November 1, 2023

VIA CFTC PORTAL

Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, DC 20581

Re: Rule Certification Concerning the Amended and Restated Stock Options and 

Futures Settlement Agreement Between The Options Clearing Corporation and 

the National Securities Clearing Corporation

Dear Secretary Kirkpatrick:

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

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

Corporation (“OCC”) hereby certifies to the CFTC (1) amendments to the Amended and Restated 

Stock Options and Futures Settlement Agreement dated August 5, 2017 between OCC and National 

Securities Clearing Corporation (“NSCC,” and together with OCC, the “Clearing Agencies”)

(“Existing Accord”)1and (2) revisions to OCC By-Laws, OCC Rules,2 OCC’s Comprehensive 

Stress Testing & Clearing Fund Methodology, and Liquidity Risk Management Description and 

OCC’s Liquidity Risk Management Framework in connection with the proposed modifications to 

the Existing Accord. The date of implementation of the rule is at least 10 business days following 

receipt of the certification by the CFTC. The proposal will not be implemented until OCC receives 

all necessary regulatory approvals in connection with a proposed rule change filed with the 

Securities and Exchange Commission (“SEC”) (File No. SR-OCC-2023-007)3under Section 19(b) 

of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 19b-4 thereunder and an 

advance notice filed with the SEC and the Board of Governors for the Federal Reserve System (File 

1 The Existing Accord was previously submitted to the CFTC on June 6, 2017 and certified on 

June 20, 2017. 

2 OCC By-Laws are available at https://www.theocc.com/getmedia/3309eceb-56cf-48fc-b3b3-

498669a24572/occ_bylaws.pdf and OCC Rules are available at

https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf.

3 See Exchange Act Release No. 98215 (Aug. 24, 2023), 88 FR 59976 (Aug. 30, 2023) (File 

No. SR-OCC-2023-007). NSCC also has filed a proposed rule change with the SEC in 

connection with this proposal. See SR-NSCC-2023-007.
Christopher J. Kirkpatrick

November 1, 2023

Page 2

No. SR-OCC-2023-801)4pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, entitled Payment, Clearing and Settlement Supervision Act of 

2010 (“Clearing Supervision Act”) and Rule 19b-4(n)(1)(i) under the Exchange Act. 

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

Explanation and Analysis

This proposed rule certification would (1) modify the Existing Accord between OCC and 

NSCC and (2) make certain revisions to OCC By-Laws, OCC Rules, OCC’s Comprehensive Stress 

Testing & Clearing Fund Methodology, and Liquidity Risk Management Description and OCC’s 

Liquidity Risk Management Framework in connection with the proposed modifications to the 

Existing Accord. The proposed changes would permit OCC to elect to make a cash payment to 

NSCC following the default of a common clearing participant that would cause NSCC’s central 

counterparty trade guaranty to attach to certain obligations of that participant, as described in greater 

detail below.

i. Executive Summary

NSCC is a clearing agency that provides clearing, settlement, risk management, and central 

counterparty services for trades involving equity securities. OCC is the sole registered clearing 

agency for standardized equity options listed on national securities exchanges, including options that 

contemplate the physical delivery of equities cleared by NSCC in exchange for cash (“physically 

settled” options).5 OCC also clears certain futures contracts that, at maturity, require the delivery of 

equity securities cleared by NSCC in exchange for cash. As a result, the exercise/assignment of 

certain options or maturation of certain futures cleared by OCC effectively results in stock 

settlement obligations. NSCC and OCC maintain a legal agreement, generally referred to by the 

parties as the “Accord” agreement, that governs the processing of such physically settled options and 

futures cleared by OCC that result in transactions in underlying equity securities to be cleared by 

NSCC (i.e., the Existing Accord). The Existing Accord establishes terms under which NSCC 

accepts for clearing certain securities transactions that result from the exercise and assignment of 

4 See Exchange Act Release No. 98214 (Aug. 24, 2023), 88 FR 59988 (Aug. 30, 2023) (File 

No. SR-OCC-2023-801).

5 The term “physically-settled” as used throughout the OCC Rulebook refers to cleared 

contracts that settle into their underlying interest (i.e., options or futures contracts that are not 

cash-settled). When a contract settles into its underlying interest, shares of stock are sent, 

i.e., delivered, to contract holders who have the right to receive the shares from contract 

holders who are obligated to deliver the shares at the time of exercise/assignment in the case 

of an option and maturity in the case of a future.
Christopher J. Kirkpatrick

November 1, 2023

Page 3

relevant options contracts and the maturity of futures contracts that are cleared and settled by OCC.6 

It also establishes the time when OCC’s settlement guaranty in respect of those transactions ends 

and NSCC’s settlement guaranty begins.

The Existing Accord allows for a scenario in which NSCC could choose not to guarantee the 

settlement of such securities arising out of transactions. Specifically, NSCC is not obligated to 

guarantee settlement until its member has met its collateral requirements at NSCC. If NSCC 

chooses not to guarantee settlement, OCC would engage in an alternate method of settlement outside 

of NSCC. This scenario presents two primary problems. First, the cash required for OCC and its 

Clearing Members in certain market conditions to facilitate settlement outside of NSCC could be 

significantly more than the amount required if NSCC were to guarantee the relevant transactions. 

This is because settlement of the transactions in the underlying equity securities outside of NSCC 

would mean that they would no longer receive the benefit of netting through the facilities of NSCC. 

In such a scenario, the additional collateral required from Clearing Members to support OCC’s 

continuing settlement guarantee would also have to be sufficiently liquid to properly manage the 

risks associated with those transactions being due on the second business day following the option 

exercise or the relevant futures contract maturity date.

Based on an analysis of scenarios using historical data where it was assumed that OCC could 

not settle transactions through the facilities of NSCC, the worst-case outcome resulted in extreme 

liquidity demands of over $300 billion for OCC to effect settlement via an alternative method, e.g., 

by way of gross broker-to-broker settlement, as discussed in more detail below. OCC Clearing 

Members, by way of their contributions to the OCC Clearing Fund, would bear the brunt of this 

demand. Furthermore, there is no guarantee that OCC Clearing Members could fund the entire 

amount of any similar real-life scenarios. By contrast, projected GSPs, defined below, identified 

during the study ranged from approximately $419 million to over $6 billion, also as discussed in 

more detail below.

The second primary problem relates to the significant operational complexities if settlement 

occurs outside of NSCC. More specifically, netting through NSCC reduces the volume and value of 

settlement obligations. For example, in 2022 it is estimated that netting through NSCC’s continuous 

net settlement (“CNS”) accounting system7reduced the value of CNS settlement obligations by 

approximately 98% or $510 trillion from $519 trillion to $9 trillion. If settlement occurred outside 

of NSCC, on a broker-to-broker basis between OCC Clearing Members, for example, shares would 

not be netted and Clearing Members would have to coordinate directly with each other to settle the 

relevant transactions. The operational complexities and uncertainty associated with alternate means 

6 Under the Existing Accord, such options and futures are defined as “E&A/Delivery 

Transactions”, which refers to “Exercise & Assignment Delivery Transactions.”

7 See Rule 11 (CNS System) and Procedure VII (CNS Accounting Operation) of the NSCC 

Rules. See NSCC’s Rules, available at https://www.dtcc.com/-

/media/Files/Downloads/legal/rules/nscc_rules.pdf.
Christopher J. Kirkpatrick

November 1, 2023

Page 4

of settlement would impact every market participant involved in a settlement of OCC-related 

transactions. 

To address these problems, OCC proposes to amend and restate the Existing Accord and 

make related changes to its rules that would allow OCC to elect to make a cash payment to NSCC 

following the default of a Common Member8that would cause NSCC to guarantee settlement of that 

Common Member’s transactions and, therefore, cause those transactions to be settled through 

processing by NSCC. As part of this proposal, OCC also will enhance its daily liquidity stress 

testing processes and procedures to account for the possibility of OCC making such a payment to 

NSCC in the event of a Common Member default. By making these enhancements to its stress 

testing, OCC could include the liquid resources necessary to make the payment in its resource 

planning. OCC believes that by NSCC accepting such a payment from OCC, the operational 

efficiencies and reduced costs related to the settlement of transactions through NSCC would limit 

market disruption following a Common Member default because settlement through NSCC 

following such a default would be less operationally complex and would be expected to require less 

liquidity and other collateral from market participants than the processes available to OCC for 

closing out positions. Additionally, proposed enhancements by OCC to its liquidity stress testing 

would add assurances that OCC could make such a payment in the event of a Common Member 

default. OCC believes that its clearing members and all other participants in the markets for which 

OCC provides clearance and settlement will benefit from OCC’s ability to choose to make a cash 

payment to effect settlement through the facilities of NSCC. This change will provide more 

certainty around certain default scenarios and would blunt the financial and operational burdens 

market participants could experience in the case of most clearing member defaults.

ii. Background

OCC acts as a central counterparty clearing agency for U.S.-listed options and futures on a 

number of underlying financial assets including common stocks, currencies and stock indices. In 

connection with these services, OCC provides the OCC Guaranty pursuant to its By-Laws and 

Rules. NSCC acts as a central counterparty clearing agency for certain equity securities, corporate 

and municipal debt, exchange traded funds and unit investment trusts that are eligible for its 

services. Eligible trading activity may be processed through NSCC’s CNS system9or through its 

8 A firm that is both an OCC Clearing Member and an NSCC Member or is an OCC Clearing 

Member that has designated an NSCC Member to act on its behalf is referred to herein as a 

“Common Member.” The term “Clearing Member” as used herein has the meaning provided 

in OCC’s By-Laws. See OCC’s By-Laws, supra, note 2. The term “Member” as used herein 

has the meaning provided in NSCC’s Rules. See NSCC’s Rules, supra note 7.

