7720 Federal Register / Vol. 90, No. 13 / Wednesday, January 22, 2025 / Notices 

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

2 17 CFR 240.19b–4. 

3See Notice of Filing infra note 4, at 89 FR 97131. 

4See Securities Exchange Act Release No. 101780 

(Dec. 2, 2024), 89 FR 97131 (Dec. 6, 2024) (File No. 

SR–OCC–2024–016) (‘‘Notice of Filing’’). 

5Capitalized 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. 

6SDOs are option contracts with a maturity of 

less than or equal to one month to expiration. See 

Notice of Filing, 89 FR at 97132. 

7See Notice of Filing, 89 FR 97132 (citing Cboe, 

The Rise of SPX & 0DTE Options (July 27, 2023), 

available at https://go.cboe.com/l/77532/2023-07- 

27/ffc83k). 

8See Notice of Filing, 89 FR 97132 (stating that 

‘‘opportunities exist to improve model performance 

for Clearing Member portfolios dominated by 

SDOs’’). 

9OCC uses the term ‘‘day count convention’’ to 

refer to a standardized methodology for calculating 

the number of days between two dates. See Notice 

of Filing, 89 FR 97132, note 13. Both calendar and 

business day conventions are used by OCC in 

STANS and CST calculations. Id. 

10The implied volatility of an option is a measure 

of the expected future volatility of the option’s 

underlying security at expiration, which is reflected 

in the current option premium in the market. See 

Notice of Filing, 89 FR 97132, note 12. 

to comments and suggestions submitted 

by March 24, 2025. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

Please direct your written comments 

to: Austin Gerig, Director/Chief Data 

Officer, Securities and Exchange 

Commission, c/o Tanya Ruttenberg, 100 

F Street NE Washington, DC 20549 or 

send an email to: PRA_Mailbox@

sec.gov. 

Dated: January 15, 2025. 

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2025–01417 Filed 1–21–25; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meetings 

FEDERAL REGISTER CITATION OF PREVIOUS

ANNOUNCEMENT: Publishing in the 

Federal Register of January 21, 2025. 

PREVIOUSLY ANNOUNCED TIME AND DATE OF

THE MEETING: Thursday, January 23, 

2025, at 2 p.m. 

CHANGES IN THE MEETING: The Closed 

Meeting scheduled for Thursday, 

January 23, 2025, at 2 p.m., has been 

changed to Thursday, January 23, 2025, 

at 1 p.m. 

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: January 17, 2025. 

Stephanie J. Fouse, 

Assistant Secretary. 

[FR Doc. 2025–01596 Filed 1–17–25; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–102203; File Nos. SR– 

OCC–2024–016] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Order 

Granting Approval 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 

January 15, 2025. 

I. Introduction 

On November 22, 2024, the Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change SR–OCC–2024– 

016, pursuant to Section 19(b) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) 1 and Rule 19b–4 2

thereunder, to (i) align assumptions 

across models and (ii) generate implied 

volatility shocks for options with a tenor 

of less than one month that are 

consistent with observed market 

dynamics.3 The proposed rule change 

was published for public comment in 

the Federal Register on December 6, 

2024.4 The Commission has received no 

comments regarding the proposed rule 

change. For the reasons discussed 

below, the Commission is approving the 

proposed rule change (hereinafter 

defined as ‘‘Proposed Rule Change’’). 

II. Background 

OCC is a central counterparty 

(‘‘CCP’’), which means that as part of its 

function as a clearing agency, it 

interposes itself as the buyer to every 

seller and the seller to every buyer for 

financial transactions. As the CCP for 

the listed options markets and for 

certain futures in the United States, 

OCC is exposed to the risk that one or 

more of its Clearing Members may fail 

to make a payment or to deliver 

securities. OCC addresses such risk 

exposure, in part, by requiring its 

members to provide collateral, 

including both margin collateral and 

Clearing Fund collateral. Margin is the 

collateral that CCPs collect to cover 

potential changes in a member’s 

positions over a set period of time 

during normal market conditions. OCC’s 

Clearing Fund is a mutualized pool of 

financial resources to which each 

Clearing Member is required to 

contribute to ensure that OCC maintains 

sufficient qualifying liquid resources to 

manage its liquidity risk, and to address 

the tail risk that the margin collateral 

OCC collects from each Clearing 

Member might be insufficient to cover 

OCC’s credit exposure to a defaulting 

member in extreme but plausible market 

conditions. 

