Federal Register / Vol. 89, No. 235 / Friday, December 6, 2024 / Notices 97127 

23See supra note 18. 

24 15 U.S.C. 78s(b)(3)(A). 

25 17 CFR 240.19b–4(f)(6). 

26 15 U.S.C. 78s(b)(3)(A). 

27 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

28 17 CFR 240.19b–4(f)(6). 

29 17 CFR 240.19b–4(f)(6)(iii). 

30For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 31 15 U.S.C. 78s(b)(2)(B). 

32 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 98959 

(Dec. 5, 2023), 88 FR 84454 (Dec. 5, 2023) (File No. 

S7–21–22) (‘‘SEC Adopting Release’’), https://

www.govinfo.gov/content/pkg/FR-2023-12-05/pdf/ 

2023-25807.pdf. 

4Securities Exchange Act Release No. 101444 

(October 25, 2024), 89 FR 86868 (October 31, 2024) 

(File No. SR–OCC–2024–015) (‘‘Notice’’). 

the SEC rule filing process, and others 

have done so.23

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has designated this rule 

filing as non-controversial under 

Section 19(b)(3)(A) 24 of the Act and 

Rule 19b–4(f)(6) 25 thereunder. Because 

the proposed rule change does not (i) 

significantly affect the protection of 

investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

for 30 days from the date on which it 

was filed, or such shorter time as the 

Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 26 and Rule 19b– 

4(f)(6) thereunder.27

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 28 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)(iii) 29

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. The Exchange has asked 

the Commission to waive the 30-day 

operative delay so that the proposal may 

be operative concurrent with IEX’s 

planned implementation of DEEP+ on 

December 9, 2024. The Commission 

believes that the proposed rule change 

raises no novel issues and that waiver 

of the operative delay is consistent with 

the protection of investors and the 

public interest. Therefore, the 

Commission hereby waives the 

operative delay and designates the 

proposal operative upon filing.30

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 31 of the Act to 

determine whether the proposed rule 

change should be approved or 

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 (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

IEX–2024–27 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–IEX–2024–27. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (https://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 website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing will 

also be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–IEX–2024–27 and should be 

submitted on or before December 27, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.32

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–28539 Filed 12–5–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101792; File No. SR–OCC– 

2024–015] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Order 

Granting Approval of Proposed Rule 

Change by The Options Clearing 

Corporation Concerning Modifications 

to Its Governance Documents To Align 

With Recently Adopted SEC 

Governance Rules 

December 2, 2024. 

I. Introduction 

On October 21, 2024, The Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’), 

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

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change 

(the ‘‘Proposed Rule Change’’) to amend 

its governance documents as part of an 

effort to achieve compliance with 

recently adopted governance 

requirements 3 and to make changes 

identified during OCC’s annual review 

process. The Proposed Rule Change was 

published for comment in the Federal 

Register on October 31, 2024.4 The 

Commission has not received any 

comments on the Proposed Rule 

Change. For the reasons discussed 


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5See SEC Adopting Release. 

6Under the amendments, such independence 

would need to meet the definition of that term in, 

and be determined in accordance with the 

requirements of, Rule 17Ad–25(a) under the 

Exchange Act. See Notice, 89 FR at 86869; Exhibit 

A (Board Charter) to File No. SR–OCC–2024–015. 

below, the Commission is approving the 

Proposed Rule Change. 

II. Description of the Proposed Rule 

Change 

OCC is registered with the 

Commission as a clearing agency for the 

purpose of clearing standardized equity 

options. The Proposed Rule Change 

amends OCC’s Board of Directors 

Charter and Corporate Governance 

Principles (‘‘Board Charter’’), 

Governance and Nominating Committee 

(‘‘GNC’’) Charter, Risk Committee 

Charter, Technology Committee Charter, 

Compensation and Performance 

Committee (‘‘CPC’’) Charter, Regulatory 

Committee Charter, Audit Committee 

Charter, Fitness Standards, Third-Party 

Risk Management Framework, and 

Article III of OCC’s By-Laws (together, 

‘‘governance documents’’). OCC 

proposes such amendments in response 

to the new governance rules that apply 

to OCC.5 Specifically, OCC proposes 

changes to require that a majority of the 

Board and any Board-level committee 

are independent directors; establish 

policies and procedures to identify, 

mitigate, or eliminate conflicts of 

interest; and establish policies and 

procedures for monitoring and 

managing risks relating to third-party 

providers of core services. The 

amendments also make other 

conforming changes and typographical 

corrections. 

