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16 15 U.S.C. 78f(b)(8). 

17See supra nn. 10–11. 

18 15 U.S.C. 78s(b)(3)(A). 

19 17 CFR 240.19b–4(f)(2). 

20 15 U.S.C. 78s(b)(2)(B). 21 17 CFR 200.30–3(a)(12). 

outcry and therefore not dependent on 

a Port, but a Port is nonetheless 

necessary to meet Market Maker quoting 

obligations. The Exchange notes that 

Floor Market Makers that do not meet 

this volume threshold for their options 

activity in open outcry would continue 

to be charged at the same rate for Port 

Fees as all other ATP Holders. 

The Exchange believes that the 

proposal to re-format the section of the 

fee schedule describing Port Fees into a 

table, with distinct rows and columns, 

is reasonable, equitable and not unfairly 

discriminatory as the proposed change 

will reduce confusion and will make the 

fee schedule more transparent and 

easier for all participants to understand. 

Finally, the Exchange believes that it 

is subject to significant competitive 

forces, as described below in the 

Exchange’s statement regarding the 

burden on competition. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

In accordance with Section 6(b)(8) of 

the Act,16 the Exchange does not believe 

that the proposed rule change would 

impose any burden on competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

The Exchange believes the proposed fee 

change is reasonably designed to be fair 

and equitable, and therefore, will not 

unduly burden any particular group of 

market participants trading on the 

Exchange vis-a`-vis another group (i.e., 

Market Markers versus non-Market 

Makers). Specifically, the Exchange 

believes that the reduced fee for ATP 

Holders that utilize more than 40 Ports 

will relieve any undue burden that the 

proposed fee change might have on 

Marker Makers. Further, the Exchange 

believes that the proposed discount to 

the monthly Port Fee, capped at $10,000 

for those NYSE Amex Options Market 

Maker that executes at least 50% of their 

market maker volume in open outcry, 

likewise does not impose any undue 

burden on competition among and 

between market participants because as 

any market making firm can seek to 

place individual traders on the trading 

floor. In addition, the Exchange believes 

that the proposed changes will enhance 

the competiveness of the Exchange 

relative to other exchanges and, as noted 

above, the increased fees are comparable 

to port fees offered by competing option 

exchanges.17 The Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily favor competing venues. In such 

an environment, the Exchange must 

continually review, and consider 

adjusting, its fees and credits to remain 

competitive with other exchanges. For 

the reasons described above, the 

Exchange believes that the proposed 

rule change reflects this competitive 

environment. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) 18 of the Act and 

subparagraph (f)(2) of Rule 19b–4 19

thereunder, because it establishes a due, 

fee, or other charge imposed by the 

Exchange. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 20 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

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 email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEMKT–2014–092 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549. 

All submissions should refer to File 

Number SR–NYSEMKT–2014–092. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (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 Web site 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. and 3:00 p.m. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEMKT–2014–092 and should be 

submitted on or before November 28, 

2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26349 Filed 11–5–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73483; File No. SR–OCC– 

2014–14] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Order 

Approving Proposed Rule Change To 

Better Manage Risks Concentration 

and Other Risks Associated With 

Accepting Deposits of Common 

Stocks for Margin Purposes 

October 31, 2014. 

On July 15, 2014, The Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 72717 (July 

30, 2014), 79 FR 45523 (August 5, 2014) (SR–OCC– 

2014–14). OCC also filed proposals contained in 

this proposed rule change as an advance notice 

under Section 806(e)(1) of the Payment, Clearing, 

and Settlement Supervision Act of 2010 (‘‘Payment, 

Clearing and Settlement Supervision Act’’) and 

Rule 19b–4(n)(1) of the Act, which was published 

for comment in the Federal Register on August 15, 

2014. 12 U.S.C. 5465(e)(1); 17 CFR 240.19b–4(n)(1). 

See Securities Exchange Act Release No. 72803 

(August 11, 2014), 79 FR 48285 (August 15, 2014) 

(SR–OCC–2014–803). The Commission did not 

receive any comments on the advance notice. 