OCC’s methodology for calculating 

margin collateral requirements is called 

the System for Theoretical Analysis and 

Numerical Simulations (‘‘STANS’’).5

OCC’s methodology for sizing and 

monitoring its Clearing Fund is called 

the Comprehensive Stress Testing 

(‘‘CST’’) methodology. OCC relies on 

STANS and the CST methodology to set 

collateral requirements to cover the 

financial risk posed by the positions 

OCC clears for its members. OCC states 

that the proportion of such positions 

that comprise short-dated options 

(‘‘SDOs’’) 6 has increased over the past 

several years.7 In response to this 

observation, OCC examined the risks 

posed by the increase in SDO trading 

and identified opportunities to improve 

the performance of the models 

comprising STANS and the CST 

methodology in covering the financial 

risk posed by the increase in SDO 

trading observed by OCC.8 As described 

below, OCC proposes two changes to the 

models comprising STANS and the CST 

methodology: one set of changes related 

to the day count conventions 9 and one 

set of changes related to the application 

of volatility shocks to theoretical option 

prices.10


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Federal Register / Vol. 90, No. 13 / Wednesday, January 22, 2025 / Notices 7721 

11See Notice of Filing, 89 FR 97132. 

12OCC states that SDOs are more sensitive to daycount convention alignment than contracts with 

longer expirations due to the proportionally larger 

difference in time to expiry between the trading day 

convention and calendar day convention for shorter 

dated tenors. See Notice of Filing, 89 FR 97133. 

13The ‘‘tenor’’ of an option is the amount of time 

remaining until its expiration or maturity. See 

Notice of Filing, 89 FR 97132, note 14. 

14OCC has observed that the day-over-day at the 

money implied volatility changes for the options 

with a one-week tenor are approximately twice that 

of the 1M tenor on certain risk factors such as SPX, 

RUT, QQQ, AAPL, and TSLA. See Notice of Filing, 

89 FR 97132, note 15. 

15See Notice of Filing, 89 FR 97135. 

16See Notice of Filing, 89 FR 97136. 

17 Id. 

18 Id. 

19 15 U.S.C. 78s(b)(2)(C). 

20Rule 700(b)(3), Commission Rules of Practice, 

17 CFR 201.700(b)(3). 

21 Id. 

22 Id. 

23Susquehanna Int’l Group, LLP v. Securities and 

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

2017). 

24 17 CFR 240.17Ad–22(e)(4). 

25 17 CFR 240.17Ad–22(e)(6). 

26 15 U.S.C. 78q–1(b)(3)(F). 

27 17 CFR 240.17Ad–22(e)(4)(vi). 

28 17 CFR 240.17Ad–22(e)(6)(i). 

Day count conventions. The models 

supporting STANS and CST rely on two 

different day count conventions. 

Specifically, OCC’s option price 

smoothing process uses calendar day 

convention, and OCC’s implied 

volatility simulation uses trading day 

convention. OCC asserts that the usage 

of two different day count conventions 

results in differences in implied 

volatility, especially when non-trading 

days make up a large portion of the 

time-to-expiration (e.g., on Fridays for 

options that expire the following 

Monday),11 which is more pronounced 

in SDOs.12

OCC proposes to address the 

misalignment of day count conventions 

used in the models underlying both 

STANS and the CST methodology by 

processing data through a series of 

conversions to ensure that the data 

presented to the price smoothing and 

volatility simulation models is 

consistent with the assumptions of 

those models. Specifically, OCC would 

convert implied volatility data into a 

trading day convention before feeding 

that data into OCC’s implied volatility 

simulation models. OCC would then 

convert the output of its implied 

volatility simulation models back into a 

calendar day convention before feeding 

those results into OCC’s price 

smoothing process. 

Volatility shocks. OCC’s model for 

simulating theoretical prices assumes 

that the implied volatility shocks of the 

one-month tenor (‘‘1M’’) are sufficient to 

cover the implied volatility changes for 

SDO tenors.13 As constructed, the 

models underlying both STANS and the 

CST methodology impose the same 

volatility shocks applied to 1M options 

to all options with tenors of less than 

one month. However, changes in 

implied volatility for SDOs can be much 

larger than the changes observed in 1M 

options.14

OCC proposes to estimate implied 

volatility shocks specific to options with 

a shorter tenor than 1M options rather 

than imposing the same shock on all 

options with one month or less to 

maturity. Within STANS, OCC proposes 

to derive the shocks for SDOs from the 

shock applied to 1M options. 

