December 11, 2020

VIA ELECTRONIC MAIL

Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, DC 20581

Re: Rule Filing SR-OCC-2020-014 Rule Certification

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, enclosed is a copy of the 

above-referenced rule filing submitted by The Options Clearing Corporation (“OCC”). The date of 

implementation of the rule is at least 10 business days following receipt of the rule filing by the 

CFTC or the date the proposed rule is approved by the Securities and Exchange Commission 

(“SEC”) or otherwise becomes effective under the Securities Exchange Act of 1934 (“Exchange 

Act”). This rule filing has been submitted to the SEC under the Exchange Act. This rule filing would 

adopt a Third-Party Risk Management Framework (“TPRMF”) and retire the Counterparty Credit 

Risk Management Policy (“CCRMP”).

OCC has requested confidential treatment for Exhibits 3a-3j and 5b-5f to SR-OCC-2020-014

(contained in pages 62-139 and 147-221 of SR-OCC-2020-014).

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

Explanation and Analysis

The proposed TPRMF is contained in confidential Exhibit 5a. Material proposed to be added 

to Exhibits 5a-5f 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.1

1 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.
Christopher J. Kirkpatrick

October 8, 2020

Page 2

Background

OCC proposes to adopt the proposed TPRMF, which would replace the CCRMP and provide 

an overview of OCC’s overall approach to Third-Party2 risk management. The proposed TPRMF 

would identify the risks that pertain to OCC’s Third-Party relationships and the actions taken by 

OCC at each stage of the relationship. OCC plans to make the proposed TPRMF publicly available 

on its website, which would provide transparency into OCC’s approach to Third-Party risk 

management for interested market participants. Currently, the CCRMP includes information about 

risk management related to direct and indirect participants, Liquidity Providers, asset custodians,

settlement banks, letter of credit issuers, investment counterparties, and financial market utilities 

(“FMU”) arising from its payment, clearing, and settlement processes. Under the proposed TPRMF, 

OCC would consolidate into one document its process for managing the risks associated with all 

Third-Party relationships across the entire lifecycle of their relationship with OCC. OCC believes 

the consolidation provides a more comprehensive and clear presentation of OCC’s Third-Party risk 

management without requiring a reader to seek multiple sources. 

Proposed Third-Party Risk Management Framework

The proposed TPRMF would state that as a central counterparty, OCC is exposed to risks 

arising from its Third-Party relationships. The proposed TPRMF would outline OCC’s approach to 

identify, measure, monitor, and manage risks arising from Third-Party relationships including:

Clearing Members; Clearing Banks, custodians, liquidity providers and investment counterparties

(“Financial Institutions”); FMUs;3 Exchanges;4 and vendors.

The proposed TPRMF would be approved annually by the Risk Committee of OCC’s Board 

(“Risk Committee”) and implemented by the OCC Management Committee (“MC”).

Risk Identification

The proposed TPRMF would state that OCC faces risks associated with its Third-Party 

relationships, including:

• Financial risks arising from a Clearing Member failing to meet its financial obligations to OCC including, 

but not limited to, obligations related to settlement, margin, and Clearing Fund. OCC may also face 

financial risks from other Third-Parties not meeting their obligations to OCC, including, but not limited 

2 Under the proposed TPRMF, a Third-Party would be defined as: a Clearing Member, Clearing Bank, 

custodians, liquidity provider, investment counterparty, financial market utility, Exchange, or vendor, which 

also has: (i) a relationship with OCC where products and/or services are exchanged; (ii) other ongoing 

business relationships with OCC; or (iii) responsibility for OCC associated records.

3 Under the proposed TPRMF, FMUs may include any person that manages or operates a multilateral 

system for the purpose of transferring, clearing, or settling payments, securities, or other financial transactions 

among Financial Institutions or between Financial Institutions and the person. 4 Under the proposed TPRMF, Exchange relationships may include options exchanges, futures 

markets, OTC Trade Sources or Loan Markets.
Christopher J. Kirkpatrick

October 8, 2020

Page 3

to, facilitating daily settlements, providing timely access to collateral, honoring liquidity draw requests, or 

meeting obligations under an agreement.

• Operational risks arising from errors, disruptions, failures, or the inability of a Third-Party to fulfill its 

obligations to OCC. These risks include a disruption preventing OCC from completing trade processing, 

daily settlements, accessing collateral, or safeguarding OCC property, equipment, or personnel. 

• Information Technology and Security risks arising when a Third-Party is unable to safeguard OCC data 

or maintain capabilities or services to support OCC’s operations.

• Legal and Regulatory risks arising when a Third-Party fails to fulfill its obligations to OCC. These risks 

include exposure to potential litigation or regulatory compliance concerns.

Relationship Lifecycle

The proposed TPRMF would state that OCC’s relationship lifecycle is designed to identify, 

measure, monitor, and manage Third-Party risks. The proposed TPRMF would state that the 

lifecycle consists of three stages. 

• On-Boarding – The proposed TPRMF would state that Third-Parties are evaluated to determine whether 

they can engage in or expand a relationship with OCC. The proposed TPRMF would state that after 

evaluation, OCC completes any operational tasks necessary to activate the relationship.

• Ongoing Monitoring – The proposed TPRMF would state that Third-Parties are monitored for 

compliance with standards, the presence of additional or increased risks, and fulfillment of contractual 

obligations. The proposed TPRMF would state that ongoing monitoring is conducted based upon the 

nature of each relationship and is commensurate with the risks posed by the Third-Party.

• Off-Boarding – The proposed TPRMF would state that Third-Parties or OCC may elect to terminate a 

relationship. The proposed TPRMF would state that following the determination to terminate a 

relationship, OCC completes any operational tasks necessary to off-board the relationship.

•

The proposed TPRMF would state that Third-Parties that have multiple relationships with 

OCC are subject to the processes described below for each type of relationship. The proposed 

TPRMF would state that OCC recognizes that multiple relationships with a single entity may result 

in additional risks (as identified above) and incorporates this into its on-boarding and ongoing 

monitoring by reviewing affiliated relationships and their exposures at the Credit and Liquidity Risk 

Working Group (“CLRWG”).

The proposed TPRMF would state that as described below, risks identified throughout the 

relationship lifecycle are reported and escalated through associated working groups. The proposed 

TPRMF would state that working groups are cross-departmental and support OCC’s business as 

assigned by the MC. The proposed TPRMF would state that each working group has a chair and 

designated MC member who are responsible to determine the matters to be escalated to the MC. The 

proposed TPRMF would state that the working groups identified in the TPRMF have defined 

decision-making authority, functions and responsibilities as defined in the associated working group 

procedure. The proposed TPRMF would state that the working groups that support the activities 

described in the TPRMF are: CLRWG, Exchange Working Group (“EWG”), and Vendor Risk 

Working Group (“VRWG”).
Christopher J. Kirkpatrick

October 8, 2020

Page 4

Third-Party Relationship Management

Clearing Members

The proposed TPRMF would state that OCC’s membership standards are designed to be 

objective and risk-based, and are publicly disclosed in OCC’s Rules and By-Laws. The proposed 

TPRMF would state that annually, Business Operations, Financial Risk Management (“FRM”), 

Treasury, and Third-Party Risk Management (“TPRM”) assess the adequacy of OCC’s membership 

standards to address the management of risks presented by Clearing Members and the processes 

used to monitor initial and ongoing compliance with those standards, in accordance with the 

CLRWG Procedure. The proposed TPRMF would state that the review may contain 

recommendations to change the standards or monitoring processes. The proposed TPRMF would 

state that the results of the annual assessment are summarized for consecutive review and approval 

by the CLRWG, MC, Risk Committee, and if rule changes are necessary, Board. 

On-Boarding: The proposed TPRMF would state that Business Operations, FRM, and TPRM 

complete a risk-based evaluation of Clearing Member applicants by evaluating their financial 

resources, operational capacity, personnel, and facilities against OCC’s membership standards. The 

proposed TPRMF would state that FRM presents the results of this evaluation to the CLRWG and 

other key stakeholders as identified within Article V, Section 2 of OCC’s By-Laws for review and 

approval. 

Ongoing Monitoring: The proposed TPRMF would state that Clearing Members are 

monitored for ongoing compliance with OCC’s membership standards. The proposed TPRMF would 

state that FRM, with support from Business Operations and TPRM, performs Watch Level reporting 

and ongoing monitoring of financial and operational risks. The proposed TPRMF would state that in 

addition to or in support of Watch Level reporting, Business Operations and FRM conduct the 

following processes to monitor Clearing Members: 

• Determining an internal credit rating to identify creditworthiness;

• Performing periodic examinations to evaluate Clearing Member risk management policies, procedures, 

and practices; and 

• Evaluating material risks related to customers of Clearing Members. 

•

The proposed TPRMF would state that FRM provides informational Watch Level5 reporting 

at meetings of the CLRWG, MC, and Risk Committee that summarizes the circumstances leading to 

5 Under the proposed TPRMF, Watch Level would be defined as: OCC assigns a level of required 

monitoring and reporting (i.e., a “Watch Level”) based on the identification of events or trends that might 

signal the deterioration of an entity’s financial or operational ability to timely meet its future obligations to 

OCC. Watch Level is a tiered structure with financial (e.g., capital and profitability), operational (e.g., 

operational difficulties and late financial report submissions), and general business (e.g., risk management 

issues and business restrictions by another SRO) criteria at each tier. Reaching the criteria at higher tier levels 

signals a more material event or trend has been detected and an entity may require heightened risk 

management. The CLRWG may recommend changes to Watch Level criteria to the MC, which maintains 
Christopher J. Kirkpatrick

October 8, 2020

Page 5

violations of higher tier Watch Level criteria, additional risks observed, and any corrective measures 

taken by such Clearing Members.

The proposed TPRMF would state that should a Clearing Member approach or no longer 

meet minimum membership standards, protective measures may be imposed to limit or eliminate 

OCC’s counterparty exposure. The proposed TPRMF would state that OCC maintains authorities in 

its Rules (Chapter III, Chapter VI Rule 608, and Chapter VII Rules 704 and 707) to act to protect 

OCC, given the facts and circumstances of the exposure presented by a Clearing Member, including 

but not limited to the imposition of additional monitoring, changes to margin requirements or 

composition, or suspension of some or all product and account approvals.

The proposed TPRMF would state that Business Operations, FRM, and TPRM provide 

reporting to the CLRWG, comprised of results from ongoing monitoring and management of 

Clearing Member financial, operational, legal, and regulatory risks and may raise matters for 

consideration to the CLRWG. The proposed TPRMF would state that the CLRWG may take action 

or escalate the matter to the MC, in accordance with the functions and responsibilities assigned to 

the CLRWG by the MC in the CLRWG Procedure. 

Off-Boarding: The proposed TPRMF would state that a Clearing Member may voluntarily 

terminate its membership. The proposed TPRMF would state that upon request for termination, 

Business Operations and FRM ensure all financial exposures and operational capabilities are wound 

down and all obligations to OCC are satisfied before the relationship is terminated. The proposed 

TPRMF would state that in the event a Clearing Member is suspended by OCC, the suspension will 

be managed in accordance with the Default Management Policy.

Clearing Banks, Custodians, Liquidity Providers and Investment Counterparties

The proposed TPRMF would state that OCC maintains relationships with Financial 

Institutions that facilitate clearance and settlement activities, manage collateral, provide liquidity, 

and serve as investment counterparties.

On-Boarding: The proposed TPRMF would state that FRM and TPRM, with support as 

needed from Business Operations and Treasury, complete a risk-based evaluation of each entity by 

evaluating its financial resources and operational capacity. The proposed TPRMF would state that 

for custodians, the evaluation considers whether a relationship is structured to allow prompt access 

to OCC and Clearing Member assets and whether the custodian is a supervised and regulated 

institution that adheres to generally accepted accounting practices, maintains safekeeping 

procedures, and has controls that fully protect these assets. The proposed TPRMF would state that 

the results of the evaluation are presented to the CLRWG for review and recommendation for 

approval prior to presentation to the Chief Executive Officer or Chief Operating Officer, each of 

whom has the authority to approve such relationships. 

approval authority for recommended changes. FRM is responsible for implementing all approved Watch 

Level criteria changes.
Christopher J. Kirkpatrick

October 8, 2020

Page 6

Ongoing Monitoring: The proposed TPRMF would state that Business Operations, FRM, 

Treasury, and TPRM monitor the financial, operational, legal, and regulatory risks related to 

Financial Institution relationships. The proposed TPRMF would state that this monitoring includes 

Watch Level reporting, material agreement reviews, and ongoing monitoring of financial and 

operational risks. The proposed TPRMF would state that should Watch Level reporting detect 

potential issues or trends that might indicate the deterioration of a Financial Institution’s ability to 

perform, protective measures that may be applied include, but are not limited to, modifying the 

business relationship or termination of the relationship. 

The proposed TPRMF would state that Business Operations, FRM, Treasury, and TPRM 

provide reporting to the CLRWG, comprised of results from ongoing monitoring and management 

of a Financial Institution’s financial, operational, legal, and regulatory risks and may raise matters 

for consideration to the CLRWG. The proposed TPRMF would state that the CLRWG may take 

action or escalate the matter to the MC, in accordance with the functions and responsibilities 

assigned to the CLRWG by the MC in the CLRWG Procedure.

Off-Boarding: The proposed TPRMF would state that a Financial Institution relationship 

may be terminated by the Financial Institution or OCC, pursuant to applicable agreements. The 

proposed TPRMF would state that the Chief Executive Officer or Chief Operating Officer, each of 

whom has the authority, must approve the termination of a Financial Institution relationship initiated 

by OCC. The proposed TPRMF would state that OCC may terminate a relationship if risks rise to an 

unacceptable level or a relationship is no longer required. Business Operations, FRM, Treasury, and 

Legal perform activities necessary to off-board the relationship in accordance with the agreement 

between OCC and the applicable Financial Institution.

Financial Market Utilities

The proposed TPRMF would state that FMUs provide OCC with a range of services, 

including custody, stock loan processing, cross-margin programs, and securities settlement. 

On-Boarding: The proposed TPRMF would state that Business Operations, FRM, Legal, and 

TPRM consider an FMU’s financial condition, operational capabilities, and any legal or regulatory 

risks associated with the relationship during the on-boarding process. The proposed TPRMF would 

state that the CLRWG reviews this evaluation and recommends approval prior to presentation to the 

Chief Executive Officer or Chief Operating Officer, each of whom has the authority to approve such 

relationships. The proposed TPRMF would state that on-boarding of the relationship may be subject 

to completion of any necessary agreements or regulatory filings.

Ongoing Monitoring: The proposed TPRMF would state that Business Operations, FRM and 

TPRM monitor the financial, operational, legal, and regulatory risks related to FMU relationships. 

The proposed TPRMF would state that this monitoring includes Watch Level reporting, material 

agreement reviews, and ongoing monitoring of financial and operational risks. 
Christopher J. Kirkpatrick

October 8, 2020

Page 7

The proposed TPRMF would state that Business Operations, FRM, and TPRM provide 

reporting to the CLRWG, comprised of results from ongoing monitoring and management of an 

FMU’s financial, operational, legal, and regulatory risks and may raise matters for consideration to 

the CLRWG. The proposed TPRMF would state that the CLRWG may take action or escalate the 

matter to the MC in accordance with the functions and responsibilities assigned to the CLRWG by 

the MC in the CLRWG Procedure.

Off-Boarding: The proposed TPRMF would state that an FMU relationship may be 

terminated by the FMU or OCC, pursuant to applicable agreements. The proposed TPRMF would 

state that the Chief Executive Officer or Chief Operating Officer, each of whom has the authority, 

must approve the termination of an FMU relationship initiated by OCC. The proposed TPRMF 

would state that Business Operations, FRM, Legal, and TPRM coordinate the activities necessary to 

off-board the relationship, including, but not limited to, the wind down of all services with the FMU 

and, if necessary, revising OCC policies and procedures and filing rule changes with OCC’s 

regulators after receiving the appropriate internal approvals.

