January 18, 2024

VIA CFTC PORTAL

Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, DC 20581

Re: Rule Certification Concerning Updates to OCC Rules, By-Laws, and Clearing 

Member Documents in Connection with a Shortened Settlement Cycle

Dear Secretary Kirkpatrick:

Pursuant to Section 5c(c)(1) of the Commodity Exchange Act, as amended (“Act”), and 

Commodity Futures Trading Commission (“CFTC”) Regulation 40.6, The Options Clearing 

Corporation (“OCC”) hereby certifies changes to its Rules, By-Laws, and certain Clearing Member 

documents1in connection with the recent amendments adopted by the Securities and Exchange 

Commission (“SEC”) to Rule 15c6-1(a)2under the Securities Exchange Act of 1934 (“Exchange 

Act”). The amendments to Rule 15c6-1(a)3shorten the standard settlement cycle for most brokerdealer securities transactions from two business days after the trade date to one business day after 

the trade date. The date of implementation of the rule is at least 10 business days following receipt 

of the certification by the CFTC and is further described below. The proposal has also been 

submitted to the SEC under Section 19(b) of the Exchange Act and Rule 19b-4 thereunder. The 

change will not be implemented until OCC has obtained all necessary regulatory approvals.

In conformity with the requirements of Regulation 40.6(a)(7), OCC states the following:

Explanation and Analysis

The purpose of the certification is to modify the OCC Rules, By-Laws, and certain Clearing 

Member documents in connection with the recently adopted amendments to SEC Rule 15c6-1(a) to 

shorten the standard settlement cycle for most broker-dealer securities transactions from two 

1 The Clearing Member documents consist of contracts and forms, that in conjunction with OCC’s By-Laws and 

Rules, establish and govern the relationship between OCC and each Clearing Member. See Exchange Act 

Release No. 73577 (Nov. 12, 2014), 79 FR 68733 (Nov. 18, 2014) (File No. SR-OCC-2014-20).

2 17 CFR 240.15c6-1(a).

3

Id.
Christopher J. Kirkpatrick

January 18, 2024

Page 2

business days after the trade date (“T+2”) to one business day after the trade date (“T+1”).4 

Specifically, OCC proposes to (i) revise provisions connected to late exercise that are impacted by a 

shortened settlement cycle, (ii) change timeframes related to the standard settlement cycle to reflect 

T+1, and (iii) make certain other conforming and clarifying changes. The compliance date regarding 

the amendments to Rule 15c6-1(a) is May 28, 2024.5 

The proposed changes are included in Exhibits A through F. Material proposed to be added 

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

Background

Rule 15c6-1 establishes a standard settlement cycle for most purchases or sales of securities 

by broker-dealers. The SEC adopted Rule 15c6-1(a) in 1993 to establish T+3 as the standard trade 

settlement cycle (instead of five business days after the trade date), and it became effective in June 

1995.7 In March 1995, the SEC approved changes to OCC’s Rules that were proposed to ensure 

consistency with the new T+3 standard settlement cycle.8 In 2017, the SEC amended Rule 15c6-1(a) 

to shorten the standard settlement cycle from T+3 to T+2.9 In coordination with the SEC’s 

designated September 2017 compliance date, OCC adopted changes to its Rules and By-Laws to 

ensure consistency with the new T+2 standard settlement cycle.10

Since the change to T+2, the SEC and the financial services industry have continued to 

explore the idea of shortening the settlement cycle even further. In February 2021, the Depository 

Trust and Clearing Corporation (“DTCC”) published a White Paper discussing the benefits of 

accelerated settlement beyond T+2.11 Following the publication, the securities industry formed an 

4 Exchange Act Release No. 96930 (Feb. 15, 2023), 88 FR 13872 (Mar. 6, 2023) (“T+1 Adopting Release”). 

5

Id. 

6 OCC’s By-Laws and Rules can be found on OCC’s public website, available 

https://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules.

7 Exchange Act Release No. 33023 (Oct. 6, 1993), 58 FR 52891 (Oct. 13, 1993) (final rule adopting Rule 

15c6-1); Exchange Act Release No. 34952 (Nov. 9, 1994), 59 FR 59137 (changing the effective date of the 

final rule from June 1, 1995 to June 7, 1995).

