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[Federal Register Volume 89, Number 249 (Monday, December 30, 2024)]
[Notices]
[Pages 106660-106663]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-31094]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102018; File No. SR-OCC-2024-018]

Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Update The Options Clearing Corporation's By-Laws

December 20, 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 December 19, 2024, the Options Clearing 
Corporation (``OCC'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared primarily by 
OCC. OCC filed the proposed rule change pursuant to Section 19(b)(3)(A) 
\3\ of the Act and Rule 19b-4(f)(6) \4\ thereunder. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change would amend the definition of ``Fund 
Share'' in Article I of OCC's By-Laws (including the Interpretation and 
Policy), consistent with the staff advisory (``Advisory'') recently 
issued by the Commodity Futures Trading Commission (``CFTC'') regarding 
the clearing of options on spot commodity exchange traded funds 
(``ETFs'') \5\ (hereinafter ``Proposed Rule Change'').
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    \5\ See CFTC Staff Advisory Relating to the Clearing of Options 
on Spot Commodity Exchange Traded Funds (ETFs), Letter No. 24-16 
(Nov. 15, 2024), available at https://www.cftc.gov/csl/24-16/download.
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    The proposed changes to OCC's By-Laws are included [sic] in Exhibit 
5 of

[[Page 106661]]

File No. SR-OCC-2024-018. Material proposed to be added to OCC's By-
Laws as currently in effect is underlined and material proposed to be 
deleted is marked in strikethrough text. All capitalized terms not 
defined herein have the same meaning as set forth in the OCC By-Laws 
and Rules.\6\
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    \6\ OCC's By-Laws and Rules can be found on OCC's public 
website: https://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules.
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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

