’s stress testing the 

Projected Draw attributable to Clearing 

Member JKL, a Clearing Member with 

no affiliated Clearing Members and net 

capital of $600 million, is $10.0 billion, 

or 128% of the Clearing Fund. OCC 

would make a margin call for $500 

million, which represents the lowest of 

the Exceedance Above Base Amount, 

$500 million and 100% of net capital. 

The Clearing Member would be required 

to meet the $500 million call within one 

hour unless OCC prescribed a different 

time, and OCC would retain the $500 

million until collection of all the funds 

to satisfy the next monthly Clearing 

Fund sizing calculation. 

After collecting the additional margin, 

OCC would determine whether the 

Projected Draw would exceed 90% of 

the Clearing Fund after reducing the 

Projected Draw by the additional 

margin. This calculation would divide a 

Projected Draw of $9.5 billion, which is 

the original Projected Draw of $10 

billion reduced by the additional 

margin, by the Clearing Fund of $7.8 

billion. The resulting percentage of 

122%, while lower, would still exceed 

the 90% threshold, and accordingly 

OCC would declare a Clearing Fund 

Intra-month Increase Event. To calculate 

the Clearing Fund Increase, OCC would 

first determine the difference between 

the modified Projected Draw ($9.5 

billion) and the Clearing Fund ($7.8 

billion), which in this case would be 

$1.7 billion, OCC would then multiply 

this by 1.25, resulting in $2.125 billion. 

Because this amount is greater than $1 

billion, the Clearing Fund Increase 

would be $2.125 billion and a modified 

Clearing Fund of OCC totaling $9.925 

billion ($425 million in excess of the 

modified Projected Draw of $9.5 

billion). 

2. Statutory Basis 

OCC believes the proposed rule 

change is consistent with Section 

17A(b)(3)(F) of the Act,25 and the rules 

and regulations thereunder. By 

establishing sound procedures 

governing the monthly resizing of the 

Clearing Fund and how OCC would add 

Financial Resources in response to a 

Margin Call Event and a Clearing Fund 

Intra-month Increase Event, the 

proposed modifications would further 

ensure that OCC is capable of 

safeguarding securities and funds which 

are in the custody or control of OCC or 

for which it is responsible and 

protecting investors and the public 

interest. The development of the 

Monthly Clearing Fund Sizing 

Procedure and the Financial Resource 

Monitoring and Call Procedure also 

ensures that OCC has procedures 

designed to maintain sufficient financial 

resources to withstand, at a minimum, 

a default by the participant family to 

which it has the largest exposure in 

extreme but plausible market 

conditions, in compliance with Rule 

17Ad-22(b)(3).26

(B) Clearing Agency’s Statement on 

Burden on Competition 

OCC does not believe that the 

proposed rule change would impose any 

burden on competition.27 OCC believes 

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 OCC would establish the size of 

the Clearing Fund in accordance with 

the Monthly Clearing Fund Sizing 

Procedure and without regard to any 

particular user or Clearing Member that 

makes Clearing Fund contributions. 

Furthermore, OCC would respond to a 

Margin Call Event and Clearing Fund 

Intra-month Increase Event in 

accordance with the Financial Resource 

Monitoring and Call Procedure without 

regard to any particular user or Clearing 

Member. 

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. 


tkelley on DSK3SPTVN1PROD with NOTICES
17812 Federal Register / Vol. 80, No. 63 / Thursday, April 2, 2015 / Notices 

28 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(2). 

5The Exchange notes that the date of the fee 

schedule was amended to March 17, 2015 in a 

previously filed proposed rule change. See SR– 

BYX–2015–18 (filed March 17, 2015). 

6See Securities Exchange Act Release No. 73918 

(December 23, 2014), 79 FR 78920 (December 31, 

2014) (File Nos. SR–EDGX–2014–25; SR–EDGA– 

2014–25; SR–BATS–2014–055; SR–BYX–2014–030) 

(Notice of Amendments No. 2 and Order Granting 

Accelerated Approval to Proposed Rule Changes, as 

Modified by Amendments Nos. 1 and 2, to Establish 

a New Market Data Product called the BATS One 

Feed) (‘‘BATS One Approval Order’’). 

(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 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

OCC–2015–009 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–OCC–2015–009. 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_

009.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–2015–009 and should 

be submitted on or before April 23, 

2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–07523 Filed 4–1–15; 8:45 am] 

BILLING CODE CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74599; File No. SR–BYX– 

2015–19] 

Self-Regulatory Organizations; BATS 

Y-Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the Fees for 

the BATS One Market Data Product 

March 27, 2015. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 17, 

2015, BATS Y-Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated the proposed rule change as 

one establishing or changing a member 

due, fee, or other charge imposed by the 

Exchange under Section 19(b)(3)(A)(ii) 

of the Act 3 and Rule 19b–4(f)(2) 

thereunder,4 which renders the 

proposed rule change effective upon 

filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange filed a proposal to 

amend the market data section of its fee 

schedule to: (i) Establish a Digital Media 

Enterprise Fee for the BATS One Feed; 

and (ii) make a non-substantive change 

to the description of the BATS One Feed 

Enterprise fee. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at www.batstrading.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

market data section of its fee schedule 

to: (i) Establish a Digital Media 

Enterprise Fee for the BATS One Feed; 

and (ii) make a non-substantive change 

to the description of the BATS One Feed 

Enterprise fee.5

The Commission recently approved a 

proposed rule change by the Exchange 

to establish a new market data product 

called the BATS One Feed 6 as well as 

published proposed rule changes to 


tkelley on DSK3SPTVN1PROD with NOTICES