8 Exchange Act Release No. 35552 (Mar. 30, 1995), 60 FR 17600 (Apr. 6, 1995) (SR-OCC-94-11). 

9 Exchange Act Release No. 80295 (Mar. 22, 2017), 82 FR 15564 (Mar. 29, 2017).

10 Exchange Act Release No. 81008 (June 23, 2017), 82 FR 29598 (June 29, 2017) (SR-OCC-2017-015) (filed for 

immediate effectiveness on June 9, 2017). 

11 See DTCC, “Advancing Together: Leading the Industry to Accelerated Settlement” (Feb. 2021), available at

https://www.dtcc.com/-/media/Files/PDFs/White%20Paper/DTCC-Accelerated-Settle-WP-2021.pdf.
Christopher J. Kirkpatrick

January 18, 2024

Page 3

Industry Steering Committee (“ISC”) and an Industry Working Group (“IWG”) to develop industry 

consensus to transition to an accelerated settlement cycle.12 The ISC engaged Deloitte & Touche 

LLP (“Deloitte”) to support the effort, including facilitating analysis on the benefits and barriers to 

transitioning to T+1 and coordinating with the industry on the transition.13 In December 2021, 

DTCC, SIFMA, and ICI, together with Deloitte, published a report containing the ISC’s 

recommendations for migrating to a T+1 standard settlement cycle.14

On February 9, 2022, the SEC proposed amendments to Rule 15c6-1(a) to shorten the 

standard settlement cycle to T+1 on the basis that the shorter settlement cycle would reduce the 

credit, market and liquidity risks in securities transactions faced by market participants and U.S. 

investors.15 On February 15, 2023, the SEC adopted these amendments to Rule 15c6-1(a).16 In light 

of this action by the SEC, OCC proposes to implement the changes described herein in connection 

with the T+1 settlement cycle on the SEC’s designated T+1 compliance date.

Proposed Changes

OCC proposes certain amendments in light of the anticipated industry move to a T+1 

settlement cycle. OCC has determined that shortening the settlement cycle to T+1 would require 

revisions to OCC Rules, By-Laws, and Clearing Member documents, which are currently aligned 

with a T+2 settlement cycle. Specifically, OCC proposes to (i) revise provisions connected to late 

exercise that are impacted by a shortened settlement cycle, (ii) change timeframes related to the 

standard settlement cycle to reflect T+1, and (iii) make certain other conforming and clarifying 

changes. 

(i) Provisions Connected to Late Exercise 

OCC proposes to amend provisions in Chapter VIII of the Rules that are affected by a 

shortened settlement cycle. Rules 801 and 805 require Clearing Members to submit exercise notices 

12 Exchange Act Release No. 94196 (Feb. 9, 2022), 87 FR 10436 (Feb. 24, 2022) (“T+1 Proposing Release”).

13 Id.

14 See Deloitte, DTCC, Investment Company Institute (“ICI”), and Securities Industry and Financial Markets 

Association (“SIFMA”), “Accelerating the U.S. Securities Settlement Cycle to T+1” (Dec. 1, 2021), available 

at https://www.sifma.org/wp-content/uploads/2021/12/Accelerating-the-U.S.-Securities-Settlement-Cycle-toT1-December-1-2021.pdf.

15 T+1 Proposing Release, supra note 12; see also SEC Press Release 2022-21: “SEC Issues Proposal to Reduce 

Risks in Clearance and Settlement” (Feb. 9, 2022). 

16 T+1 Adopting Release, supra note 4.
Christopher J. Kirkpatrick

January 18, 2024

Page 4

within the timeframes prescribed by OCC.17 These Rules currently set out an exception process to 

accommodate notices submitted after these timeframes. OCC’s late exercise process provides final 

deadlines by which late exercise notices must be received by OCC and subjects Clearing Members 

to potential disciplinary action (as the filing of such notice may be deemed a violation) and liability 

for a late filing fee, among other things.18 More specifically, subject to certain conditions, Rule 801, 

which addresses the exercise of options other than at expiration, allows a Clearing Member to file an 

exercise notice after the prescribed deadline solely for the purpose of correcting a bona fide error on 

the part of the Clearing Member or a customer and imposes liability for a late filing fee of $250,000 

per line item listed on the notice. Similarly, OCC Rule 805, which addresses exercises on 

expiration, imposes liability for a late filing fee of $250,000 per line item on a Clearing Member that 

submits an exercise notice after the prescribed deadline. 