Exchanges

The proposed TPRMF would state that OCC provides clearing services for Exchanges 

pursuant to applicable agreements (Exchange agreements are filed with OCC's regulators, as 

required). The proposed TPRMF would state that under these agreements, OCC clears products 

including equity and index options, commodity contracts, treasury futures, security futures, and 

stock loan transactions.

On-Boarding: The proposed TPRMF would state that Product and Business Development, in 

coordination with stakeholders which may include, but are not limited to, FRM, Business 

Operations, and TPRM, completes an evaluation of proposed Exchange relationships, including 

assessing whether an Exchange meets OCC’s qualification requirements (as further described in the 

OCC By-Laws, Article VIIA – Equity Exchanges and Article VIIB – Non-Equity Exchanges). The 

proposed TPRMF would state that the due diligence performed for a proposed Exchange 

relationship is presented to the EWG for review and subsequently to the MC for approval. The 

proposed TPRMF would state that a summary of due diligence and on-boarding activities are 

presented to the Board for approval to launch. 

Ongoing Monitoring: The proposed TPRMF would state that Business Operations and 

TPRM monitor the operational, legal and regulatory risks related to Exchange relationships. The 

proposed TPRMF would state that such relationships are monitored for connectivity and trade 

activity on an ongoing basis. The proposed TPRMF would state that Exchange monitoring allows 

for internal escalation to Production Support and the EWG, and externally to Exchanges. 

The proposed TPRMF would state that Business Operations and TPRM conduct reviews to 

assess an Exchange’s operational performance, overall financial condition, and ability to meet 

contractual obligations. The proposed TPRMF would state that to assess operational performance, 

Business Operations executes testing activities throughout the year aimed at mitigating operational 
Christopher J. Kirkpatrick

October 8, 2020

Page 8

risk, including the requirement that all Exchanges must participate in annual disaster recovery tests. 

The proposed TPRMF would state that in addition, Business Operations supports external testing 

with all Exchanges upon request or related to OCC system changes and enhancements. The 

proposed TPRMF would state that TPRM monitors the financial condition of Exchanges and 

evaluates whether an Exchange’s operations meet its contractual obligations. The proposed TPRMF 

would state that Business Operations facilitates annual meetings with each Exchange that include an 

operational performance review, communicate updates about upcoming OCC system enhancements 

and changes, and seek feedback.

The proposed TPRMF would state that Business Operations and TPRM provide reporting to 

the EWG, comprised of results from ongoing monitoring and management of an Exchange’s 

financial, operational, legal and regulatory risks and may raise matters for consideration to the 

EWG. The proposed TPRMF would state that the EWG may take action or escalate the matter to the 

MC, in accordance with the functions and responsibilities assigned to the EWG by the MC in the 

EWG Procedure.

Off-Boarding: The proposed TPRMF would state that an Exchange relationship may be 

terminated by the Exchange or OCC, pursuant to the applicable Exchange agreement. The proposed 

TPRMF would state that upon request for termination by the Exchange, Business Operations notifies 

the EWG and the MC to discuss any immediate actions such as limiting connectivity with the 

Exchange to mitigate exposure to operational, legal, or regulatory risks and to determine a 

termination date. 

The proposed TPRMF would state that additionally, Business Operations leads the 

development of a deployment plan to identify the departments and required actions necessary to 

reduce any interim risk prior to termination, which may include performing clearing system 

maintenance and limiting or removing connectivity to the Exchange. The proposed TPRMF would 

state that Business Operations and other supporting departments coordinate and perform activities 

necessary to off-board the relationship in accordance with the applicable Exchange agreement.

Vendors

The proposed TPRMF would state that OCC engages and maintains vendor relationships for 

various purposes, including to accomplish its strategic objectives, outsource operational activities, 

and assist in compliance with legal and regulatory obligations. The proposed TPRMF would state 

that all Third-Party relationships that are not Clearing Members, Financial Institutions, FMUs, or 

Exchanges are treated as vendor relationships. 

On-Boarding: The proposed TPRMF would state that during on-boarding, TPRM works with 

the business area requesting the vendor to assign a vendor relationship manager (“VRM”) who is 

obligated to manage the vendor relationship and execute the phases of the vendor relationship 

lifecycle. The proposed TPRMF would state that TPRM coordinates with the VRM to complete an 

evaluation of inherent risks posed by the vendor relationship. The proposed TPRMF would state that 

the evaluation of inherent risk results in a vendor risk tier which is used to inform the level of due 

diligence and frequency of monitoring for each vendor. The proposed TPRMF would state that due 
Christopher J. Kirkpatrick

October 8, 2020

Page 9

diligence is based on the inherent risks identified and may include a review of financial health, 

operational capacity, and other standards based on the relationship. 

The proposed TPRMF would state that any potential risk issues identified are presented to 

the VRM and OCC’s Legal Department for review. Potential risk issues may also be shared with the 

VRWG. The proposed TPRMF would state that an agreement that addresses control and business 

requirements is then negotiated with the vendor and executed by an OCC officer (an OCC Vice 

President or above).

Ongoing Monitoring: The proposed TPRMF would state that VRMs and TPRM monitor 

vendors to assess whether they are delivering services as required by applicable agreements. The 

proposed TPRMF would state that the scope and frequency of monitoring is determined by the 

vendor risk tier and inherent risks identified during on-boarding. The proposed TPRMF would state 

that monitoring may include reviewing a vendor’s financial health, operational capacity, and other 

standards based on the relationship’s inherent risks. 

The proposed TPRMF would state that TPRM provides reporting to the VRWG, comprised 

of results from ongoing monitoring and management of a vendor’s financial, operational, legal, and 

regulatory risks and may raise matters for consideration to the VRWG. The proposed TPRMF would 

state that the VRWG may take action (e.g., additional monitoring, require contingency plans, and 

additional contractual requirements) or escalate the matter to the MC, in accordance with the 

functions and responsibilities assigned to the VRWG by the MC in the Vendor Risk Working Group 

Procedure.

Off-Boarding: The proposed TPRMF would state that a vendor relationship may be 

terminated by the vendor or OCC, pursuant to applicable agreements. The proposed TPRMF would 

state that OCC mitigates exposure to operational, legal, and regulatory risk and performs activities 

necessary to off-board the relationship in accordance with the applicable vendor agreement.

Retirement of Counterparty Credit Risk Management Policy

OCC proposes retiring the CCRMP and replacing it with the proposed TPRMF. Currently, 

the CCRMP includes information about the Third-Party risk management lifecycle for Clearing 

Members, Financial Institutions, and FMUs. The information related to the Third-Party risk 

management lifecycle (on-boarding, ongoing monitoring and off-boarding) is now included in the 

proposed TPRMF. The proposed TPRMF also includes information about the Third-Party risk 

management lifecycle for Exchanges and Vendors, and OCC believes consolidating its Third-Party 

risk management lifecycle information into one publicly available document will provide for greater 

efficiency and transparency. 

Additionally, by reconciling procedural information that was previously in the CCRMP with 

OCC’s existing procedures, OCC was able to eliminate redundancy that could lead to confusion. In 

the proposed TPRMF, the Third-Party risk management lifecycle for each entity type is described. 
Christopher J. Kirkpatrick

October 8, 2020

Page 10

Detailed supporting procedural information that covers the various Third-Party relationships, 

lifecycle phases and governance steps is provided for in OCC’s procedures. 

The below table summarizes where the information currently in the CCRMP will reside 

following its proposed retirement. The left column lists the sections of the current CCRMP, the right 

column indicates where the information will be available under the proposed rule changes, including 

in the TPRMF and OCC Rules and By-Laws, as well as related OCC procedures. The CCRMP 

applies only to Clearing Members, Financial Institutions, and FMUs. Therefore, the below table only 

illustrates information related to those Third-Parties. A comprehensive statement about the ThirdParty risk management lifecycle approach for Exchanges and Vendors has not been previously filed 

as a rule.

CCRMP Section Location in Proposed Revised Structure

I. Purpose No longer necessary, as the CCRMP will be retired. TPRMF includes an 

Executive Summary appropriate to that document. 

II.A. Identification 

of Credit Risk

TPRMF Section II: Risk Identification

In the TPRMF, OCC has defined the risks it faces to include financial risks, 

operational risks, information technology and security risks, and legal and 

regulatory risks. The credit risk areas identified in the CCRMP are covered in 

the broader OCC definition of financial risks in the TPRMF. The teams 

monitoring credit risk continue to monitor for each potential area of credit risk 

in accordance with OCC’s procedures for each type of Third-Party relationship. 

OCC does not believe this reorganization changes the risks faced by OCC or 

the rights and obligations of OCC. 

II.B. Counterparty 

Access and 

Participation

TPRMF Section III: Relationship Lifecycle (On-Boarding)

TPRMF Section IV: Third-Party Relationship Management (Clearing 

Members, Financial Institutions and FMUs)

OCC By-Laws Articles IV and Article V, Section 1.03 (e) and Section 2

OCC Rules Chapters II and III, Rule 604

The information about how OCC on-boards and monitors the ongoing 

compliance with standards of its Third-Party relationships is summarized in the 

proposed TPRMF relationship lifecycle overview and then in greater detail in 

the section related to each Third-Party type. The proposed TPRMF is organized 

by Third-Party type where the CCRMP is organized by relationship phase. 

While the sections have been reorganized and the drafting style has been 

changed from stating what OCC “shall” do to statements of what OCC does, 

the approach to risk management for Clearing Members, Financial Institutions 

and FMUs (e.g., OCC’s procedures require monitoring for a low probability of 

defaulting on obligations and assessing potential risks presented by indirect 

participants) during on-boarding and initial approval has not changed.
Christopher J. Kirkpatrick

October 8, 2020

Page 11

Additionally, specific information related to the qualification and approval of 

Clearing Members and Financial Institutions is currently publicly available in 

the OCC Rules and By-Laws. OCC modified the approval process for FMUs to 

reflect its practices more accurately. While the Board approves any project that 

would require the on-boarding of an FMU, the final authority to implement the 

relationship is maintained by the CEO or COO, consistent with the approval 

structure OCC utilizes for Financial Institutions. The TPRMF is consistent with 

the management structure changes previously approved by the Commission.6

Finally, on-boarding is done in accordance with OCC’s procedures for each 

type of Third-Party relationship. 

II.C. Measuring 

Counterparty 

Credit Risk

TPRMF Section III: Relationship Lifecycle (Ongoing Monitoring)

TPRMF Section IV: Third-Party Relationship Management (Clearing 

Members, Financial Institutions and FMUs)

The information about how OCC monitors its established Third-Party 

relationships on an ongoing basis is summarized in the proposed TPRMF 

relationship lifecycle overview and then in greater detail in the section related 

to the on-going monitoring of each Third-Party type. The proposed TPRMF is 

organized by Third-Party type where the CCRMP is organized by relationship 

phase. While the sections have been reorganized and the drafting style has been 

changed from stating what OCC “shall” do to statements of what OCC does, 

the approach to risk management for Clearing Members, Financial Institutions 

and FMUs (e.g., OCC’s procedures require measurement and reporting of credit 

risk and other exposures) during ongoing monitoring has not changed.

Additionally, the relationship lifecycle section in the proposed TPRMF states 

that OCC recognizes that multiple relationships with a single entity may result 

in concentration risk and incorporates this into its monitoring and reporting 

processes. Finally, ongoing monitoring is done in accordance with OCC’s 

procedures for each type of Third-Party relationship.

II.D. Monitoring 

and Managing 

Counterparty 

Credit Risk

TPRMF Section III: Relationship Lifecycle (Ongoing Monitoring)

TPRMF Section IV: Third-Party Relationship Management (Clearing 

Members, Financial Institutions and FMUs)

The information about how OCC monitors its established Third-Party 

relationships on an ongoing basis is summarized in the proposed TPRMF 

relationship lifecycle overview and then in greater detail in the section related 

to the on-going monitoring of each Third-Party type. The proposed TPRMF is 

6 See Securities Exchange Act Release No. 34–85129 (February 13, 2019), 84 FR 5129 (February 13, 

2019) (SR-OCC-2018-015).
Christopher J. Kirkpatrick

October 8, 2020

Page 12

organized by Third-Party type where the CCRMP is organized by relationship 

phase. While the sections have been reorganized and the drafting style has been 

changed from stating what OCC “shall” do to statements of what OCC does, 

the approach to risk management for Clearing Members (e.g., OCC’s 

procedures require monitoring for potential risks presented by indirect 

participants), Financial Institutions and FMUs during ongoing monitoring has 

not changed.

In this section, OCC proposes to maintain the information related to OCC’s 

program for Watch Level reporting but remove the specificity about what 

constitutes the Watch Level Tiers for Clearing Members, Financial Institutions 

and FMUs. OCC proposes to define the term Watch Level in the TPRMF and 

use it consistently throughout the on-going monitoring sections related to 

Clearing Members (and related indirect participants), Financial Institutions and 

FMUs. In each of these sections, the proposed TPRMF would describe OCC’s 

utilization of Watch Level reporting and the steps that can be taken if a ThirdParty is trending towards lower creditworthiness. OCC proposes to remove the 

information about what constitutes each Watch Level tier from its rules and 

maintain this information in its procedures. OCC believes this is appropriate as 

it would allow OCC to react to changing or unforeseen circumstances that may 

call for an update to its tiering immediately.

Finally, ongoing monitoring is done in accordance with OCC’s procedures for 

each type of Third-Party relationship.

II.E. Counterparty 

Credit Risk 

Termination 

TPRMF Section III: Relationship Lifecycle (Off-Boarding)

TPRMF Section IV: Third-Party Relationship Management (Clearing 

Members, Financial Institutions and FMUs)

The information about how OCC off-boards Third-Party relationships is 

summarized in the proposed TPRMF relationship lifecycle overview and then 

in greater detail in the section related to the off-boarding of each Third-Party 

type. The proposed TPRMF is organized by entity type where the CCRMP is 

organized by relationship phase. While the sections have been reorganized and 

the drafting style has been changed from stating what OCC “shall” do to 

statements of what OCC does, the approach to risk management for Clearing 

Members, Financial Institutions and FMUs during off-boarding monitoring has 

not changed.

Finally, off-boarding is done in accordance with OCC’s procedures for each 

type of Third-Party relationship.
Christopher J. Kirkpatrick

October 8, 2020

Page 13

Proposed Corresponding Changes to Risk Management Framework Policy, Liquidity Risk 

Management Framework, Margin Policy, and Collateral Risk Management Policy

OCC additionally proposes to make changes to its rule filed documents that refer to the 

CCRMP. OCC believes this change will not substantively alter these documents, but rather refer 

readers to the TPRMF which will provide information related to the risk management of all OCC 

Third-Parties in one document. 

OCC proposes to update all references to the CCRMP in the Risk Management Framework 

Policy to refer to the TPRMF. Additionally, OCC proposes to update references to the Third-Party 

Risk Management Policy7 in the Risk Management Framework Policy to also refer to the TPRMF. 

Similarly, OCC proposes to update all references to the CCRMP and Third-Party Risk Management 

Policy in the Liquidity Risk Management Framework and Margin Policy to refer to the TPRMF. 

Finally, OCC proposes to update references to the CCRMP in the Collateral Risk Management 

Policy to refer to the TPRMF. In some cases, these proposed revisions include combining redundant 

references to the CCRMP in favor of one reference to the TPRMF. Lastly, OCC proposes to remove, 

rather than update, a paragraph in the Collateral Risk Management Policy related to cross-margining 

that refers to the CCRMP as it is redundant with the Margin Policy. OCC believes the redundant 

description does not need to remain in both rule filed documents. 