9 See Rule 11 (CNS System) and Procedure VII (CNS Accounting Operation) of the NSCC 

Rules, supra note 7.
Christopher J. Kirkpatrick

November 1, 2023

Page 5

Balance Order Account system,10 where all eligible compared and recorded transactions for a 

particular settlement date are netted by issue into one net long (buy), net short (sell) or flat position. 

As a result, for each day with activity, each Member has a single deliver or receive obligation for 

each issue in which it has activity. In connection with these services, NSCC also provides the 

NSCC Guaranty pursuant to Addendum K of the NSCC Rules. 

OCC’s Rules provide that delivery of, and payment for, securities underlying certain 

exercised stock options and matured single stock futures that are physically settled are generally 

effected through the facilities of NSCC and are not settled through OCC’s facilities.11 OCC and 

NSCC executed the Existing Accord to facilitate, via NSCC’s systems, the physical settlement of 

securities arising out of options and futures cleared by OCC. OCC Clearing Members that clear and 

settle physically settled options and futures transactions through OCC also are required under OCC’s 

Rules12 to be Members of NSCC or to have appointed or nominated a Member of NSCC to act on its 

behalf. As noted above, these firms are referred to as “Common Members” in the Existing Accord.

iii. Summary of the Existing Accord

The Existing Accord governs the transfer between OCC and NSCC of responsibility for 

settlement obligations that involve a delivery and receipt of stock in the settlement of physically 

settled options and futures that are cleared and settled by OCC and for which the underlying 

securities are eligible for clearing through the facilities of NSCC (“E&A/Delivery Transactions”). It 

also establishes the time when OCC’s settlement guarantee (the “OCC Guaranty”) ends and NSCC’s 

settlement guarantee (the “NSCC Guaranty”)13 begins with respect to E&A/Delivery Transactions. 

However, in the case of a Common Member default14 NSCC can reject these settlement obligations, 

in which case the settlement guaranty will not transfer from OCC to NSCC and OCC would not 

have a right to settle the transactions through the facilities of NSCC. Instead, OCC would have to 

engage in alternative methods of settlement that have the potential to create significant liquidity and 

collateral requirements for both OCC and its non-defaulting Clearing Members.15 More specifically, 

10 See Rule 8 (Balance Order and Foreign Security Systems) and Procedure V (Balance Order 

Accounting Operation) of the NSCC Rules, supra note 7.

11 See Chapter IX of OCC’s Rules (Delivery of Underlying Securities and Payment), supra note 

2.

12 See OCC Rule 901, supra note 2.

13 See Addendum K and Procedure III of the NSCC Rules, supra note 7. 

14 A Common Member that has been suspended by OCC or for which NSCC has ceased to act 

is referred to as a “Mutually Suspended Member.”

15 For example, OCC evaluated certain Clearing Member default scenarios in which OCC 

assumed that NSCC would not accept the settlement obligations under the Existing Accord, 

including the default of a large Clearing Member coinciding with a monthly options 

expiration. OCC has estimated that in such a Clearing Member default scenario, the 
Christopher J. Kirkpatrick

November 1, 2023

Page 6

this could involve broker-to-broker settlement between OCC Clearing Members.16 This settlement 

method is operationally complex because it requires bilateral coordination directly between 

numerous Clearing Members rather than relying on NSCC to facilitate multilateral netting to settle 

the relevant settlement obligations. As described above, it also potentially could result in significant 

liquidity and collateral requirements for both OCC and its non-defaulting Clearing Members because 

the transactions will not be netted through the facilities of NSCC. Alternatively, where NSCC 

accepts the E&A/Delivery Transactions from OCC, the OCC Guaranty ends and the NSCC 

Guaranty takes effect. The transactions are then netted through NSCC’s systems, which allows 

settlement obligations for the same settlement date to be netted into a single deliver or receive 

obligation. This netting reduces the costs associated with securities transfers by reducing the 

number of securities movements required for settlement and further reduces operational and market 

risk. The benefits of such netting by NSCC may be significant with respect to the large volumes of 

E&A/Delivery Transactions processed during monthly options expiry periods.

Pursuant to the Existing Accord, on each trading day NSCC delivers to OCC a file that 

identifies the securities, including stocks, exchange-traded funds and exchange-traded notes, that are 

eligible (1) to settle through NSCC and (2) to be delivered in settlement of (i) exercises and 

assignments of stock options cleared and settled by OCC or (ii) delivery obligations from maturing 

stock futures cleared and settled by OCC. OCC, in turn, delivers to NSCC a file identifying 

securities to be delivered, or received, for physical settlement in connection with OCC 

transactions.17 

After NSCC, receives the list of eligible transactions from OCC, and NSCC has received all 

required deposits to the NSCC Clearing Fund from all Common Members taking into consideration 

amounts required to physically settle the OCC transactions, the OCC Guaranty would end and the 

aggregate liquidity burden on OCC in connection with obligations having to be settled on a 

gross broker-to-broker basis could reach a significantly high level. For example, in January 

2022, the largest gross broker-to-broker settlement amount in the case of a larger Clearing 

Member default would have resulted in liquidity needs of approximately $384,635,833,942. 

16 In broker-to-broker settlement, Clearing Member parties are responsible for coordinating 

settlement – delivery and payment – among themselves on a transaction-by-transaction basis. 

Once transactions settle, the parties also have an obligation to affirmatively notify OCC so 

that OCC can close out the transactions. If either one of or both of the parties do not notify 

OCC, the transaction will remain open on OCC’s books indefinitely until the time both 

parties have provided notice of settlement to OCC.

17 Each day that both OCC and NSCC are open for accepting trades for clearing is referred to 

as an “Activity Date” in the Existing Accord. Securities eligible for settlement at NSCC are 

referred to collectively as “Eligible Securities” in the Existing Accord. Eligible securities are 

settled at NSCC through NSCC’s CNS Accounting Operation or NSCC’s Balance Order 

Accounting Operation. 
Christopher J. Kirkpatrick

November 1, 2023

Page 7

NSCC Guaranty would begin with respect to physical settlement of the eligible OCC-related 

transactions. At this point, NSCC is solely responsible for settling the transactions.18 19

Each day, NSCC is required to promptly notify OCC at the time the NSCC Guaranty takes 

effect. If NSCC rejects OCC’s transactions due to an improper submission20 or if NSCC “ceases to 

act” for a Common Member,21 NSCC’s Guaranty will not take effect for the affected transactions 

pursuant to the NSCC Rules.

NSCC is required to promptly notify OCC if it ceases to act for a Common Member. Upon 

receiving such a notice, OCC would not continue to submit to NSCC any further unsettled 

transactions that involve such Common Member, unless authorized representatives of both OCC and 

NSCC otherwise consent. OCC would, however, deliver to NSCC a list of all transactions that have 

already been submitted to NSCC and that involve such Common Member. The NSCC Guaranty 

ordinarily would not take effect with respect to transactions for a Common Member for which 

NSCC has ceased to act, unless both Clearing Agencies agree otherwise. As such, NSCC does not 

have any existing contractual obligation to guarantee such Common Member’s transactions. To the 

extent the NSCC Guaranty does not take effect, OCC’s Guaranty would continue to apply, and, as 

described above, OCC would remain responsible for effecting the settlement of such Common 

Member’s transactions pursuant to OCC’s By-Laws and Rules.

As noted above, the Existing Accord does provide that the Clearing Agencies may agree to 

permit additional transactions for a Common Member default (“Defaulted NSCC Member 

18 The term “NSCC Clearing Fund” as used herein has the same meaning as the term “Clearing 

Fund” as provided in the NSCC Rules. Procedure XV of the NSCC Rules provides that all 

NSCC Clearing Fund requirements and other deposits must be made within one hour of 

demand, unless NSCC determines otherwise, supra note 7.

19 This is referred to in the Existing Accord as the “Guaranty Substitution Time,” and the 

process of the substitution of the NSCC Guaranty for the OCC Guaranty in respect of 

E&A/Delivery Transactions is referred to as “Guaranty Substitution.”

20 Guaranty Substitution by NSCC (discussed further below) does not occur with respect to an 

E&A/Delivery Transaction that is not submitted to NSCC in the proper format or that 

involves a security that is not identified as an Eligible Security on the then-current NSCC 

Eligibility Master File. 

21 Under NSCC’s Rules, a default would generally be referred to as a “cease to act” and could 

encompass a number of circumstances, such as an NSCC Member’s failure to make a 

Required Fund Deposit in a timely fashion. See NSCC Rule 46 (Restrictions on Access to 

Services), supra note 7. An NSCC Member for which it has ceased to act is referred to in the 

Existing Accord as a “Defaulting NSCC Member.” Transactions associated with a 

Defaulting NSCC Member are referred to as “Defaulted NSCC Member Transactions” in the 

Existing Accord.
Christopher J. Kirkpatrick

November 1, 2023

Page 8

Transactions”) to be processed by NSCC while subject to the NSCC Guaranty. This optional 

feature, however, creates uncertainty for the Clearing Agencies and market participants about how 

Defaulted NSCC Member Transactions may be processed following a Common Member default and 

also does not provide NSCC with the ability to collect collateral from OCC that it may need to close 

out these additional transactions. While the optional feature would remain in the agreement as part 

of this proposal, the proposed changes to the Existing Accord, as described below, could 

significantly reduce the likelihood that it would be utilized.