Specifically, OCC would derive the 

shocks for such options through the 

application of a square-root decay to the 

1M option volality.15 Within the CST 

methodology, OCC proposes to extend 

its existing processes for establishing 

implied volatility shocks to specific 

maturities that are less than one month 

(i.e., two weeks, one week) and to rely 

on linear interpolation to establish 

shocks for even shorter maturities (i.e., 

down to three days). 

OCC summarized the potential 

impacts of the proposed changes to both 

margin and Clearing Fund requirements 

based on data from July 2023 to 

September 2024.16 For margin, OCC 

observed that the proposed changes 

would have caused an increase in 

average daily margin requirements of 

0.58 percent with the daily impacts 

ranging from a 0.81 percent decrease to 

a 3.21 percent increase.17 For the 

Clearing Fund, OCC observed that the 

proposed changes would have caused 

the total Clearing Fund to decrease by 

0.14 percent.18

III. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Exchange 

Act directs the Commission to approve 

a proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Exchange 

Act and the rules and regulations 

thereunder applicable to such 

organization.19 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.’’ 20

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,21 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.22

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.23

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, the Commission 

finds that the Proposed Rule Change is 

consistent with Exchange Act Rules 

17Ad–22(e)(4) 24 and 17Ad–22(e)(6),25

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

Exchange Act,26 as described in detail 

below. 

A. Consistency With Rules 17Ad– 

22(e)(4) and (6) Under the Exchange Act 

Rule 17Ad–22(e)(4) under the 

Exchange Act requires that a covered 

clearing agency establish, implement, 

maintain, and enforce written policies 

and procedures reasonably designed to 

effectively identify, measure, monitor, 

and manage its credit risk exposures to 

participants and those arising from 

payment clearing, and settlement 

processes by, in part, testing the 

sufficiency of its financial resources 

available to meet the minimum 

standards under Rules 17Ad–22(e)(4)(i) 

through (iii), as applicable.27 Rule 

17Ad–22(e)(6) under the Exchange Act 

requires that a covered clearing agency 

establish, implement, maintain, and 

enforce written policies and procedures 

reasonably designed to cover, if the 

covered clearing agency provides 

central counterparty services, its credit 

exposures to its participants by 

establishing a risk-based margin system 

that, among other things, considers, and 

produces margin levels commensurate 

with, the risks and particular attributes 

of each relevant product, portfolio, and 

market.28 Based on the review of the 

record, and for the reasons described 

below, OCC’s proposed update to 

STANS and the CST methodology in the 

manner described above is consistent 

with Rules 17Ad–22(e)(4) and (6). 

As described above, OCC proposes 

changes to both its margin methodology 

(STANS) and stress testing (CST) 

methodology. The proposed changes 


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7722 Federal Register / Vol. 90, No. 13 / Wednesday, January 22, 2025 / Notices 

29 17 CFR 240.17Ad–22(e)(4) and 17 CFR 

240.17Ad–22(e)(6). 

30 15 U.S.C. 78q–1(b)(3)(F). 

31 15 U.S.C. 78q–1(b)(3)(F). 

32 In approving the Proposed Rule Change, the 

Commission has considered the proposed rules’ 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

33 15 U.S.C. 78s(b)(2). 

34 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Exchange Act Release No. 100664 (Aug.6, 

2024), 89 FR 65695 (Aug. 12, 2024) (File No. SR– 

OCC–2024–010). 

4See Exchange Act Release No. 101446 (Oct. 25, 

2024), 89 FR 91000 (Nov 18, 2024) (File No. S7– 

10–23). 

5OCC’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. 

would resolve inconsistent model 

assumptions by aligning the day count 

convention across models. The 

proposed changes would also provide 

for implied volatility shocks to options 

with tenors of less than one month that 

are consistent with historical evidence, 

rather than simply applying the shocks 

generated for 1M options. Each of the 

proposed changes is designed to more 

accurately reflect the particular 

attributes of the options OCC clears. In 

the context of STANS, therefore, the 

proposed changes would support the 

production of margining requirements 

consistent with such attributes. In the 

context of OCC’s CST methodology, the 

changes would provide a more accurate 

basis on which to test the sufficiency of 

OCC’s financial resources. 