OCC reviewed the derivatives clearing organization (“DCO”) core principles as set forth in 

the Act (“Core Principles”). During this review, OCC identified the following Core Principles as 

potentially being impacted:

Risk management. OCC believes that implementing the proposed rule change will be 

aligned with the requirements of Core Principle D.8 Core Principle D requires, in part, that each 

DCO limit, through the use of margin and other risk control mechanisms, its potential losses from 

defaults by members and participants of the DCO to ensure that its operations would not be 

disrupted and that its non-defaulting members or participants are not exposed to losses they cannot 

anticipate or control.9

The proposed TPRMF would provide an overview of OCC’s approach to Third-Party risk 

management. The proposed TPRMF would describe how OCC monitors the risks that arise in or are 

borne by OCC through a variety of risk assessment, risk reporting, evaluation and internal control 

management activities. Additionally, OCC believes that retiring the CCRMP in favor of the 

proposed TPRMF, which includes a more thorough description of the OCC Third-Party risk 

management lifecycle approach across entity types, will provide a more comprehensive, clear and 

7 The OCC Third-Party Risk Management Policy has never been filed as a rule, and will be retired 

upon approval of the TPRMF. 

8 7 U.S.C. 7a-1(c)(2)(D).

9 7 U.S.C. 7a-1(c)(2)(D)(iii).
Christopher J. Kirkpatrick

October 8, 2020

Page 14

transparent presentation of OCC’s Third-Party risk management program. Currently, OCC’s 

approach to Third-Party risk management for Clearing Members, Financial Institutions and FMUs is 

included the CCRMP, while OCC’s approach to Third-Party risk management for Exchanges and 

Vendors is contained in policies and procedures that are not filed as rules. OCC believes that 

consolidating its approach to Third-Party risk management into one public document, will provide 

for greater consistency and a single source for information related to OCC’s approach to the 

management of risks presented by Third-Parties. In this way, OCC believes the proposed change 

promotes compliance with Core Principle D under the Act.10

Participant and product eligibility. OCC believes that the proposed rule change would also 

be consistent with the Core Principle C, which requires, in part, that each DCO establish appropriate 

admission and continuing eligibility standards (including sufficient financial resources and 

operational capacity to meet obligations arising from participation in the DCO) for members of, and 

participants in, the DCO and that participation and membership requirements be objective, publicly 

disclosed, and permit fair and open access. The TPRMF, which OCC plans to make publicly 

available, details OCC’s approach to managing risks associated with Third-Parties. OCC manages 

these risks by scrutinizing the Third-Party before it can be on-boarded, monitoring the Third-Party 

throughout its relationship with OCC and carefully off-boarding the Third-Party should the 

relationship end. By identifying the risks associated with Third-Party relationships throughout their 

lifecycle in accordance with the TPRMF, OCC would aim to avoid or manage these risks. OCC 

believes following the process contained in the proposed TPRMF would allow OCC to identify, 

measure, monitor and manage the risks associated with Third-Parties. OCC therefore believes that 

the proposed rule change would be consistent with the Core Principle C.

Opposing Views

No opposing views were expressed related to the rule amendments. 

Notice of Pending Rule Certification

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

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

website concurrently with the filing of this submission.

Certification

OCC hereby certifies that the rule set forth at Item 1 of the enclosed filing complies with the 

Act and the CFTC’s regulations thereunder. 

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

10 7 U.S.C. 7a-1(c)(2)(D).
Christopher J. Kirkpatrick

October 8, 2020

Page 15

Sincerely,

Michelle Weiler

Associate General Counsel

Enclosure
Notice of proposed change pursuant to the Payment, Clearing, and Settlement Act of 2010

Section 806(e)(1) * Section 806(e)(2) *

Security-Based Swap Submission pursuant

to the Securities Exchange Act of 1934

Section 3C(b)(2) *

Exhibit 2 Sent As Paper Document Exhibit 3 Sent As Paper Document

has duly caused this filing to be signed on its behalf by the undersigned thereunto duly authorized.

19b-4(f)(6)

19b-4(f)(5)

Provide a brief description of the action (limit 250 characters, required when Initial is checked *).

(Name *)

NOTE: Clicking the button at right will digitally sign and lock

this form. A digital signature is as legally binding as a physical 

signature, and once signed, this form cannot be changed.

Associate General Counsel

(Title *)

Date 11/04/2020

Provide the name, telephone number, and e-mail address of the person on the staff of the self-regulatory organization

prepared to respond to questions and comments on the action.

Title * Associate General Counsel

Contact Information

19b-4(f)(4)

19b-4(f)(2)

19b-4(f)(3)

Extension of Time Period

for Commission Action *

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 19b-4

Withdrawal

Fax

Michelle Last Name *

Filing by

Pilot

Options Clearing Corporation

2020 - * 014

Amendment No. (req. for Amendments *)

File No.* SR - 

Weiler

mweiler@theocc.com

Telephone * (312) 998-4604

E-mail *

First Name *

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, 

Initial * Amendment * Section 19(b)(3)(A) * Section 19(b)(3)(B) *

Pursuant to Rule 19b-4 under the Securities Exchange Act of 1934

Description

OCC proposes to adopt a Third-Party Risk Management Framework and retire the Counterparty Credit Risk

Management Policy.

Michelle Weiler, mweiler@theocc.com

By Michelle Weiler

Section 19(b)(2) *

19b-4(f)(1)

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If the self-regulatory organization is amending only part of the text of a lengthy

proposed rule change, it may, with the Commission's permission, file only those

portions of the text of the proposed rule change in which changes are being made if

the filing (i.e. partial amendment) is clearly understandable on its face. Such partial

amendment shall be clearly identified and marked to show deletions and additions. 

Partial Amendment

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The self-regulatory organization may choose to attach as Exhibit 5 proposed changes

to rule text in place of providing it in Item I and which may otherwise be more easily

readable if provided separately from Form 19b-4. Exhibit 5 shall be considered part

of the proposed rule change. 

Exhibit 5 - Proposed Rule Text

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

For complete Form 19b-4 instructions please refer to the EFFS website.

Copies of any form, report, or questionnaire that the self-regulatory organization

proposes to use to help implement or operate the proposed rule change, or that is

referred to by the proposed rule change.

Exhibit Sent As Paper Document

Exhibit 4 - Marked Copies

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Exhibit 2 - Notices, Written Comments, 

Transcripts, Other Communications

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Exhibit 1 - Notice of Proposed Rule Change *

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Exhibit 1A- Notice of Proposed Rule

Change, Security-Based Swap Submission, 

or Advance Notice by Clearing Agencies *

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The full text shall be marked, in any convenient manner, to indicate additions to and

deletions from the immediately preceding filing. The purpose of Exhibit 4 is to permit 

the staff to identify immediately the changes made from the text of the rule with which

it has been working.

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The self-regulatory organization must provide all required information, presented in a

clear and comprehensible manner, to enable the public to provide meaningful

comment on the proposal and for the Commission to determine whether the proposal

is consistent with the Act and applicable rules and regulations under the Act. 

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Exhibit Sent As Paper Document

The Notice section of this Form 19b-4 must comply with the guidelines for publication

in the Federal Register as well as any requirements for electronic filing as published 

by the Commission (if applicable). The Office of the Federal Register (OFR) offers

guidance on Federal Register publication requirements in the Federal Register

Document Drafting Handbook, October 1998 Revision. For example, all references to

the federal securities laws must include the corresponding cite to the United States

Code in a footnote. All references to SEC rules must include the corresponding cite

to the Code of Federal Regulations in a footnote. All references to Securities

Exchange Act Releases must include the release number, release date, Federal

Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO]

-xx-xx). A material failure to comply with these guidelines will result in the proposed

rule change being deemed not properly filed. See also Rule 0-3 under the Act (17

CFR 240.0-3)

The Notice section of this Form 19b-4 must comply with the guidelines for publication

in the Federal Register as well as any requirements for electronic filing as published 

by the Commission (if applicable). The Office of the Federal Register (OFR) offers

guidance on Federal Register publication requirements in the Federal Register

Document Drafting Handbook, October 1998 Revision. For example, all references to 

the federal securities laws must include the corresponding cite to the United States

Code in a footnote. All references to SEC rules must include the corresponding cite

to the Code of Federal Regulations in a footnote. All references to Securities

Exchange Act Releases must include the release number, release date, Federal

Register cite, Federal Register date, and corresponding file number (e.g., SR-[SRO]

-xx-xx). A material failure to comply with these guidelines will result in the proposed

rule change, security-based swap submission, or advance notice being deemed not 

properly filed. See also Rule 0-3 under the Act (17 CFR 240.0-3)

Copies of notices, written comments, transcripts, other communications. If such

documents cannot be filed electronically in accordance with Instruction F, they shall be

filed in accordance with Instruction G.

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Required fields are shown with yellow backgrounds and asterisks.
File No. SR-OCC-2020-014

Page 3 of 221

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________

Form 19b-4

Proposed Rule Change 

by

THE OPTIONS CLEARING CORPORATION

Pursuant to Rule 19b-4 under the

Securities Exchange Act of 1934
File No. SR-OCC-2020-014

Page 4 of 221

Item 1. Text of the Proposed Rule Change

This proposed rule change by The Options Clearing Corporation (“OCC”) would adopt a 

Third-Party Risk Management Framework (“TPRMF”) and retire the Counterparty Credit Risk 

Management Policy (“CCRMP”). The TPRMF and CCRMP are included in Exhibit 5 of this

filing. The TPRMF is being submitted in its entirety as new rule text. Additionally, attached as 

exhibits are marked changes to OCC’s rules that reference the CCRMP. These include the: Risk 

Management Framework Policy (Exhibit 5c); Liquidity Risk Management Framework (Exhibit 

5d); Margin Policy (Exhibit 5e); and Collateral Risk Management Policy (Exhibit 5f). The 

proposed rule change does not require any changes to the text of OCC’s By-Laws or Rules.

OCC has separately submitted certain internal procedures related to the TPRMF, which 

are included in this filing as Exhibits 3a-j, and for which OCC has requested confidential 

treatment. These Exhibits are being provided as supplemental information to the filing and would 

not constitute part of OCC’s rules, which have been provided in Exhibit 5.

All capitalized terms that are not otherwise defined herein have the same meaning as set 

forth in the OCC By-Laws and Rules.

1

Item 2. Procedures of the Self-Regulatory Organization

The proposed rule change was approved for filing with the Commission by OCC’s Risk 

Committee, pursuant to delegated authority from the OCC Board of Directors (“Board”) at a 

meeting held June 10, 2019.

1 OCC’s By-Laws and Rules can be found on OCC’s website: 

http://optionsclearing.com/about/publications/bylaws.jsp.
File No. SR-OCC-2020-014

Page 5 of 221

Questions should be addressed to Michelle Weiler, Vice President, Associate General 

Counsel, at (312) 998-4604.

Item 3. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory 

Basis for, the Proposed Rule Change

A. Purpose

Background

On September 28, 2016, the Commission adopted amendments to Rule 17Ad-222 and 

added new Rule 17Ab2-23 pursuant to Section 17A of the Securities Exchange Act of 1934

(“Exchange Act”)4 and the Payment, Clearing and Settlement Supervision Act of 2010 

(“Clearing Supervision Act”)5 to establish enhanced standards for the operation and governance 

of those clearing agencies registered with the Commission that meet the definition of a “covered 

clearing agency,” as defined by Rule 17Ad-22(a)(5)6 (collectively, the rules are herein referred to 

as “CCA” rules). The CCA rules require that covered clearing agencies, among other things:

“[E]stablish, implement, maintain and enforce written policies and procedures reasonably 

designed to...[m]aintain a sound risk management framework for comprehensively 

managing legal, credit, liquidity, operational, general business, investment, custody, and 

other risks that arise in or are borne by the covered clearing agency, which...[i]ncludes 

risk management policies, procedures, and systems designed to identify, measure, 

2 17 CFR 240.17Ad-22.

3 17 CFR 240.17Ab2-2.

4 15 U.S.C. 78q-1.

5 12 U.S.C. 5461 et. seq.

6 17 CFR 240.17Ad-22(a)(5).
File No. SR-OCC-2020-014

Page 6 of 221

monitor, and manage the range of risks that arise in or are borne by the covered clearing 

agency, that are subject to review on a specified periodic basis and approved by the board 

of directors annually.”7

OCC proposes to adopt the proposed TPRMF, which would replace the CCRMP and

provide an overview of OCC’s overall approach to Third-Party8 risk management. The proposed 

TPRMF would identify the risks that pertain to OCC’s Third-Party relationships and the actions 

taken by OCC at each stage of the relationship. OCC plans to make the proposed TPRMF 

publicly available on its website, which would provide transparency into OCC’s approach to 

Third-Party risk management for interested market participants. Currently, the CCRMP includes 

information about risk management related to direct and indirect participants, Liquidity 

Providers, asset custodians, settlement banks, letter of credit issuers, investment counterparties, 

and financial market utilities (“FMU”) arising from its payment, clearing, and settlement 

processes. Under the proposed TPRMF, OCC would consolidate into one document its process 

for managing the risks associated with all Third-Party relationships across the entire lifecycle of 

their relationship with OCC. OCC believes the consolidation provides a more comprehensive 

and clear presentation of OCC’s Third-Party risk management without requiring a reader to seek 

multiple sources. 

7 17 CFR 240.17Ad-22(e)(3). OCC is defined as a covered clearing agency under the CCA rules, 

and therefore is subject to the requirements of the CCA rules, including Rule 17Ad-22(e)(3).

8 Under the proposed TPRMF, a Third-Party would be defined as: a Clearing Member, Clearing 

Bank, custodians, liquidity provider, investment counterparty, financial market utility, Exchange, or 

vendor, which also has: (i) a relationship with OCC where products and/or services are exchanged; (ii) 

other ongoing business relationships with OCC; or (iii) responsibility for OCC associated records.
File No. SR-OCC-2020-014

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Proposed Third-Party Risk Management Framework

The proposed TPRMF would state that as a central counterparty, OCC is exposed to risks 

arising from its Third-Party relationships. The proposed TPRMF would outline OCC’s approach 

to identify, measure, monitor, and manage risks arising from Third-Party relationships including:

Clearing Members; Clearing Banks, custodians, liquidity providers and investment 

counterparties (“Financial Institutions”); FMUs;

9 Exchanges;10 and vendors.

The proposed TPRMF would be approved annually by the Risk Committee of OCC’s 

Board (“Risk Committee”) and implemented by the OCC Management Committee (“MC”).

Risk Identification

The proposed TPRMF would state that OCC faces risks associated with its Third-Party 

relationships, including:

• Financial risks arising from a Clearing Member failing to meet its financial obligations to 

OCC including, but not limited to, obligations related to settlement, margin, and Clearing 

Fund. OCC may also face financial risks from other Third-Parties not meeting their 

obligations to OCC, including, but not limited to, facilitating daily settlements, providing 

timely access to collateral, honoring liquidity draw requests, or meeting obligations under an 

agreement.

9 Under the proposed TPRMF, FMUs may include any person that manages or operates a 

multilateral system for the purpose of transferring, clearing, or settling payments, securities, or other 

financial transactions among Financial Institutions or between Financial Institutions and the person.

10 Under the proposed TPRMF, Exchange relationships may include options exchanges, futures 

markets, OTC Trade Sources or Loan Markets.
File No. SR-OCC-2020-014

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• Operational risks arising from errors, disruptions, failures, or the inability of a Third-Party to 

fulfill its obligations to OCC. These risks include a disruption preventing OCC from 

completing trade processing, daily settlements, accessing collateral, or safeguarding OCC 

property, equipment, or personnel. 