OCC proposes to cease facilitating the late exercise process after the move to T+1. OCC 

reviewed its internal operational processes to assess the implications of the shortened settlement 

cycle on late exercises. Currently, when a late exercise is processed, OCC sends the delivery 

information to the National Securities Clearing Corporation (“NSCC”) for T+1 settlement.19 

Reducing the standard settlement time to T+1 would reduce the time available to OCC and NSCC to 

transmit information and perform operational and risk management steps associated with their 

arrangement. Specifically, moving to T+1 would require settlement activity from a late exercise to 

be sent to NSCC for same-day settlement, which is not supported by the Accord. Late exercise 

activity would thus not be guaranteed by NSCC, resulting in various implications, as the link 

between OCC and NSCC allows common clearing members, and their customers, to realize 

financial and operational efficiencies through the combined settlement of obligations from their 

OCC and NSCC cleared positions. OCC proposes to no longer accommodate late exercises due to 

operational challenges for same-day settlement and limitations under the Accord. Even if OCC were 

to find another operational mechanism outside of NSCC to process the settlement of a late exercise 

submission in a T+1 environment, any such processing would negate the settlement certainty for all 

market participants that the SEC seeks to achieve in its T+1 proposal. 

OCC does not believe that such changes represent a significant departure from its current 

practices or the practices of other self-regulatory organizations. As described above, OCC’s Rules 

17 The current deadline for submitting exercise notices other than at expiration is 6:00 p.m. CT. The current 

deadline for submitting exercise notices at expiration is 8:00 p.m. CT on monthly standard Friday expirations, 

7:00 p.m. CT on weekly Friday expirations, and 6:30 p.m. CT on Monday and Wednesday expirations. 

18 Under Rule 801, the deadline for submitting late exercise notices is 6:00 a.m. CT. Under Rule 805, the 

deadline for submitting late exercise notices is the expiration time of the option, which is currently 10:59 p.m. 

CT (as set forth in Article 1, Section 1(E)(23) of the By-Laws). 

19 OCC maintains a link with NSCC to facilitate the settlement of physically settled stock options and stock 

futures. More specifically, OCC and NSCC are parties to a Stock Options and Futures Settlement Agreement 

that specifies the time at which responsibility for the settlement of such obligations passes from OCC to NSCC 

(the “Accord”). See Exchange Act Release No. 81266 (July 31, 2017), 82 FR 36484 (Aug. 4, 2017) (File No. 

SR-OCC-2017-013).
Christopher J. Kirkpatrick

January 18, 2024

Page 5

allow OCC to prescribe timeframes during which Clearing Members may submit exercise notices. 

Following the proposed changes, OCC would continue to maintain deadlines for receiving exercise 

notices. The Financial Industry Regulatory Authority (“FINRA”) and the options exchanges have 

similarly established a cut-off time for receiving exercise notices.20 Moreover, the late exercise 

process at OCC is intended to be used in extenuating circumstances and is not routinely performed. 

The filing of a late exercise notice may be deemed a violation subject to disciplinary action under 

Rules 801 and 805. Most recently, in 2020, OCC raised the late filing fee from $75,000 to $250,000 

per line item to further disincentivize late exercises.21 For these reasons, OCC would cease 

accepting late exercise notices and proposes to amend the following provisions in connection with 

such change.

OCC proposes to revise Rule 801, which addresses the exercise of options other than at 

expiration. OCC propose to remove language in paragraph (a) that requires a Clearing Member to 

prepare and preserve a memorandum describing the error that gave rise to a late filing. OCC also 

proposes to remove paragraph (d) that grants certain individuals the discretion to permit a Clearing 

Member to file a late exercise notice to correct a bona fide error, subject to certain conditions, 

including liability for a late filing fee, a final deadline for submission, and potential disciplinary 

action.22 OCC accordingly proposes to remove a reference to paragraph (d) in Rule 801, 

Interpretation and Policy .02.