4See Securities Exchange Act Release No. 58158 

(July 15, 2008), 73 FR 42646 (July 22, 2008) (SR– 

OCC–2007–20). 

5According to OCC, consistent with the language 

contained in existing Interpretation & Policy .14, 

the Interpretation provides OCC with discretion in 

determining the amount of margin credit given to 

deposits of common stock by an individual clearing 

member as such determination would be based on 

positions held and common stock deposits made by 

such clearing member on a given business day. 

However, as discussed in the following two 

sections, OCC also has developed certain automated 

processes as well as additional internal policies that 

describe how OCC presently intends to exercise 

such discretion. According to OCC, these additional 

internal policies are included in OCC’s collateral 

risk management policy, which will not be 

implemented until approval of this rule change 

with changes thereto being subject to additional 

rule filings. 

Commission (‘‘Commission’’) the 

proposed rule change SR–OCC–2014–14 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’)1 and Rule 19b–4 thereunder.2

The proposed rule change was 

published for comment in the Federal 

Register on August 5, 2014.3 The 

Commission did not receive any 

comments on the proposed rule change. 

This order approves the proposed rule 

change. 

I. Description 

According to OCC, the purpose of this 

proposed rule change is to permit OCC 

to better manage concentration risk and 

wrong-way risk associated with 

accepting deposits of common stock for 

margin purposes. In order to manage 

such risks, OCC proposed to add an 

Interpretation and Policy to Rule 604, 

which specifies the forms of margin 

assets accepted by OCC, that will 

provide OCC with discretion with 

respect to giving value to assets 

deposited by a single clearing member 

to satisfy its margin requirement(s). In 

addition, OCC proposed to make 

clarifying amendments to an existing 

Interpretation and Policy under Rule 

604 that gives OCC discretion to not 

give value to a particular type of margin 

collateral across all clearing members. 

a. Background 

OCC Rule 604 lists the types of assets 

that clearing members may deposit with 

OCC to satisfy their margin 

requirement(s) as well as sets forth 

eligibility criteria for such assets. 

According to OCC, common stocks, 

including Exchange Traded Funds 

(‘‘ETFs’’) and Exchange Traded Notes 

(‘‘ETNs’’), are the most common form of 

margin assets deposited by clearing 

members and currently comprise 68% 

of the $60.6 billion in clearing member 

margin deposits held by OCC (not 

including deposits in lieu of margin). 

According to OCC, since 2009, OCC has 

used its System for Theoretical Analysis 

and Numerical Simulations (‘‘STANS’’), 

which is OCC’s daily automated Monte 

Carlo simulation-based margining 

methodology, to value common stocks 

deposited by clearing members as 

margin.4 The value given to margin 

deposits depends on factors that include 

the price volatility and the price 

correlation relationship of common 

stock collateral to the balance of the 

cleared portfolio. The approach used by 

STANS incentivizes clearing members 

who chose to meet their margin 

obligations with deposits of common 

stocks to choose common stocks that 

hedge their related open positions. 

According to OCC, notwithstanding 

the value STANS gives to deposits of 

common stocks, certain factors warrant 

OCC adjusting the value STANS gives to 

all clearing member margin deposits of 

a particular type of margin collateral. 

