10262 Federal Register / Vol. 87, No. 36 / Wednesday, February 23, 2022 / Notices 

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

2 17 CFR 240.19b–4(n)(1)(i). 

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

4See Notice of Filing infra note 5, at 87 FR 1814. 

5Securities Exchange Act Release No. 93915 (Jan. 

6, 2022), 87 FR1814 (Jan. 12, 2022) (File No. SR– 

OCC–2021–803) (‘‘Notice of Filing’’). On December 

23, 2021, OCC also filed a related proposed rule 

change (SR–OCC–2021–014) with the Commission 

pursuant to Section 19(b)(1) of the Exchange Act 

and Rule 19b–4 thereunder (‘‘Proposed Rule 

Change’’). 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b– 

4, respectively. In the Proposed Rule Change, which 

was published in the Federal Register on January 

12, 2022, OCC seeks approval of proposed changes 

to its rules necessary to implement the Advance 

Notice. Securities Exchange Act Release No. 93916 

(Jan. 6, 2022), 87 FR 1819 (Jan. 12, 2022) (File No. 

SR–OCC–2021–014). The comment period for the 

related Proposed Rule Change filing closed on 

February 2, 2022. 

6A comment letter addressed market conduct 

generally; however, additional discussion is 

unnecessary because the substance of the letter does 

not bear on the basis for the Commission’s decision 

not to object to the proposal. Comments on the 

Advance Notice are available at https://

www.sec.gov/comments/sr-occ-2021-803/ 

srocc2021803.htm. Since the proposal contained in 

the Advance Notice was also filed as a proposed 

rule change, all public comments received on the 

proposal are considered regardless of whether the 

comments are submitted on the Proposed Rule 

Change or the Advance Notice. 

7Capitalized terms used but not defined herein 

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

publications/bylaws.jsp. 

8See By-Law Art. IX, Sec. 1. 

9See OCC Rule 604(a); Rule 1006(c). 

10See Notice of Filing, 87 FRat 1815. 

11Under the proposed Policy, OCC Cash would 

include working capital related to future operating 

costs, inclusive of financial resources held to meet 

liquidity and resiliency requirements, proceeds 

from lines of credit, if any, maintained to support 

OCC’s working capital, and investments made with 

OCC Cash. OCC Cash would also include OCC’s 

Minimum Corporate Contribution. See Securities 

Exchange Act Release No. 92038 (May 27, 2021), 86 

FR 29861 (Jun. 3, 2021) (File No. SR–OCC–2021– 

003) (establishing a persistent minimum level of 

OCC’s own capital that it would contribute to 

default losses or liquidity shortfalls prior to 

allocating a default loss to the Clearing Fund 

contributions of non-defaulting Clearing Members). 

OCC Cash would not include cash held in respect 

of OCC’s pension plan, post-retirement welfare 

plan, or other deferred compensation plans. 

12Under the proposed Policy, Clearing Member 

Cash would include cash collateral deposited as 

margin or Clearing Fund contributions, cash held in 

liquidating settlement accounts for suspended 

Clearing Members pursuant to OCC’s Rule 1104, 

and investments made with Clearing Member Cash. 

Clearing Member Cash would also include proceeds 

from OCC’s syndicated credit facility and liquidity 

facilities. See Securities Exchange Act Release No. 

88971 (May 28, 2020), 85 FR 34257 (Jun. 3, 2020) 

(File No. SR–OCC–2020–804) (discussing OCC’s 

revolving credit facility); Securities Exchange Act 

Release No. 89039 (Jun. 10, 2020), 85 FR 36444 

(Jun. 16, 2020) (File No. SR–OCC–2020–803) 

(discussing OCC’s non-bank liquidity facility). 

13See OCC Rule 1104. 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) 

and (10) and 17 CFR 200.402(a)(3), 

(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and 

(a)(10), permit consideration of the 

scheduled matters at the closed meeting. 

The subject matter of the closed 

meeting will consist of the following 

topics: 

Institution and settlement of injunctive 

actions; 

Institution and settlement of administrative 

proceedings; 

Resolution of litigation claims; and 

Other matters relating to examinations and 

enforcement proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting agenda items that 

may consist of adjudicatory, 

examination, litigation, or regulatory 

matters. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information; please contact 

Vanessa A. Countryman from the Office 

of the Secretary at (202) 551–5400. 