• Information Technology and Security risks arising when a Third-Party is unable to safeguard 

OCC data or maintain capabilities or services to support OCC’s operations.

• Legal and Regulatory risks arising when a Third-Party fails to fulfill its obligations to OCC. 

These risks include exposure to potential litigation or regulatory compliance concerns.

Relationship Lifecycle

The proposed TPRMF would state that OCC’s relationship lifecycle is designed to 

identify, measure, monitor, and manage Third-Party risks. The proposed TPRMF would state 

that the lifecycle consists of three stages. 

• On-Boarding – The proposed TPRMF would state that Third-Parties are evaluated to 

determine whether they can engage in or expand a relationship with OCC. The proposed 

TPRMF would state that after evaluation, OCC completes any operational tasks necessary to 

activate the relationship.

• Ongoing Monitoring – The proposed TPRMF would state that Third-Parties are monitored 

for compliance with standards, the presence of additional or increased risks, and fulfillment 

of contractual obligations. The proposed TPRMF would state that ongoing monitoring is 

conducted based upon the nature of each relationship and is commensurate with the risks 

posed by the Third-Party.
File No. SR-OCC-2020-014

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• Off-Boarding – The proposed TPRMF would state that Third-Parties or OCC may elect to 

terminate a relationship. The proposed TPRMF would state that following the determination 

to terminate a relationship, OCC completes any operational tasks necessary to off-board the 

relationship.

The proposed TPRMF would state that Third-Parties that have multiple relationships with 

OCC are subject to the processes described below for each type of relationship. The proposed 

TPRMF would state that OCC recognizes that multiple relationships with a single entity may 

result in additional risks (as identified above) and incorporates this into its on-boarding and 

ongoing monitoring by reviewing affiliated relationships and their exposures at the Credit and 

Liquidity Risk Working Group (“CLRWG”).

The proposed TPRMF would state that as described below, risks identified throughout 

the relationship lifecycle are reported and escalated through associated working groups. The 

proposed TPRMF would state that working groups are cross-departmental and support OCC’s 

business as assigned by the MC. The proposed TPRMF would state that each working group has 

a chair and designated MC member who are responsible to determine the matters to be escalated 

to the MC. The proposed TPRMF would state that the working groups identified in the TPRMF

have defined decision-making authority, functions and responsibilities as defined in the 

associated working group procedure. The proposed TPRMF would state that the working groups 

that support the activities described in the TPRMF are: CLRWG, Exchange Working Group

(“EWG”), and Vendor Risk Working Group (“VRWG”).
File No. SR-OCC-2020-014

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Third-Party Relationship Management

Clearing Members

The proposed TPRMF would state that OCC’s membership standards are designed to be 

objective and risk-based, and are publicly disclosed in OCC’s Rules and By-Laws. The proposed 

TPRMF would state that annually, Business Operations, Financial Risk Management (“FRM”), 

Treasury, and Third-Party Risk Management (“TPRM”) assess the adequacy of OCC’s 

membership standards to address the management of risks presented by Clearing Members and 

the processes used to monitor initial and ongoing compliance with those standards, in accordance 

with the CLRWG Procedure. The proposed TPRMF would state that the review may contain 

recommendations to change the standards or monitoring processes. The proposed TPRMF would 

state that the results of the annual assessment are summarized for consecutive review and 

approval by the CLRWG, MC, Risk Committee, and if rule changes are necessary, Board. 

On-Boarding: The proposed TPRMF would state that Business Operations, FRM, and 

TPRM complete a risk-based evaluation of Clearing Member applicants by evaluating their 

financial resources, operational capacity, personnel, and facilities against OCC’s membership 

standards. The proposed TPRMF would state that FRM presents the results of this evaluation to 

the CLRWG and other key stakeholders as identified within Article V, Section 2 of OCC’s ByLaws for review and approval. 

Ongoing Monitoring: The proposed TPRMF would state that Clearing Members are 

monitored for ongoing compliance with OCC’s membership standards. The proposed TPRMF 

would state that FRM, with support from Business Operations and TPRM, performs Watch 
File No. SR-OCC-2020-014

Page 11 of 221

Level reporting and ongoing monitoring of financial and operational risks. The proposed 

TPRMF would state that in addition to or in support of Watch Level reporting, Business 

Operations and FRM conduct the following processes to monitor Clearing Members: 

• Determining an internal credit rating to identify creditworthiness;

• Performing periodic examinations to evaluate Clearing Member risk management policies, 

procedures, and practices; and 

• Evaluating material risks related to customers of Clearing Members. 

The proposed TPRMF would state that FRM provides informational Watch Level11

reporting at meetings of the CLRWG, MC, and Risk Committee that summarizes the 

circumstances leading to violations of higher tier Watch Level criteria, additional risks observed, 

and any corrective measures taken by such Clearing Members.

The proposed TPRMF would state that should a Clearing Member approach or no longer 

meet minimum membership standards, protective measures may be imposed to limit or eliminate 

OCC’s counterparty exposure. The proposed TPRMF would state that OCC maintains authorities 

in its Rules (Chapter III, Chapter VI Rule 608, and Chapter VII Rules 704 and 707) to act to 

protect OCC, given the facts and circumstances of the exposure presented by a Clearing 

11 Under the proposed TPRMF, Watch Level would be defined as: OCC assigns a level of required 

monitoring and reporting (i.e., a “Watch Level”) based on the identification of events or trends that might 

signal the deterioration of an entity’s financial or operational ability to timely meet its future obligations 

to OCC. Watch Level is a tiered structure with financial (e.g., capital and profitability), operational (e.g., 

operational difficulties and late financial report submissions), and general business (e.g., risk management 

issues and business restrictions by another SRO) criteria at each tier. Reaching the criteria at higher tier 

levels signals a more material event or trend has been detected and an entity may require heightened risk 

management. The CLRWG may recommend changes to Watch Level criteria to the MC, which maintains 

approval authority for recommended changes. FRM is responsible for implementing all approved Watch 

Level criteria changes.
File No. SR-OCC-2020-014

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Member, including but not limited to the imposition of additional monitoring, changes to margin 

requirements or composition, or suspension of some or all product and account approvals.

The proposed TPRMF would state that Business Operations, FRM, and TPRM provide 

reporting to the CLRWG, comprised of results from ongoing monitoring and management of 

Clearing Member financial, operational, legal, and regulatory risks and may raise matters for 

consideration to the CLRWG. The proposed TPRMF would state that the CLRWG may take 

action or escalate the matter to the MC, in accordance with the functions and responsibilities 

assigned to the CLRWG by the MC in the CLRWG Procedure. 

Off-Boarding: The proposed TPRMF would state that a Clearing Member may 

voluntarily terminate its membership. The proposed TPRMF would state that upon request for 

termination, Business Operations and FRM ensure all financial exposures and operational 

capabilities are wound down and all obligations to OCC are satisfied before the relationship is 

terminated. The proposed TPRMF would state that in the event a Clearing Member is suspended 

by OCC, the suspension will be managed in accordance with the Default Management Policy.

Clearing Banks, Custodians, Liquidity Providers and Investment Counterparties

The proposed TPRMF would state that OCC maintains relationships with Financial 

Institutions that facilitate clearance and settlement activities, manage collateral, provide liquidity, 

and serve as investment counterparties.

On-Boarding: The proposed TPRMF would state that FRM and TPRM, with support as 

needed from Business Operations and Treasury, complete a risk-based evaluation of each entity 

by evaluating its financial resources and operational capacity. The proposed TPRMF would state 
File No. SR-OCC-2020-014

Page 13 of 221

that for custodians, the evaluation considers whether a relationship is structured to allow prompt 

access to OCC and Clearing Member assets and whether the custodian is a supervised and 

regulated institution that adheres to generally accepted accounting practices, maintains 

safekeeping procedures, and has controls that fully protect these assets. The proposed TPRMF 

would state that the results of the evaluation are presented to the CLRWG for review and 

recommendation for approval prior to presentation to the Chief Executive Officer or Chief 

Operating Officer, each of whom has the authority to approve such relationships. 

Ongoing Monitoring: The proposed TPRMF would state that Business Operations, FRM, 

Treasury, and TPRM monitor the financial, operational, legal, and regulatory risks related to 

Financial Institution relationships. The proposed TPRMF would state that this monitoring 

includes Watch Level reporting, material agreement reviews, and ongoing monitoring of 

financial and operational risks. The proposed TPRMF would state that should Watch Level 

reporting detect potential issues or trends that might indicate the deterioration of a Financial 

Institution’s ability to perform, protective measures that may be applied include, but are not 

limited to, modifying the business relationship or termination of the relationship. 

The proposed TPRMF would state that Business Operations, FRM, Treasury, and TPRM 

provide reporting to the CLRWG, comprised of results from ongoing monitoring and 

management of a Financial Institution’s financial, operational, legal, and regulatory risks and 

may raise matters for consideration to the CLRWG. The proposed TPRMF would state that the 

CLRWG may take action or escalate the matter to the MC, in accordance with the functions and 

responsibilities assigned to the CLRWG by the MC in the CLRWG Procedure.
File No. SR-OCC-2020-014

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Off-Boarding: The proposed TPRMF would state that a Financial Institution relationship 

may be terminated by the Financial Institution or OCC, pursuant to applicable agreements. The 

proposed TPRMF would state that the Chief Executive Officer or Chief Operating Officer, each 

of whom has the authority, must approve the termination of a Financial Institution relationship 

initiated by OCC. The proposed TPRMF would state that OCC may terminate a relationship if 

risks rise to an unacceptable level or a relationship is no longer required. Business Operations, 

FRM, Treasury, and Legal perform activities necessary to off-board the relationship in 

accordance with the agreement between OCC and the applicable Financial Institution.

Financial Market Utilities

The proposed TPRMF would state that FMUs provide OCC with a range of services, 

including custody, stock loan processing, cross-margin programs, and securities settlement. 

On-Boarding: The proposed TPRMF would state that Business Operations, FRM, Legal, 

and TPRM consider an FMU’s financial condition, operational capabilities, and any legal or 

regulatory risks associated with the relationship during the on-boarding process. The proposed 

TPRMF would state that the CLRWG reviews this evaluation and recommends approval prior to 

presentation to the Chief Executive Officer or Chief Operating Officer, each of whom has the 

authority to approve such relationships. The proposed TPRMF would state that on-boarding of 

the relationship may be subject to completion of any necessary agreements or regulatory filings.

Ongoing Monitoring: The proposed TPRMF would state that Business Operations, FRM 

and TPRM monitor the financial, operational, legal, and regulatory risks related to FMU 

relationships. The proposed TPRMF would state that this monitoring includes Watch Level 
File No. SR-OCC-2020-014

Page 15 of 221

reporting, material agreement reviews, and ongoing monitoring of financial and operational 

risks. 

The proposed TPRMF would state that Business Operations, FRM, and TPRM provide 

reporting to the CLRWG, comprised of results from ongoing monitoring and management of an 

FMU’s financial, operational, legal, and regulatory risks and may raise matters for consideration 

to the CLRWG. The proposed TPRMF would state that the CLRWG may take action or escalate 

the matter to the MC in accordance with the functions and responsibilities assigned to the 

CLRWG by the MC in the CLRWG Procedure.

Off-Boarding: The proposed TPRMF would state that an FMU relationship may be 

terminated by the FMU or OCC, pursuant to applicable agreements. The proposed TPRMF 

would state that the Chief Executive Officer or Chief Operating Officer, each of whom has the 

authority, must approve the termination of an FMU relationship initiated by OCC. The proposed 

TPRMF would state that Business Operations, FRM, Legal, and TPRM coordinate the activities 

necessary to off-board the relationship, including, but not limited to, the wind down of all 

services with the FMU and, if necessary, revising OCC policies and procedures and filing rule 

changes with OCC’s regulators after receiving the appropriate internal approvals.

Exchanges

The proposed TPRMF would state that OCC provides clearing services for Exchanges 

pursuant to applicable agreements (Exchange agreements are filed with OCC's regulators, as 

required). The proposed TPRMF would state that under these agreements, OCC clears products 
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including equity and index options, commodity contracts, treasury futures, security futures, and 

stock loan transactions.

On-Boarding: The proposed TPRMF would state that Product and Business 

Development, in coordination with stakeholders which may include, but are not limited to, FRM, 

Business Operations, and TPRM, completes an evaluation of proposed Exchange relationships, 

including assessing whether an Exchange meets OCC’s qualification requirements (as further 

described in the OCC By-Laws, Article VIIA – Equity Exchanges and Article VIIB – NonEquity Exchanges). The proposed TPRMF would state that the due diligence performed for a 

proposed Exchange relationship is presented to the EWG for review and subsequently to the MC 

for approval. The proposed TPRMF would state that a summary of due diligence and onboarding activities are presented to the Board for approval to launch. 

Ongoing Monitoring: The proposed TPRMF would state that Business Operations and 

TPRM monitor the operational, legal and regulatory risks related to Exchange relationships. The 

proposed TPRMF would state that such relationships are monitored for connectivity and trade 

activity on an ongoing basis. The proposed TPRMF would state that Exchange monitoring 

allows for internal escalation to Production Support and the EWG, and externally to Exchanges. 

The proposed TPRMF would state that Business Operations and TPRM conduct reviews 

to assess an Exchange’s operational performance, overall financial condition, and ability to meet 

contractual obligations. The proposed TPRMF would state that to assess operational 

performance, Business Operations executes testing activities throughout the year aimed at 

mitigating operational risk, including the requirement that all Exchanges must participate in 
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annual disaster recovery tests. The proposed TPRMF would state that in addition, Business 

Operations supports external testing with all Exchanges upon request or related to OCC system 

changes and enhancements. The proposed TPRMF would state that TPRM monitors the financial 

condition of Exchanges and evaluates whether an Exchange’s operations meet its contractual 

obligations. The proposed TPRMF would state that Business Operations facilitates annual 

meetings with each Exchange that include an operational performance review, communicate 

updates about upcoming OCC system enhancements and changes, and seek feedback.

The proposed TPRMF would state that Business Operations and TPRM provide reporting 

to the EWG, comprised of results from ongoing monitoring and management of an Exchange’s 

financial, operational, legal and regulatory risks and may raise matters for consideration to the 

EWG. The proposed TPRMF would state that the EWG may take action or escalate the matter to 

the MC, in accordance with the functions and responsibilities assigned to the EWG by the MC in 

the EWG Procedure.

Off-Boarding: The proposed TPRMF would state that an Exchange relationship may be 

terminated by the Exchange or OCC, pursuant to the applicable Exchange agreement. The 

proposed TPRMF would state that upon request for termination by the Exchange, Business 

Operations notifies the EWG and the MC to discuss any immediate actions such as limiting 

connectivity with the Exchange to mitigate exposure to operational, legal, or regulatory risks and 

to determine a termination date. 

The proposed TPRMF would state that additionally, Business Operations leads the 

development of a deployment plan to identify the departments and required actions necessary to 
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reduce any interim risk prior to termination, which may include performing clearing system 

maintenance and limiting or removing connectivity to the Exchange. The proposed TPRMF 

would state that Business Operations and other supporting departments coordinate and perform 

activities necessary to off-board the relationship in accordance with the applicable Exchange 

agreement.

Vendors

The proposed TPRMF would state that OCC engages and maintains vendor relationships 

for various purposes, including to accomplish its strategic objectives, outsource operational 

activities, and assist in compliance with legal and regulatory obligations. The proposed TPRMF 

would state that all Third-Party relationships that are not Clearing Members, Financial 

Institutions, FMUs, or Exchanges are treated as vendor relationships. 