A. Board Charter and By-Laws 

OCC proposes to amend the Board 

Charter to provide that a majority of the 

Board and all Board-level committees be 

independent directors.6 As a 

conforming change, OCC would also 

remove references in the current Board 

Charter indicating that only the Audit 

Committee must be comprised of 

independent directors. 

OCC proposes adding to the Board’s 

mission an oversight role for service 

providers that provide core services to 

OCC. The oversight would be 

accomplished by overseeing senior 

management’s review, risk assessment, 

and approval of agreements for service 

providers of core services, and by 

reviewing senior management’s policies 

and procedures that govern 

relationships and manage risks for 

service providers of core services. The 

amendments to the Board Charter also 

would require the Board to evaluate 

certain of senior management’s actions 

related to such service providers, 

including senior management’s efforts 

to monitor identified material issues 

with, document weaknesses or 

deficiencies of, and remedy significant 

deterioration in performance of such 

service providers. 

The proposed changes to the Board 

Charter would remove statements 

indicating that a substantial portion of 

directors must be independent ‘‘of OCC 

and OCC’s management,’’ and instead 

state that the Board’s policy is to require 

that a majority of directors be 

independent at all times. The proposed 

changes would also clarify the role of 

the GNC in selecting Exchange 

Directors, including a requirement that 

the GNC have a written evaluation 

process for Exchange Directors, and that 

the GNC will evaluate each Exchange 

Director before that director is elected 

by the Equity Exchange at each annual 

meeting of stockholders. 

OCC proposes adding the word 

‘‘additional’’ before ‘‘independence’’ to 

describe independence criteria for the 

Audit Committee. The amendments 

would also detail specific requirements 

the Board would use to determine 

whether an individual director meets 

the definition of Public Director in the 

Board Charter and Article III of the ByLaws. Further proposed amendments to 

the Board Charter would require the 

Board to have at least five directors who 

are not an associated person or 

employee of an entity or entity affiliate 

that is registered or exempt from 

registration with the Commission or 

Commodity Futures Trading 

Commission. The current requirement 

that a Public Director must not be 

affiliated with any national securities 

exchange or association, designated 

contract market, futures commission 

merchant, or broker or dealer in 

securities would be removed. 

Finally, OCC proposes amending 

Article III, Section A of the By-Laws to 

require the GNC to nominate for Public 

Director a non-associated person or 

employee of an entity or entity affiliate 

that is registered or exempt from 

registration with the Commission or 

Commodity Futures Trading 

Commission before each annual meeting 

of stockholders where a Public Director 

is elected. 

B. GNC Charter 

OCC proposes amending the GNC 

Charter to provide that at least a 

majority of the Committee must be 

comprised of independent directors. 

The proposed changes also require the 

Chair to be a Public Director who is also 

an independent director. Under the 

amendments, the GNC would be 

required to assist the Board in 

overseeing OCC’s corporate governance 

processes, including evaluating Board 

candidates, to more closely align 

existing practice with rule text. This 

evaluation would include a new written 

process and a packet of materials 

containing background and other 

relevant information for all Board 

candidates. In addition, as part of the 

written evaluation process, the GNC 

would be required to identify, screen, 

and review individuals qualified to 

serve as Directors, and to document the 

outcome of the written evaluation 

process once completed. 

OCC also proposes eliminating from 

the GNC Charter the terms ‘‘Member 

Directors’’ and ‘‘Public Directors’’ and 

instead using the term ‘‘Directors.’’ 

Under the amendments, the GNC would 

be required to specify fitness standards 

for serving as a director that are 

documented in writing and approved by 

the Board. When evaluating director 

nominees, the GNC would be required 

to consider the views of other 

stakeholders who may be affected by the 

decisions of the Board, other than 

owners and Clearing Members. Finally, 

the GNC would be required to review 

and advise the board on whether 

directors are independent, and annually 

recommend for Board approval the 

appointment of directors to Board 

committees and assignment of 

Committee Chairs. 

C. Risk Committee Charter 

The proposed amendments to the Risk 

Committee Charter would require the 

GNC and the Board, in making their 

nominations, to take into consideration 

a broad array of market participants on 

risk management issues. The proposed 

amendments would also amend the Risk 

Committee Charter to provide that at 

least a majority of the Committee must 

be comprised of independent directors. 