OCC propose similar changes to Rule 805, which addresses exercises on expiration. OCC 

proposes to remove the language in paragraph (c) and related language in paragraph (e) that allows 

Clearing Members to file late exercise notices subject to a final deadline for submission. OCC 

would replace the text in paragraph (c) with the term “Reserved.” OCC proposes to remove 

paragraphs (g), (h), and (i) that set out various terms and conditions governing the submission of late 

exercise notices, including liability for a late filing fee and potential disciplinary action for the 

Clearing Member. OCC would eliminate and update references to the provisions in Rule 805 

(including the Interpretation and Policy) and make conforming changes throughout the Rules, 

including in Rules 1305, 1401, and 2702.

20 See e.g., FINRA Rule 2360(b)(23)(A)(iii); Nasdaq Options 6B, Section 1(c); NYSE Arca Rule 6.24-O(c).

21 See Exchange Act Release No. 88310 (Mar. 2, 2020), 85 FR 13198 (Mar. 6, 2020) (File No. SR-OCC2020-001) (noting that the late exercise fee is intended to encourage Clearing Members to be diligent in 

processing exercise notices and to improve back office procedures).

22 For the avoidance of doubt, Clearing Members may still correct errors following the proposed changes but 

must make any corrections prior to daily processing deadlines. OCC discussed the cessation of late exercises 

following T+1 with the Operations Roundtable, which solicits feedback from interested stakeholders such as 

Clearing Members. No substantive opposing views were raised in these discussions. 
Christopher J. Kirkpatrick

January 18, 2024

Page 6

(ii) Timeframes Related to the Standard Settlement Cycle 

OCC proposes changes to timeframes in its Rules, By-Laws, and Clearing Member 

documents that are related to the current T+2 standard settlement cycle. The following provisions 

would need to be updated to facilitate the move to T+1 and are discussed in more detail below: 

• OCC Rule 901 (Settlement Through Correspondent Clearing Corporations);23

• OCC Rule 903 (Obligation to Deliver);

• OCC Rule 1302 (Delivery of Underlying Securities);

• OCC Rule 1302B (Delivery of Underlying Treasury Securities);

• OCC Rule 1503 (Exercise Settlement Date for Event Options and Range Options);

• OCC Rule 2201 (Instructions to the Corporation);

• OCC Rule 2208 (Settlement Date);

• Article XXI of OCC’s By-Laws (Stock Loan/Hedge Program); 

• OCC Rule 2209A (Termination of Market Loans); and

• OCC Rule 2502 (Settlement Date for BOUNDs).

OCC proposes to amend certain of its Rules that govern the settlement of physically-settled 

options and futures through NSCC. Rule 901 requires that certain obligations be settled through the 

facilities of NSCC. Consistent with the new standard settlement cycle, OCC proposes to amend 

paragraph (c) of Rule 901 to remove a parenthetical indicating that “regular way” settlement under 

NSCC’s rules and procedures does not occur on T+1. Further, paragraph (d) permits OCC to revoke 

a specification in any delivery advice that settlement be made through the facilities of NSCC at any 

time prior to the obligation time. In such event, Rule 901(d) allows specified OCC senior officers to 

extend or postpone the time for delivery to no more than two business days after the date of such 

revocation. To be consistent with the T+1 settlement cycle, OCC proposes to change the amount of 

time that OCC has to extend or postpone the time of delivery to one business day. 