(Authority: 5 U.S.C. 552b.) 

Dated: February 17, 2022. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2022–03859 Filed 2–18–22; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94270; File No. SR–OCC– 

2021–803] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of No Objection to Advance Notice 

Concerning The Options Clearing 

Corporation’s Cash and Investment 

Management 

February 17, 2022. 

I. Introduction 

On December 23, 2021, the Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) advance 

notice SR–OCC–2021–803 (‘‘Advance 

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

Title VIII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, 

entitled Payment, Clearing and 

Settlement Supervision Act of 2010 

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

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

Exchange Act of 1934 (‘‘Exchange 

Act’’) 3 to (i) adopt OCC’s policy 

regarding cash and related investments 

to its rules, and (ii) amend OCC’s Rules 

governing the use of Clearing Fund 

contributions to ensure access in the 

event of the failure of an investment 

counterparty with whom OCC has 

invested cash collateral.4 The Advance 

Notice was published for public 

comment in the Federal Register on 

January 12, 2022,5 and the Commission 

has received no comments regarding the 

substance of the changes proposed in 

the Advance Notice.6 The Commission 

is hereby providing notice of no 

objection to the Advance Notice. 

II. Background 7

OCC is proposing to adopt a policy 

governing OCC’s cash and investment 

practices (the ‘‘Cash and Investment 

Management Policy’’ or ‘‘Policy’’) and 

amend its rules regarding access to 

Clearing Fund contributions to address 

the failure of an investment 

counterparty to return Clearing Member 

cash collateral, which would also allow 

OCC to use such collateral to access its 

revolving credit facility. 

A. Policy Regarding Cash and Related 

Investments 

OCC’s current rules include 

provisions governing the management 

and investment of OCC’s own funds and 

cash deposited by Clearing Members. 

Pursuant to its rules, OCC’s Board of 

Directors (‘‘Board’’) may invest funds in 

excess of the amount needed as working 

capital in Government securities or such 

other securities or financial 

instruments.8 Further, OCC’s Rules 

allow for the investment of cash 

deposited in respect of a Clearing 

Member’s margin requirements or 

Clearing Fund contributions by OCC for 

its account in Government securities.9

OCC proposes to add its Cash and 

Investment Management Policy to its 

current investment related rules.10

The proposed Cash and Investment 

Management Policy (i) outlines the 

safeguarding standards for cash and 

related investments managed by OCC to 

minimize credit and liquidity risk, and 

(2) provides guidelines for investments 

permitted by OCC’s rules as described 

above. With regard to safeguarding cash, 

the Policy would allow OCC to hold 

OCC Cash 11 and Clearing Member 

Cash 12 in demand deposit accounts 

with commercial banks or in accounts at 

a Federal Reserve Bank. Consistent with 

OCC’s current rules, the Policy would 

require OCC to move all margin and 

Clearing Fund cash related to a 

suspended Clearing Member into a 

liquidating settlement account for use in 

meeting the obligations of the Clearing 

Member.13 The Policy would also 

require that OCC employ a bank account 

structure that segregates customer funds 

per applicable regulatory 


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Federal Register / Vol. 87, No. 36 / Wednesday, February 23, 2022 / Notices 10263 

14See 17 CFR 39.15 (requiring a derivatives 

clearing organization to comply with the 

segregation requirements section 4d of the 

Commodity Exchange Act). 

15See OCC By-Laws Art. VI, Sec. 3(f) (providing 

for maintenance of segregated futures accounts). 

16OCC’s Qualitative Disclosures are available at 

https://www.theocc.com/Risk-Management/PFMIDisclosures. 

17Additionally, OCC’s Third-Party Risk 

Management Framework describes the basis for 

evaluating financial institutions based on financial 

resources and operational capacity, such as whether 

a relationship is structured to allow prompt access 

to assets and whether a custodian is a supervised 

and regulated institution that adheres to generally 

accepted accounting practices, maintains 

safekeeping procedures, and has controls that fully 

protect these assets. See Securities Exchange Act 

Release No. 90797 (Dec. 23, 2021), 85 FR 86592, 

86593 (Dec. 30, 2021) (File No. SR–OCC–2020–014). 