    OCC clears and settles options on ETFs. Such ETFs are classified 
under the definition of ``Fund Share'' in OCC's By-Laws. An 
Interpretation and Policy to the fund share definition lists by name 
certain precious metals commodity-based ETFs for which OCC can provide 
clearance and settlement services on related options and security 
futures contracts. This practice began in 2008 because of the uncertain 
jurisdictional status of options or security futures on precious metals 
commodity-based ETFs.\7\ As exchanges have launched more of these 
products since 2008, OCC has, for each product, (i) sought CFTC 
exemptive relief pursuant to Section 4(c) of the Commodity Exchange Act 
(``CEA'') \8\ from regulations that would be inconsistent with the 
trading and clearing of these products if the underlying were 
considered a commodity that is not a security \9\ and then (ii) filed a 
proposed rule change with the Commission to incorporate the name of the 
product for which relief was granted into the Interpretation and Policy 
of the fund share definition.\10\
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    \7\ In seeking comment to an OCC request to clear and settle 
options on streetTRACKS[supreg] Gold Trust Shares, the CFTC 
indicated that, ``novel derivative products that implicate areas of 
overlapping regulatory concern should be permitted to trade in 
either or both a CFTC- or SEC- regulated environment [. . .]'' The 
CFTC further noted that in considering the exemption, ``the CFTC 
need not--and does not--find that [these options] are (or are not) 
subject to the CEA'' and that the options were ```novel instruments' 
and the `determination as to [their] jurisdiction is not 
straightforward.' Given their potential usefulness to the market, 
however, the [CFTC] believes that this may be an appropriate case 
for issuing an exemption without making a finding as to the nature 
of these particular instruments.'' See Proposal to Exempt the 
Trading and Clearing of Certain Products Related to 
streetTRACKS[supreg] Gold Trust Shares, 73 FR 21917, at 21918 (Apr. 
23, 2008).
    \8\ 7 U.S.C. 7a-1.
    \9\ See infra note 15.
    \10\ See e.g., Securities Exchange Act Release Nos. 57466 (Mar. 
11, 2008), 73 FR 14297 (Mar. 17, 2008) and 57695 (Apr. 21, 2008), 73 
FR 22452 (Apr. 25, 2008) (SR-OCC-2008-07) (SPDR Gold Trust f/k/a 
streetTRACKS[supreg] Gold Shares); 59054 (Dec. 4, 2008), 73 FR 75159 
(Dec. 10, 2008) (SR-OCC-2008-13 and SR-OCC-2008-14) (iShares COMEX 
Gold Trust Shares and iShares Silver Trust Shares); 61254 (Dec. 29, 
2009), 75 FR 1093 (Jan. 8, 2010) (SR-OCC-2009-20) (ETFS Physical 
Swiss Gold Shares and ETFS Physical Silver Shares).
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    On November 15, 2024, the CFTC issued the Advisory relating to the 
clearing of options on spot commodity ETFs. The Advisory provided that 
it is ``substantially likely'' that these spot commodity ETF shares 
would be held to be securities.\11\ The Advisory further concluded that 
``these shares listed on SEC registered national securities exchanges 
do not implicate the [CFTC's] jurisdiction, and therefore, the clearing 
of these options by OCC would be undertaken in its capacity as a 
registered clearing agency subject to SEC oversight.'' \12\ OCC 
believes the Advisory largely forecloses any potential liability under 
the CEA, as amended, including the argument that OCC's clearance and 
settlement of options on spot commodity ETFs constitutes a violation of 
the CEA.
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    \11\ See supra note 5.
    \12\ Id.
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    In light of the Advisory, OCC will no longer seek product-by-
product exemptive relief from the CFTC to clear spot commodity-based 
ETF products. OCC will, therefore, no longer need to specifically 
identify commodity-based products in the fund share definition. OCC 
proposes to make clarifications to the fund share definition based on 
the contents of the Advisory and delete the Interpretation and Policy 
to the fund share definition, which is no longer relevant or necessary, 
as further described below.
1. Purpose
    The purpose of the Proposed Rule Change is to amend the definition 
of ``Fund Share'' in Article I of OCC's By-Laws (including the 
Interpretation and Policy), consistent with the Advisory recently 
issued by the CFTC regarding the clearing of options on spot commodity 
ETFs.\13\ Currently, Article I, Section 1, of OCC's By-Laws defines 
``Fund Share'' as a publicly traded security (as defined in Section 
3(a)(10) of the Act, as amended) that represents an interest in a 
trust, investment company, commodity pool, or similar entity holding 
and/or trading in one or more investments. Where the investments are 
commodities, the amended definition would clarify that such term is 
subject to any applicable advisory, exemption or other relief or 
guidance issued by the CFTC. This proposed change is intended to 
facilitate the clearance of these products in a manner that is 
consistent with the Advisory and applicable regulations.
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    \13\ Id.
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    Additionally, the Interpretation and Policy to the fund share 
definition currently identifies on a product-by-product basis specific 
precious metals commodity-based ETFs that OCC includes within the 
definition of fund share. The Commission previously approved proposed 
rule changes by OCC in which OCC added these precious metals commodity-
based ETFs to the Interpretation and Policy.\14\ As discussed above, 
the purpose of adding specific ETF names to the Interpretation and 
Policy was to clarify the jurisdictional status of options or security 
futures on these products, and was done in conjunction with the CFTC's 
issuance of a 4(c) order exempting the trading and clearing of the 
specific ETF names from CFTC regulations with which trading and 
clearing would be inconsistent if the products were commodities that 
were not securities.\15\ Because the Advisory finds it ``substantially 
likely'' likely that spot commodity ETF shares would be held to be 
securities, OCC believes that it no longer needs to seek product-by-
product exemptive relief from the CFTC to clear spot commodity-based 
ETF products, including precious metals commodity-based ETFs. OCC will 
no longer need to specifically identify commodity-based products in the 
fund share definition. OCC thus proposes a clean-up change to delete in 
its entirety the Interpretation and Policy to the fund share 
definition, which is no longer

[[Page 106662]]