OCC proposes related changes to conform language with the T+1 settlement cycle in Rule 

901(f) and (g) and in certain associated Clearing Member documents. Rule 901(f) permits a 

Clearing Member (the “Appointing Clearing Member”) that is not an NSCC member to appoint 

another Clearing Member that is an NSCC member (the “Appointed Clearing Member”) to act on its 

behalf with respect to the settlement of exercised or matured cleared securities in its accounts 

through NSCC. OCC maintains a related Clearing Member document (the “Appointment of 

Clearing Member Form” or an “appointment form”) that permits the Appointed Clearing Member to 

act on behalf of the Appointing Clearing Member for this purpose. Rule 901(g) permits a Canadian 

23 Article I, Section 1.C.(32) of OCC’s By-Laws defines the term “correspondent clearing corporation” to 

mean National Securities Clearing Corporation (“NSCC”) or any successor thereto which, “by agreement with 

[OCC], provides facilities for settlements in respect of exercised option contracts or BOUNDs or in respect of 

delivery obligations arising from physically-settled stock futures.” The Accord is the current agreement that 

governs NSCC settlement of OCC related activity. 
Christopher J. Kirkpatrick

January 18, 2024

Page 7

Clearing Member, on behalf of which CDS Clearing and Depository Services Inc. (“CDS”)24

maintains a subaccount at NSCC, to appoint CDS to act on its behalf with respect to the settlement 

of exercised or matured cleared securities in its accounts through NSCC. OCC also maintains a 

related Clearing Member document (the “Appointment of CDS — Stock Settlement Form” or an 

“appointment form”) that permits CDS to act on behalf of the Canadian Clearing Member for this 

purpose. Such appointments currently become effective as of the second business day following the 

day on which OCC receives written notice, or such later date as may be specified. Under the 

proposed rule change, OCC would replace the “second” business day with the “first” business day in 

Rule 901(f) and (g) and in the appointment forms.

Rule 903 governs a Clearing Member’s obligation to deliver when either a delivery advice or 

OCC directs that settlement be made on a broker-to-broker basis. Under Rule 903, the delivery date 

for physically-settled options is the second business day following the day on which the exercise 

notice was, or is deemed to have been, properly tendered to OCC, and the delivery date for 

physically settled security futures is generally the second business day following the maturity date. 

OCC proposes to replace references to the “second” business day with the “first” business day. 

In Chapter XIII regarding futures, futures options and commodity options, OCC proposes to 

revise Rule 1302 concerning the delivery of underlying securities and Rule 1302B concerning the 

delivery of underlying Treasury securities. With certain exceptions, Rule 1302 currently provides 

that the delivery date for a physically-settled stock future is the second business day following the 

maturity date of the applicable series. Rule 1302B(a) currently provides that the delivery date for 

each physically-settled Treasury future in respect of which a delivery intent has been submitted (or 

deemed submitted) is the second business day following such submission (or deemed submission). 

OCC also maintains a related Clearing Member document (the “Designation of Clearing Member” 

or a “designation form”) that permits, among other things, a Clearing Member to designate another 

Clearing Member for the purposes of effecting settlement of physically-settled treasury futures 

through the Fixed Income Clearing Corporation (“FICC”).25 OCC proposes to replace references to 

the “second” business day in Rules 1302 and 1302B and in the designation form with the “first” 

business day. OCC also proposes corresponding changes to update references from the “second” 

business day to the “first” business day with respect to applicable deadlines specified in paragraphs 

(d), (e), and (j) of Rule 1302B.

OCC proposes similar changes to make language consistent with the T+1 settlement cycle in 

Rule 1503. With certain exceptions, Rule 1503 currently provides that the exercise settlement date 

for a credit default option and credit default basket option is the second business day following the 

24 CDS is Canada’s national securities depository, which, among other things, facilitates the settlement of 

cross-border transactions with the U.S. and has relationships with NSCC and The Depository Trust Company 

(“DTC”). 

25 FICC provides central counterparty services to firms that participate in the U.S. government and mortgagebacked securities markets. 
Christopher J. Kirkpatrick

January 18, 2024

Page 8

date on which the option is deemed to have been exercised. Under the proposed rule change, OCC 

would replace the “second” business day with the “first” business day. 