18OCC’s Target Capital Requirement is the 

amount of shareholders’ equity recommended by 

OCC management and approved by the Board to 

ensure compliance under both the Commission and 

Commodity Futures Trading Commission rules and 

to keep such additional amount the Board may 

approve for capital expenditures. See OCC Rule 

101(T)(1). 

19Under its Liquidity Risk Management 

Framework, OCC may require a Clearing Member 

Group to post cash collateral to supplement OCC’s 

Available Liquidity Resources when stressed 

liquidity demands for that Clearing Member Group 

are above established thresholds or until the 

settlement demand is met. See Exchange Act 

Release No. 89014 (Jun. 4, 2020), 85 FR 35446, 

35449 (Jun. 10, 2020) (File No. SR–OCC–2020–003). 

20See e.g., Securities Exchange Act Release No. 

82502 (Jan. 12, 2018), 82 FR 2825, 2826 (Jan. 19, 

2018) (File No. SR–OCC–2017–009) (stating that 

OCC would pass interest income earned on Clearing 

Fund cash deposited at a Federal Reserve Bank 

through to its Clearing Members). 

21See OCC Rule 1006(a) and (c). 

22See OCC Rule 1006(f). 

23See Notice of Filing, 87 Fed. Reg at1817. In 

anticipation of the proposed changes, OCC 

modified the permitted uses set forth in the credit 

agreement, implemented on June 21, 2021, to align 

with the proposed changes to OCC Rule 1006. Id. 

OCC provided a summary of the terms and 

conditions for the 2021 credit agreement in a 

confidential Exhibit 3 to the Advance Notice. Id. 

24See 12 U.S.C. 5461(b). 

25 12 U.S.C. 5464(a)(2). 

26 12 U.S.C. 5464(b). 

27 12 U.S.C. 5464(c). 

28 17 CFR 240.17Ad–22. See Securities Exchange 

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

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

Clearing Agency Standards, 81 FR 70786. OCC is a 

‘‘covered clearing agency’’ as defined in Rule 

17Ad–22(a)(5). 