relevant or necessary, to avoid potential confusion.
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    \14\ See e.g., Securities Exchange Act Release Nos. 57895 (May 
30, 2008), 73 FR 32066 (June 5, 2008) (SR-OCC-2008-07) (SPDR Gold 
Trust f/k/a streetTRACKS[supreg] Gold Trust Shares)); and 61591 
(Feb. 25, 2010), 75 FR 9981 (Mar. 4, 2010) (SR-OCC-2009-20) (ETFS 
Physical Swiss Gold Shares and ETFS Physical Silver Shares).
    \15\ See e.g., 73 FR 31979 (Jun. 5, 2008) (SPDR[supreg] Gold 
Futures Contracts (f/k/a streetTRACKS[supreg] Gold Trust Shares 
security futures)); 73 FR 31981 (Jun. 5, 2008) (SPDR[supreg] Gold 
Trust Shares (f/k/a streetTRACKS[supreg] Gold Trust Shares 
options)); 73 FR 79830 (Dec. 30, 2008) (iShares[supreg] COMEX Gold 
Trust Shares and iShares[supreg] Silver Trust Shares); and 75 FR 
37406 (Jun. 29, 2010) (ETFS Physical Swiss Gold Shares and ETFS 
Physical Silver Shares).
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    In general, OCC believes that the proposed changes would provide 
additional certainty to market participants regarding OCC's treatment 
of fund shares, including commodity-based ETF products, in accordance 
with applicable regulatory requirements and guidance. OCC believes that 
this proposed rule change does not make any substantive modifications 
to the fund share definition. Instead, the proposed changes update the 
definition with current details and remove those details that have 
become irrelevant due to the Advisory. Such changes would further 
ensure that OCC's By-Laws remain up-to-date, clear, and transparent.
2. Statutory Basis
    OCC believes the Proposed Rule Change is consistent with Section 
17A of the Exchange Act \16\ and the rules and regulations thereunder 
applicable to OCC. In particular, OCC believes that the Proposed Rule 
Change is consistent with Section 17A(b)(3)(F) of the Act \17\ and Rule 
17Ad-22(e)(21) \18\ thereunder, for the reasons described below.
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    \16\ 15 U.S.C. 78q-1.
    \17\ 15 U.S.C. 78q-1(b)(3)(F).
    \18\ 17 CFR 240.17ad-22(e)(21).
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    Section 17A(b)(3)(F) \19\ of the Act requires, among other things, 
that the rules of a clearing agency be designed to remove impediments 
to and perfect the mechanism of a national system for the prompt and 
accurate clearance and settlement of securities transactions. OCC 
believes the proposed changes would facilitate the clearance of spot 
commodity-based ETF products in a manner that is consistent with 
regulatory requirements and guidance. OCC believes the proposed changes 
would provide additional certainty to market participants regarding 
OCC's treatment of such products, which would reduce the likelihood 
that OCC Clearing Members would have jurisdictional concerns over 
trading these products. Reducing jurisdictional concerns that could 
impede the trading of new products would remove impediments to and 
perfect the mechanism of a national system for the prompt and accurate 
clearance and settlement of securities transactions by providing 
certainty regarding the treatment of fund shares.
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    \19\ 15 U.S.C. 78q-1(b)(3)(F).
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    Commission Rule 17Ad-22(e)(21) requires OCC to establish, 
implement, maintain, and enforce written policies and procedures 
reasonably designed to ``be efficient and effective in meeting the 
requirements of its [clearing members] and the markets it serves . . . 
.'' \20\ OCC believes the Proposed Rule Change is consistent with this 
provision because, as described above, by providing clarity in its By-
Laws, it will (i) reduce the likelihood that OCC Clearing Members would 
have jurisdictional concerns over trading these products and (ii) 
ensure that OCC's By-Laws remain up-to-date and transparent. The 
proposed changes to the fund share definition are intended to 
facilitate the clearance of commodity-based ETF products in a manner 
that is consistent with the Advisory and applicable regulations and to 
provide additional certainty regarding OCC's treatment of such 
products. The proposed deletion of the Interpretation and Policy to the 
fund share definition would prevent potential confusion, as this 
provision is no longer relevant or necessary. Moreover, the Proposed 
Rule Change is not inconsistent with the By-Laws and Rules of OCC.
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    \20\ 17 CFR 240.17ad-22(e)(21).
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(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act \21\ requires that the rules of a 
clearing agency not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. OCC does not 
believe that the proposed amendments to the fund share definition, 
including the Interpretation and Policy, would impose any burden on 
competition because they would merely establish clear treatment of fund 
shares in a manner that is consistent with regulatory requirements and 
guidance. OCC believes that this Proposed Rule Change does not make any 
substantive modifications to the fund share definition but, instead, 
updates the definition with current details and removes those details 
that have become irrelevant due to the Advisory. The proposed changes 
would not inhibit access to OCC's services in any way, would apply to 
all Clearing Members uniformly and would not disadvantage or favor any 
particular user in relationship to another user. Accordingly, OCC does 
not believe that the Proposed Rule Change would have any impact or 
impose a burden on competition.
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    \21\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments 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

    Because the foregoing 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 \22\ and 
Rule 19b-4(f)(6) \23\ thereunder.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(6).
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    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.
    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.\24\
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    \24\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC Regulation 40.6.
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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 [email protected]. Please include 
file number SR-OCC-2024-018 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-OCC-2024-018. This file

[[Page 106663]]

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 such filing also will be available for 
inspection and copying at the principal office of OCC and on OCC's 
website at https://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules.
    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-OCC-2024-018 and should 
be submitted on or before January 21, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-31094 Filed 12-27-24; 8:45 am]
BILLING CODE 8011-01-P
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