Finally, the Risk Committee would be 

required to provide risk assessments to 

the Board for any service providers of 

core services. 

D. Technology Committee Charter 

OCC proposes amending the 

Technology Committee Charter to 

provide that at least a majority of the 

Technology Committee must be 

comprised of independent directors. 

E. Compensation and Performance 

Committee (‘‘CPC’’) Charter 

OCC proposes amending the CPC 

Charter to provide that at least a 

majority of the Committee must be 

comprised of independent directors. In 

addition, OCC proposes expanding the 


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description of the role of the CPC in 

overseeing OCC’s human resources 

programs and requiring the CPC to 

oversee the development of human 

resources programs and policies, 

including talent acquisition, 

compensation performance 

management, diversity, equity, and 

inclusion programs, training and 

development, benefits, and succession 

planning for critical roles. 

F. Regulatory Committee Charter 

OCC proposes amending the 

Regulatory Committee Charter to 

provide that at least a majority of the 

Committee must be comprised of 

independent directors. The Regulatory 

Committee Charter also would be 

amended to correct minor grammatical 

errors identified in OCC’s annual 

review. 

G. Audit Committee Charter 

OCC proposes amending the Audit 

Committee Charter to provide that at 

least a majority of the Audit Committee 

must be comprised of independent 

directors. 

H. Fitness Standards 

OCC proposes amending its Fitness 

Standards to specify that, when 

considering nominees for election or 

appointment to the Board, the GNC 

must consider whether the individual 

would help demonstrate that the Board 

has diverse skills, knowledge, and 

experience and whether the individual 

understands and considers the views of 

stakeholders who may be affected by 

Board decisions other than OCC’s 

owners and Clearing Members. 

OCC also proposes amending its 

Fitness Standards to align with the 

proposed changes to the description of 

Public Director and the proposed 

changes in OCC’s Board Charter and ByLaws.Specifically, the proposed 

amendments would replace current 

language in the Fitness Standards 

prohibiting a director from having an 

affiliation with any national securities 

exchange, national securities 

association, designated contract market, 

futures commission merchant, or 

broker-dealer in securities with 

language precluding the director from 

being an associated person or employee 

of an exempt or registered entity or 

affiliate of the Commission or 

Commodity Futures Trading 

Commission, as described above. OCC 

also proposes adding that this 

requirement will not prevent a person 

from serving as a Public Director solely 

based on some other relationship with 

an entity described in the previous 

sentence. 

I. Third-Party Risk Management 

Framework 

OCC proposes amending its ThirdParty Risk Management Framework to 

require enhanced lifecycle management 

by OCC’s management and Board for 

third-party service providers of core 

services. The amendments would 

require OCC’s Management Committee, 

as part of the process for onboarding a 

service provider of core services, to 

evaluate and document risks related to 

the service agreement with the service 

provider, assess the risks, and submit its 

findings to the Board for review and 

approval prior to onboarding. OCC’s 

Management Committee also would be 

required to conduct and report to the 

Board its evaluation of ongoing 

monitoring for service providers of core 

services. In addition, the Management 

Committee would be required to 

monitor service provider performance 

and: (i) remedy significant deterioration 

in services; (ii) address changing risks or 

material issues; or (iii) assess and 

document weaknesses or deficiencies if 

the risks or material issues cannot be 

remedied. The Management Committee 

would be required to report to the Board 

any action taken by senior management 

to remedy significant deterioration in 

performance of the service provider for 

core services or address material issues 

with the service provider for core 

services, or to assess and document 

deficiencies that cannot be remedied. 

Under the Proposed Rule Change, the 

Third-Party Risk Management 

Framework would be amended to 

provide that each OCC staff working 

group responsible for identifying and 

escalating risks throughout the thirdparty relationship lifecycle will have a 

chair and designated Management 

Committee member responsible for 

identifying matters to be escalated to the 

Management Committee. The proposed 

changes would also add a definition of 

‘‘Service Provider for Core Services’’ as 

a service provider for core services that 

directly supports the delivery of 

clearance or settlement functionality or 

any other material purpose on an going 

basis to OCC’s business through a 

written agreement. 