OCC also proposes to amend provisions of its Rules and By-Laws concerning its two Stock 

Loan Programs. OCC operates two programs in which it acts as a central counterparty for stock loan 

transactions: the Stock Loan/Hedge Program and Market Loan Program.26 The Stock Loan/Hedge 

Program allows Clearing Members to use borrowed and loaned securities to reduce OCC margin 

requirements. The Market Loan Program is a program whereby OCC processes and maintains stock 

loan positions that have originated through a Loan Market.27 

In respect of the Stock Loan/Hedge Program, Rule 2201(c) currently permits a Canadian 

Clearing Member on behalf of which CDS maintains a subaccount at DTC to appoint CDS to act on 

its behalf with respect to effecting delivery orders for stock loan and stock borrow transactions in its 

accounts through DTC. OCC also maintains a related Clearing Member document (the 

“Appointment of CDS — Stock Loan Form” or an “appointment form”) that permits CDS to act on 

behalf of the Canadian Clearing Member for this purpose. Such appointment currently becomes 

effective as of the second business day following the day on which OCC receives written notice, or 

such later date as may be specified. Under the proposed rule change, OCC would replace the 

“second” business day with the “first” business day in Rule 2201(c) and in the appointment form. 

In addition, with respect to the Stock Loan/Hedge Program, Rule 2208(a) currently provides 

that the settlement date for the termination of a stock loan will be the earlier of: (1) the date on 

which the borrowing Clearing Member initiates the termination or (2) the date that is two stock loan 

business days after the date on which the lending Clearing Member initiates the termination. OCC 

proposes to amend Rule 2208(a) to change “two stock loan business days” to “one stock loan 

business day.”

OCC may terminate outstanding stock loans under certain conditions pursuant to Article 

XXI, Section 2(c) of OCC’s By-Laws with respect to the Stock Loan/Hedge Program. If any stock 

loans are so terminated, OCC is required to provide written notice to the affected Clearing Members 

specifying the date on which such termination is to become effective, which will be at least two 

stock loan business days after the date of such notice. OCC proposes to make the effective date 

consistent with the new T+1 settlement cycle by changing the minimum number of days between 

notice and termination from two to one.

Regarding the Market Loan Program, a market loan (i.e., a loan of eligible stock effected 

through a Loan Market) is terminated by the relevant Clearing Member providing a return or recall 

26 Information on the Stock Loan/Hedge Program and Market Loan Program can be found on OCC’s public 

website, available at https://www.theocc.com/clearance-and-settlement/stock-loan-programs. 

27 Article I, Section 1.L.(5) of OCC’s By-Laws defines “Loan Market” as an electronic platform included in 

OCC’s Market Loan Program that supports securities lending and borrowing transactions by matching lenders 

and borrowers based on loan terms that each party is willing to accept.
Christopher J. Kirkpatrick

January 18, 2024

Page 9

notice to the Loan Market with respect to a specified quantity of loaned stock under Rule 2209A. 

Rule 2209A(a)(3) discusses the scenario where a recall transaction fails to settle by the settlement 

time on the second stock loan business day following the day that the transaction was first 

submitted. OCC proposes to replace “second” stock loan business day with “first” stock loan 

business day. Under Rule 2209A(d), OCC may terminate outstanding market loans under certain 

conditions. If any market loans are so terminated, OCC is required to provide written notice to the 

affected Clearing Members specifying the date on which such termination is to become effective, 

which will be at least two stock loan business days after the date of such notice. OCC proposes to 

make the effective date consistent with the new T+1 settlement cycle by changing the minimum 

number of days between notice and termination from two to one.

OCC proposes to amend Rule 2502 concerning the settlement date for BOUNDs. Namely, 

OCC proposes to update the settlement date for a BOUND contract from the second business day 

following the expiration date to the first business day.