Proposed Change

i. Proposed Changes to the Existing Accord

The proposed changes to the Existing Accord would permit OCC to make a cash payment, 

referred to as the “Guaranty Substitution Payment” or “GSP,” to NSCC. This cash payment could 

occur on either or both of the day that the Common Clearing Member becomes a Mutually 

Suspended Member and on the next business day. Upon NSCC’s receipt of the Guaranty 

Substitution Payment from OCC, the NSCC Guaranty would take effect for the Common Member’s 

transactions, and they would be accepted by NSCC for clearance and settlement. 22 OCC could use 

all Clearing Member contributions to the OCC Clearing Fund23 and certain Margin Assets24 of a 

defaulted Clearing Member to pay the GSP, as described in more detail below.

NSCC would calculate the Guaranty Substitution Payment as the sum of the Mutually 

Suspended Member’s unpaid required deposit to the NSCC Clearing Fund (“Required Fund 

Deposit”)25 and the unpaid Supplemental Liquidity Deposit26 obligation that is attributable to 

E&A/Delivery Transactions. The proposed changes to the Existing Accord define how NSCC would 

calculate the Guaranty Substitution Payment.

More specifically, NSCC would first determine how much of the member’s unpaid Clearing 

22 Acceptance of such transactions by NSCC would be subject to NSCC’s standard validation 

criteria for incoming trades. See NSCC Rule 7, supra note 7.

23 The term “OCC Clearing Fund” as used herein has the same meaning as the term “Clearing 

Fund” in OCC’s By-Laws, supra note 2.

24 The term “Margin Assets” as used herein has the same meaning as provided in OCC’s ByLaws, supra note 2.

25 The Required Fund Deposit is calculated pursuant to Rule 4 (Clearing Fund) and Procedure 

XV (Clearing Fund Formula and Other Matters) of the NSCC Rules, see supra note 7.

26 Under the NSCC Rules, NSCC collects additional cash deposits from those Members who 

would generate the largest settlement debits in stressed market conditions, referred to as 

“Supplemental Liquidity Deposits” or “SLD”. See Rule 4A of the NSCC Rules, supra note 

7.
Christopher J. Kirkpatrick

November 1, 2023

Page 9

Fund requirement would be included in the GSP. NSCC would look at the day-over-day change in 

gross market value of the Mutually Suspended Member’s positions as well as day-over-day change 

in the member’s NSCC Clearing Fund requirements. Based on such changes, NSCC would identify 

how much of the change in the Clearing Fund requirement was attributable to E&A/Delivery 

Transactions coming from OCC. If 100 percent of the day-over-day change in the NSCC Clearing 

Fund requirement is attributable to activity coming from OCC, then the GSP would include 100 

percent of the member’s NSCC Clearing Fund requirement. If less than 100 percent of the change is 

attributable to activity coming from OCC, then the GSP would include that percent of the member’s 

unpaid NSCC Clearing Fund requirement attributable to activity coming from OCC. NSCC would 

then determine the portion of the member’s unpaid SLD obligation that is attributable to 

E&A/Delivery Transactions. As noted above, the GSP would be the sum of these two amounts. A 

member’s NSCC Clearing Fund requirement and SLD obligation at NSCC are designed to address 

the credit and liquidity risks that a member poses to NSCC. The GSP calculation is intended to 

assess how much of a member’s obligations arise out of activity coming from OCC so that the 

amount paid by OCC is commensurate with the risk to NSCC of guarantying such activity.

To permit OCC to anticipate the potential resources it would need to pay the GSP for a 

Mutually Suspended Member, each business day, NSCC would provide OCC with (1) Required 

Fund Deposit and Supplemental Liquidity Deposit obligations, as calculated pursuant to the NSCC 

Rules, and (2) the gross market value of the E&A/Delivery Transactions and the gross market value 

of total Net Unsettled Positions (as such term is defined in the NSCC Rules). On options expiry days 

that fall on a Friday, NSCC would also provide OCC with information regarding liquidity needs and 

resources, and any intraday SLD requirements of Common Members. Such information would be 

delivered pursuant to the ongoing information sharing obligations under the Existing Accord (as 

proposed to be amended) and the Service Level Agreement (“SLA”) to which both NSCC and OCC 

are a party pursuant to Section 2 of the Existing Accord. The SLA addresses specifics regarding the 

time, form, and manner of various required notifications and actions described in the Accord and 

also includes information applicable under the Accord.

NSCC and OCC believe the proposed calculation of the Required Fund Deposit portion of 

the GSP is appropriate because it is designed to provide a reasonable proxy for the impact of the 

Mutually Suspended Member’s E&A/Delivery Transactions on its Required Fund Deposit. While 

impact study data did show that the proposed calculation could result in a GSP that overestimates or 

underestimates the Required Fund Deposit attributable to the Mutually Suspended Member’s 

E&A/Delivery Transactions,27 current technology constraints prohibit NSCC from performing a 

27 The impact study was conducted at the SEC’s request to cover a three-day period and 

reviewed the ten Common Members with the largest Required Fund Deposits attributable to 

the Mutually Suspended Member’s E&A/Delivery Transactions. Over the 30 instances in 

the study, approximately 15 instances resulted in an underestimate of the Required Fund 

Deposit by an average of approximately $112,900,926, four instances where the proxy 

calculation was the same as the Required Fund Deposit, and eleven instances of an 

overestimate of the Required Fund Deposit by an average of approximately $59,654,583. 
Christopher J. Kirkpatrick

November 1, 2023

Page 10

precise calculation of the GSP on a daily basis for every Common Member.28

Implementing the ability for OCC to make the GSP and cause the E&A/Delivery 

Transactions to be cleared and settled through NSCC would promote the ability of OCC and NSCC 

to be efficient and effective in meeting the requirements of the markets they serve. This is because 

data demonstrates that the expected size of the GSP would be smaller than the amount of cash that 

would otherwise be needed by OCC and its Clearing Members to facilitate settlement outside of 

NSCC. More specifically, based on a historical study of alternate means of settlement available to 

OCC from September 2021 through September 2022, in the event that NSCC did not accept 

E&A/Delivery Transactions, the worst-case scenario peak liquidity need OCC identified was 

$384,635,833,942 for settlement to occur on a gross broker-to-broker basis. OCC estimates that the

corresponding GSP in this scenario would have been $863,619,056. OCC also analyzed several 

other large liquidity demand amounts that were identified during the study if OCC effected 

settlement on a gross broker-to-broker basis. These liquidity demand amounts and the largest 

liquidity demand amount OCC observed of $384,635,833,942 substantially exceed the amount of 

liquid resources currently available to OCC.29 By contrast, projected GSPs identified during the 

study ranged from $419,297,734 to $6,281,228,428. For each of these projected GSP amounts, 

OCC observed that the Margin Assets and OCC Clearing Fund contributions that would have been 

required of Clearing Members in these scenarios would have been sufficient to satisfy the amount of 

the projected GSPs.

To help address the current technology constraint that prohibits NSCC from performing a 

precise calculation of the GSP on a daily basis for every Common Member, proposed Section 6(b)(i) 

of the Existing Accord and related Section 7(d) of the SLA would provide that with respect to a 

Mutually Suspended Member, either NSCC or OCC may require that the Required Fund Deposit 

portion of the GSP be re-calculated by calculating the Required Fund Deposit for the Mutually 

Suspended Member both before and after the delivery of the E&A/Delivery Transactions and utilize 

the precise amount that is attributable to that activity in the final GSP. If such a recalculation is 

required, the result would replace the Required Fund Deposit component of the GSP that was 

initially calculated. The SLD component of the GSP would be unchanged by such recalculation.

As the above demonstrates, the GSP is intended to address the significant collateral and 

liquidity requirements that could be required of OCC Clearing Members in the event of a Common 

Member default.

28 OCC and NSCC have agreed that performing the necessary technology build at this time 

would delay the implementation of this proposal. Therefore, NSCC would consider 

incorporating those technology updates into future revisions to the Accord, for example in 

connection with a move to a shorter settlement cycle in the U.S. equities markets.

29 As of March 31, 2023, OCC held approximately $10.37 billion in qualifying liquid 

resources. See OCC Quantitative Disclosure, January – March 2023, available at 

https://www.theocc.com/risk-management/pfmi-disclosures. 
Christopher J. Kirkpatrick

November 1, 2023

Page 11

Allowing OCC to make a GSP payment also is intended to allow for settlement processing to 

take place through the facilities of NSCC to retain operational efficiencies associated with the 

settlement process. Alternative settlement means such as broker-to-broker settlement add operational 

burdens, because transactions would need to be settled individually on one-off bases. In contrast, 

NSCC’s netting reduces the volume and value of settlement obligations that would need to be closed 

out in the market.30 Because the clearance and settlement of obligations through NSCC’s facilities 

following a Common Member default, including netting of E&A/Delivery Transactions with a 

Common Member’s positions at NSCC, would avoid these potentially significant operational 

burdens for OCC and its Clearing Members, OCC believes that the proposed changes would limit 

market disruption relating to a Common Member default. NSCC netting significantly reduces the 

total number of obligations that require the exchange of money for settlement. Allowing more 

activity to be processed through NSCC’s netting systems would minimize risk associated with the 

close out of those transactions following the default of a Common Member.

