Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices 71479 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See OCC Rule 1001(a). 

4OCC also has submitted an advance notice that 

would provide greater detail concerning conditions 

under which OCC would resize the Clearing Fund 

intra-month. The change would permit intra-month 

resizing in the event that the five-day rolling 

average of projected draws are 150% or more of the 

Clearing Fund’s then current size. See Securities 

Exchange Act Release No. 72804 (August 11, 2014), 

79 FR 48276 (August 15, 2014) (SR–OCC–2014– 

804). 

to determine whether the proposed rule 

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– 

NASDAQ–2014–115 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, Station 

Place, 100 F Street NE., Washington, DC 

20549–9303. 

All submissions should refer to File 

Number SR–NASDAQ–2014–115. 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 the 

filing also will be available for 

inspection and copying at the principal 

office of NASDAQ. 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–NASDAQ–2014–115 and 

should be submitted on or before 

December 23, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28318 Filed 12–1–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73685; File No. SR–OCC– 

2014–21] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change in 

Order To Permit OCC To Adjust the 

Size of Its Clearing Fund on an IntraMonth Basis 

November 25, 2014. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on November 

13, 2014, The Options Clearing 

Corporation (‘‘OCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

by OCC. The Commission is publishing 

this notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

This proposed rule change by OCC 

would delete the second sentence of 

Rule 1001(a), which OCC has 

temporarily suspended pursuant to 

emergency authority under Article IX, 

Section 14 of its By-Laws, which would 

permit OCC to adjust the size of its 

Clearing Fund on an intra-month basis. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

OCC included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. OCC has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of these statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

OCC is submitting this proposed rule 

change to permit OCC to collect 

additional financial resources from its 

clearing membership by increasing the 

size of its Clearing Fund on an intramonth basis when OCC determines such 

action should be taken so that the 

Clearing Fund is sufficient to protect 

OCC against potential loss under 

simulated default scenarios. OCC 

monitors the sufficiency of the Clearing 

Fund on a daily basis but may only 

readjust the size of the Clearing Fund on 

a monthly basis.3 During the ordinary 

course of daily monitoring activities on 

October 15, 2014, and as a result of 

increased volatility in the financial 

markets in October 2014, OCC 

determined that in the event of a default 

of its largest participant family, OCC’s 

then current financial resources 

potentially could have fallen short of 

the total financial resources needed to 

cover the loss associated with the 

default. 

To permit OCC to increase the size of 

its Clearing Fund prior to the next 

monthly resizing that was scheduled to 

take place on the first business day of 

November 2014, OCC’s Executive 

Chairman, on October 15, 2014, 

exercised certain emergency powers as 

set forth in Article IX, Section 14 of 

OCC’s By-Laws.4 In emergency 

circumstances, and subject to certain 

conditions, Article IX, Section 14 

permits OCC’s Board of Directors, 

Executive Chairman, or President to 

waive or suspend its By-Laws, Rules, 

policies and procedures, or any other 

rules issued by OCC or extend the time 

fixed thereby for the doing of any act or 

acts for up to thirty calendar days. 

Consistent with that authority, and 

following discussions with the Risk 

Committee of OCC’s Board of Directors, 

the Executive Chairman waived the 

provisions in the second sentence of 

Rule 1001(a). OCC then filed an 

emergency notice with the Commission 

pursuant to Section 806(e)(2) of the 

Payment, Clearing, and Settlement 


rljohnson on DSK3VPTVN1PROD with NOTICES
71480 Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices 

5 12 U.S.C. 5465(e)(2). 

6See Notice of Emergency Change to OCC’s 

Procedures to Resize the Clearing Fund in Response 

to Market Conditions (SR–OCC–2014–807), http://

www.theocc.com/components/docs/legal/rules_

and_bylaws/sr_occ_14_807.pdf. 

7See Information Memorandum #35397, dated 

October 16, 2014, available on OCC’s Web site, 

http://www.theocc.com/clearing/clearinginfomemos/infomemos1.jsp. 

8See Information Memorandum #35507, dated 

October 31, 2014, available on OCC’s Web site, 

http://www.theocc.com/clearing/clearinginfomemos/infomemos1.jsp. 

9See, OCC By-Laws, Article IX, Section 14(c). 

OCC will also submit this proposed rule change to 

the Commodity Futures Trading Commission. 

10 Id. 

11 15 U.S.C. 78q–1(b)(3)(F). 

12 17 CFR 240.17Ad–22(b)(3). 

13 15 U.S.C. 78q–1(b)(3)(I). 