(iii) Conforming and Clarifying Changes 

OCC proposes changes to Chapter VI of its Rules related to deposits in lieu of margin. In 

lieu of depositing margin, OCC permits a Clearing Member or an approved custodian to deposit 

eligible collateral in respect of certain option contracts included in a short position in accordance 

with OCC Rule 610. More specifically, OCC permits certain types of deposits in lieu of margin, 

including member specific deposits, third-party specific deposits, and escrow deposits, which are 

further described in Rules 610A, 610B and 610C, respectively.28

With certain exceptions, OCC Rule 610C(o) provides that any escrow deposit in respect of a 

short position in stock put options will be released by OCC on its own initiative at a specified time 

on the fourth business day following the expiration date.29 OCC proposes to amend this outdated 

provision to state that such deposits will be released by OCC at a specified time following the 

expiration date. Reference to the specific business day would be removed from the Rules and, 

instead, would be centralized in and made available through the Operations Manual, along with 

other timeframes and deadlines specified by OCC. The Operations Manual would state that this 

release of collateral would occur on the next business day following the expiration date. Shortening 

the period for the automatic release of collateral to the next business day following the expiration 

date would be in line with the changes described above to shorten the current settlement cycle to 

28 Member specific deposits are equity securities deposited by clearing members at DTC at the direction of 

their customers; third-party specific deposits are equity securities deposited by custodian banks at DTC at the 

direction of their customers; and escrow deposits can consist of cash deposits held at a custodian bank for the 

benefit of OCC, in addition to equities, and U.S. Government securities pledged to OCC through DTC by

escrow deposit banks at the direction of their customers.

29 The exceptions in OCC Rule 610C(o) include that (1) the Clearing Member’s obligations in respect of such 

short position have not been satisfied or (2) the deposit is subject to a “hold” instruction (i.e., an instruction 

requesting that OCC not release such deposit).
Christopher J. Kirkpatrick

January 18, 2024

Page 10

T+1. OCC believes that such change would align with the goals of the T+1 Adopting Release to 

reduce central counterparty exposure to credit, market, and liquidity risk arising from its obligations 

to its participants, as there is no need for OCC to hold the collateral for an extended period of time.30 

OCC proposes conforming changes throughout Chapter VI. OCC proposes to amend Rule 

610B(d)(2) regarding third-party specific deposits31 and Rule 610C(p) regarding escrow deposits in 

respect of a short position in index options32 to uniformly state that such deposits will be released by 

OCC at a specified time following the expiration date, which would be consistent with the language 

described above in amended Rule 610C(o). OCC also proposes language in new paragraph (2) of 

Rule 610A(c) to address the automatic release of any member specific deposits by OCC, which 

would largely align with the language in amended Rule 610B(d)(2).33 This addition is intended to 

be clarifying in nature, as OCC currently releases member specific deposits in the same general 

manner as set out in Rule 610B(d)(2) for third-party specific deposits. Consistent with the change 

described above, automatic release would occur on the next business day following the expiration 

date for member specific, third-party specific and escrow deposits and would be set out in the 

Operations Manual. These changes are intended to ensure consistent language and practices to

promote clarity for market participants. These changes are made in conjunction with the revisions to 

Rule 610C(o) and align with the goals of the T+1 Adopting Release to reduce central counterparty 

exposure to credit, market, and liquidity risk arising from its obligations to its participants, as there 

is no need for OCC to hold the collateral for an extended period of time.34 

OCC further proposes revisions to Chapter XIV in relation to Treasury securities options. As 

U.S. Treasury securities commonly settle on a T+1 basis, OCC proposes to update the exercise 

settlement date for Treasury securities options from the second business day following the expiration 

date to the first business day in Rule 1402(a). Additionally, Clearing Members are required to notify 

OCC within a prescribed timeframe if a trade required to be completed pursuant to Rule 1403 has 

30 See T+1 Adopting Release, supra note 4.

31 Rule 610B(d)(2) provides that any third-party specific deposit will be released by OCC on its own initiative 

at a specified time on the business day following the exercise settlement date unless (1) the settlement 

obligations in respect of such short position have not been met, that NSCC has determined to suspend, decline 

or cease to act for the Clearing Member in respect of whose account such deposit was made, or, that NSCC has 

determined to prohibit or limit such Clearing Member’s access to services; (2) OCC has directed that the 

exercise be settled otherwise than through NSCC; or (3) the deposit is subject to a “hold” instruction. 

32 Rule 610C(p) provides that such escrow deposit will be released by OCC on its own initiative at a specified 

time on the first business day following the expiration date unless (1) the Clearing Member carrying the short 

position is not in full compliance with its obligations to OCC or (2) the deposit is subject to a “hold” 

instruction.