In Section I, Executive Summary, the 

description of Exchange-related risks 

would be broadened from those arising 

from ‘‘Exchanges’’ to those arising from 

‘‘Exchange Relationships.’’ This 

definition would be moved from a 

footnote to section V, Definitions. 

In Section II, Risk Identification, OCC 

proposes expanding the definitions of 

both Information Technology and 

Security risks and Legal and Regulatory 

risks to include when third-parties are 

unable to safeguard OCC’s systems and 

data. The proposed changes would also 

add as specifically identified Legal and 

Regulatory risks: (i) when a third-party 

fails to fulfill its obligations to OCC; (ii) 

when OCC fails to fulfill its obligations 

to a third-party; and (iii) when a thirdparty fails to comply with regulatory 

standards and protocols. 

In Section III, Relationship Lifecycle, 

OCC proposes changing the header to 

read ‘‘Third-Party Relationship Cycle,’’ 

and adding the language ‘‘in compliance 

with agreement terms’’ to clarify current 

risk management responsibilities 

relating to third-party off-boarding about 

off-boarding third-parties. 

In Section IV, Third-Party 

Relationship Management, the proposed 

changes would broaden the header from 

‘‘Exchanges’’ to ‘‘Exchange 

Relationships,’’ as noted above. As part 

of OCC’s current on-boarding process, 

OCC staff is required to present a 

summary of due diligence and onboarding activities to OCC’s Board. 

Under the Proposed Rule Change, OCC 

staff would present such summaries to 

the Management Committee as well as 

a summary of legal documents and 

requirements to the Board of Directors. 

OCC proposes inserting language to 

require the escalation of identified 

legals risks to the Legal Department. 

Further, OCC proposes replacing ‘‘OCC 

Officer’’ with ‘‘authorized signatories’’ 

to define who would be responsible for 

executing agreements that address 

control and business requirements. OCC 

proposes removing language from the 

Off-Boarding section to avoid the 

implication that OCC is authorized to 

limit connectivity with an Exchange 

only in the context of off-boarding an 

exchange. The Vendors section would 

be amended to require Information 

Technology personnel to review 

requests for on-boarding new 

technology vendors and verify that the 

vendors meet enterprise requirements. 

The Framework would be amended to 

clarify that agreements with vendors are 

required to be negotiated through the 

process outlined in OCC’s Legal 

Services Policy. Lastly, references that 

Third-Party Risk Management personnel 

monitor vendors throughout the Section 

IV would be eliminated because it is the 

vendor relationship managers who are 

responsible for monitoring vendors; 

Third-Party Risk Management personnel 

gather information and escalate if 

necessary. 

In Definitions, Section V, the 

definition of ‘‘Watch Level’’ would be 

amended to add ‘‘risk management’’ to 

a list of events requiring a risk response. 

Finally, OCC proposes combining the 

Exchange Working Group and Vendor 


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7 15 U.S.C. 78s(b)(2)(C). 

8Rule 700(b)(3), Commission Rules of Practice, 17 

CFR 201.700(b)(3). 

9 Id. 

10 Id. 

11Susquehanna Int’l Group, LLP v. Securities and 

Exchange Commission, 866 F.3d 442, 447 (D.C. Cir. 

2017) (‘‘Susquehanna’’). 

12 15 U.S.C. 78q–1(b)(3)(F) and 15 U.S.C. 78q– 

1(b)(3)(F). 

13 17 CFR 240.17Ad–22(e)(2) and 17 CFR 

240.17Ad–25. 

14 15 U.S.C. 78q–1(b)(3)(A). 

15 15 U.S.C. 78q–1(b)(3)(F). 

16See infra Section III. B. (Consistency with Rule 

17Ad–22(e)(2) under the Act). 

17 15 U.S.C. 78q–1(b)(3)(A) and 15 U.S.C. 78q– 

1(b)(3)(F). 

18 17 CFR 240.17Ad–22(e)(2)(i). 

19 17 CFR 240.17Ad–22(e)(2)(iv). 

20 17 CFR 240.17Ad–22(e)(2)(v). 

21Securities Exchange Act Release No. 78961 

(Sept. 28, 2016), 81 FR 70786, 70806 (Oct. 13, 2016) 

(File No. S7–03–14) (‘‘Standards for Covered 

Clearing Agencies’’). 