On-Boarding: The proposed TPRMF would state that during on-boarding, TPRM works 

with the business area requesting the vendor to assign a vendor relationship manager (“VRM”) 

who is obligated to manage the vendor relationship and execute the phases of the vendor 

relationship lifecycle. The proposed TPRMF would state that TPRM coordinates with the VRM 

to complete an evaluation of inherent risks posed by the vendor relationship. The proposed 

TPRMF would state that the evaluation of inherent risk results in a vendor risk tier which is used 

to inform the level of due diligence and frequency of monitoring for each vendor. The proposed 

TPRMF would state that due diligence is based on the inherent risks identified and may include a 

review of financial health, operational capacity, and other standards based on the relationship. 
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The proposed TPRMF would state that any potential risk issues identified are presented 

to the VRM and OCC’s Legal Department for review. Potential risk issues may also be shared 

with the VRWG. The proposed TPRMF would state that an agreement that addresses control and 

business requirements is then negotiated with the vendor and executed by an OCC officer (an 

OCC Vice President or above).

Ongoing Monitoring: The proposed TPRMF would state that VRMs and TPRM monitor 

vendors to assess whether they are delivering services as required by applicable agreements. The 

proposed TPRMF would state that the scope and frequency of monitoring is determined by the 

vendor risk tier and inherent risks identified during on-boarding. The proposed TPRMF would 

state that monitoring may include reviewing a vendor’s financial health, operational capacity,

and other standards based on the relationship’s inherent risks. 

The proposed TPRMF would state that TPRM provides reporting to the VRWG, 

comprised of results from ongoing monitoring and management of a vendor’s financial, 

operational, legal, and regulatory risks and may raise matters for consideration to the VRWG. 

The proposed TPRMF would state that the VRWG may take action (e.g., additional monitoring, 

require contingency plans, and additional contractual requirements) or escalate the matter to the 

MC, in accordance with the functions and responsibilities assigned to the VRWG by the MC in 

the Vendor Risk Working Group Procedure.

Off-Boarding: The proposed TPRMF would state that a vendor relationship may be 

terminated by the vendor or OCC, pursuant to applicable agreements. The proposed TPRMF 

would state that OCC mitigates exposure to operational, legal, and regulatory risk and performs 
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activities necessary to off-board the relationship in accordance with the applicable vendor 

agreement.

Retirement of Counterparty Credit Risk Management Policy

OCC proposes retiring the CCRMP and replacing it with the proposed TPRMF. 

Currently, the CCRMP includes information about the Third-Party risk management lifecycle for

Clearing Members, Financial Institutions, and FMUs. The information related to the Third-Party 

risk management lifecycle (on-boarding, ongoing monitoring and off-boarding) is now included 

in the proposed TPRMF. The proposed TPRMF also includes information about the Third-Party

risk management lifecycle for Exchanges and Vendors, and OCC believes consolidating its 

Third-Party risk management lifecycle information into one publicly available document will 

provide for greater efficiency and transparency. 

Additionally, by reconciling procedural information that was previously in the CCRMP

with OCC’s existing procedures, OCC was able to eliminate redundancy that could lead to 

confusion. In the proposed TPRMF, the Third-Party risk management lifecycle for each entity 

type is described. Detailed supporting procedural information that covers the various Third-Party 

relationships, lifecycle phases and governance steps is provided for in OCC’s procedures. 

The below table summarizes where the information currently in the CCRMP will reside 

following its proposed retirement. The left column lists the sections of the current CCRMP, the 

right column indicates where the information will be available under the proposed rule changes,

including in the TPRMF and OCC Rules and By-Laws, as well as related OCC procedures. The 

CCRMP applies only to Clearing Members, Financial Institutions, and FMUs. Therefore, the 
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below table only illustrates information related to those Third-Parties. A comprehensive 

statement about the Third-Party risk management lifecycle approach for Exchanges and Vendors 

has not been previously filed as a rule.

CCRMP Section Location in Proposed Revised Structure

I. Purpose No longer necessary, as the CCRMP will be retired. TPRMF includes an 

Executive Summary appropriate to that document. 

II.A. Identification 

of Credit Risk

TPRMF Section II: Risk Identification

In the TPRMF, OCC has defined the risks it faces to include financial risks, 

operational risks, information technology and security risks, and legal and 

regulatory risks. The credit risk areas identified in the CCRMP are covered in 

the broader OCC definition of financial risks in the TPRMF. The teams 

monitoring credit risk continue to monitor for each potential area of credit risk 

in accordance with OCC’s procedures for each type of Third-Party relationship. 

OCC does not believe this reorganization changes the risks faced by OCC or 

the rights and obligations of OCC. 

II.B. Counterparty 

Access and 

Participation

TPRMF Section III: Relationship Lifecycle (On-Boarding)

TPRMF Section IV: Third-Party Relationship Management (Clearing 

Members, Financial Institutions and FMUs)

OCC By-Laws Articles IV and Article V, Section 1.03 (e) and Section 2

OCC Rules Chapters II and III, Rule 604

The information about how OCC on-boards and monitors the ongoing 

compliance with standards of its Third-Party relationships is summarized in the 

proposed TPRMF relationship lifecycle overview and then in greater detail in 

the section related to each Third-Party type. The proposed TPRMF is organized 

by Third-Party type where the CCRMP is organized by relationship phase. 

While the sections have been reorganized and the drafting style has been 

changed from stating what OCC “shall” do to statements of what OCC does, 

the approach to risk management for Clearing Members, Financial Institutions 

and FMUs (e.g., OCC’s procedures require monitoring for a low probability of 

defaulting on obligations and assessing potential risks presented by indirect 

participants) during on-boarding and initial approval has not changed.

Additionally, specific information related to the qualification and approval of 

Clearing Members and Financial Institutions is currently publicly available in 

the OCC Rules and By-Laws. OCC modified the approval process for FMUs to 

reflect its practices more accurately. While the Board approves any project that 
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would require the on-boarding of an FMU, the final authority to implement the 

relationship is maintained by the CEO or COO, consistent with the approval 

structure OCC utilizes for Financial Institutions. The TPRMF is consistent with 

the management structure changes previously approved by the Commission.

12

Finally, on-boarding is done in accordance with OCC’s procedures for each 

type of Third-Party relationship. 

II.C. Measuring 

Counterparty 

Credit Risk

TPRMF Section III: Relationship Lifecycle (Ongoing Monitoring)

TPRMF Section IV: Third-Party Relationship Management (Clearing 

Members, Financial Institutions and FMUs)

The information about how OCC monitors its established Third-Party

relationships on an ongoing basis is summarized in the proposed TPRMF 

relationship lifecycle overview and then in greater detail in the section related 

to the on-going monitoring of each Third-Party type. The proposed TPRMF is 

organized by Third-Party type where the CCRMP is organized by relationship 

phase. While the sections have been reorganized and the drafting style has been 

changed from stating what OCC “shall” do to statements of what OCC does, 

the approach to risk management for Clearing Members, Financial Institutions 

and FMUs (e.g., OCC’s procedures require measurement and reporting of credit 

risk and other exposures) during ongoing monitoring has not changed.

Additionally, the relationship lifecycle section in the proposed TPRMF states

that OCC recognizes that multiple relationships with a single entity may result 

in concentration risk and incorporates this into its monitoring and reporting 

processes. Finally, ongoing monitoring is done in accordance with OCC’s 

procedures for each type of Third-Party relationship.

II.D. Monitoring 

and Managing 

Counterparty 

Credit Risk

TPRMF Section III: Relationship Lifecycle (Ongoing Monitoring)

TPRMF Section IV: Third-Party Relationship Management (Clearing 

Members, Financial Institutions and FMUs)

The information about how OCC monitors its established Third-Party 

relationships on an ongoing basis is summarized in the proposed TPRMF 

relationship lifecycle overview and then in greater detail in the section related 

to the on-going monitoring of each Third-Party type. The proposed TPRMF is 

organized by Third-Party type where the CCRMP is organized by relationship 

phase. While the sections have been reorganized and the drafting style has been 

changed from stating what OCC “shall” do to statements of what OCC does, 

the approach to risk management for Clearing Members (e.g., OCC’s 

12 See Securities Exchange Act Release No. 34–85129 (February 13, 2019), 84 FR 5129 (February 

13, 2019) (SR-OCC-2018-015).
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procedures require monitoring for potential risks presented by indirect 

participants), Financial Institutions and FMUs during ongoing monitoring has 

not changed.

In this section, OCC proposes to maintain the information related to OCC’s 

program for Watch Level reporting but remove the specificity about what 

constitutes the Watch Level Tiers for Clearing Members, Financial Institutions 

and FMUs. OCC proposes to define the term Watch Level in the TPRMF and 

use it consistently throughout the on-going monitoring sections related to 

Clearing Members (and related indirect participants), Financial Institutions and 

FMUs. In each of these sections, the proposed TPRMF would describe OCC’s 

utilization of Watch Level reporting and the steps that can be taken if a ThirdParty is trending towards lower creditworthiness. OCC proposes to remove the 

information about what constitutes each Watch Level tier from its rules and 

maintain this information in its procedures. OCC believes this is appropriate as 

it would allow OCC to react to changing or unforeseen circumstances that may 

call for an update to its tiering immediately.

Finally, ongoing monitoring is done in accordance with OCC’s procedures for 

each type of Third-Party relationship.

II.E. Counterparty 

Credit Risk 

Termination

TPRMF Section III: Relationship Lifecycle (Off-Boarding)

TPRMF Section IV: Third-Party Relationship Management (Clearing 

Members, Financial Institutions and FMUs)

The information about how OCC off-boards Third-Party relationships is 

summarized in the proposed TPRMF relationship lifecycle overview and then 

in greater detail in the section related to the off-boarding of each Third-Party

type. The proposed TPRMF is organized by entity type where the CCRMP is 

organized by relationship phase. While the sections have been reorganized and 

the drafting style has been changed from stating what OCC “shall” do to 

statements of what OCC does, the approach to risk management for Clearing 

Members, Financial Institutions and FMUs during off-boarding monitoring has 

not changed.

Finally, off-boarding is done in accordance with OCC’s procedures for each 

type of Third-Party relationship.
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Proposed Corresponding Changes to Risk Management Framework Policy, Liquidity Risk 

Management Framework, Margin Policy, and Collateral Risk Management Policy

OCC additionally proposes to make changes to its rule filed documents that refer to the 

CCRMP. OCC believes this change will not substantively alter these documents, but rather refer 

readers to the TPRMF which will provide information related to the risk management of all OCC 

Third-Parties in one document. 

OCC proposes to update all references to the CCRMP in the Risk Management 

Framework Policy to refer to the TPRMF. Additionally, OCC proposes to update references to 

the Third-Party Risk Management Policy13 in the Risk Management Framework Policy to also 

refer to the TPRMF. Similarly, OCC proposes to update all references to the CCRMP and ThirdParty Risk Management Policy in the Liquidity Risk Management Framework and Margin 

Policy to refer to the TPRMF. Finally, OCC proposes to update references to the CCRMP in the 

Collateral Risk Management Policy to refer to the TPRMF. In some cases, these proposed 

revisions include combining redundant references to the CCRMP in favor of one reference to the 

TPRMF. Lastly, OCC proposes to remove, rather than update, a paragraph in the Collateral Risk 

Management Policy related to cross-margining that refers to the CCRMP as it is redundant with 

the Margin Policy. OCC believes the redundant description does not need to remain in both rule 

filed documents. 

13 The OCC Third-Party Risk Management Policy has never been filed as a rule, and will be retired 

upon approval of the TPRMF. 
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B. Statutory Basis

Section 17A(b)(3)(F) of the Act14 requires, in part, that the rules of a clearing agency be 

designed to promote the prompt and accurate clearance and settlement of securities transactions, 

to assure the safeguarding of securities and funds in the custody or control of the clearing agency 

or for which it is responsible, and in general, to protect investors and the public interest. OCC 

believes that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act15

because OCC’s TPRMF details OCC’s approach to managing risks associated with ThirdParties. Third-Parties are involved in OCC’s clearance and settlement process in various ways 

and therefore present risks to OCC’s ability to promptly and accurately clear and settle securities 

transactions. The following provides one example for each Third-Party. Clearing Members

present risk if they are not able to meet their financial obligations to OCC; Financial Institutions 

present risk if they are unable to provide ready access to OCC’s funds; FMUs present risk if they 

do not perform as expected under agreements with OCC; Exchanges present risk if inaccurate 

trade information is sent to OCC for processing; and vendors present risk as OCC outsources 

certain critical activities, such as gathering pricing data, to vendors. OCC manages these risks by 

scrutinizing the Third-Party before it can be on-boarded, monitoring the Third-Party throughout 

its relationship with OCC and carefully off-boarding the Third-Party should the relationship end. 

This organized and diligent approach to managing the risks associated with Third-Parties,

promotes the prompt and accurate clearance and settlement of securities transactions by 

14 15 U.S.C. 78q-1(b)(3)(F).

15 Id.
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providing for the management of the risks associated Third-Party relationships. By identifying 

the risks associated with Third-Party relationships throughout their lifecycle in accordance with 

the TPRMF, OCC would aim to avoid or manage these risks in order to continue providing 

prompt and accurate clearance and settlement services. 

Additionally, OCC’s TPRMF provides for the safeguarding of securities and funds in the 

custody or control of OCC or for which it is responsible by detailing the program OCC uses to 

manage its relationships with Third-Parties and more specifically, Financial Institutions and 

FMUs. The TPRMF would outline the process OCC would use to manage the risks associated 

with Financial Institutions and FMUs. Financial Institutions and FMUs present settlement risk to 

OCC if they do not perform within expected settlement time frames. In addition, Financial 

Institutions and FMUs present custodial risk to OCC if they are unable to provide ready access to 

OCC’s funds in their custody. Furthermore, Financial Institutions and FMUs present risk to OCC 

if they are unable to promptly recover from a business continuity or disaster recovery event in 

order to perform services for OCC. By following the risk management process proposed in the 

TPRMF, OCC believes it would identify the risks associated with Financial Institutions and 

FMUs and use this information to make decisions about whether to begin a relationship with the 

Third-Party and whether to maintain the on-going relationship. 

OCC believes following the process contained in the proposed TPRMF will contribute to 

the safeguarding of securities and funds in its custody or control or for which OCC is responsible

by documenting the process OCC aims to consistently follow in order to identify, measure, 

monitor and manage the risks associated with Third-Parties.
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Rule 17Ad-22(e)(3)16 requires, in part, that a covered clearing agency “establish, 

implement, maintain and enforce written policies and procedures reasonably designed 

to...[m]aintain a sound risk management framework for comprehensively managing legal, credit, 

liquidity, operational, general business, investment, custody, and other risks that arise in or are 

borne by the covered clearing agency, which...[i]ncludes risk management policies, procedures, 

and systems designed to identify, measure, monitor, and manage the range of risks that arise in 

or are borne by the covered clearing agency, that are subject to review on a specified periodic 

basis and approved by the board of directors annually.” OCC believes that the proposed rule 

change is also consistent with Rule 17Ad-22(e)(3)17 because the proposed TPRMF would 

provide an overview of OCC’s approach to Third-Party risk management. The proposed TPRMF 

would describe how OCC monitors the risks that arise in or are borne by OCC through a variety 

of risk assessment, risk reporting, evaluation and internal control management activities, 

consistent with the requirements of Rule 17Ad-22(e)(3).

18 Additionally, OCC believes that 

retiring the CCRMP in favor of the proposed TPRMF, which includes a more thorough 

description of the OCC Third-Party risk management lifecycle approach across entity types, will 

provide a more comprehensive, clear and transparent presentation of OCC’s Third-Party risk

management program. Currently, OCC’s approach to Third-Party risk management for Clearing 

Members, Financial Institutions and FMUs is included the CCRMP, while OCC’s approach to 

16 17 CFR 240.17Ad-22(e)(3).