Such factors are set forth in Rule 604, 

Interpretation and Policy .14, and 

include the number of outstanding 

shares, number of outstanding 

shareholders and overall trading 

volume. OCC is proposing to add a new 

Interpretation and Policy to Rule 604 

(the ‘‘Interpretation’’) so that OCC has 

discretion to not give margin credit to a 

particular clearing member when such 

clearing member deposits a 

concentrated amount of any common 

stock and when a common stock, 

deposited as margin, presents ‘‘wrongway risk’’ to OCC. In addition, the 

Interpretation will provide OCC 

discretion to grant margin credit to a 

clearing member when it deposits 

shares of common stock that serve as a 

hedge to the clearing member’s related 

open positions and would otherwise be 

not be given margin credit.5

b. Concentrated Deposits of Common 

Stock 

OCC has determined that in the event 

it is necessary to liquidate a clearing 

member’s positions (including the 

clearing member’s margin collateral), 

OCC may be exposed to risk arising 

from a large quantity of a particular 

common stock deposited as margin by a 

clearing member. Specifically, 

depending on the relationship between 

the average daily trading volume of a 

particular security and the number of 

outstanding shares of such security 

deposited by a clearing member as 

margin, it is possible that the listed 

equities markets may not be able to 

quickly absorb all of the common stock 

OCC seeks to sell, or OCC may not be 

able to auction such securities, without 

an appreciable negative price impact. 

This occurrence, referred to by OCC as 

‘‘concentration risk,’’ is greatest when 

the number of shares being sold is large 

and the average daily trading volume is 

low. 

OCC’s existing authority to not give 

value to otherwise eligible forms of 

margin only provides OCC with the 

discretion to not give value across all 

clearing member deposits of a particular 

common stock. However, concentration 

risk may be a clearing member and 

account-specific risk. In order to 

mitigate the concentration risk of a 

single clearing member, OCC plans to 

implement automated processes to 

monitor the composition of a clearing 

member’s margin deposits. Such 

processes will identify concentration 

risk at both an account level and across 

all accounts of a clearing member. OCC 

proposed to add the Interpretation so 

that OCC has discretion to limit the 

margin credit granted to an individual 

clearing member that maintains a 

concentrated margin deposit of 

otherwise eligible common stock. 

According to OCC, for the reasons 

stated above, OCC considers a common 

stock’s average daily trading volume 

and the number of shares a clearing 

member deposited as margin to be the 

two most significant factors when 

making a decision to limit margin credit 

due to concentration risk. Accordingly, 

OCC will not give margin credit to 

clearing member margin deposits of a 

particular common stock in respect of a 

particular account when the deposited 

amount of such common stock is in 

excess of two times the average daily 

trade volume of such common stock 

over the most recent three month 

period. OCC’s systems will continually 

assess the composition of clearing 

member margin deposits for each 

account maintained by the clearing 

member, including intra-day collateral 

substitutions in such accounts, to 

determine if a clearing member has a 

margin deposit with a concentrated 

amount of common stock. With respect 

to a given account, OCC’s systems will 

automatically set appropriate limits on 

the amount of a particular common 

stock for which a clearing member may 

be given margin credit for any one of its 

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66012 Federal Register / Vol. 79, No. 215 / Thursday, November 6, 2014 / Notices 

6According to OCC, since a 2-day limit is first 

checked at each account, it is possible that a 

clearing member with multiple accounts may have 

more than 2-days of a given common stock on 

deposit in aggregate. To control this condition, a 

final check is done on the aggregate amount of 

shares held by a clearing member across all of its 

accounts. For example, if a particular clearing 

member has three accounts each holding 2-days 

volume of a specific common stock, the clearing 

member check would identify that the member was 

holding six days of volume in aggregate. To mitigate 

this risk, an add-on charge equal to the market 

value of four days of volume would be applied to 

all accounts holding that security on a pro-rata 

basis. 

7This standard is based on the provisions of OCC 

Rule 215(a)(5). 

8OCC believes that by providing such 

information clearing members will be better able to 

adjust their margin deposits at OCC to conform to 

the proposed rule change if it is approved. 

9According to OCC, the ‘‘delta equivalent 

position’’ is the equivalent number of underlying 

shares represented by the aggregation of cleared 

products on that same underlying instrument. This 

value is calculated using the ‘‘delta’’ of the option 

or futures contract, which is the ratio between the 

theoretical change in the price of the options or 

futures contract to the corresponding change in the 

price of an underlying asset. Thus, delta measures 

the sensitivity of an options or futures contract 

price to changes in the price of the underlying asset. 