requirements 14 and OCC’s By-Laws and 

Rules.15

With regard to investments, the Policy 

would provide that OCC’s investment 

strategy is to preserve principal and 

maintain adequate liquidity. OCC 

outlines its specific investment in 

internal procedures, but will publish its 

investment strategy in its Qualitative 

Disclosures posted to OCC’s public 

website.16 Under the proposed Policy, 

OCC will invest only with 

counterparties that meet the financial 

and operational standards outlined in 

OCC’s procedures concerning its 

banking relationships.17

The Policy would affirm OCC’s 

current practice of not investing 

Clearing Fund cash, which is instead 

maintained in accounts at a Federal 

Reserve Bank or a commercial bank. The 

Policy would also limit the investment 

of margin cash to instruments that 

provide liquidity to OCC by the 

following business day. In contrast, the 

Policy would not limit the investment of 

OCC cash in excess of 110 percent of its 

Target Capital Requirement 18 to 

overnight transactions. Further, the 

Policy would require procedures to 

ensure that end-of-day margin cash 

balances remain above the aggregate 

level of any Required Cash Deposits to 

support OCC’s management of liquidity 

risk.19 Under the Policy, interest or gain 

received on investments will belong to 

OCC except as otherwise provided for in 

OCC’s rules.20

B. Access to Clearing Fund 

Contributions 

OCC’s current Rules define the 

conditions under which OCC may use 

Clearing Fund assets to make good 

losses or expenses suffered by OCC or 

by the Clearing Fund with regard to 

borrowings made by OCC.21 OCC’s rules 

also define the conditions under which 

OCC may borrow Clearing Fund 

assets.22 OCC’s Rules address OCC’s 

authority to access Clearing Fund assets 

related to the failure of a bank or 

clearing organization to perform its 

obligations to OCC, but not the failure 

of an investment counterparty. OCC 

proposes a series of changes to its Rules, 

described below, to broaden OCC’s 

authority to access Clearing Fund assets 

to address the potential failure of an 

investment counterparty to meet its 

obligations to OCC. Such changes would 

also align with modifications to OCC’s 

revolving credit facility.23

OCC proposes to amend its Rules 

1006(a) and (c) to add ‘‘investment 

counterparty’’ to the list of 

counterparties whose failure to perform 

any obligation to OCC when due 

because of its bankruptcy, insolvency, 

receivership, suspension of operations, 

or any similar event that causes OCC to 

sustain a loss. OCC also proposes to 

amend its Rule 1006(f) to authorize OCC 

to take possession of cash or securities 

deposited by Clearing Members as 

contributions to the Clearing Fund and 

securities in which OCC has invested 

Clearing Fund cash contributions if OCC 

reasonably believes it necessary to 

borrow to meet its liquidity needs for 

same day settlement as a result of the 

failure of an investment counterparty. 

The proposed changes to Rules 1006(a), 

(c), and (f) would limit access, however, 

to failures with respect to cash invested 

under OCC’s Rules 604(a) and 1002(c), 

which deal with margin cash and 

Clearing Fund cash contributions, 

respectively. 

OCC is also proposing to restate and 

reorganize Rule 1006(f), which currently 

consists of a single paragraph, into four 

subparagraphs with the following 

headings: (1) Conditions; (2) Uses; (3) 

Term; Clearing Fund Charge; and (4) 

Substitution Requests. To eliminate a 

potential inconsistency with Rule 

1006(c), OCC would revise the 

condition triggering OCC’s access to the 

Clearing Fund from failure ‘‘to achieve 

daily settlement’’ to failure ‘‘to perform 

any obligation to the Corporation when 

due.’’ The proposed changes to 1006(f) 

also include the removal of a gendered 

pronoun and other administrative 

changes. 

III. Discussion and Notice of No 

Objection 

Although the Clearing Supervision 

Act does not specify a standard of 

review for an advance notice, the stated 

purpose of the Clearing Supervision Act 

is instructive: To mitigate systemic risk 

in the financial system and promote 

financial stability by, among other 

things, promoting uniform risk 

management standards for SIFMUs and 

strengthening the liquidity of SIFMUs.24

Section 805(a)(2) of the Clearing 

Supervision Act authorizes the 

Commission to prescribe regulations 

containing risk management standards 

for the payment, clearing, and 

settlement activities of designated 

clearing entities engaged in designated 

activities for which the Commission is 

the supervisory agency.25 Section 805(b) 

of the Clearing Supervision Act 

provides the following objectives and 

principles for the Commission’s risk 

management standards prescribed under 

Section 805(a): 26

• To promote robust risk 

management; 

• to promote safety and soundness; 

• to reduce systemic risks; and 

• to support the stability of the 

broader financial system. 

Section 805(c) provides, in addition, 

that the Commission’s risk management 

standards may address such areas as 

risk management and default policies 

and procedures, among other areas.27

The Commission has adopted risk 

management standards under Section 

805(a)(2) of the Clearing Supervision 

Act and Section 17A of the Exchange 

Act (the ‘‘Clearing Agency Rules’’).28

The Clearing Agency Rules require, 


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29 17 CFR 240.17Ad–22. 

30 12 U.S.C. 5464(b). 

31 17 CFR 240.17Ad–22(e)(13) and 17 CFR 

240.17Ad–22(e)(16). 

32 12 U.S.C. 5464(b). 

33See Financial Stability Oversight Council 

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

https://home.treasury.gov/system/files/261/here.pdf 

(last visited Feb. 17, 2022). 34 12 U.S.C. 5464(b). 35 17 CFR 240.17Ad–22(e)(13). 36See Securities Exchange Act Release No. 87717 

(Dec. 11, 2019), 84 FR 68985, 68987 (Dec. 17, 2019) 

(File No. SR–OCC–2019–009). 37See Securities Exchange Act Release No. 89014 

(Jun. 4, 2020), 85 FR 35446, 35450 (Jun. 10, 2020) 

(File No. SR–OCC–2020–003) (stating that cash 

contributions to the Clearing fund serve as an 

important source of liquidity and that non-cash 

contributions provide a source of collateral 

necessary for OCC to access sources of liquidity). 