17 Id.

18 Id.
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Third-Party risk management for Exchanges and Vendors is currently contained in policies and 

procedures that are not filed as rules. OCC believes that consolidating its approach to ThirdParty risk management into one public document, will provide for greater consistency and a 

single source for information related to OCC’s approach to the management of risks presented by 

Third-Parties. Additionally, OCC believes clarity and consistency will be gained by maintaining 

certain procedural information previously redundantly contained in the CCRMP and OCC’s 

procedures only in OCC’s procedures, rather than redundantly in the TPRMF. OCC believes 

resolving these redundancies will avoid potential confusion that could be created by any 

inconsistency between the TPRMF and OCC’s procedures. Finally, OCC believes that making 

the proposed TPRMF publicly available will provide for greater transparency into OCC’s policy 

to identify, measure, monitor, and manage risks related to Third-Party relationships. 

Finally, OCC believes the proposed corresponding changes to the Risk Management 

Framework Policy, Liquidity Risk Management Framework, Margin Policy, and Collateral Risk 

Management Policy contribute to the maintenance required related to these policies as OCC aims 

to continue to maintain a sound risk management framework. While these edits do not change 

the substance or meaning of the Risk Management Framework Policy, Liquidity Risk 

Management Framework, Margin Policy, and Collateral Risk Management Policy, OCC believes 

accurate references within its policies and procedures support the maintenance of its risk 

management framework.

The proposed rule change is not inconsistent with the existing rules of OCC, including 

any other rules proposed to be amended.
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Item 4. Self-Regulatory Organization’s Statement on Burden on Competition

Section 17A(b)(3)(I) of the Act19 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 rule changes would impact or impose any burden on 

competition. The proposed rule change clearly and transparently presents the framework OCC 

uses to identify, monitor and manage its risks related to Third-Parties in the TPRMF. In addition, 

by retiring the CCRMP, the TPRMF consolidates information related to Third-Parties in one 

document for ease of access by interested parties. In addition, OCC plans to make this document 

publicly available on its website, thereby providing additional transparency and equal availability 

to all market participants. While the proposed rule change would enhance OCC’s framework of 

risk management documentation, these updates do not affect Clearing Members’ access to 

OCC’s services or impose any direct burdens on Clearing Members. Accordingly, the proposed 

rule change would not unfairly inhibit access to OCC’s services or disadvantage or favor any 

particular user in relationship to another user.

For the foregoing reasons, OCC believes that the proposed rule change is in the public 

interest, would be consistent with the requirements of the Act applicable to clearing agencies, 

and would not impact or impose a burden on competition.

19 15 U.S.C. 78q-1(b)(3)(I).
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Item 5. Self-Regulatory Organization’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. 

Item 6. Extension of Time Period for Commission Action

Not applicable. 

Item 7. Basis for Summary Effectiveness Pursuant to Section 19(b)(3) or for

Accelerated Effectiveness Pursuant to Section 19(b)(2) or Section 19(b)(7)(D)

Not applicable.

Item 8. Proposed Rule Change Based on Rule of Another Self-Regulatory 

Organization or of the Commission

Not applicable.

Item 9. Security-Based Swap Submissions Filed Pursuant to Section 3C of the Act

Not applicable. 

Item 10. Advance Notices Filed Pursuant to Section 806(e) of the Payment, Clearing 

and Settlement Supervision Act

Not applicable. 

Item 11. Exhibits

Exhibit 1a. Completed Notice of Proposed Rule Change for publication in the Federal 

Register. 

Exhibit 3a. Bank Monitoring & Protective Measures Procedure.

Exhibit 3b. Bank On-Boarding & Off-Boarding Procedure.

Exhibit 3c. Clearing Member Monitoring and Protective Measures Procedure.

Exhibit 3d. Clearing Member On-Boarding & Off-Boarding Procedure.
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Exhibit 3e. Clearing Member Risk Management Examination Procedure.

Exhibit 3f. Counterparties and Links Third-Party Risk Review Procedure.

Exhibit 3g. Credit and Liquidity Risk Working Group Procedure.

Exhibit 3h. Exchange Working Group Procedure.

Exhibit 3i. Operational Bank Monitoring and Review Procedure.

Exhibit 3j. Vendor Risk Working Group Procedure.

Exhibit 5a. Third-Party Risk Management Framework. 

Exhibit 5b. Counterparty Credit Risk Management Policy.

Exhibit 5c. Risk Management Framework Policy.

Exhibit 5d. Liquidity Risk Management Framework.

Exhibit 5e. Margin Policy. 

Exhibit 5f. Collateral Risk Management Policy.

CONFIDENTIAL TREATMENT IS REQUESTED FOR EXHIBITS 

3a, 3b, 3c, 3d, 3e, 3f, 3g, 3h, 3i, 3j, 5b, 5c, 5d, 5e, and 5f

PURSUANT TO SEC RULE 24b-2
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, The Options 

Clearing Corporation has caused this filing to be signed on its behalf by the undersigned 

hereunto duly authorized.

THE OPTIONS CLEARING CORPORATION

By:____________________________________

Michelle Weiler

Vice President, Associate General Counsel
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EXHIBIT 1A

SECURITIES AND EXCHANGE COMMISSION

(Release No. 34-[_______________]; File No. SR-OCC-2020-014)

November __, 2020

Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of 

Proposed Rule Change to Adopt the OCC Third-Party Risk Management Framework and 

Retire the OCC Counterparty Credit Risk Management Framework

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 4,

2020, 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. 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 by The Options Clearing Corporation (“OCC”) would 

adopt a Third-Party Risk Management Framework (“TPRMF”) and retire the 

Counterparty Credit Risk Management Policy (“CCRMP”). The TPRMF and CCRMP 

are included in Exhibit 5 of filing SR-OCC-2020-014. The TPRMF is being submitted in 

its entirety as new rule text. Additionally, attached as exhibits to filing SR-OCC-2020-

014 are marked changes to OCC’s rules that reference the CCRMP. These include the:

Risk Management Framework Policy (Exhibit 5c to filing SR-OCC-2020-014); Liquidity 

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

2 17 CFR 240.19b-4.
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Risk Management Framework (Exhibit 5d to filing SR-OCC-2020-014); Margin Policy 

(Exhibit 5e to filling SR-OCC-2020-014); and Collateral Risk Management Policy 

(Exhibit 5f to filing SR-OCC-2020-014). The proposed rule change does not require any 

changes to the text of OCC’s By-Laws or Rules. 

OCC has separately submitted certain internal procedures related to the TPRMF, 

which are included in this filing as Exhibits 3a-j to filing SR-OCC-2020-014, and for 

which OCC has requested confidential treatment. These Exhibits to filing SR-OCC-2020-

014 are being provided as supplemental information to the filing and would not constitute 

part of OCC’s rules, which have been provided in Exhibit 5 to filing SR-OCC-2020-014.

All capitalized terms that are not otherwise defined herein have the same meaning 

as set forth in the OCC By-Laws and Rules.

3

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.

3 OCC’s By-Laws and Rules can be found on OCC’s website: 

http://optionsclearing.com/about/publications/bylaws.jsp.
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(A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for,

the Proposed Rule Change

(1) Purpose

Background

On September 28, 2016, the Commission adopted amendments to Rule 17Ad-224

and added new Rule 17Ab2-25 pursuant to Section 17A of the Securities Exchange Act of 

1934 (“Exchange Act”)6 and the Payment, Clearing and Settlement Supervision Act of 

2010 (“Clearing Supervision Act”)7 to establish enhanced standards for the operation and 

governance of those clearing agencies registered with the Commission that meet the 

definition of a “covered clearing agency,” as defined by Rule 17Ad-22(a)(5)8

(collectively, the rules are herein referred to as “CCA” rules). The CCA rules require that 

covered clearing agencies, among other things:

“[E]stablish, implement, maintain and enforce written policies and procedures 

reasonably designed to...[m]aintain a sound risk management framework for 

comprehensively managing legal, credit, liquidity, operational, general business, 

investment, custody, and other risks that arise in or are borne by the covered 

clearing agency, which...[i]ncludes risk management policies, procedures, and 

systems designed to identify, measure, monitor, and manage the range of risks 

4 17 CFR 240.17Ad-22.

5 17 CFR 240.17Ab2-2.

6 15 U.S.C. 78q-1.

7 12 U.S.C. 5461 et. seq.

8 17 CFR 240.17Ad-22(a)(5).
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that arise in or are borne by the covered clearing agency, that are subject to review 

on a specified periodic basis and approved by the board of directors annually.”9

OCC proposes to adopt the proposed TPRMF, which would replace the CCRMP 

and provide an overview of OCC’s overall approach to Third-Party10 risk management. 

The proposed TPRMF would identify the risks that pertain to OCC’s Third-Party 

relationships and the actions taken by OCC at each stage of the relationship. OCC plans 

to make the proposed TPRMF publicly available on its website, which would provide 

transparency into OCC’s approach to Third-Party risk management for interested market 

participants. Currently, the CCRMP includes information about risk management related 

to direct and indirect participants, Liquidity Providers, asset custodians, settlement banks, 

letter of credit issuers, investment counterparties, and financial market utilities (“FMU”)

arising from its payment, clearing, and settlement processes. Under the proposed 

TPRMF, OCC would consolidate into one document its process for managing the risks 

associated with all Third-Party relationships across the entire lifecycle of their 

relationship with OCC. OCC believes the consolidation provides a more comprehensive 

and clear presentation of OCC’s Third-Party risk management without requiring a reader 

to seek multiple sources. 

9 17 CFR 240.17Ad-22(e)(3). OCC is defined as a covered clearing agency under the CCA 

rules, and therefore is subject to the requirements of the CCA rules, including Rule 17Ad22(e)(3).

10 Under the proposed TPRMF, a Third-Party would be defined as: a Clearing Member, 

Clearing Bank, custodians, liquidity provider, investment counterparty, financial market utility, 

Exchange, or vendor, which also has: (i) a relationship with OCC where products and/or services 

are exchanged; (ii) other ongoing business relationships with OCC; or (iii) responsibility for OCC 

associated records.
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Proposed Third-Party Risk Management Framework

The proposed TPRMF would state that as a central counterparty, OCC is exposed 

to risks arising from its Third-Party relationships. The proposed TPRMF would outline 

OCC’s approach to identify, measure, monitor, and manage risks arising from ThirdParty relationships including: Clearing Members; Clearing Banks, custodians, liquidity 

providers and investment counterparties (“Financial Institutions”); FMUs;11 Exchanges;

12

and vendors.

The proposed TPRMF would be approved annually by the Risk Committee of 

OCC’s Board (“Risk Committee”) and implemented by the OCC Management 

Committee (“MC”).

Risk Identification

The proposed TPRMF would state that OCC faces risks associated with its ThirdParty relationships, including:

• Financial risks arising from a Clearing Member failing to meet its financial 

obligations to OCC including, but not limited to, obligations related to settlement, 

margin, and Clearing Fund. OCC may also face financial risks from other ThirdParties not meeting their obligations to OCC, including, but not limited to, facilitating 

daily settlements, providing timely access to collateral, honoring liquidity draw 

requests, or meeting obligations under an agreement.

11 Under the proposed TPRMF, FMUs may include any person that manages or operates a 

multilateral system for the purpose of transferring, clearing, or settling payments, securities, or 

other financial transactions among Financial Institutions or between Financial Institutions and the 

person.

12 Under the proposed TPRMF, Exchange relationships may include options exchanges, 

futures markets, OTC Trade Sources or Loan Markets.
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• Operational risks arising from errors, disruptions, failures, or the inability of a ThirdParty to fulfill its obligations to OCC. These risks include a disruption preventing 

OCC from completing trade processing, daily settlements, accessing collateral, or 

safeguarding OCC property, equipment, or personnel. 

• Information Technology and Security risks arising when a Third-Party is unable to 

safeguard OCC data or maintain capabilities or services to support OCC’s operations.

• Legal and Regulatory risks arising when a Third-Party fails to fulfill its obligations to 

OCC. These risks include exposure to potential litigation or regulatory compliance 

concerns.

Relationship Lifecycle

The proposed TPRMF would state that OCC’s relationship lifecycle is designed 

to identify, measure, monitor, and manage Third-Party risks. The proposed TPRMF 

would state that the lifecycle consists of three stages. 

• On-Boarding – The proposed TPRMF would state that Third-Parties are evaluated to 

determine whether they can engage in or expand a relationship with OCC. The 

proposed TPRMF would state that after evaluation, OCC completes any operational 

tasks necessary to activate the relationship.

• Ongoing Monitoring – The proposed TPRMF would state that Third-Parties are 

monitored for compliance with standards, the presence of additional or increased 

risks, and fulfillment of contractual obligations. The proposed TPRMF would state 

that ongoing monitoring is conducted based upon the nature of each relationship and 

is commensurate with the risks posed by the Third-Party.
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• Off-Boarding – The proposed TPRMF would state that Third-Parties or OCC may 

elect to terminate a relationship. The proposed TPRMF would state that following the 

determination to terminate a relationship, OCC completes any operational tasks 

necessary to off-board the relationship.

The proposed TPRMF would state that Third-Parties that have multiple 

relationships with OCC are subject to the processes described below for each type of 

relationship. The proposed TPRMF would state that OCC recognizes that multiple 

relationships with a single entity may result in additional risks (as identified above) and 

incorporates this into its on-boarding and ongoing monitoring by reviewing affiliated 

relationships and their exposures at the Credit and Liquidity Risk Working Group 

(“CLRWG”).

The proposed TPRMF would state that as described below, risks identified 

throughout the relationship lifecycle are reported and escalated through associated 

working groups. The proposed TPRMF would state that working groups are crossdepartmental and support OCC’s business as assigned by the MC. The proposed TPRMF 

would state that each working group has a chair and designated MC member who are 

responsible to determine the matters to be escalated to the MC. The proposed TPRMF 

would state that the working groups identified in the TPRMF have defined decisionmaking authority, functions and responsibilities as defined in the associated working 

group procedure. The proposed TPRMF would state that the working groups that support 

the activities described in the TPRMF are: CLRWG, Exchange Working Group

(“EWG”), and Vendor Risk Working Group (“VRWG”).
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Third-Party Relationship Management

Clearing Members

The proposed TPRMF would state that OCC’s membership standards are 

designed to be objective and risk-based, and are publicly disclosed in OCC’s Rules and 

By-Laws. The proposed TPRMF would state that annually, Business Operations, 

Financial Risk Management (“FRM”), Treasury, and Third-Party Risk Management 

(“TPRM”) assess the adequacy of OCC’s membership standards to address the 

management of risks presented by Clearing Members and the processes used to monitor 

initial and ongoing compliance with those standards, in accordance with the CLRWG 

Procedure. The proposed TPRMF would state that the review may contain 

recommendations to change the standards or monitoring processes. The proposed 

TPRMF would state that the results of the annual assessment are summarized for 

consecutive review and approval by the CLRWG, MC, Risk Committee, and if rule 

changes are necessary, Board. 

On-Boarding: The proposed TPRMF would state that Business Operations, FRM, 

and TPRM complete a risk-based evaluation of Clearing Member applicants by 

evaluating their financial resources, operational capacity, personnel, and facilities against 

OCC’s membership standards. The proposed TPRMF would state that FRM presents the 

results of this evaluation to the CLRWG and other key stakeholders as identified within 

Article V, Section 2 of OCC’s By-Laws for review and approval. 