For example, a delta of +0.7 means that for every 

$1 increase in the price of the underlying stock, the 

price of a call option will increase by $0.70. Delta 

for an option or future can be expressed in shares 

of the underlying asset. For example, a standard put 

option with a delta of¥.45 would have a delta 

of¥45 shares, because the unit of trading is 100 

shares. 

10Assume, for example, an average daily trade 

volume of 250 shares, a threshold of 2 times the 

average daily trade volume, and a delta of -300 

shares for the options on a particular security in a 

particular account. A position of 700 shares that did 

not hedge any short options or futures would 

receive credit for only 500 shares (i.e., 2 times the 

average daily trade volume). If the net long position 

in the account, when combined with the delta of 

short option and futures position, were only 400, 

credit would be given for the entire 700 shares since 

the delta equivalent position is below the 500 share 

threshold. However, if the option delta were +300, 

the net long position would be 1000, and credit 

would only be given for 500 shares because the 

delta equivalent position would exceed the 500 

share threshold. 

tier accounts. In addition, and with 

respect to all of a clearing member’s 

accounts, OCC will impose an add-on 

margin charge if, in aggregate, a clearing 

member deposits a concentrated amount 

of a particular common stock as margin 

across all of its accounts. The add-on 

margin charge will operate to negate the 

margin credit given to the concentrated 

margin deposit, and will be collected, 

when applicable, as part of OCC’s 

standard morning margin process. OCC 

will assess the add-on margin charge 

across all of a clearing member’s 

accounts on a pro-rata basis (based on 

the amount of the particular common 

stock in each of a clearing member’s 

accounts).6

According to OCC, OCC staff has been 

monitoring concentrated common stock 

positions, assessing the impact of the 

proposed rule change described in this 

filing and contacting clearing members 

affected by the proposed rule change. 

OCC believes that clearing members will 

be able to comply with the proposed 

rule change without making significant 

changes to their day-to-day business 

operations. In December 2013, an 

information memo was posted to inform 

all members of the upcoming change. 

According to OCC, since January 2014, 

OCC staff has been in contact with any 

clearing member that would be affected 

by the proposed rule change. On a 

weekly basis, any clearing member that 

would see a reduction of 10% or more 

of its collateral value is contacted and 

provided an explanation of the policy 

and a list of concentrated positions 

observed in this analysis. On a monthly 

basis, all clearing members exhibiting 

any concentration risk are contacted to 

provide an explanation of the proposed 

policy and a list of concentrated 

positions. In both cases, clearing 

members are encouraged to proactively 

reduce concentrated positions to 

conform to the proposed policy. As of 

June 2014, twenty-five members would 

be affected. Implementation of the 

Interpretation would result in 

disallowing $1.2 billion in collateral 

value and result in margin calls for six 

members totaling $710 million. 

Moreover, in July 2014, OCC made an 

automated report concerning 

concentrated margin deposits of 

common stock available to all clearing 

members. 

c. Wrong-Way Risk 

OCC also proposed to use the 

Interpretation to address the risk that 

the common stock a clearing member 

has deposited as margin and which is 

issued by the clearing member itself or 

an affiliate of the clearing member will 

lose value in the event the clearing 

member providing such margin defaults, 

which is known as ‘‘wrong-way risk.’’ 