Amending the Existing Accord to define the terms and conditions under which Guaranty 

Substitution may occur, at OCC’s election, with respect to Defaulted NSCC Member Transactions 

after a Common Member becomes a Mutually Suspended Member will also provide more certainty 

to both the Clearing Agencies and market participants generally about how a Mutually Suspended 

Member’s Defaulted NSCC Member Transactions may be processed.

NSCC and OCC have agreed it is appropriate to limit the availability of the proposed 

provision to the day of the Common Member default and the next business day because, based on 

historical simulations of cease to act events involving Common Members, most activity of a 

Mutually Suspended Member is closed out on those days. Furthermore, the benefits of netting 

through NSCC’s systems would be reduced for any activity submitted to NSCC after that time.

To implement these proposed changes to the Existing Accord, OCC proposes to make the 

following changes.

Section 1 – Definitions

First, new definitions would be added, and existing definitions would be amended in Section 

1, which is the Definitions section. The new defined terms would be as follows.

• The term “Close Out Transaction” would be defined to mean “the liquidation, termination or 

30 CNS reduces the value of obligations that require financial settlement by approximately 

98%, where, for example $519 trillion in trades could be netted down to approximately $9 

trillion in net settlements.
Christopher J. Kirkpatrick

November 1, 2023

Page 12

acceleration of one or more exercised or matured Stock Options31 or Stock Futures32

contracts, securities contracts, commodity contracts, forward contracts, repurchase 

agreements, swap agreements, master netting agreements or similar agreements of a 

Mutually Suspended Member pursuant to OCC Rules 901, 1006 and 1101 through 1111 

(including but not limited to Rules 1104 and 1107) and/or NSCC Rule 18.” This proposed 

definition would make it clear that the payment of the Guaranty Substitution Payment and 

NSCC’s subsequent acceptance of Defaulted NSCC Member Transactions for clearance and 

settlement are intended to fall within the “safe harbors” provided in the Bankruptcy Code,33

the Securities Investor Protection Act,34 and other similar laws.

• The term “Guaranty Substitution Payment” would be defined to mean “an amount calculated 

by NSCC in accordance with the calculations set forth in Appendix A [to the Existing 

Accord (as proposed to be amended)], to include two components: (i) a portion of the 

Mutually Suspended Member’s Required Fund Deposit deficit to NSCC at the time of the 

cease to act; and (ii) a portion of the Mutually Suspended Member’s unpaid Supplemental 

Liquidity Deposit obligation at the time of the cease to act.”

• The term “Mutually Suspended Member” would mean “any OCC Participating Member35

that has been suspended by OCC that is also an NSCC Participating Member36 for which 

31 The term “Stock Options” is defined in the Existing Accord within the definition of “Eligible 

Securities,” and refers to options issued by OCC.

32 The term “Stock Futures” is defined in the Existing Accord within the definition of “Eligible 

Securities,” and refers to stock futures contracts cleared by OCC.

33 11 U.S.C. § 101 et seq., including §§362(b)(6), (7), (17), (25) and (27) (exceptions to the 

automatic stay), §§546(e) – (g) and (j) (limitations on avoiding powers), and §§555 – 556 

and 559 – 562 (contractual right to liquidate, terminate or accelerate certain contracts).

34 15 U.S.C. §§ 78aaa – lll, including §78eee(b)(2)(C) (exceptions to the stay).

35 The term “OCC Participating Member” is defined in the Existing Accord to mean “(i) a 

Common Member; (ii) an OCC Clearing Member that is an ‘Appointing Clearing Member’ 

(as defined in Article I of OCC’s By-Laws) and has appointed an Appointed Clearing 

Member that is an NSCC Member to effect settlement of E&A/Delivery Transactions 

through NSCC on the Appointing Clearing Member’s behalf; (iii) an OCC Clearing Member 

that is an Appointed Clearing Member; or (iv) a Canadian Clearing Member.” No changes 

are proposed to this definition.

36 The term “NSCC Participating Member” is defined in the Existing Accord to mean “(i) a 

Common Member; (ii) an NSCC Member that is an ‘Appointed Clearing Member’ (as 

defined in Article I of OCC’s By-Laws); or (iii) [or Canadian Depository for Securities, or 

“CDS”]. For the avoidance of doubt, the Clearing Agencies agree that CDS is an NSCC 

Member for purposes of this Agreement.” No changes are proposed to this definition.
Christopher J. Kirkpatrick

November 1, 2023

Page 13

NSCC has ceased to act.”

• The term “Required Fund Deposit” would have the meaning “provided in Rule 4 of NSCC’s 

Rules and Procedures (or any replacement or substitute rule), the version of which, with 

respect to any transaction or obligation incurred that is the subject of this Agreement, is in 

effect at the time of such transaction or incurrence of obligation.”

• The term “Supplemental Liquidity Deposit” would have the meaning “provided in Rule 4A 

of NSCC’s Rules and Procedures (or any replacement or substitute rule), the version of 

which, with respect to any transaction or obligation incurred that is the subject of this 

Agreement, is in effect at the time of such transaction or incurrence of obligation.”

The defined terms that would be amended in Section 1 of the Existing Accord are as follows.

• The definition for the term “E&A/Delivery Transaction” generally contemplates a 

transaction that involves a delivery and receipt of stock in the settlement of physically settled 

options and futures that are cleared and settled by OCC and for which the underlying 

securities are eligible for clearing through the facilities of NSCC. The definition would be 

amended to make clear that it would apply in respect of a “Close Out Transaction” of a 

“Mutually Suspended Member” as those terms are proposed to be defined (described above).

• The definition for the term “Eligible Securities” generally contemplates the securities that are 

eligible to be used for physical settlement under the Existing Accord. The term would be 

modified to clarify that this may include, for example, equities, exchange-traded funds and 

exchange-traded notes that are underlying securities for options issued by OCC.

Section 6 – Default by an NSCC Participating Member or OCC Participating Member

Section 6 of the Existing Accord provides that NSCC is required to provide certain notice to 

OCC in circumstances in which NSCC has ceased to act for a Common Member. Currently, Section 

6(A)(ii) of the Existing Accord also requires NSCC to notify OCC if a Common Member has failed 

to satisfy its Clearing Fund obligations to NSCC, but for which NSCC has not yet ceased to act. In 

practice, this provision would trigger a number of obligations (described below) when a Common 

Member fails to satisfy its NSCC Clearing Fund obligations for any reason, including those due to 

an operational delay. Therefore, OCC and NSCC are proposing to remove the notification 

requirement under Section 6(A)(ii) from the Existing Accord. Under Section 7(d) of the Existing 

Accord, NSCC and OCC are required to provide each other with general surveillance information 

regarding Common Members, which includes information regarding any Common Member that is 

considered by the other party to be in distress. Therefore, if a Common Member has failed to satisfy 

its NSCC Clearing Fund obligations and NSCC believes this failure is due to, for example, financial 

distress and not, for example, due to a known operational delay, and NSCC has not yet ceased to act 

for that Common Member, such notification to OCC would still occur but would be done pursuant to 

Section 7(d) of the Existing Accord (as proposed to be amended), and not Section 6(A)(ii). 
Christopher J. Kirkpatrick

November 1, 2023

Page 14

Notifications under Section 6 of the Existing Accord (as proposed to be amended) would be limited 

to instances when NSCC has actually ceased to act for a Common Member pursuant to the NSCC 

Rules. 37 

Following notice by NSCC that it has ceased to act for a Common Member, OCC is 

obligated in turn to deliver to NSCC a list of all E&A/Delivery Transactions (excluding certain 

transactions for which Guaranty Substitution does not occur) involving the Common Member.38 

This provision would be amended to clarify that it applies in respect of such E&A/Delivery 

Transactions for the Common Member for which the NSCC Guaranty has not yet attached –

meaning that Guaranty Substitution has not yet occurred. 

As described above in the summary of the Existing Accord, where NSCC has ceased to act 

for a Common Member, the Existing Accord refers to the Common Member as the Defaulting 

NSCC Member and also refers to the relevant E&A/Delivery Transactions in connection with that 

Defaulting NSCC Member for which a Guaranty Substitution has not yet occurred as Defaulted 

NSCC Member Transactions. 

If the Defaulting NSCC Member is also suspended by OCC, it would be covered by the 

proposed definition that is described above for a Mutually Suspended Member. For such a Mutually 

Suspended Member, the proposed changes in Section 6(b) would provide that NSCC, by a time 

agreed upon by the parties, would provide OCC with the amount of the Guaranty Substitution 

Payment as calculated by NSCC and related documentation regarding the calculation. The Guaranty 

Substitution Payment would be calculated pursuant to NSCC’s Rules as that portion of the unmet 

Required Fund Deposit39 and Supplemental Liquidity Deposit40 obligations of the Mutually 

Suspended Member attributable to the Defaulted NSCC Member Transactions. By a time agreed 

upon by the parties,41 OCC would then be required to either notify NSCC of its intent to make the 

full amount of the Guaranty Substitution Payment to NSCC or notify NSCC that it will not make the 

Guaranty Substitution Payment. If OCC makes the full amount of the Guaranty Substitution 

Payment, NSCC’s guaranty would take effect at the time of NSCC’s receipt of that payment and the 

37 See Rule 46 (Restrictions on Access to Services) of the NSCC Rules, supra note 7.

38 The section of the Existing Accord that addresses circumstances in which NSCC ceases to 

act and/or an NSCC Member defaults is currently part of Section 6(a). It would be redesignated as Section 6(b) for organizational purposes. 