Supervision Act of 2010 5 and increased 

the Clearing Fund size for the remainder 

of October 2014 as otherwise provided 

for by the terms of Rule 1001(a).6 This 

was done to respond to the potential 

risk under prevailing market conditions 

that the Clearing Fund could be 

underfunded, which could have affected 

OCC’s ability to provide services in a 

safe and sound manner. 

Clearing members were informed of 

the action taken by the Executive 

Chairman and the amount of their 

additional Clearing Fund requirements, 

which were met without issue.7 As a 

result of these actions, OCC’s Clearing 

Fund for October 2014 was increased by 

$1.8 billion. In continued reliance on 

the emergency rule waiver and the 

emergency notice, OCC set the 

November 2014 Clearing Fund size at 

$7.8 billion, which included an amount 

determined by OCC to be sufficient to 

protect OCC against loss under 

simulated default scenarios (i.e., $6 

billion), plus a prudential margin of 

safety (the additional $1.8 billion 

collected in October).8 All required 

contributions to the November 2014 

Clearing Fund have been met by 

impacted clearing members. 

Under Article IX, Section 14(c) of 

OCC’s By-Laws, OCC’s waiver of the 

provisions of the second sentence of 

Rule 1001(a) is permitted to continue for 

no more than thirty calendar days 

unless OCC submits a proposed rule 

change to the Commission seeking 

approval of such waiver.9 Upon 

submission of a rule filing, the waiver 

may continue in effect until the 

Commission approves or disapproves 

the proposed rule change.10

Accordingly, OCC is now submitting 

this proposed rule change to delete the 

second sentence of Rule 1001(a) and, by 

the terms of Article IX, Section 14(c), to 

preserve the suspended effectiveness of 

the second sentence of Rule 1001(a) 

beyond thirty calendar days. 

OCC believes that this proposal is 

appropriate to permit OCC to resize the 

Clearing Fund more frequently than 

monthly and to determine its size in an 

amount sufficient to protect OCC from 

loss by relying on a broader range of 

sound risk management practices than 

only the average daily calculations 

under Rule 1001(a) that are performed 

during the preceding calendar month. 

OCC would use its authority to adjust 

the size of its Clearing Fund on an intramonth basis only to increase the size of 

the Clearing Fund where appropriate, 

not to decrease the size of the Clearing 

Fund. 

2. Statutory Basis 

OCC believes the proposed rule 

change is consistent with Section 

17A(b)(3)(F) of the Act,11 and the rules 

and regulations thereunder, including 

Rule 17Ad–22(b)(3),12 because, by 

permitting OCC to resize the Clearing 

Fund intra-month and to determine its 

size in an amount sufficient to protect 

OCC from loss using a broader range of 

sound risk management practices than 

is currently required, the proposed 

modifications would assure the 

safeguarding of securities and funds 

which are in the custody or control of 

OCC or for which it is responsible, 

protect investors and the public interest 

and ensure that OCC has policies and 

procedures designed to maintain 

sufficient financial resources to 

withstand, at a minimum, a default by 

the participant family to which it has 

the largest exposure in extreme but 

plausible market conditions. The 

proposed rule change is not inconsistent 

with the existing rules of OCC, 

including any other rules proposed to be 

amended. 

(B) Clearing Agency’s Statement on 

Burden on Competition 

OCC does not believe that the 

proposed rule change would impose any 

burden on competition.13 OCC believes 

the proposed rule change would not 

unfairly inhibit access to OCC’s services 

or disadvantage or favor any particular 

user in relationship to another user 

because OCC would continue to allocate 

the Clearing Fund as per current rules 

and without regard to any particular 

user or Clearing Member that makes 

Clearing Fund contributions. For the 

foregoing reasons, OCC believes that the 

proposed rule change is in the public 

interest, would be consistent with the 

requirements of the Act applicable to 

clearing agencies, and would not 

impose a burden on competition. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants, or Others 

Written comments on the proposed 

rule change were not and are not 

intended to be solicited with respect to 

the proposed rule change and none have 

been received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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– 

OCC–2014–21 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–OCC–2014–21. 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 


rljohnson on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 231 / Tuesday, December 2, 2014 / Notices 71481 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 34– 

63038 (October 5, 2010), 75 FR 62899 (October 13, 

2010) (SR–FICC–2010–04). 

4See Securities Exchange Act Release No. 34– 

64004 (March 2, 2011), 76 FR 12782 (March 8, 

2011) (SR–FICC–2011–02). 

5See Securities Exchange Act Release No. 34– 

66550 (March 9, 2012), 77 FR 15155 (March 14, 

2012) (SR–FICC–2008–01). 