38 17 CFR 240.17Ad–22(e)(13). 

39 17 CFR 240.17Ad–22(e)(16). 

40Covered Clearing Agency Standards, 81 FR at 

70837. 

41 Id. 

among other things, each covered 

clearing agency to establish, implement, 

maintain, and enforce written policies 

and procedures that are reasonably 

designed to meet certain minimum 

requirements for its operations and risk 

management practices on an ongoing 

basis.29 As such, it is appropriate for the 

Commission to review advance notices 

against the Clearing Agency Rules and 

the objectives and principles of these 

risk management standards as described 

in Section 805(b) of the Clearing 

Supervision Act. As discussed below, 

the Commission believes the changes 

proposed in the Advance Notice are 

consistent with the objectives and 

principles described in Section 805(b) of 

the Clearing Supervision Act,30 and in 

the Clearing Agency Rules, in particular 

Rules 17Ad–22(e)(13) and (16).31

A. Consistency With Section 805(b) of 

the Clearing Supervision Act 

The Commission believes that the 

proposal contained in OCC’s Advance 

Notice is consistent with the stated 

objectives and principles of Section 

805(b) of the Clearing Supervision Act. 

Specifically, as discussed below, the 

Commission believes that the changes 

proposed in the Advance Notice are 

consistent with promoting robust risk 

management, promoting safety and 

soundness, reducing systemic risks, and 

supporting the stability of the broader 

financial system.32

The Commission believes that the 

addition of the Cash and Investment 

Management Policy to OCC’s rules is 

consistent with the promotion of robust 

risk management. As described above, 

the Policy would build on OCC’s 

current rules for managing cash and 

investments. The Policy includes 

standards for safeguarding OCC Cash 

and Clearing Fund Cash through the 

application of OCC’s counterparty 

standards. Further, the Policy includes 

limitations on the tenure of investments 

to support OCC’s liquidity risk 

management practices. The Commission 

believes that adding the Policy to OCC’s 

rules will support OCC’s management of 

risk with regard to the safeguarding of 

funds and investments. 

The Commission also believes that the 

proposed changes to broaden OCC’s 

authority to access Clearing Fund 

contributions are consistent with the 

promotion of safety and soundness. 

Ensuring that OCC has the authority to 

access Clearing Fund contributions to 

contain losses and shortfalls would 

reduce the likelihood that OCC would 

have insufficient financial resources to 

address such losses and shortfalls, 

which in turn would enhance the safety 

and soundness of OCC. Further, the 

Commission believes that, to the extent 

the proposed changes are consistent 

with promoting OCC’s safety and 

soundness, they are also consistent with 

supporting the stability of the broader 

financial system. OCC has been 

designated as a SIFMU, in part, because 

its failure or disruption could increase 

the risk of significant liquidity or credit 

problems spreading among financial 

institutions or markets.33 As noted 

above, the Commission believes that the 

proposed changes would support OCC’s 

ability to continue providing services to 

the options markets by addressing losses 

and shortfalls arising out of the default 

of a Clearing Member. OCC’s continued 

operations would, in turn, help support 

the stability of the financial system by 

reducing the risk of significant liquidity 

or credit problems spreading among 

market participants that rely on OCC’s 

central role in the options market. 

Accordingly, and for the reasons 

stated above, the Commission believes 

the changes proposed in the Advance 

Notice are consistent with Section 

805(b) of the Clearing Supervision 

Act.34

B. Consistency With Rule 17Ad– 

22(e)(13) Under the Exchange Act 

Rule 17Ad–22(e)(13) under the 

Exchange Act requires, among other 

things, that a covered clearing agency 

establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to ensure the 

covered clearing agency has the 

authority to take timely action to 

contain losses and liquidity demands 

and continue to meet its obligations.35

As the Commission has observed 

previously, OCC relies on the resources 

in its Clearing Fund to manage the 

potential losses arising out of the default 

of a Clearing Member under extreme but 

plausible market conditions.36

Similarly, OCC relies on such resources 

to manage potential liquidity shortfalls 

arising out of the default of a Clearing 

Member under extreme but plausible 

market conditions.37 In the event of a 

Clearing Member default, OCC’s 

inability to access the defaulter’s cash 

collateral due to the failure of an 

investment counterparty could inhibit 

OCC’s ability to contain losses and 

liquidity demands unless it has access 

to the Clearing Fund contributions of 

non-defaulting Clearing Members. 