39 The Required Fund Deposit is calculated pursuant to Rule 4 (Clearing Fund) and Procedure 

XV (Clearing Fund Formula and Other Matters) of the NSCC Rules, see supra note 7. 

40 The Supplemental Liquidity Deposit is calculated pursuant to Rule 4A (Supplemental 

Liquidity Deposits) of the NSCC Rules, see supra note 7. 

41 The time by which OCC would be required notify NSCC of its intent would be defined in the 

Service Level Agreement. As of the time of this filing, the parties intend to set that time as 

one hour after OCC’s receipt of the calculated Guaranty Substitution Payment from NSCC. 
Christopher J. Kirkpatrick

November 1, 2023

Page 15

OCC Guaranty would end. 

The proposed changes would further provide that if OCC does not suspend the Common 

Member (such that the Common Member would therefore not meet the proposed definition of a 

Mutually Suspended Member) or if OCC elects to not make the full amount of the Guaranty 

Substitution Payment to NSCC, then all of the Defaulted NSCC Member Transactions would be 

exited from NSCC’s CNS Accounting Operation and/or NSCC’s Balance Order Accounting 

Operation, as applicable, and Guaranty Substitution would not occur in respect thereof. Therefore, 

NSCC would continue to have no obligation to guarantee or settle the Defaulted NSCC Member 

Transactions, and the OCC Guaranty would continue to apply to them pursuant to OCC’s By-Laws 

and Rules.42

Proposed changes to the Existing Accord would also address the application of any Guaranty 

Substitution Payment by NSCC. Specifically, new Section 6(d) would provide that any Guaranty 

Substitution Payment made by OCC may be used by NSCC to satisfy any liability or obligation of 

the Mutually Suspended Clearing Member to NSCC on account of transactions involving the 

Mutually Suspended Clearing Member for which the NSCC Guaranty applies and to the extent that 

any amount of assets otherwise held by NSCC for the account of the Mutually Suspended Member 

(including any Required Fund Deposit or Supplemental Liquidity Deposit) are insufficient to satisfy 

its obligations related to transactions for which the NSCC Guaranty applies. Proposed changes to 

Section 6(d) would further provide for the return to OCC of any unused portion of the GSP. With 

regard to the portion of the Guaranty Substitution Payment that corresponds to a member’s 

Supplemental Liquidity Deposit obligation, NSCC must return any unused amount to OCC within 

fourteen (14) days following the conclusion of NSCC’s settlement, close-out and/or liquidation. 

With regard to the portion of the Guaranty Substitution Payment that corresponds to a Required 

Fund Deposit, NSCC must return any unused amount to OCC under terms agreed to by the parties.43

Other Proposed Changes

Certain other technical changes are also proposed to the Existing Accord to conform it to the 

proposed changes described above. For example, the preamble and the “whereas” clauses in the 

Preliminary Statement would be amended to clarify that the agreement is an amended and restated 

agreement and to summarize that the agreement would be modified to contemplate the Guaranty 

Substitution Payment structure. Section 1(c), which addresses the terms in the Existing Accord that 

are defined by reference to NSCC’s Rules and Procedures and OCC’s By-Laws and Rules would be 

modified to state that such terms would have the meaning then in effect at the time of any 

42 Under the current and proposed terms of the Existing Accord, NSCC would be permitted to 

voluntarily guaranty and settle the Defaulted NSCC Member Transactions. 

43 Such amounts would be returned to OCC as appropriate and in accordance with a Netting 

Contract and Limited Cross-Guaranty, by and among the Depository Trust Company, Fixed 

Income Clearing Corporation, NSCC and OCC, dated as of January 1, 2003, as amended.
Christopher J. Kirkpatrick

November 1, 2023

Page 16

transaction or obligation that is covered by the agreement rather than stating that such terms have the 

meaning given to them as of the effective date of the agreement. This change is proposed to help 

ensure that the meaning of such terms in the agreement will not become inconsistent with the 

meaning in the NSCC Rules and/or OCC By-Laws and Rules, as they may be modified through 

proposed rule changes. 

Technical changes would be made to Sections 3(d) and (e) of the Existing Accord to provide 

that those provisions would not apply in the event new Section 6(b) described above, is triggered. 

Section 3(d) generally provides that OCC will no longer submit E&A/Delivery Transactions to 

NSCC involving a suspended OCC Participating Member.44 Similarly, Section 3(e) generally 

provides that OCC will no longer submit E&A/Delivery Transactions to NSCC involving an NSCC 

Participating Member45 for which NSCC has ceased to act. A proposed change would also be made 

to Section 5 of the Existing Accord to modify a reference to Section 5 of Article VI of OCC’s ByLaws to instead provide that the updated cross-reference should be to Chapter IV of OCC’s Rules.

Section 5 would also be amended to clarify that Guaranty Substitution occurs when NSCC 

has received both the Required Fund Deposit and Supplemental Liquidity Deposit, as calculated by 

NSCC in its sole discretion, from Common Members. The addition of the collection of the 

Supplemental Liquidity Deposit to the definition of the Guaranty Substitution Time in this Section 5 

would reflect OCC and NSCC’s agreement that both amounts are components of the Guaranty 

Substitution Payment (as described above) and would make this definition consistent with that 

agreement. 

In Section 7 of the Existing Accord, proposed changes would be made to provide that NSCC 

would provide to OCC information regarding a Common Member’s Required Fund Deposit and 

Supplemental Liquidity Deposit obligations, to include the Supplemental Liquidity Deposit 

obligation in this notice requirement, and additionally that NSCC would provide OCC with 

information regarding the potential Guaranty Substitution Payment for the Common Member. On 

an options expiration date that is a Friday, NSCC would, by close of business on that day, also 

provide to OCC information regarding the intra-day liquidity requirement, intra-day liquidity 

resources and intra-day calls for a Common Member that is subject to a Supplemental Liquidity 

Deposit at NSCC. 

Finally, Section 14 of the Existing Accord would be modernized to provide that notices 

between the parties would be provided by e-mail rather than by hand, overnight delivery service or 

first-class mail.

ii. Proposed Changes to OCC By-Laws and Rules

44 See supra note 35 defining OCC Participating Member.

45 See supra note 36 defining NSCC Participating Member.
Christopher J. Kirkpatrick

November 1, 2023

Page 17

General Description

OCC is also proposing certain changes to its By-Laws and Rules that are designed to 

complement the proposed changes described above regarding the Existing Accord. These proposed 

changes to the By-Laws and Rules are described below, and they generally cover the following four 

areas. First, the proposed changes would define Guaranty Substitution Payment. Second, the 

proposed changes would describe the circumstances under which OCC could make a Guaranty 

Substitution Payment to NSCC. Third, the proposed changes would specify what financial resources 

could be used by OCC to make the Guaranty Substitution Payment.46 Fourth, the proposed changes 

to OCC’s Comprehensive Stress Testing and Clearing Fund Methodology, and Liquidity Risk 

Management Description would outline enhanced stress testing incorporating the GSP and OCC’s 

ability to call for additional resources from Clearing Members. OCC also is proposing changes to 

OCC’s Liquidity Risk Management Framework to account for OCC’s ability to make the GSP.

Article I – Definitions

OCC proposes to add “Guaranty Substitution Payment” as a new defined term under Article I 

of OCC’s By-Laws, which is the Definitions section. The term “Guaranty Substitution Payment” 

would be defined to mean: “a payment that may be made by [OCC] to [NSCC] under the terms of an 

agreement between them, as described in Rule 901, so that [NSCC] will not reject settlement 

obligations for CCC-eligible47 securities that are directed by [OCC] for settlement through the 

facilities of [NSCC] on account of a Clearing Member that has been suspended, as described in Rule 

1102, and for which [NSCC] has ceased to act.”

Chapter IX – Delivery of Underlying Securities and Payment 

Certain changes are also proposed to Chapter IX of OCC’s Rules. OCC proposes to add 

parenthetical language to the Introduction section of Chapter IX of OCC’s Rules. It would specify 

that a Guaranty Substitution Payment could be made by OCC to NSCC in connection with OCC’s 

general policy that to the extent a security to be delivered and received is CCC-eligible, OCC will 

direct the delivery and payment obligations to be settled through the facilities of NSCC where the 

46 OCC would be permitted to borrow from the Clearing Fund and margin of a suspended 

Clearing Member, over which OCC has a general lien, where that Clearing Member is a 

Mutually Suspended Member. The change would merely expand the circumstances under 

which OCC’s current By-Laws and Rules permit OCC to borrow Clearing Fund and margin. 

The change would not affect the treatment of such borrowing under OCC’s default waterfall 

that determines how OCC allocates losses against available financial resources. The 

Mutually Suspended Member’s margin and Clearing Fund collateral would remain first in 

line to absorb losses.

47 The term “CCC-Eligible” as used herein has the meaning provided in OCC’s By-Laws, supra

note 2.
Christopher J. Kirkpatrick

November 1, 2023

Page 18

obligations are physically-settled and arise out of the exercise of stock option contracts or the 

maturity of stock futures contracts. 