According to OCC, wrong-way risk 

occurs when a clearing member makes 

a deposit of common stock issued by it 

or an affiliate and, in the event the 

clearing member defaults, the clearing 

member’s common stock margin deposit 

will also be losing value at the same 

time because there is likely to be a 

strong correlation between the clearing 

member’s creditworthiness and the 

value of such common stock. In order to 

address wrong-way risk, the 

Interpretation will implement 

automated systems that will not give 

margin credit to a clearing member that 

deposits common stock issued by such 

clearing member or an affiliate as 

margin collateral. OCC proposed to 

define ‘‘affiliate’’ broadly in the 

Interpretation to include any entity with 

direct or indirect equity ownership of 

10% of the clearing member, or any 

entity for which the clearing member 

holds 10% of the direct or indirect 

equity ownership.7

OCC has addressed the impact of the 

change designed to address wrong-way 

risk. As of June 2014, there were 73 

clearing members whose parent or an 

affiliate has issued securities trading on 

U.S. exchanges. As of June 2014, there 

are six clearing members that would be 

affected by virtue of having made 

margin deposits of their own or an 

affiliate’s common stock. In total, these 

shares equaled $132 million and 

accounted for less than one half of one 

percent of the total market value of 

valued securities pledged as margin at 

OCC. In July 2014, OCC made 

information available to each clearing 

member that indicates which of its 

deposits of common stock would not 

receive margin credit under the 

proposed change due to wrong-way risk 

considerations, as described above.8

d. Deposits That Hedge Open Positions 

In addition to the above, OCC also 

proposed to include language in the 

Interpretation so that it has discretion to 

give margin credit to common stock 

deposited as margin that would 

otherwise not be given margin credit in 

circumstances when such common 

stock acts as a hedge (i.e., the member 

holds an equivalent short position in 

cleared contracts on the same 

underlying security). This condition 

will be checked in both the account and 

clearing member level. For example, if 

a clearing member deposits the common 

stock of an affiliate as margin collateral, 

which, pursuant to the above, would 

ordinarily not be given value for the 

purposes of granting margin credit, OCC 

may nevertheless give value to such 

common stock for the purposes of 

granting margin credit to the extent such 

common stock acts as a hedge against 

open positions of the clearing member. 

In this case, a decline in the value of the 

margin deposit would be wholly or 

partially offset by an increase in the 

value in the open position. Moreover, in 

such a situation, OCC will 

systematically limit the margin credit 

granted to the lesser of a multiple of the 

daily trading volume or the ‘‘delta 

equivalent position’’ 9 for the particular 

common stock, taking into account the 

hedging position.10 OCC believes that 

this policy will further encourage 

clearing members to deposit margin 

collateral that hedges their related open 

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11 15 U.S.C. 78s(b)(2)(C). 

12 15 U.S.C. 78q–1(b)(3)(F). 

13 17 CFR 240.17Ad–22(b)(2). 

14 15 U.S.C. 78q–1(b)(3)(F). 

15 17 CFR 240.17Ad–22(b)(2). 

16 Id. 

17See Rule 604, Interpretation and Policy .15 

(providing OCC discretion to disapprove as margin 

collateral securities that meet certain factors, 

including trading volume, number of outstanding 

shareholder, number of outstanding shares, 

volatility and liquidity). 

18 17 CFR 240.17Ad–22(b)(2). 

19 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

20 15 U.S.C. 78s(b)(2). 

21 12 U.S.C. 5465(e)(1)(I). 

22 17 CFR 200.30–3(a)(12). 

positions and is in line with the 

valuation methods within STANS. This 

policy will also facilitate OCC’s 

management of its and its participants’ 

credit exposure as well as the 

liquidation of a clearing member’s 

portfolio should the need arise. 

e. Other Proposed Changes 

OCC also proposed to make certain 

clarifying changes in order to 

accommodate the adoption of the 

Interpretation into its Rules. Primarily, 

OCC proposed to add language to OCC 

Rule 604, Interpretation and Policy .14, 

to clarify that such Interpretation and 

Policy concerns OCC’s authority to not 

give value to certain margin deposits for 

all clearing members (whereas the 

Interpretation applies to particular 

clearing member(s)). In addition, OCC 

proposed to remove language from OCC 

Rule 604, Interpretation and Policy .14, 

to improve readability as well as to 

remove ‘‘factors’’ concerning number of 

shares and affiliates since OCC’s 

authority with respect to such factors 

will be more clearly described in the 

Interpretation. Finally, OCC proposed to 

renumber the Interpretations and 

Policies of Rule 604 in order to 

accommodate the adoption of the 

Interpretation. 

II. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act 11

directs the Commission to approve a 

proposed rule change of a selfregulatory organization if it finds that 

the proposed rule change is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to such organization. 