Ongoing Monitoring: The proposed TPRMF would state that Clearing Members 

are monitored for ongoing compliance with OCC’s membership standards. The proposed 

TPRMF would state that FRM, with support from Business Operations and TPRM, 
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performs Watch Level reporting and ongoing monitoring of financial and operational 

risks. The proposed TPRMF would state that in addition to or in support of Watch Level 

reporting, Business Operations and FRM conduct the following processes to monitor 

Clearing Members: 

• Determining an internal credit rating to identify creditworthiness;

• Performing periodic examinations to evaluate Clearing Member risk management 

policies, procedures, and practices; and 

• Evaluating material risks related to customers of Clearing Members. 

The proposed TPRMF would state that FRM provides informational Watch

Level13 reporting at meetings of the CLRWG, MC, and Risk Committee that summarizes 

the circumstances leading to violations of higher tier Watch Level criteria, additional 

risks observed, and any corrective measures taken by such Clearing Members.

The proposed TPRMF would state that should a Clearing Member approach or no 

longer meet minimum membership standards, protective measures may be imposed to 

limit or eliminate OCC’s counterparty exposure. The proposed TPRMF would state that 

OCC maintains authorities in its Rules (Chapter III, Chapter VI Rule 608, and Chapter 

VII Rules 704 and 707) to act to protect OCC, given the facts and circumstances of the 

13 Under the proposed TPRMF, Watch Level would be defined as: OCC assigns a level of 

required monitoring and reporting (i.e., a “Watch Level”) based on the identification of events or 

trends that might signal the deterioration of an entity’s financial or operational ability to timely 

meet its future obligations to OCC. Watch Level is a tiered structure with financial (e.g., capital 

and profitability), operational (e.g., operational difficulties and late financial report submissions), 

and general business (e.g., risk management issues and business restrictions by another SRO) 

criteria at each tier. Reaching the criteria at higher tier levels signals a more material event or 

trend has been detected and an entity may require heightened risk management. The CLRWG 

may recommend changes to Watch Level criteria to the MC, which maintains approval authority 

for recommended changes. FRM is responsible for implementing all approved Watch Level 

criteria changes.
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exposure presented by a Clearing Member, including but not limited to the imposition of 

additional monitoring, changes to margin requirements or composition, or suspension of 

some or all product and account approvals.

The proposed TPRMF would state that Business Operations, FRM, and TPRM 

provide reporting to the CLRWG, comprised of results from ongoing monitoring and 

management of Clearing Member financial, operational, legal, and regulatory risks and 

may raise matters for consideration to the CLRWG. The proposed TPRMF would state 

that the CLRWG may take action or escalate the matter to the MC, in accordance with 

the functions and responsibilities assigned to the CLRWG by the MC in the CLRWG 

Procedure. 

Off-Boarding: The proposed TPRMF would state that a Clearing Member may 

voluntarily terminate its membership. The proposed TPRMF would state that upon 

request for termination, Business Operations and FRM ensure all financial exposures and 

operational capabilities are wound down and all obligations to OCC are satisfied before 

the relationship is terminated. The proposed TPRMF would state that in the event a 

Clearing Member is suspended by OCC, the suspension will be managed in accordance 

with the Default Management Policy.

Clearing Banks, Custodians, Liquidity Providers and Investment Counterparties

The proposed TPRMF would state that OCC maintains relationships with

Financial Institutions that facilitate clearance and settlement activities, manage collateral, 

provide liquidity, and serve as investment counterparties.

On-Boarding: The proposed TPRMF would state that FRM and TPRM, with 

support as needed from Business Operations and Treasury, complete a risk-based 
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evaluation of each entity by evaluating its financial resources and operational capacity. 

The proposed TPRMF would state that for custodians, the evaluation considers whether a 

relationship is structured to allow prompt access to OCC and Clearing Member assets and 

whether the custodian is a supervised and regulated institution that adheres to generally 

accepted accounting practices, maintains safekeeping procedures, and has controls that 

fully protect these assets. The proposed TPRMF would state that the results of the 

evaluation are presented to the CLRWG for review and recommendation for approval 

prior to presentation to the Chief Executive Officer or Chief Operating Officer, each of 

whom has the authority to approve such relationships. 

Ongoing Monitoring: The proposed TPRMF would state that Business 

Operations, FRM, Treasury, and TPRM monitor the financial, operational, legal, and 

regulatory risks related to Financial Institution relationships. The proposed TPRMF 

would state that this monitoring includes Watch Level reporting, material agreement 

reviews, and ongoing monitoring of financial and operational risks. The proposed 

TPRMF would state that should Watch Level reporting detect potential issues or trends 

that might indicate the deterioration of a Financial Institution’s ability to perform, 

protective measures that may be applied include, but are not limited to, modifying the 

business relationship or termination of the relationship. 

The proposed TPRMF would state that Business Operations, FRM, Treasury, and 

TPRM provide reporting to the CLRWG, comprised of results from ongoing monitoring 

and management of a Financial Institution’s financial, operational, legal, and regulatory 

risks and may raise matters for consideration to the CLRWG. The proposed TPRMF 

would state that the CLRWG may take action or escalate the matter to the MC, in 
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accordance with the functions and responsibilities assigned to the CLRWG by the MC in 

the CLRWG Procedure.

Off-Boarding: The proposed TPRMF would state that a Financial Institution 

relationship may be terminated by the Financial Institution or OCC, pursuant to 

applicable agreements. The proposed TPRMF would state that the Chief Executive 

Officer or Chief Operating Officer, each of whom has the authority, must approve the 

termination of a Financial Institution relationship initiated by OCC. The proposed 

TPRMF would state that OCC may terminate a relationship if risks rise to an 

unacceptable level or a relationship is no longer required. Business Operations, FRM, 

Treasury, and Legal perform activities necessary to off-board the relationship in 

accordance with the agreement between OCC and the applicable Financial Institution.

Financial Market Utilities

The proposed TPRMF would state that FMUs provide OCC with a range of 

services, including custody, stock loan processing, cross-margin programs, and securities 

settlement. 

On-Boarding: The proposed TPRMF would state that Business Operations, FRM, 

Legal, and TPRM consider an FMU’s financial condition, operational capabilities, and 

any legal or regulatory risks associated with the relationship during the on-boarding 

process. The proposed TPRMF would state that the CLRWG reviews this evaluation and 

recommends approval prior to presentation to the Chief Executive Officer or Chief 

Operating Officer, each of whom has the authority to approve such relationships. The 

proposed TPRMF would state that on-boarding of the relationship may be subject to 

completion of any necessary agreements or regulatory filings.
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Ongoing Monitoring: The proposed TPRMF would state that Business 

Operations, FRM and TPRM monitor the financial, operational, legal, and regulatory 

risks related to FMU relationships. The proposed TPRMF would state that this 

monitoring includes Watch Level reporting, material agreement reviews, and ongoing 

monitoring of financial and operational risks. 

The proposed TPRMF would state that Business Operations, FRM, and TPRM 

provide reporting to the CLRWG, comprised of results from ongoing monitoring and 

management of an FMU’s financial, operational, legal, and regulatory risks and may raise 

matters for consideration to the CLRWG. The proposed TPRMF would state that the 

CLRWG may take action or escalate the matter to the MC in accordance with the 

functions and responsibilities assigned to the CLRWG by the MC in the CLRWG 

Procedure.

Off-Boarding: The proposed TPRMF would state that an FMU relationship may 

be terminated by the FMU or OCC, pursuant to applicable agreements. The proposed 

TPRMF would state that the Chief Executive Officer or Chief Operating Officer, each of 

whom has the authority, must approve the termination of an FMU relationship initiated 

by OCC. The proposed TPRMF would state that Business Operations, FRM, Legal, and 

TPRM coordinate the activities necessary to off-board the relationship, including, but not 

limited to, the wind down of all services with the FMU and, if necessary, revising OCC 

policies and procedures and filing rule changes with OCC’s regulators after receiving the 

appropriate internal approvals.
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Exchanges

The proposed TPRMF would state that OCC provides clearing services for 

Exchanges pursuant to applicable agreements (Exchange agreements are filed with 

OCC's regulators, as required). The proposed TPRMF would state that under these 

agreements, OCC clears products including equity and index options, commodity 

contracts, treasury futures, security futures, and stock loan transactions.

On-Boarding: The proposed TPRMF would state that Product and Business 

Development, in coordination with stakeholders which may include, but are not limited 

to, FRM, Business Operations, and TPRM, completes an evaluation of proposed 

Exchange relationships, including assessing whether an Exchange meets OCC’s 

qualification requirements (as further described in the OCC By-Laws, Article VIIA –

Equity Exchanges and Article VIIB – Non-Equity Exchanges). The proposed TPRMF 

would state that the due diligence performed for a proposed Exchange relationship is 

presented to the EWG for review and subsequently to the MC for approval. The proposed 

TPRMF would state that a summary of due diligence and on-boarding activities are 

presented to the Board for approval to launch. 

Ongoing Monitoring: The proposed TPRMF would state that Business Operations 

and TPRM monitor the operational, legal and regulatory risks related to Exchange 

relationships. The proposed TPRMF would state that such relationships are monitored for 

connectivity and trade activity on an ongoing basis. The proposed TPRMF would state 

that Exchange monitoring allows for internal escalation to Production Support and the 

EWG, and externally to Exchanges. 
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The proposed TPRMF would state that Business Operations and TPRM conduct 

reviews to assess an Exchange’s operational performance, overall financial condition, and 

ability to meet contractual obligations. The proposed TPRMF would state that to assess 

operational performance, Business Operations executes testing activities throughout the 

year aimed at mitigating operational risk, including the requirement that all Exchanges 

must participate in annual disaster recovery tests. The proposed TPRMF would state that 

in addition, Business Operations supports external testing with all Exchanges upon 

request or related to OCC system changes and enhancements. The proposed TPRMF 

would state that TPRM monitors the financial condition of Exchanges and evaluates 

whether an Exchange’s operations meet its contractual obligations. The proposed 

TPRMF would state that Business Operations facilitates annual meetings with each 

Exchange that include an operational performance review, communicate updates about 

upcoming OCC system enhancements and changes, and seek feedback.

The proposed TPRMF would state that Business Operations and TPRM provide 

reporting to the EWG, comprised of results from ongoing monitoring and management of 

an Exchange’s financial, operational, legal and regulatory risks and may raise matters for 

consideration to the EWG. The proposed TPRMF would state that the EWG may take 

action or escalate the matter to the MC, in accordance with the functions and 

responsibilities assigned to the EWG by the MC in the EWG Procedure.

Off-Boarding: The proposed TPRMF would state that an Exchange relationship 

may be terminated by the Exchange or OCC, pursuant to the applicable Exchange 

agreement. The proposed TPRMF would state that upon request for termination by the 

Exchange, Business Operations notifies the EWG and the MC to discuss any immediate 
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actions such as limiting connectivity with the Exchange to mitigate exposure to 

operational, legal, or regulatory risks and to determine a termination date. 

The proposed TPRMF would state that additionally, Business Operations leads 

the development of a deployment plan to identify the departments and required actions 

necessary to reduce any interim risk prior to termination, which may include performing 

clearing system maintenance and limiting or removing connectivity to the Exchange. The 

proposed TPRMF would state that Business Operations and other supporting departments 

coordinate and perform activities necessary to off-board the relationship in accordance 

with the applicable Exchange agreement.

Vendors

The proposed TPRMF would state that OCC engages and maintains vendor 

relationships for various purposes, including to accomplish its strategic objectives, 

outsource operational activities, and assist in compliance with legal and regulatory 

obligations. The proposed TPRMF would state that all Third-Party relationships that are 

not Clearing Members, Financial Institutions, FMUs, or Exchanges are treated as vendor 

relationships. 

On-Boarding: The proposed TPRMF would state that during on-boarding, TPRM 

works with the business area requesting the vendor to assign a vendor relationship 

manager (“VRM”) who is obligated to manage the vendor relationship and execute the 

phases of the vendor relationship lifecycle. The proposed TPRMF would state that TPRM 

coordinates with the VRM to complete an evaluation of inherent risks posed by the 

vendor relationship. The proposed TPRMF would state that the evaluation of inherent 

risk results in a vendor risk tier which is used to inform the level of due diligence and 
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frequency of monitoring for each vendor. The proposed TPRMF would state that due 

diligence is based on the inherent risks identified and may include a review of financial 

health, operational capacity, and other standards based on the relationship. 

The proposed TPRMF would state that any potential risk issues identified are 

presented to the VRM and OCC’s Legal Department for review. Potential risk issues may 

also be shared with the VRWG. The proposed TPRMF would state that an agreement that 

addresses control and business requirements is then negotiated with the vendor and 

executed by an OCC officer (an OCC Vice President or above).

Ongoing Monitoring: The proposed TPRMF would state that VRMs and TPRM 

monitor vendors to assess whether they are delivering services as required by applicable 

agreements. The proposed TPRMF would state that the scope and frequency of 

monitoring is determined by the vendor risk tier and inherent risks identified during onboarding. The proposed TPRMF would state that monitoring may include reviewing a 

vendor’s financial health, operational capacity, and other standards based on the 

relationship’s inherent risks. 

The proposed TPRMF would state that TPRM provides reporting to the VRWG, 

comprised of results from ongoing monitoring and management of a vendor’s financial, 

operational, legal, and regulatory risks and may raise matters for consideration to the 

VRWG. The proposed TPRMF would state that the VRWG may take action (e.g., 

additional monitoring, require contingency plans, and additional contractual 

requirements) or escalate the matter to the MC, in accordance with the functions and 

responsibilities assigned to the VRWG by the MC in the Vendor Risk Working Group 

Procedure.
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Off-Boarding: The proposed TPRMF would state that a vendor relationship may 

be terminated by the vendor or OCC, pursuant to applicable agreements. The proposed 

TPRMF would state that OCC mitigates exposure to operational, legal, and regulatory 

risk and performs activities necessary to off-board the relationship in accordance with the 

applicable vendor agreement.

Retirement of Counterparty Credit Risk Management Policy

OCC proposes retiring the CCRMP and replacing it with the proposed TPRMF. 

Currently, the CCRMP includes information about the Third-Party risk management 

lifecycle for Clearing Members, Financial Institutions, and FMUs. The information 

related to the Third-Party risk management lifecycle (on-boarding, ongoing monitoring 

and off-boarding) is now included in the proposed TPRMF. The proposed TPRMF also 

includes information about the Third-Party risk management lifecycle for Exchanges and 

Vendors, and OCC believes consolidating its Third-Party risk management lifecycle 

information into one publicly available document will provide for greater efficiency and 

transparency. 

Additionally, by reconciling procedural information that was previously in the 

CCRMP with OCC’s existing procedures, OCC was able to eliminate redundancy that 

could lead to confusion. In the proposed TPRMF, the Third-Party risk management 

lifecycle for each entity type is described. Detailed supporting procedural information 

that covers the various Third-Party relationships, lifecycle phases and governance steps is 

provided for in OCC’s procedures. 

The below table summarizes where the information currently in the CCRMP will 

reside following its proposed retirement. The left column lists the sections of the current 
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CCRMP, the right column indicates where the information will be available under the 

proposed rule changes, including in the TPRMF and OCC Rules and By-Laws, as well as 

related OCC procedures. The CCRMP applies only to Clearing Members, Financial 

Institutions, and FMUs. Therefore, the below table only illustrates information related to 

those Third-Parties. A comprehensive statement about the Third-Party risk management 

lifecycle approach for Exchanges and Vendors has not been previously filed as a rule.

CCRMP Section Location in Proposed Revised Structure

I. Purpose No longer necessary, as the CCRMP will be retired. TPRMF includes an Executive 

Summary appropriate to that document. 