Next, OCC proposes to delete certain provisions from Rule 901(b) regarding when a 

Guaranty Substitution occurs. Specifically, Rule 901(b) currently provides that unless otherwise 

agreed between OCC and NSCC, a Guaranty Substitution with respect to settlement obligations for 

CCC-eligible securities that settle “regular way” under NSCC’s Rules and Procedures will occur if: 

(i) the applicable settlement obligations are reported to and are not rejected by NSCC; (ii) NSCC has 

not notified OCC that it has ceased to act for the relevant Clearing Member or Appointed Clearing 

Member; and (iii) the NSCC Clearing Fund requirements of the relevant Clearing Member or 

Appointed Clearing Member owing to NSCC, as determined in accordance with NSCC’s Rules and 

Procedures, are received by NSCC. These considerations regarding when a Guaranty Substitution 

occurs are addressed under the terms of the Existing Accord, and they would continue to be relevant 

considerations regarding when a Guaranty Substitution occurs under the changes that OCC and 

NSCC are proposing to the Existing Accord. However, because additional considerations would be 

added to the Guaranty Substitution process in connection with the proposed ability for OCC in 

certain circumstances to make a Guaranty Substitution Payment to NSCC and also to eliminate the 

potential for a description of the Guaranty Substitution process in OCC’s Rules to become 

inconsistent with the process that OCC and NSCC have agreed to in the Existing Accord, as it would 

be amended, OCC is proposing to delete the discussion of these considerations in Rule 901(b) in 

favor of instead simply cross referencing the terms of the agreement.

In addition, OCC proposes to add a new paragraph to the end of Rule 901(b) to provide that 

pursuant to the proposed changes to the Existing Accord, OCC would be permitted to make a 

Guaranty Substitution Payment to NSCC. The proposed changes would also describe the 

circumstances in which OCC may make a Guaranty Substitution Payment in connection with 

settlement obligations of a suspended Clearing Member, and that the amount of the Guaranty 

Substitution Payment under the terms of the Existing Accord, as amended, would be the amount 

required by NSCC to satisfy its deficit(s) regarding such Clearing Member’s “Required Fund 

Deposit” and “Supplemental Liquidity Deposit” as those terms are defined in NSCC’s Rules and 

Procedures.48 The changes would provide that any amount of a Guaranty Substitution Payment that 

NSCC does not use pursuant to its Rules and Procedures would subsequently be returned to OCC 

under such terms and within such times as are agreed by OCC and NSCC. OCC believes that it is 

useful to include this description of the proposed process for the Guaranty Substitution Payment and 

the circumstances in which it may be made so that a user of OCC’s publicly available By-Laws and 

Rules would have sufficient information to understand the existence of the Guaranty Substitution 

Payment mechanism, the general circumstances in which it may be made and the role that a 

Guaranty Substitution Payment would play in causing NSCC to accept obligations for CCC-eligible 

securities for clearance and settlement.

48 See NSCC Rules 4 (defining “Required Fund Deposit”) and 4A (defining “Supplemental 

Liquidity Deposit”), supra note 7.
Christopher J. Kirkpatrick

November 1, 2023

Page 19

Chapters X and XI – Clearing Fund Contributions and Suspension of a Clearing Member 

As generally described above, the proposed changes would also provide that OCC would be 

permitted to borrow from the OCC Clearing Fund and also against certain Margin Assets of a 

Clearing Member that has been suspended by OCC where that Clearing Member is a Mutually 

Suspended Member. To implement these changes, OCC is proposing the following amendments to 

OCC Rule 1006 and Rule 1104.

OCC Rule 1006 addresses the purpose and permitted uses of the OCC Clearing Fund. OCC 

proposes to make amendments to paragraphs (a) and (f) to permit OCC to utilize assets in the 

Clearing Fund as a liquidity resource in connection with making a Guaranty Substitution Payment. 

Currently, OCC Rule 1006(a) states the conditions for use of the OCC Clearing Fund. These 

provide that the OCC Clearing Fund may be used for borrowings pursuant to OCC Rule 1006(f) or 

to make good losses or expenses suffered by OCC including: (i) as a result of the failure of any 

Clearing Member to discharge duly any obligation on or arising from any confirmed trade accepted 

by OCC, (ii) as a result of the failure of any Clearing Member (including any Appointed Clearing 

Member) or of CDS (Canada’s national securities depository) to perform its obligations under any 

contract or obligation issued, undertaken, or guaranteed by OCC or in respect of which OCC is 

otherwise liable, (iii) as a result of the failure of any Clearing Member to perform any of its 

obligations to OCC in respect of the stock loan and borrow positions of such Clearing Member, (iv) 

in connection with any liquidation of a Clearing Member’s open positions, (v) in connection with 

protective transactions effected for the account of OCC pursuant to Chapter XI of OCC’s Rules 

(delivery of underlying securities and payment), (vi) as a result of the failure of any Clearing 

Member to make any other required payment or render any other required performance or (vii) as a 

result of the failure of any bank, securities or commodities clearing organization, or investment 

counterparty, to perform its obligations to OCC for certain specified reasons.49

OCC proposes to renumber clauses (iii) through (vii) in paragraph (a) as (iv) through (viii), 

and to insert as new clause (iii) a provision that the OCC Clearing Fund may be used “regarding any 

Guaranty Substitution Payment that [OCC] may make to [NSCC] under an agreement between them, 

as described in [OCC] Rule 901, so that [NSCC] will not reject settlement obligations for CCCeligible securities involving a Clearing Member for which [NSCC] has ceased to act and that [OCC] 

directs to [NSCC] for settlement through its facilities.”

50

 OCC also proposes to add parenthetical 

language to paragraphs (f)(1)(A) and (f)(2)(A)(ii) to further clarify that contributions to the OCC 

Clearing Fund may be borrowed by OCC for use in connection with making a Guaranty Substitution 

Payment to NSCC. Any borrowing from the OCC Clearing Fund by OCC to make a Guaranty 

Substitution Payment to NSCC would be subject to the existing terms of OCC Rule 1006(f)(3) that 

49 The terms “Clearing Member” and “Appointed Clearing Member” as used herein have the 

meanings provided in OCC’s By-Laws, supra note 2.

50 In connection with these amendments, the reference in Rule 1006(b) to “clauses (i) through 

(vi) of paragraph (a)” would be changed to “clauses (i) through (vii) of paragraph (a).”
Christopher J. Kirkpatrick

November 1, 2023

Page 20

provide that irrespective of how any such borrowings from the OCC Clearing Fund are applied by 

OCC, the borrowing for a period not to exceed thirty (30) days will not be deemed to result in 

charges against the OCC Clearing Fund under OCC’s default waterfall for allocating actual losses. 

For purposes of determining whether a loss resulting from a Guaranty Substitution Payment has 

occurred, OCC Rule 1006(f)(3) would be amended to provide that the Guaranty Substitution 

Payment is deemed to be repaid by OCC at such time as under the Accord that it is NSCC’s 

obligation to return any portion of the Guaranty Substitution Payment that NSCC does not use 

pursuant to its rules. If, subsequent to the borrowing, OCC determines that the borrowing represents 

an actual loss or all or any part of the borrowing remains outstanding after thirty (30) days (or on the 

first Business Day thereafter if the thirtieth calendar day is not a Business Day) then the amount of 

OCC Clearing Fund assets used in the outstanding borrowing would be an actual loss that OCC 

would be required to immediately allocate under its By-Laws and Rules.51 As noted above, losses 

resulting from the borrowing of Clearing Fund or Margin Assets as a liquidity resource to facilitate 

OCC making a Guaranty Substitution Payment would be allocated in the same sequence as any other 

losses charged to the default waterfall.

Consistent with these changes to permit OCC to use the OCC Clearing Fund as a borrowing 

resource to make a Guaranty Substitution Payment to NSCC, OCC is also proposing similar changes 

to OCC Rule 1104 that would permit OCC to borrow certain Margin Assets of a Clearing Member 

that has been suspended by OCC where that Clearing Member is a Mutually Suspended Member and 

OCC has a general lien52 over the Margin Assets.

Specifically, OCC proposes to add a new paragraph (g) to OCC Rule 1104 that would 

provide that OCC may use specified Margin Assets of a suspended Clearing Member as a borrowing 

in order to use such borrowed Margin Assets to make a Guaranty Substitution Payment to NSCC. 

OCC would be permitted to use Margin Assets from the following accounts of a suspended 

Common Member: firm lien account and firm non-lien account; separate Market-Maker’s account; 

combined Market-Maker’s account; and JBO Participants’ account.53 OCC is not proposing at this 

time to have authority to borrow Margin Assets from other types of accounts over which OCC has a 

51 If the defaulting OCC Clearing Member’s Margin Assets and OCC Clearing Fund 

contribution were insufficient to cover the associated losses, OCC would next look to certain 

OCC financial resources that are available for that purpose (e.g., OCC’s corporate 

contribution and Clearing Fund contributions of non-defaulting OCC Clearing Members).

52 Article I, Section 1.G.(1) of OCC’s By-Laws states that the “term ‘general lien’ means a 

security interest of [OCC] in all or specified assets in a Clearing Member account as security 

for all of the Clearing Member’s obligations to [OCC] regardless of the source or nature of 

such obligations.” See OCC By-Laws, supra note 2.