The Commission finds that the 

proposed rule change is consistent with 

Section 17A(b)(3)(F) of the Act,12 and 

Rule 17Ad–22(b)(2) of the Act.13 Section 

17A(b)(3)(F) of the Act 14 requires a 

registered clearing agency to have rules 

that are designed to, among other things, 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, and to assure the 

safeguarding of securities and funds 

which are in the custody or control of 

the clearing agency or for which it is 

responsible. OCC’s proposed rule 

change is consistent with this rule 

because by implementing margin 

collateral requirements that address 

concentration risk and wrong-way risk, 

OCC’s proposed rule change is 

consistent with promoting the prompt 

and accurate clearance and settlement of 

securities transactions and assuring the 

safeguarding of securities and funds 

which are in OCC’s custody or control 

or for which OCC is responsible. The 

proposed changes are designed to 

reduce the risk that clearing member 

margin assets would be insufficient 

should OCC need to use such assets to 

close-out positions of a defaulted 

clearing member. The changes are also 

designed to facilitate OCC to timely 

meet its settlement obligations because 

the proposed change will diminish the 

likelihood that a large percentage of the 

value of a defaulting clearing member’s 

margin assets would not be available to 

OCC to cover losses in the event of a 

clearing member default. 

OCC’s proposed rule change is 

consistent with Rule17Ad–22(b)(2) of 

the Act.15 Rule 17Ad–22(b)(2) of the 

Act 16 requires a registered clearing 

agency that performs central 

counterparty services to, among other 

things, establish, implement, maintain 

and enforce written policies and 

procedures reasonably designed to use 

margin requirements to limit its credit 

exposures to participants under normal 

market conditions. This proposal is 

consistent with this rule because it is 

reasonably designed to permit OCC to 

use margin requirements to limit its 

credit exposures to clearing members 

under normal market conditions in two 

ways. First, it is reasonably designed to 

limit OCC’s credit exposures to clearing 

members whose collateral portfolios 

could present concentration risk. 

Specifically, it addresses concentration 

risk by particular clearing member and 

by particular account by giving OCC 

discretion to disapprove as margin 

collateral certain securities, based on 

the number of shares deposited, by 

particular clearing member and by 

particular account, while also 

considering deposits that hedge open 

positions. It also clarifies that OCC’s 

existing authority to not give value to 

certain margin deposits applies to all 

clearing members, as opposed to 

particular clearing members.17 Second, 

it is reasonably designed to limit OCC’s 

credit exposures to clearing members 

whose collateral portfolios could 

present wrong-way risk. Specifically, it 

addresses wrong-way risk presented by 

clearing members who deposit as 

margin securities that are issued by the 

clearing member itself or by an affiliate 

of the clearing member. It addresses this 

type of wrong-way risk by giving OCC 

discretion to disapprove as margin 

collateral, with respect to a particular 

clearing member, any security issued by 

such clearing member or by an affiliate 

of such clearing member, while also 

considering deposits that hedge open 

positions. 

Rule 17Ad–22(b)(2) of the Act 18 also 

requires a registered clearing agency 

that performs central counterparty 

services to, among other things, 

establish, implement, maintain and 

enforce written policies and procedures 

reasonably designed to use risk-based 

models and parameters to set margin 

requirements. This proposal is 

consistent with this rule because it 

permits OCC to use risk-based models 

and parameters to set margin 

requirements in a way that takes into 

account concentration risk and wrongway risk, as described above. 

III. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act and, in particular, with the 

requirements of Section 17A of the 

Act 19 and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,20 that the 

proposed rule change (SR–OCC–2014– 

14) be, and it hereby is, approved, as of 

the date of this order or the date of a 

notice by the Commission noticing, 

pursuant to Section 806(e)(1)(I) of the 

Payment, Clearing and Settlement 

Supervision Act,21 that the Commission 

does not object to the proposal in OCC’s 

advance notice (SR–OCC–2014–803) 

and OCC is authorized to implement the 

proposal, whichever is later. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26345 Filed 11–5–14; 8:45 am] 

BILLING CODE 8011–01–P 

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