Risk Working Group to create the 

Exchange and Vendor Working Group 

throughout the Third-Party Risk 

Management Framework. OCC also 

proposes making non-substantive 

conforming changes throughout for 

consistency. 

III. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act requires 

the Commission to approve a proposed 

rule change of a self-regulatory 

organization if it finds that the Proposed 

Rule Change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

the organization.7 Under the 

Commission’s Rules of Practice, the 

‘‘burden to demonstrate that a proposed 

rule change is consistent with the 

Exchange Act and the rules and 

regulations issued thereunder . . . is on 

the self-regulatory organization [‘SRO’] 

that proposed the rule change.’’ 8

The description of a proposed rule 

change, its purpose and operation, its 

effect, and a legal analysis of its 

consistency with applicable 

requirements must all be sufficiently 

detailed and specific to support an 

affirmative Commission finding,9 and 

any failure of an SRO to provide this 

information may result in the 

Commission not having a sufficient 

basis to make an affirmative finding that 

a proposed rule change is consistent 

with the Exchange Act and the 

applicable rules and regulations.10

Moreover, ‘‘unquestioning reliance’’ on 

an SRO’s representations in a proposed 

rule change is not sufficient to justify 

Commission approval of a proposed rule 

change.11

After carefully considering the 

Proposed Rule Change, the Commission 

finds that the Proposed Rule Change is 

consistent with the requirements of the 

Exchange Act and the rules and 

regulations thereunder applicable to 

OCC. More specifically, for the reasons 

given below, the Commission finds that 

the Proposed Rule Change is consistent 

with Section 17A(b)(3)(A) and (F) of the 

Act 12 and Rules 17Ad–22(e)(2) and 

17Ad–25 thereunder.13

A. Consistency With Section 17A(b)(3) 

of the Act 

Section 17A(b)(3) of the Act requires, 

among other things, that OCC be so 

organized and has the capacity to be 

able to comply with the provisions of 

the Act and the rules and regulations 

thereunder,14 and that OCC’s rules be 

designed to foster cooperation and 

coordination with persons engaged in 

the clearance and settlement of 

securities transactions.15 Based on 

review of the record, and for the reasons 

discussed below,16 OCC’s changes are 

consistent with OCC being so organized 

and having the capacity to comply with 

the provisions of the Act and the rules 

and regulations thereunder and with 

fostering cooperation and coordination 

with persons engaged in the clearance 

and settlement of securities 

transactions. Accordingly, the Proposed 

Rule Change is consistent with the 

requirements of Sections 17A(b)(3)(A) 

and (F) of the Act.17

B. Consistency With Rule 17Ad–22(e)(2) 

Under the Act 

Rule 17Ad–22(e)(2) requires covered 

clearing agencies to, among other things, 

provide for governance arrangements 

that are clear and transparent,18

establish that the board of directors and 

senior management have appropriate 

experience and skills to discharge their 

duties and responsibilities,19 and 

specify clear and direct lines of 

responsibility.20 In adopting Rule 

17Ad–22(e)(2), the Commission 

provided guidance that a covered 

clearing agency generally should 

consider in establishing and 

maintaining policies and procedures, 

including, in part, whether the board of 

directors contains suitable members 

with the appropriate skills and 

incentives to fulfill the board’s multiple 

roles, and whether the board of directors 

should include non-executive board 

members.21

OCC’s proposed changes would 

strengthen OCC’s written fitness 

standards for board nominees. 

Strengthening the criteria by which OCC 

evaluates both directors and nominees 

would help OCC review each nominee 

in the broader context of the diversity of 

skills, knowledge, experience, and 

perspectives of the Board. Additionally, 

the proposed changes would insert 

independence requirements across 

OCC’s governance documents (e.g., 

Board and Board committee charters). 

An increased focus on director 

independence would help ensure that 

the members of OCC’s board of directors 

have the appropriate incentives to fulfill 

the Board’s roles. As a result, the 

proposed changes to fitness standards 

and as well as the broader changes 

across the governing documents are 

consistent with ensuring that OCC’s 

board of directors contains members 

with the appropriate skills and 

incentives to discharge their duties. 