Further, the Commission believes that 

the proposed changes to restate and 

reorganize Rule 1006(f) would provide 

clarity to such authority. As described 

above, the proposed changes would 

increase OCC’s authority to access 

Clearing Fund contributions to address 

losses or shortfalls arising out of the 

failure of an investment counterparty to 

perform with regard to investments of 

margin cash or Clearing Fund cash and 

such changes would align with the 

terms of OCC’s revolving credit 

agreement. 

The Commission believes, therefore, 

that the proposed changes to broaden 

OCC’s authority to access to Clearing 

Fund contributions are consistent with 

Rule 17Ad–22(e)(13) under the 

Exchange Act.38

C. Consistency With Rule 17Ad– 

22(e)(16) Under the Exchange Act 

Rule 17Ad–22(e)(16) under the 

Exchange Act requires that a covered 

clearing agency establish, implement, 

maintain, and enforce written policies 

and procedures reasonably designed to 

safeguard its own and its participants’ 

assets, minimize the risk of loss and 

delay in access to these assets, and 

invest such assets in instruments with 

minimal credit, market and liquidity 

risks.39 In adopting Rule 17Ad– 

22(e)(16), the Commission provided 

guidance for consideration by covered 

clearing agencies.40 Such guidance 

included the consideration of whether a 

covered clearing agency’s investment 

strategy is consistent with its overall 

risk management strategy and fully 

disclosed to participants.41

The Commission believes that the 

proposed Cash and Investment 

Management Policy would support and 

enhance OCC’s current rules regarding 

the investment of its and its 

participants’ cash assets. As described 

above, the Policy outlines safeguarding 

standards, such as allowing OCC Cash 

and Clearing Member Cash to be 


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Federal Register / Vol. 87, No. 36 / Wednesday, February 23, 2022 / Notices 10265 

42The Policy would allow OCC to invest its own 

cash in longer-tenured instruments only where such 

cash is in excess of 110 percent of OCC’s Target 

Capital Requirement. 

43 17 CFR 240.17Ad–22(e)(16). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 84575 

(November 13, 2018), 83 FR 58309 (November 19, 

2018) (approving SR–NASDAQ–2018–070, as 

modified by Amendment Nos. 1–3) (‘‘Approval 

Order’’). 

4Rule 5702(a). 

5Specifically, the 2020 Filing expanded the 

categories of non-convertible bonds eligible to be 

listed under Rule 5702 to include non-convertible 

bonds of affiliates of a listed company where: A 

listed company directly or indirectly owns a 

majority interest in, or is under common control 

with, the issuer of the non- convertible bond; or a 

listed company has guaranteed the non-convertible 

bond. In addition, for un-affiliated companies, the 

2020 Filing allowed listing of non-convertible 

bonds where a nationally recognized securities 

rating organization (an ‘‘NRSRO’’) has assigned a 

current rating to the non-convertible bond that is no 

lower than an S&P Corporation ‘‘B’’ rating or 

equivalent rating by another NRSRO; or if no 

NRSRO has assigned a rating to the issue, an 

NRSRO has currently assigned (i) an investment 

grade rating to an immediately senior issue of the 

same company, or (ii) a rating that is no lower than 

an S&P Corporation ‘‘B’’ rating, or an equivalent 

rating by another NRSRO, to a pari passu or junior 

issue of the same company. 

6See Securities Exchange Act Release No. 84001 

(August 30, 2018), 83 83 FR 45289 (September 6, 

2018). 

7See Securities and Exchange Act Release No. 

86072 (June 10, 2019), 84 FR 27816 (June 14, 2020). 