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 the 

filing also will be available for 

inspection and copying at the principal 

office of OCC and on OCC’s Web site at 

http://www.theocc.com/components/

docs/legal/rules_and_bylaws/sr_occ_14_

21.pdf. 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–OCC–2014–21 and should 

be submitted on or before December 23, 

2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28353 Filed 12–1–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73682; File No. SR–FICC– 

2014–09] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing of Proposed Rule Change To 

Amend the Rules of the Government 

Securities Division and the MortgageBacked Securities Division Regarding 

the Default of Fixed Income Clearing 

Corporation 

November 25, 2014. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on November 

12, 2014, Fixed Income Clearing 

Corporation (‘‘FICC’’ or ‘‘Corporation’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by FICC. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

amendments to the rules of the 

Government Securities Division (‘‘GSD 

Rules’’) of FICC and the rules of the 

Mortgage-Backed Securities Division 

(‘‘MBSD Rules’’) of FICC (each of GSD 

and MBSD, a ‘‘Division’’ of FICC) 

regarding a default by the Corporation. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

FICC included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item IV below. FICC has prepared 

summaries, set forth in sections A, B 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

(1) Purpose 

The purpose of this filing is to amend 

in certain respects the GSD Rules and 

the MBSD Rules regarding a default by 

the Corporation. 

By way of background, in 2010, FICC 

received approval from the Securities 

and Exchange Commission (‘‘SEC’’) to 

amend the GSD Rules to add Rule 22B 

(the ‘‘GSD Corporation Default Rule’’).3

Certain technical clarifying changes to 

the GSD Corporation Default Rule were 

subsequently filed by FICC with the SEC 

for immediate effectiveness in 2011.4

The GSD Corporation Default Rule 

was originally added to the GSD Rules 

to make explicit the close out netting 

that would be applied to obligations 

between FICC and its members in the 

event that FICC becomes insolvent or 

otherwise defaults on its obligations to 

its members, and, in doing so, provide 

clarity to member firms in their 

application of balance sheet netting to 

their transactions at FICC under U.S. 

GAAP and in the calculation of their 

capital requirements on the basis of 

their net credit exposure to FICC under 

Basel Accord standards. A rule parallel 

to the GSD Corporation Default Rule 

was subsequently added as Rule 17A to 

the MBSD Rules 5 (the ‘‘MBSD 

Corporation Default Rule’’, and together 

with the GSD Corporation Default Rule, 

the ‘‘Corporation Default Rules’’). 

There are three general types of 

default covered by the Corporation 

Default Rules: Voluntary proceedings 

defaults, involuntary proceedings 

defaults and non-insolvency related 

defaults. 

With respect to voluntary proceedings 

defaults, FICC would be considered in 

default under the current Corporation 

Default Rules immediately upon the 

dissolution of the Corporation, the 

voluntary institution of proceedings by 

the Corporation seeking a judgment of 

insolvency or bankruptcy or other 

similar relief or the voluntary 

presentation by the Corporation of a 

petition for its winding up or 

liquidation. 

With respect to involuntary 

proceedings defaults, FICC would be 

considered in default under the current 

Corporation Default Rules on the 91st 

calendar day after the judgment of 

insolvency or bankruptcy or the entry of 

an order for relief (or similar order) for 

FICC’s winding up or liquidation, or the 

appointment of an administrator, 

provisional liquidator, conservator, 

receiver, trustee, custodian or other 

similar official for all or substantially all 

of the Corporation’s assets, where such 

judgment, order or appointment, as 

applicable, remains unstayed 

throughout the 90 calendar day grace 

period. 

With respect to non-insolvency 

related defaults, FICC would, as a 

general matter, be considered in default 

under the current Corporation Default 

Rules on the 91st calendar day after it 

receives notice from a member of its 

failure to make an undisputed payment 

or delivery to such member that is 

required under the GSD Rules or the 

MBSD Rules, respectively, where such 

failure remains unremedied throughout 

the 90 calendar day grace period. 

However, the current Corporation 

Default Rules exclude from the scope of 

what can be considered a noninsolvency related default of the 

applicable Division of FICC: (1) Failure 

to satisfy obligations to members in 

wind-down and defaulting members; (2) 

the satisfaction of obligations by 

alternate means provided for under the 

applicable Division’s Rules; (3) failure 

of the other Division of FICC to satisfy 

an obligation to a member; and (4) 

failure to satisfy obligations as a result 

of an operational, technological or 


rljohnson on DSK3VPTVN1PROD with NOTICES