II.A. Identification 

of Credit Risk

TPRMF Section II: Risk Identification

In the TPRMF, OCC has defined the risks it faces to include financial risks, 

operational risks, information technology and security risks, and legal and regulatory 

risks. The credit risk areas identified in the CCRMP are covered in the broader OCC 

definition of financial risks in the TPRMF. The teams monitoring credit risk continue 

to monitor for each potential area of credit risk in accordance with OCC’s procedures 

for each type of Third-Party relationship. 

OCC does not believe this reorganization changes the risks faced by OCC or the rights 

and obligations of OCC. 

II.B. Counterparty 

Access and 

Participation

TPRMF Section III: Relationship Lifecycle (On-Boarding)

TPRMF Section IV: Third-Party Relationship Management (Clearing Members, 

Financial Institutions and FMUs)

OCC By-Laws Articles IV and Article V, Section 1.03 (e) and Section 2

OCC Rules Chapters II and III, Rule 604

The information about how OCC on-boards and monitors the ongoing compliance with 

standards of its Third-Party relationships is summarized in the proposed TPRMF 

relationship lifecycle overview and then in greater detail in the section related to each 

Third-Party type. The proposed TPRMF is organized by Third-Party type where the 

CCRMP is organized by relationship phase. While the sections have been reorganized 

and the drafting style has been changed from stating what OCC “shall” do to 

statements of what OCC does, the approach to risk management for Clearing 

Members, Financial Institutions and FMUs (e.g., OCC’s procedures require monitoring 

for a low probability of defaulting on obligations and assessing potential risks 

presented by indirect participants) during on-boarding and initial approval has not 

changed.
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Additionally, specific information related to the qualification and approval of Clearing 

Members and Financial Institutions is currently publicly available in the OCC Rules 

and By-Laws. OCC modified the approval process for FMUs to reflect its practices 

more accurately. While the Board approves any project that would require the onboarding of an FMU, the final authority to implement the relationship is maintained by 

the CEO or COO, consistent with the approval structure OCC utilizes for Financial 

Institutions. The TPRMF is consistent with the management structure changes 

previously approved by the Commission.14

Finally, on-boarding is done in accordance with OCC’s procedures for each type of 

Third-Party relationship. 

II.C. Measuring 

Counterparty Credit 

Risk

TPRMF Section III: Relationship Lifecycle (Ongoing Monitoring)

TPRMF Section IV: Third-Party Relationship Management (Clearing Members, 

Financial Institutions and FMUs)

The information about how OCC monitors its established Third-Party relationships on 

an ongoing basis is summarized in the proposed TPRMF relationship lifecycle 

overview and then in greater detail in the section related to the on-going monitoring of 

each Third-Party type. The proposed TPRMF is organized by Third-Party type where 

the CCRMP is organized by relationship phase. While the sections have been 

reorganized and the drafting style has been changed from stating what OCC “shall” do 

to statements of what OCC does, the approach to risk management for Clearing 

Members, Financial Institutions and FMUs (e.g., OCC’s procedures require 

measurement and reporting of credit risk and other exposures) during ongoing 

monitoring has not changed.

Additionally, the relationship lifecycle section in the proposed TPRMF states that OCC 

recognizes that multiple relationships with a single entity may result in concentration 

risk and incorporates this into its monitoring and reporting processes. Finally, ongoing 

monitoring is done in accordance with OCC’s procedures for each type of Third-Party 

relationship.

II.D. Monitoring and 

Managing 

Counterparty Credit 

Risk

TPRMF Section III: Relationship Lifecycle (Ongoing Monitoring)

TPRMF Section IV: Third-Party Relationship Management (Clearing Members, 

Financial Institutions and FMUs)

The information about how OCC monitors its established Third-Party relationships on 

an ongoing basis is summarized in the proposed TPRMF relationship lifecycle 

overview and then in greater detail in the section related to the on-going monitoring of 

each Third-Party type. The proposed TPRMF is organized by Third-Party type where 

the CCRMP is organized by relationship phase. While the sections have been 

reorganized and the drafting style has been changed from stating what OCC “shall” do 

to statements of what OCC does, the approach to risk management for Clearing 

14 See Securities Exchange Act Release No. 34–85129 (February 13, 2019), 84 FR 5129 

(February 13, 2019) (SR-OCC-2018-015).
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Members (e.g., OCC’s procedures require monitoring for potential risks presented by 

indirect participants), Financial Institutions and FMUs during ongoing monitoring has 

not changed.

In this section, OCC proposes to maintain the information related to OCC’s program 

for Watch Level reporting but remove the specificity about what constitutes the Watch 

Level Tiers for Clearing Members, Financial Institutions and FMUs. OCC proposes to 

define the term Watch Level in the TPRMF and use it consistently throughout the ongoing monitoring sections related to Clearing Members (and related indirect 

participants), Financial Institutions and FMUs. In each of these sections, the proposed 

TPRMF would describe OCC’s utilization of Watch Level reporting and the steps that 

can be taken if a Third-Party is trending towards lower creditworthiness. OCC 

proposes to remove the information about what constitutes each Watch Level tier from 

its rules and maintain this information in its procedures. OCC believes this is 

appropriate as it would allow OCC to react to changing or unforeseen circumstances 

that may call for an update to its tiering immediately.

Finally, ongoing monitoring is done in accordance with OCC’s procedures for each 

type of Third-Party relationship.

II.E. Counterparty 

Credit Risk 

Termination 

TPRMF Section III: Relationship Lifecycle (Off-Boarding)

TPRMF Section IV: Third-Party Relationship Management (Clearing Members, 

Financial Institutions and FMUs)

The information about how OCC off-boards Third-Party relationships is summarized 

in the proposed TPRMF relationship lifecycle overview and then in greater detail in 

the section related to the off-boarding of each Third-Party type. The proposed TPRMF 

is organized by entity type where the CCRMP is organized by relationship phase. 

While the sections have been reorganized and the drafting style has been changed from 

stating what OCC “shall” do to statements of what OCC does, the approach to risk 

management for Clearing Members, Financial Institutions and FMUs during offboarding monitoring has not changed.

Finally, off-boarding is done in accordance with OCC’s procedures for each type of 

Third-Party relationship.

Proposed Corresponding Changes to Risk Management Framework Policy, Liquidity 

Risk Management Framework, Margin Policy, and Collateral Risk Management Policy

OCC additionally proposes to make changes to its rule filed documents that refer 

to the CCRMP. OCC believes this change will not substantively alter these documents, 

but rather refer readers to the TPRMF which will provide information related to the risk 

management of all OCC Third-Parties in one document. 
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OCC proposes to update all references to the CCRMP in the Risk Management 

Framework Policy to refer to the TPRMF. Additionally, OCC proposes to update 

references to the Third-Party Risk Management Policy15 in the Risk Management 

Framework Policy to also refer to the TPRMF. Similarly, OCC proposes to update all 

references to the CCRMP and Third-Party Risk Management Policy in the Liquidity Risk 

Management Framework and Margin Policy to refer to the TPRMF. Finally, OCC 

proposes to update references to the CCRMP in the Collateral Risk Management Policy 

to refer to the TPRMF. In some cases, these proposed revisions include combining 

redundant references to the CCRMP in favor of one reference to the TPRMF. Lastly, 

OCC proposes to remove, rather than update, a paragraph in the Collateral Risk 

Management Policy related to cross-margining that refers to the CCRMP as it is 

redundant with the Margin Policy. OCC believes the redundant description does not need 

to remain in both rule filed documents. 

(2) Statutory Basis

Section 17A(b)(3)(F) of the Act16 requires, in part, that the rules of a clearing 

agency be designed to promote the prompt and accurate clearance and settlement of 

securities transactions, to assure the safeguarding of securities and funds in the custody or 

control of the clearing agency or for which it is responsible, and in general, to protect 

investors and the public interest. OCC believes that the proposed rule change is consistent 

with Section 17A(b)(3)(F) of the Act17 because OCC’s TPRMF details OCC’s approach 

15 The OCC Third-Party Risk Management Policy has never been filed as a rule, and will be

retired upon approval of the TPRMF. 

16 15 U.S.C. 78q-1(b)(3)(F).

17 Id.
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to managing risks associated with Third-Parties. Third-Parties are involved in OCC’s 

clearance and settlement process in various ways and therefore present risks to OCC’s 

ability to promptly and accurately clear and settle securities transactions. The following 

provides one example for each Third-Party. Clearing Members present risk if they are not 

able to meet their financial obligations to OCC; Financial Institutions present risk if they 

are unable to provide ready access to OCC’s funds; FMUs present risk if they do not 

perform as expected under agreements with OCC; Exchanges present risk if inaccurate 

trade information is sent to OCC for processing; and vendors present risk as OCC 

outsources certain critical activities, such as gathering pricing data, to vendors. OCC 

manages these risks by scrutinizing the Third-Party before it can be on-boarded, 

monitoring the Third-Party throughout its relationship with OCC and carefully offboarding the Third-Party should the relationship end. This organized and diligent 

approach to managing the risks associated with Third-Parties, promotes the prompt and 

accurate clearance and settlement of securities transactions by providing for the 

management of the risks associated Third-Party relationships. By identifying the risks 

associated with Third-Party relationships throughout their lifecycle in accordance with 

the TPRMF, OCC would aim to avoid or manage these risks in order to continue 

providing prompt and accurate clearance and settlement services. 

Additionally, OCC’s TPRMF provides for the safeguarding of securities and 

funds in the custody or control of OCC or for which it is responsible by detailing the 

program OCC uses to manage its relationships with Third-Parties and more specifically, 

Financial Institutions and FMUs. The TPRMF would outline the process OCC would use 

to manage the risks associated with Financial Institutions and FMUs. Financial 
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Institutions and FMUs present settlement risk to OCC if they do not perform within 

expected settlement time frames. In addition, Financial Institutions and FMUs present 

custodial risk to OCC if they are unable to provide ready access to OCC’s funds in their 

custody. Furthermore, Financial Institutions and FMUs present risk to OCC if they are 

unable to promptly recover from a business continuity or disaster recovery event in order 

to perform services for OCC. By following the risk management process proposed in the 

TPRMF, OCC believes it would identify the risks associated with Financial Institutions 

and FMUs and use this information to make decisions about whether to begin a 

relationship with the Third-Party and whether to maintain the on-going relationship. 

OCC believes following the process contained in the proposed TPRMF will 

contribute to the safeguarding of securities and funds in its custody or control or for 

which OCC is responsible by documenting the process OCC aims to consistently follow 

in order to identify, measure, monitor and manage the risks associated with Third-Parties.

Rule 17Ad-22(e)(3)18 requires, in part, that a covered clearing agency “establish, 

implement, maintain and enforce written policies and procedures reasonably designed 

to...[m]aintain a sound risk management framework for comprehensively managing legal, 

credit, liquidity, operational, general business, investment, custody, and other risks that 

arise in or are borne by the covered clearing agency, which...[i]ncludes risk management 

policies, procedures, and systems designed to identify, measure, monitor, and manage the 

range of risks that arise in or are borne by the covered clearing agency, that are subject to 

review on a specified periodic basis and approved by the board of directors annually.” 

18 17 CFR 240.17Ad-22(e)(3).
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OCC believes that the proposed rule change is also consistent with Rule 17Ad-22(e)(3)19

because the proposed TPRMF would provide an overview of OCC’s approach to ThirdParty risk management. The proposed TPRMF would describe how OCC monitors the 

risks that arise in or are borne by OCC through a variety of risk assessment, risk 

reporting, evaluation and internal control management activities, consistent with the 

requirements of Rule 17Ad-22(e)(3).

20 Additionally, OCC believes that retiring the 

CCRMP in favor of the proposed TPRMF, which includes a more thorough description of 

the OCC Third-Party risk management lifecycle approach across entity types, will 

provide a more comprehensive, clear and transparent presentation of OCC’s Third-Party 

risk management program. Currently, OCC’s approach to Third-Party risk management 

for Clearing Members, Financial Institutions and FMUs is included the CCRMP, while 

OCC’s approach to Third-Party risk management for Exchanges and Vendors is currently 

contained in policies and procedures that are not filed as rules. OCC believes that 

consolidating its approach to Third-Party risk management into one public document, 

will provide for greater consistency and a single source for information related to OCC’s 

approach to the management of risks presented by Third-Parties. Additionally, OCC 

believes clarity and consistency will be gained by maintaining certain procedural 

information previously redundantly contained in the CCRMP and OCC’s procedures only 

in OCC’s procedures, rather than redundantly in the TPRMF. OCC believes resolving 

these redundancies will avoid potential confusion that could be created by any 

inconsistency between the TPRMF and OCC’s procedures. Finally, OCC believes that 

19 Id.

20 Id.
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making the proposed TPRMF publicly available will provide for greater transparency 

into OCC’s policy to identify, measure, monitor, and manage risks related to Third-Party 

relationships. 

Finally, OCC believes the proposed corresponding changes to the Risk 

Management Framework Policy, Liquidity Risk Management Framework, Margin 

Policy, and Collateral Risk Management Policy contribute to the maintenance required 

related to these policies as OCC aims to continue to maintain a sound risk management 

framework. While these edits do not change the substance or meaning of the Risk 

Management Framework Policy, Liquidity Risk Management Framework, Margin 

Policy, and Collateral Risk Management Policy, OCC believes accurate references within 

its policies and procedures support the maintenance of its risk management framework.

The proposed rule change is not inconsistent with the existing rules of OCC, 

including any other rules proposed to be amended. 

(B) Clearing Agency’s Statement on Burden on Competition

Section 17A(b)(3)(I) of the Act21 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 rule changes would impact 

or impose any burden on competition. The proposed rule change clearly and transparently 

presents the framework OCC uses to identify, monitor and manage its risks related to 

Third-Parties in the TPRMF. In addition, by retiring the CCRMP, the TPRMF 

consolidates information related to Third-Parties in one document for ease of access by 

interested parties. In addition, OCC plans to make this document publicly available on its 

21 15 U.S.C. 78q-1(b)(3)(I).
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website, thereby providing additional transparency and equal availability to all market 

participants. While the proposed rule change would enhance OCC’s framework of risk 

management documentation, these updates do not affect Clearing Members’ access to 

OCC’s services or impose any direct burdens on Clearing Members. Accordingly, the 

proposed rule change would not unfairly inhibit access to OCC’s services or disadvantage 

or favor any particular user in relationship to another user. 

For the foregoing reasons, OCC believes that the proposed rule change is in the 

public interest, would be consistent with the requirements of the Act applicable to 

clearing agencies, and would not impact or impose a burden on competition.

(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

Within 45 days of the date of publication of this notice in the Federal Register or 

within such longer period up to 90 days (i) as the Commission may designate if it finds 

such longer period to be appropriate and publishes its reasons for so finding or (ii) as to 

which the self- regulatory organization consents, the Commission will:

(A) by order approve or disapprove the proposed rule change, or

(B) institute proceedings to determine whether the proposed rule change should 

be disapproved.
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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 (http://www.sec.gov/rules/sro.shtml);

or

• Send an e-mail to rule-comments@sec.gov. Please include File Number SR-OCC2020-014 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-2020-014. This file number should 

be included on the subject line if e-mail 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

(http://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 10:00 a.m. 
File No. SR-OCC-2020-014

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and 3:00 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/CompanyInformation/Documents-and-Archives/By-Laws-and-Rules#rule-filings.

All comments received will be posted without change. Persons submitting 

comments are cautioned that we do not redact or edit personal identifying information

from comment submissions. You should submit only information that you wish to make

available publicly.

All submissions should refer to File Number SR-OCC-2020-014 and should be 

submitted on or before [insert date 21 days from publication in the Federal Register].

For the Commission, by the Division of Trading and Markets, pursuant to

delegated authority.

22

Secretary

22 17 CFR 200.30-3(a)(12).