The proposed changes further detail 

the lines of responsibility for 

management of third-party providers of 

core services. For example, the 

amendments to the Third-Party Risk 

Management Framework described 

above would require the Management 

Committee to evaluate and document 

risks for on-boarding, ongoing 

monitoring, and off-boarding and 

submit those findings to the Board for 

review and approval. Moreover, the 

proposed changes described above 

detail how each working group will 

have a chair and designated member 

responsible for identifying matters for 

escalation to the Management 

Committee. Separately, the proposed 

changes more clearly articulate certain 

reporting and escalation lines such as 

the escalating legal risks related to 

Exchange Relationships to OCC’s Legal 

Department, Information Technology’s 

role in on-boarding new vendors, and 

consolidation of certain working groups. 

Taken together, these procedures 

establish clear and direct lines of 

responsibility. 

As described above, OCC proposes 

several changes to improve the clarity of 

its governance arrangements. For 

example, the proposed changes to the 

CPC Charter would, consistent with 

current practice, expand the description 

of the CPC’s oversight role with regard 

to human resources at OCC. Similarly, 

OCC proposes to broaden the 

relationships contemplated in the 

Third-Party Risk Management 

Framework by replacing the references 

to ‘‘Exchanges’’ with references to 

‘‘Exchange Relationships,’’ and to 

clarify the who can execute legal 

agreements by replacing a reference to 

‘‘OCC Officers’’ with a reference to 

‘‘authorized signatories.’’ Separately, the 

proposed changes would clarify the 

situations in which OCC can limit 

connectivity with an Exchange and that 


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22 17 CFR 240.17Ad–22(e)(2). 

23 17 CFR 240.17Ad–25(b). 

24 17 CFR 240.17Ad–25(e). 

25 17 CFR 240.17Ad–25(a). 

26 17 CFR 240.17Ad–25(c). 

27 17 CFR 240.17Ad–25(i). 

28As described above, OCC’s proposed changes 

include adopting a definition of Service Provider 

for Core Services within its rules. 

29 17 CFR 240.17Ad–25. 

30 15 U.S.C. 78q–1(b)(3)(F). 

31 17 CFR 240.17Ad–22(e)(2) and 17 CFR 

240.17Ad–25. 

32 In approving the Proposed Rule Change, the 

Commission considered the proposal’s impacts on 

efficiency, competition, and capital formation. 15 

U.S.C. 78c(f). 

33 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)(1). 

4 17 CFR 240.19b–4. 

5OCC has filed the STANS Methodology 

Description and amendments thereto with the 

Commission. See Exchange Act Release Nos. 

100528 (July 15, 2024), 89 FR 58836 (July 19, 2024) 

(SR–OCC–2024–008); 98101 (Aug. 10, 2023), 88 FR 

55775 (Aug. 16, 2023) (SR–OCC–2022–012); 95319 

(July 19, 2022), 87 FR 44167 (July 25, 2022) (SR– 

OCC–2022–001); 93371 (Oct. 18, 2021), 86 FR 

58704 (Oct. 22, 2021) (SR–OCC–2021–011); 91833 

(May 10, 2021), 86 FR 26586 (May 14, 2021) (SR– 

OCC–2021–005); 91079 (Feb. 8, 2021), 86 FR 9410 

(Feb. 12, 2021) (SR–OCC–2020–016). OCC makes its 

STANS Methodology Description available to 

Clearing Members. An overview of the STANS 

methodology is on OCC’s public website: https://

www.theocc.com/Risk-Management/MarginMethodology. 

6OCC has filed the CST Methodology Description 

and amendments thereto with the Commission. See 

Exchange Act Release Nos. 100455 (July 2, 2024), 

89 FR 56452 (July 9, 2024) (SR–OCC–2024–006); 

90827 (Dec. 30, 2020), 86 FR 659 (Jan. 6, 2021) (SR– 

OCC–2020–015); 89014 (June 4, 2020), 85 FR 35446 

(June 10, 2020) (SR–OCC–2020–003); 87718 (Dec. 

11, 2019), 84 FR 68992 (Dec. 17, 2019) (SR–OCC– 

2019–010); 87717 (Dec. 11, 2019), 84 FR 68985 

(Dec. 17, 2019) (SR–OCC–2019–009); 83735 (July 

27, 2018), 83 FR 37855 (Aug. 2, 2018) (SR–OCC– 

2018–008). 

risk management issues may be a basis 

for Watch Level-related responses. 