33 The proposed text in Rule 610A(c)(2) would mirror the amended text in Rule 610B(d)(2) with minor 

changes to remove or replace provisions associated with third-party specific deposits with member specific 

deposits.

34 See T+1 Adopting Release, supra note 4.
Christopher J. Kirkpatrick

January 18, 2024

Page 11

not been successfully matched at FICC.35 Under Rule 1404, if OCC receives timely notice of a 

failure to match a trade, the affected Clearing Members are required to attempt to resolve the failure 

such that settlement could occur through FICC by the specified deadline on the second business day 

following the expiration date. If the failure is not resolved by such deadline, the Clearing Members 

are required to notify OCC within a specified time on the second business day following the 

expiration date. OCC also proposes to update these references from the “second” business day to 

the “first” business day in Rule 1404. Similar to the changes described above, these changes would 

promote consistency between OCC’s Rules and the settlement cycle for the relevant asset class. 

Implementation Timeframe

As discussed above, OCC would implement the proposed rule change in coordination with 

the SEC’s compliance date for the amendments to Rule 15c6-1(a) and the transition to T+1. OCC 

would provide notice to Clearing Members of the implementation through an Information 

Memorandum posted to its public website at least two (2) weeks prior to implementation. 

Consistency with DCO Core Principles

OCC reviewed the DCO core principles (“Core Principles”) as set forth in the Act, the 

regulations thereunder, and the provisions applicable to a DCO that elects to be subject to the 

provisions of 17 CFR Subpart C (“Subpart C DCO”). During this review, OCC identified the 

following as potentially being impacted:

Legal Risk Considerations. OCC believes that the proposed changes are consistent with 

Core Principle R36 and the CFTC Regulations thereunder, which require a DCO to have a wellfounded, transparent, and enforceable legal framework for each aspect of the activities of the DCO. 

Specifically, CFTC Regulation 39.27(b) requires, among other things, that a DCO operate pursuant 

to a well-founded, transparent, and enforceable legal framework that addresses each aspect of the 

activities of the DCO.37 The proposed changes are designed to modify OCC’s Rules, By-Laws, and 

Clearing Member documents that would otherwise become outdated upon the change to the T+1 

standard settlement cycle, or present other operational difficulties or concerns. The proposed 

changes would allow OCC to maintain provisions and practices that are both clear and consistent 

with the standard settlement cycle that is specified in Rule 15c6-1(a), which would help ensure that 

OCC’s Rules, By-Laws, and Clearing Member documents remain well-founded, clear, transparent, 

and enforceable. Additional changes are proposed to OCC’s Rules that would amend an outdated 

provision and ensure consistency with the settlement cycle for the relevant asset class and regarding

35 Under Rule 1403, OCC requires every Treasury Securities Clearing Member to be a participant in the 

Government Securities Division (“GSD”) of FICC or designate a GSD participant as its representative to 

submit trade information into FICC’s real-time trade matching system. 

36 7 U.S.C. 7a-1(c)(2)(R).

37 17 CFR 39.27(b).
Christopher J. Kirkpatrick

January 18, 2024

Page 12

the automatic release of deposits, which would ensure that OCC’s Rules are well-founded, clear, 

transparent, and enforceable. 

For these reasons, OCC believes that the proposed changes are consistent with the 

requirements of the DCO Core Principles and the CFTC Regulations thereunder. 

Opposing Views

No substantive opposing views were expressed related to the rule amendments by OCC’s 

Board members, Clearing Members or market participants. 

Notice of Pending Rule Certification

OCC hereby certifies that notice of this rule filing has been given to Clearing Members of 

OCC in compliance with Regulation 40.6(a)(2) by posting a copy of this certification on OCC’s 

website concurrently with the filing of this submission.

Certification

OCC hereby certifies that the rules set forth in Exhibits A through F of the enclosed filing 

comply with the Act and the CFTC’s regulations thereunder. 

Should you have any questions regarding this matter, please do not hesitate to contact me.

Sincerely,

/s/ Maria Alarcon 

Maria Alarcon

Assistant General Counsel

Enclosure: Exhibits A and F