53 The Clearing Member accounts referenced herein are described in subparagraphs (a), (b), (c) 

and (h) of Article VI, Section 3 of OCC’s By-Laws. See OCC’s By-Laws, supra note 2.
Christopher J. Kirkpatrick

November 1, 2023

Page 21

restricted lien54 and for which the Margin Assets are security for the particular restricted lien 

accounts because of additional complexity that OCC believes would be associated with tracking 

NSCC’s use of Margin Assets associated with those accounts and also due to certain regulatory 

requirements under SEC Rule 15c3-3 that apply to broker-dealer Clearing Members and prohibit the 

use of customer property of the broker-dealer to support non-customer activities.55

As with the terms that currently apply to any borrowing from the OCC Clearing Fund 

pursuant to OCC Rule 1006(f), new paragraph (g) in OCC Rule 1104 would further provide that 

Margin Assets borrowed by OCC to make a Guaranty Substitution Payment to NSCC would not be 

deemed to be charges against the margin assets for the relevant account(s) for up to thirty (30) days; 

however, if all or a part of such borrowing were to be determined by OCC, in its discretion, to 

represent an actual loss, or if all or a part of the borrowing were to remain outstanding after such 

thirty (30)-day period, OCC would consider the amount of margin assets used to support OCC’s 

obligations under the outstanding borrowing or transaction as an actual loss and immediately 

allocate the loss in accordance with OCC’s By-Laws and Rules.

OCC anticipates that in a scenario in which it would be permitted make a Guaranty 

Substitution Payment to NSCC under the proposed changes to the Existing Accord and OCC’s ByLaws and Rules, OCC would generally expect to borrow from the Clearing Fund as a primary 

liquidity resource. OCC could also borrow Margin Assets of the suspended Clearing Member that is 

a Common Member under the proposed terms described above. OCC is not proposing changes that 

would require a specific borrowing sequence because OCC believes that it is more appropriate to 

preserve flexibility to borrow from the available OCC Clearing Fund or Margin Assets as OCC 

determines appropriate under the circumstances.

In addition, OCC proposes to specify in OCC Rule 1107(a)(1) that exercised option contracts 

and matured, physically-settled stock futures to which the suspended Clearing Member is a party 

may be settled in accordance with the terms of any agreement between OCC and NSCC governing 

54 Article I, Section 1.R.(8) of OCC’s By-Laws states that the “term ‘restricted lien’ means a 

security interest of [OCC] in specified assets (including any proceeds thereof) in an account 

of a Clearing Member with [OCC] as security for the Clearing Member’s obligations to 

[OCC] arising from such account or, to the extent so provided in the By-Laws or Rules, a 

specified group of accounts that includes such account including, without limitation, 

obligations in respect of all confirmed trades effected through such account or group of 

accounts, and exercise notices assigned to such account or group of accounts.” See OCC’s 

By-Laws, supra note 2.

55 For example, under the broker-dealer customer reserve account formula to SEC Rule 15c3-3 

the broker-dealer takes a debit in the formula under Item 13 for margin that is “required and 

on deposit with OCC for all option contracts written or purchased in customer accounts.” 

This means that such margin in turn can be used by the broker-dealer Clearing Member as 

Margin Assets to support the securities customers’ account at OCC.
Christopher J. Kirkpatrick

November 1, 2023

Page 22

the settlement of exercised option contracts and matured, physically-settled stock futures of a 

suspended Clearing Member. In such an event, settlement will be governed by and subject to the 

agreement between OCC and NSCC and the rules of NSCC.

The purpose of the proposed changes to create the Guaranty Substitution Payment 

mechanism is to provide OCC and NSCC with an additional default management tool to help 

manage liquidity and settlement risks that OCC believes would be presented in connection with a 

Mutually Suspended Member. Having the ability to make a Guaranty Substitution Payment to 

NSCC in regard to any unmet Required Fund Deposit or Supplemental Liquidity Deposit obligations 

of a Mutually Suspended Member would cause NSCC to guarantee certain securities settlement 

obligations that result from exercised options and matured futures contracts that are cleared and 

settled by OCC. In the following ways, OCC believes that this would be beneficial to and protective 

of OCC, NSCC, their participants, and the markets they serve. 

First, OCC’s ability to make the Guaranty Substitution Payment would ensure that the 

relevant securities settlement obligations would be accepted by NSCC for clearance and settlement 

and therefore the size of the related settlement obligations could be decreased from netting through 

NSCC’s CNS Accounting Operation and/or NSCC’s Balance Order Accounting Operation. Second, 

this outcome would avoid a scenario in which OCC’s Guaranty would continue to apply and the 

settlement obligations would be settled on a broker-to-broker basis between OCC Clearing Members 

pursuant to the applicable provisions in Chapter IX of OCC’s Rules. As noted above, OCC believes 

that such a broker-to-broker settlement scenario could result in substantial collateral and liquidity 

requirements for OCC Clearing Members. OCC believes that these potential collateral and liquidity 

consequences would be due to the lost benefit of netting of the settlement obligations through 

NSCC’s facilities and also due to the short time (i.e., the T+2 standard settlement cycle) between a 

rejection by NSCC of the settlement obligations for clearing and the associated settlement date on 

which settlement would be otherwise required to be made bilaterally by OCC Clearing Members. 

This scenario also raises the potential for procyclical liquidity demands on OCC Clearing Members 

and participants during stressed market conditions. Third, OCC will plan to size its liquidity 

resource requirements to reasonable expectations with a high probability of making a Guaranty 

Substitution Payment in order to facilitate the settlement of a Mutually Suspended Member’s 

obligations through NSCC. Accounting for net liquidity demands from a Mutually Suspended 

Member’s settlement obligations at the central counterparty-level enhances liquidity in the financial 

system and promotes the efficient use of capital by reducing the demand for liquidity associated with 

gross settlement of obligations and enabling the application of resources at OCC and NSCC to 

satisfy the Member’s obligation. Fourth, OCC believes that the potential for the size of the 

settlement obligations to be comparatively larger than the Guaranty Substitution Payment coupled 

with the short time remaining to settlement could also increase the risk of default by the affected 

OCC Clearing Members at a time when a Common Member has already been suspended. 

Therefore, OCC believes that the proposed changes to implement the ability for OCC to make a 

Guaranty Substitution Payment to NSCC would allow OCC to avoid these risks by causing NSCC to 

accept the relevant obligations arising from exercised options and matured futures cleared and 
Christopher J. Kirkpatrick

November 1, 2023

Page 23

settled by OCC, as it ordinarily would, and guarantee their settlement, upon OCC making a 

Guaranty Substitution Payment to NSCC in accordance with the revised Accord.

Comprehensive Stress Testing & Clearing Fund Methodology, and Liquidity Risk 

Management Description

OCC proposes to revise the OCC Comprehensive Stress Testing & Clearing Fund 

Methodology, and Liquidity Risk Management Description to include the GSP in its liquidity risk 

management practices. Overall, the proposed changes would reflect that the GSP functions as an 

additional liquidity demand type at the Clearing Member Organization (“CMO”) Group level.56

OCC would include additional specifics to address the potential increased demand that the 

inclusion of the GSP may cause in its liquidity risk management practices in the Liquidity Risk 

Management section of the Comprehensive Stress Testing & Clearing Fund Methodology, and 

Liquidity Risk Management Description. Specifically, OCC proposes to amend the Liquidity 

Demand for Positions Rejected by NSCC subsection, which describes the Existing Accord, 

including the scenario in which NSCC could choose not to guaranty certain securities settlement 

obligations arising out of transactions cleared by OCC. This subsection would be retitled as the 

Liquidity Demand Associated with NSCC Performance of Physical Settlement Activities subsection 

to more clearly describe its content and incorporate the GSP, as further detailed below. Consistent 

with the changes to the Existing Accord described above, OCC proposes to clarify that the Accord 

allows NSCC to reject such obligations if OCC elects to not make a GSP. 

OCC proposes a new subsection, titled the Liquidity Demand GSP, to describe the GSP, 

which NSCC would calculate as defined in the proposed amendments to the Existing Accord. OCC 

would describe a GSP as a firm specific liquidity demand (i.e., the amount of cash OCC needs to 

pay NSCC on behalf of the defaulting Common Member). OCC would describe the components of 

the GSP under the Accord. OCC would explain how it accounts for the liquidity demand associated 

with a potential GSP. Specifically, OCC would apply an amount to account for a potential GSP 

obligation for every day on which option expirations occur. This amount would be based on peak 

GSP amounts from the prior 12 months in a given expiration category for the specific CMO Group 

for each forecasted liquidity demand calculation. OCC will use a one-year lookback time period to 

determine the appropriate GSP amount to apply. The one-year lookback allows for the best like-tolike application of a historical GSP as there is a cyclical nature to option standard expirations with 

quarterly (i.e., March, June, September, and December) and January generally being more impactful 

than non-quarterly expirations. The one-year lookback also allows behavior changes of a Clearing 

Member to be recognized within an annual cycle. OCC proposes to utilize a historical GSP based on 

current system capabilities and data that will be supplied by NSCC.

OCC would use the total amount of Clearing Fund and SLD deficits at NSCC in its 

calculation to account for its obligation. However, in the event of a default, OCC would be 

56 A Clearing Member Group is composed of a set of affiliated OCC Clearing Members.
Christopher J. Kirkpatrick

November 1, 2023

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responsible for a proportionate share of both NSCC Clearing Fund deficits (which are analogous to 

OCC margin deficits) and SLDs that are attributable to OCC E&A activity transmitted to NSCC for 

settlement, whereas NSCC will be responsible for the portion of the Clearing Fund and SLD deficits 

associated with activity that NSCC clears that is not transmitted by OCC.