Accordingly, the Proposed Rule 

Change is consistent with Rules 17Ad– 

22(e)(4) and (6) under the Exchange 

Act.29

B. Consistency With Section 

17A(b)(3)(F) of the Exchange Act 

Section 17A(b)(3)(F) of the Exchange 

Act requires, among other things, that 

the rules of a clearing agency be 

designed to assure the safeguarding of 

securities and funds which are in the 

custody or control of the clearing agency 

or for which it is responsible.30 As 

discussed above, the proposed changes 

would improve the performance of the 

models comprising STANS and the CST 

methodology by, among other things, 

supporting the production of margining 

requirements consistent with the 

particular attributes of the products that 

OCC clears and providing a more 

accurate basis on which to test the 

sufficiency of OCC’s financial resources. 

These changes will, in turn, help ensure 

that OCC collects appropriate Clearing 

Fund collateral and reduce the 

likelihood that OCC would need to 

utilitze Clearing Fund collateral of nondefaulting clearing members in the 

event of a default. For these reasons, 

OCC’s proposed update to its Margin 

Policy in the manner described above is 

consistent with the safeguarding of 

securities and funds which are in OCC’s 

custody or control or for which it is 

responsible. Accordingly, the Proposed 

Rule Change is consistent with the 

requirements of Section 17A(b)(3)(F) of 

the Exchange Act.31

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the Proposed 

Rule Change is consistent with the 

requirements of the Exchange Act, and 

in particular, the requirements of 

Section 17A of the Exchange Act 32 and 

the rules and regulations thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Exchange Act,33

that the Proposed Rule Change (SR– 

OCC–2024–016) be, and hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.34

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2025–01414 Filed 1–21–25; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–102202; File No. SR–OCC– 

2024–010] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Amendment No. 3 to 

Proposed Rule Change by The Options 

Clearing Corporation To Establish a 

Margin Add-On Charge That Would Be 

Applied to All Clearing Member 

Accounts To Help Mitigate the Risks 

Arising From Intraday and Overnight 

Trading Activity 

January 15, 2025. 

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 January 14, 2025, The 

Options Clearing Corporation (‘‘OCC’’) 

filed with the Securities and Exchange 

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

This amendment (‘‘Amendment No. 3’’) 

to 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 

On July 25, 2024, OCC filed the 

proposed rule change File No. SR–OCC– 

2024–010 (‘‘Initial Filing’’).3 On January 

8, 2025, OCC filed Amendment No. 2 to 

the Initial Filing (‘‘Amendment No. 2’’). 

This Amendment No. 3 to the Initial 

Filing is identical in substance to 

Amendment No. 2 but includes changes 

to references and table format to 

facilitate publication of the notice of 

filing in the Federal Register and 

supersedes Amendment No. 2. 

Amendment No. 3 would establish a 

margin add-on charge that would be 

applied to all Clearing Member accounts 

to help mitigate the risks arising from 

intraday and overnight trading activity. 

Through this amendment OCC is 

incorporating certain modifications to 

its proposal to address comments from 

industry participants. OCC also intends 

to conform the proposed rule change to 

the Commission’s final rule 4 amending 

the Covered Clearing Agency (‘‘CCA’’) 

Standards concerning intraday margin 

calls, and to extend the implementation 

timeframe to address industry concerns 

and participants’ desire for additional 

time to prepare for the proposed 

changes. This Amendment No. 3 would 

modify those aspects of the proposal as 

further described below and amend and 

restate the Initial Filing. 

Proposed changes to OCC’s Rules are 

contained in Exhibit 5A to Amendment 

No. 3 to File No. SR–OCC–2024–010. 

Proposed changes to OCC’s Margin 

Policy are contained in confidential 

Exhibit 5B to Amendment No. 3 to File 

No. SR–OCC–2024–010. Material 

proposed to be added is marked by 

italicizing and material proposed to be 

deleted is marked with strikethrough 

text. All terms with initial capitalization 

that are not otherwise defined herein 

have the same meaning as set forth in 

the OCC By-Laws and Rules.5

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), 


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