Based on the foregoing, the Proposed 

Rule Change is consistent with the 

requirements of Rule 17Ad–22(e)(2) 

under the Act.22

C. Consistency With Rule 17Ad–25 

Under the Act 

Rule 17Ad–25 requires, among other 

things, that covered clearing agencies 

establish: requirements that a majority 

of the board of directors 23 and any 

committee 24 with Board authority be 

independent directors 25; a nominating 

committee, written evaluation process, 

fitness standards, and evaluation of the 

independence of nominees and 

directors 26; and policies and procedures 

requiring that senior management 

evaluate and document risks and 

whether the risks can be managed for 

service providers of core services.27

The changes described above require 

that OCC’s Board, and each committee 

with Board authority be composed of a 

majority of independent directors, and 

that such independence is determined 

in accordance with Rule 17Ad–25. The 

proposed changes also contemplate a 

written processes for nominating, 

evaluating, and electing directors. 

The proposed changes revise the 

Board Charter and Third-Party Risk 

Management Framework to require that 

senior management review, approve, 

monitor, and remediate risks with 

service providers of core services.28 The 

proposed amendments also require that 

senior management perform ongoing 

monitoring of relationships with service 

providers of core services, and 

document whether the risks can be 

remedied, and to inform the Board of 

their evaluation. Further, the proposed 

changes articulate the Board’s role in 

oversight of the management of service 

providers of core services through the 

reporting required of the Management 

Committee. 

Based on the foregoing, the Proposed 

Rule Change is consistent with the 

requirements of Rule 17Ad–25 under 

the Act.29

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the Proposed 

Rule Change is consistent with the 

requirements of the Act, and in 

particular, Sections 17A(b)(3)(A) and (F) 

of the Act 30 and Rules 17Ad–22(e)(2) 

and 17Ad–25.31

It is Therefore Ordered pursuant to 

Section 19(b)(2) of the Act that the 

Proposed Rule Change (SR–OCC–2024– 

015) be, and hereby is, approved.32

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–28548 Filed 12–5–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–101780; File No. SR–OCC– 

2024–016] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change by 

The Options Clearing Corporation 

Concerning Enhancements to the 

System for Theoretical Analysis and 

Numerical Simulations (‘‘STANS’’) and 

OCC’s Comprehensive Stress Testing 

(‘‘CST’’) Methodology, To Better 

Capture the Risks Associated With 

Short-Dated Options 

December 2, 2024. 

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

Securities Exchange Act of 1934 

(‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule 

19b–4 thereunder,2 notice is hereby 

given that on November 22, 2024, The 

Options Clearing Corporation (‘‘OCC’’) 

filed with the Securities and Exchange 

Commission (‘‘SEC’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared primarily by OCC. 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 

This proposed rule change Pursuant 

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

the Securities Exchange Act of 1934 

(‘‘Exchange Act’’ or ‘‘Act’’),3 and Rule 

19b–4 thereunder,4 The Options 

Clearing Corporation (‘‘OCC’’) is filing 

with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change in connection 

with enhancements to the modeling 

approach for implied volatility 

components within OCC’s margin 

methodology, the System for Theoretical 

Analysis and Numerical Simulations 

(‘‘STANS’’) and OCC’s Comprehensive 

Stress Testing (‘‘CST’’) methodology, to 

better capture the risks associated with 

short-dated options. Specifically, this 

proposed rule change would, as 

described below: (1) align the day-count 

convention between option price 

smoothing and implied volatility 

scenario generation, and (2) extend the 

term structure of the implied volatility 

shocks to cover implied volatility risk 

associated with options of less than onemonth expiration. 

The proposed changes to OCC’s 

STANS Methodology Description 5 and 

Comprehensive Stress Testing & 

Clearing Fund Methodology, and 

Liquidity Risk Management 

Description 6 (‘‘CST Methodology 

Description’’) are contained in Exhibits 

5A and 5B, to File No. SR–OCC–2024– 

016, respectively. Material proposed to 

be added is marked by underlining and 

material proposed to be deleted is 

marked with strikethrough text. Within 

the documents, new, revised, and 

deleted text related to the proposed rule 

change have been incorporated in 

section 2.1.3 (Implied Volatilities 

Scenarios) and 2.1.4 (S&P 500 Implied 

Volatilities Scenarios) of the STANS 

Methodology Description and section 

3.3.2 (Volatility Shock Model) of the 


lotter on DSK11XQN23PROD with NOTICES1