The amount of notional activity sent by OCC to NSCC informs the likelihood of a GSP. 

Namely, the potential amount of NSCC Clearing Fund and SLD deficits that are allocable to OCC 

increases as the amount of activity OCC sends to NSCC increases. Since not all types of expirations 

are the same with respect to the notional amount of activity sent by OCC to NSCC, OCC proposes to 

use five separate categories of expirations with potentially different GSP amounts to apply. Each 

day on which expirations occur would fall into one of five categories as follows:

• Standard Monthly Expiration: typically the third Friday of each month from the 

previous twelve months;

• Non-Standard Monthly Expiration Fridays (“End of Week Expirations”): the last 

business day of every week, typically a Friday, excluding the third Friday of each 

month from the previous twelve months;

• End of Month Expirations: the last trading day of every month from the previous 

twelve months;

• Expirations falling on Bank Holidays where Markets Are Open (“Bank Holiday 

Expirations”): days where banks are closed but the markets are open from the 

previous twelve months;57

• Remaining Expiration Days (“Daily Expirations”): All other days with an expiration 

from the previous twelve months that do not fall into any of the categories above 

(typically most Mondays through Thursdays) from the previous twelve months.

OCC believes these five categories are appropriate after an analysis of notional activity sent 

to NSCC by OCC. More specifically, the standard Friday monthly expiration far exceeds the needs 

associated with any other category.58 The remaining categories are intended to capture like time 

periods that will appropriately account for the GSP.

57 The Bank Holiday category recognizes that for Veterans Day and Columbus Day, the equity 

and equity derivative markets are open for trading, but the banking system is closed for the 

day. Since the banking system is closed while the aforementioned markets are open, 

settlement at NSCC encompasses two days of equity trading and equity derivative E&A 

activity. As OCC is using NSCC deficit numbers without regard for allocation, there is a 

possibility of a significant outlying GSP requirement due to the settlement of two days of 

activity simultaneously. Prudence dictates retaining the capability to risk manage a day with 

such disparate characteristics differently. 

58 For example, the average notional transfer for Remaining Expiration Days is approximately 

10% the size of Standard Expiration.
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November 1, 2023

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OCC would apply the peak GSP amounts from the prior twelve months in a given expiration 

category for the specific CMO Group for each forecasted liquidity demand calculation by adding the 

GSP amounts to the CMO Group’s other forecasted liquidity demands for the relevant expiration 

day.59 If a Clearing Member defaults, OCC may have to pay a GSP to NSCC on two successive 

days to facilitate the close-out of the defaulted Clearing Member’s positions. To account for this 

possibility in its liquidity risk management process, OCC contemplates the payment of a GSP on 

expirations that result in settlements on the first and second days of the default management process. 

As described above, this GSP amount may serve to only increase liquidity demands.

Furthermore, as stated in the new Liquidity Demand GSP subsection, OCC would apply a 

floor to certain expirations. At a minimum, the GSPs applied to the End of Week, End of Month, 

and Bank Holiday Expirations will be no lower than the peak of the Daily Expirations category. If a 

GSP pertaining to the End of Week, End of Month, and Bank Holiday Expiration category is higher 

than the peak of the Daily Expirations category, then OCC will apply that higher GSP. Standard 

Monthly Expirations will be floored by End of Week, End of Month, and Daily Expirations. If a 

GSP pertaining to any of these categories is higher than the Standard Monthly Expiration category, 

then OCC will apply that higher GSP. OCC would set out formulas representing the floors for the 

Standard Monthly, End of Week, End of Month, and Bank Holiday Expirations. Finally, OCC also 

proposes a minor change to clarify that it would attempt to effect alternative settlement if OCC 

elected not to make a GSP.60

Liquidity Risk Management Framework

OCC proposes changes to the Liquidity Risk Management Framework to incorporate the 

GSP. In the Liquidity Risk Identification section, OCC would specify that, in the situation where a 

member defaults immediately preceding, or during the expiration, of physically-settled E&A 

activity, OCC may elect to make a GSP to NSCC to compel NSCC to accept and process the E&A 

activity. If OCC elects to not make a GSP, OCC would complete settlement of the defaulted 

Clearing Member’s E&A transactions through its current process. Relatedly, OCC would include a 

minor clarification to a footnote in this section to note that NSCC is not acting on behalf of a 

defaulting Clearing Member “in this situation.”

Consistency with DCO Core Principles

59 As an example, if the applicable GSP is $100 and the (current) stressed liquidity demand is 

$150 for a Clearing Member Group, the result after the application of the GSP for that 

Clearing Member Group would be a combined liquidity requirement of $250 versus $150 

currently.

60 This clarification would maintain OCC’s current process for settling transactions not 

processed through NSCC and does not represent the adoption of a new process or settlement 

method.
Christopher J. Kirkpatrick

November 1, 2023

Page 26

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

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

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

following as potentially being impacted:

Risk Management. OCC believes that implementing the proposed changes will be aligned 

with Core Principle D.61 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 nondefaulting members or participants are not exposed to losses they cannot anticipate or control.62

 As 

described above, OCC proposes changes that would allow OCC to elect to make a cash payment to 

NSCC following the default of a Common Member that would cause NSCC to guarantee settlement 

of that Common Member’s transactions and, therefore, cause those transactions to be settled through 

processing by NSCC. OCC believes that, by NSCC accepting such a payment from OCC, the 

operational efficiencies and reduced costs related to the settlement of transactions through NSCC 

would limit market disruption following a Common Member default because settlement through 

NSCC following such a default would be less operationally complex and would be expected to 

require less liquidity and other collateral from market participants than the processes available to 

OCC for closing out positions. Additionally, proposed enhancements by OCC to its liquidity stress 

testing would add assurances that OCC could make such a payment in the event of a Common 

Member default. This would avoid a scenario in which OCC’s Guaranty would continue to apply 

and the settlement obligations would be settled on a broker-to-broker basis between OCC Clearing 

Members, which OCC believes could result in substantial collateral and liquidity requirements for 

OCC Clearing Members and that, in turn, could also increase a risk of default by the affected OCC 

Clearing Members at a time when a Common Member has already been suspended. The changes

would provide more certainty around certain default situations and blunt the financial and 

operational burdens market participants could experience in the case of most clearing member 

defaults.

Settlement Procedures. OCC believes that the proposed changes are consistent with Core 

Principle E63 and the CFTC Regulations thereunder, including CFTC Regulation 39.14, which 

among other things, requires that a DCO establish rules that clearly state each obligation that the 

DCO has assumed with respect to physical deliveries and ensure that the risks of each such 

obligation are identified and managed.

64 The proposed changes would continue to provide a sound 

framework to facilitate, via NSCC’s systems, the physical settlement of securities arising out of 

61 7 U.S.C. 7a-1(c)(2)(D).

62 See 7 U.S.C. 7a-1(c)(2)(D)(iii).

63 7 U.S.C. 7a-1(c)(2)(E).

64 17 CFR 39.14(g)(1) and (2).
Christopher J. Kirkpatrick

November 1, 2023

Page 27

options and futures cleared by OCC. Furthermore, permitting OCC to make a GSP payment to 

allow for settlement processing to take place through the facilities of NSCC would retain operational 

efficiencies associated with the settlement process. As discussed above, alternative settlement 

means such as broker-to-broker settlement add operational burdens, because transactions would need 

to be settled individually on one-off bases. In contrast, NSCC’s netting reduces the volume and 

value of settlement obligations that would need to be closed out in the market. The clearance and 

settlement of obligations through NSCC’s facilities following a Common Member default would 

avoid these potentially significant operational burdens for OCC and its Clearing Members. NSCC 

netting significantly reduces the total number of obligations that require the exchange of money for 

settlement. Allowing more activity to be processed through NSCC’s netting systems would 

minimize risk associated with the close-out of those transactions following the default of a Common 

Member.

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

Core Principle R65 and the CFTC Regulations thereunder, which require a DCO to have a wellfounded, transparent, and enforceable legal framework for each aspect of the activities of the DCO. 

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

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

activities of the DCO.66 The revised Accord would constitute a legal, valid and binding obligation 

on each of OCC and NSCC, which is enforceable. The revised Accord, and the By-Law and Rule 

changes associated therewith, would establish clear, transparent, and enforceable terms for the 

settlement of OCC’s cleared stock options and futures through the facilities of NSCC. The amended 

Accord would provide a clear, transparent and enforceable legal basis for OCC’s obligations during 

the event of a Common Member default. 

Opposing Views

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

Board members, Clearing Members or market participants.

Notice of Pending Rule Certification

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

OCC in compliance with Regulation 40.6(a)(2) by posting a copy of the proposed rule change on 

OCC’s website concurrently with the filing of this submission.

65 7 U.S.C. 7a-1(c)(2)(R).

66 17 CFR 39.27(b).
Christopher J. Kirkpatrick

November 1, 2023

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Certification

OCC hereby certifies that the rules set forth in Exhibit A through Exhibit E of the enclosed 

filing comply with the Act and the CFTC’s Regulations thereunder. OCC has requested confidential 

treatment for Exhibit C, Exhibit D, and Exhibit E. 

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

Sincerely,

/s/ Maria Alarcon

Assistant General Counsel

Enclosure: Exhibit A through Exhibit E