8To increase the clarity of the rule, Nasdaq 

proposes to include in the proposed Listing Rule 

5702(d) other exemptions applicable to an issuer of 

a non-convertible bond, as provided by Listing Rule 

5615(a)(6)(A), which states, in the relevant parts, 

that issuers ‘‘whose only securities listed on Nasdaq 

are . . . debt securities . . . are exempt from the 

requirements relating to Independent Directors (as 

set forth in Rule 5605(b)), Compensation 

Committees (as set forth in Rule 5605(d)), Director 

Nominations (as set forth in Rule 5605(e)), Codes 

of Conduct (as set forth in Rule 5610), and Meetings 

of Shareholders (as set forth in Rule 5620(a)). In 

addition, these issuers are exempt from the 

requirements relating to Audit Committees (as set 

forth in Rule 5605(c)), except for the applicable 

requirements of SEC Rule 10A–3. Notwithstanding, 

Continued 

deposited only in a Federal Reserve 

Bank or in demand deposit accounts 

with institutions that meet the standards 

set out in OCC’s current risk 

management strategy (e.g., OCC’s Third 

Party Risk Management Framework) to 

minimize the risk of loss or delay in 

access to such funds. The Commission 

believes further that limiting the 

investment of cash to Government 

Securities, and specifically limiting the 

investment of Clearing Member Cash to 

instruments that provide liquidity to 

OCC by the following business day, is 

consistent with investing in assets with 

minimal credit, market and liquidity 

risks.42

The Commission believes, therefore, 

that the addition of the Cash and 

Investment Management Policy to 

OCC’s rules is consistent with Rule 

17Ad–22(e)(16) under the Exchange 

Act.43

IV. Conclusion 

It is therefore noticed, pursuant to 

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

Supervision Act, that the Commission 

does not object to Advance Notice (SR– 

OCC–2021–803) and that OCC is 

authorized to implement the proposed 

change as of the date of this notice or 

the date of an order by the Commission 

approving proposed rule change SR– 

OCC–2021–014, whichever is later. 

By the Commission. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03824 Filed 2–22–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94265; File No. SR– 

NASDAQ–2022–015] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing of Proposed Rule Change To 

Exempt Non-Convertible Bonds Listed 

Under Rule 5702 From Certain 

Corporate Governance Requirements 

February 16, 2022. 

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 February 

4, 2022, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to exempt 

non-convertible bonds listed under Rule 

5702 from certain corporate governance 

requirements. The text of the proposed 

rule change is available on the 

Exchange’s website at https://

listingcenter.nasdaq.com/rulebook/ 

nasdaq/rules, at the principal office of 

the Exchange, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

In November 2018, the Commission 

approved amendments to the 

Exchange’s rules that permit the 

Exchange to list and trade nonconvertible corporate debt securities 

(referred to herein as ‘‘bonds’’ or ‘‘nonconvertible bonds’’) on the Nasdaq Bond 

Exchange.3 Under the Exchange’s listing 

rules then adopted, a non-convertible 

bond was eligible for initial listing on 

the Exchange only if it had a principal 

amount outstanding or market value of 

at least $5 million and its issuer had at 

least one class of an equity security 

listed on Nasdaq, the New York Stock 

Exchange (‘‘NYSE’’), or NYSE 

American.4 In February 2020, Nasdaq 

amended Listing Rule 5702 to allow the 

listing of non-convertible bonds issued 

by certain companies not listed on 

Nasdaq, NYSE American or NYSE (the 

‘‘2020 Filing’’).5

In 2018, Nasdaq stated its plan to seek 

exemptions to certain requirements of 

the Nasdaq Rule 5600 Series, including 

requirements relating to Review of 

Related Party Transactions (Rule 5630), 

Shareholder Approval (Rule 5635), and 

Voting Rights (Rule 5640),6 but later 

indicated that it would not pursue those 

exemptions because, at the time, the 

equity of the issuers listing nonconvertible bonds under Rule 5702 was 

required to be listed on Nasdaq, NYSE 

American or NYSE and therefore were 

subject to those Rules or substantially 

similar rules of NYSE American or the 

NYSE.7

Given the change made in the 2020 

Filing to allow the listing of nonconvertible bonds by issuers that are not 

otherwise listed on a national securities 

exchange, Nasdaq now proposes to 

exempt non-convertible bonds from the 

requirements relating to Review of 

Related Party Transactions (Rule 5630), 

Shareholder Approval (Rule 5635), and 

Voting Rights (Rule 5640).8


khammond on DSKJM1Z7X2PROD with NOTICES