Federal Register / Vol. 80, No. 37 / Wednesday, February 25, 2015 / Notices 10171 

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

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 

73961(December 30, 2014), 80 FR 568 (January 6, 

2015) (SR–OCC–2014–23). 

4According to OCC, an EFP is a transaction 

between two parties in which a futures contract on 

a commodity or security is exchanged for the actual 

physical good. 

5According to OCC, a block trade is a trade 

involving a large number of shares being traded at 

an arranged price between parties, outside of the 

open markets, in order to lessen the impact of such 

a large trade being made public. 

6Cleared Contracts and Commencement Time are 

defined terms set forth in Article 1, Section 1 of 

OCC’s By-Laws. 

7See OCC’s By-Laws Article VI, Section 5. 

According to OCC, in a practical sense, however, 

most trades are novated upon proper submission to 

OCC for clearing since OCC’s By-Laws, with limited 

exception, do not permit OCC to reject any 

confirmed trade due to the failure of the purchasing 

clearing member to pay any amount due to OCC at 

or before the settlement time. See also Securities 

Exchange Act Release No. 65990 (December 16, 

2011), 76 FR 79731 (December 22, 2011) (SR–OCC– 

2011–17). 

8 Id. 

9See Securities Exchange Act Release No. 44727 

(August 20, 2001), 66 FR 45351 (August 28, 2001) 

(SR–OCC–2001–07). 

Amendment to the Plan (File No. 4–631) 

be, and it hereby is, approved. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–03875 Filed 2–24–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Thursday, February 26, 2015 at 2:00 

p.m. 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the Closed Meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or her designee, has 

certified that, in her opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) 

and 17 CFR 200.402(a)(3), (5), (7), 9(ii) 

and (10), permit consideration of the 

scheduled matter at the Closed Meeting. 

Commissioner Stein, as duty officer, 

voted to consider the items listed for the 

Closed Meeting in closed session, and 

determined that no earlier notice thereof 

was possible. 

The subject matter of the Closed 

Meeting will be: 

Institution and settlement of 

injunctive actions; 

Institution and settlement of 

administrative proceedings; and 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact the Office of the Secretary at 

(202) 551–5400. 

Dated: February 20, 2015. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–03947 Filed 2–23–15; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74302; File No. SR–OCC– 

2014–23] 

Self-Regulatory Organizations; the 

Options Clearing Corporation; Order 

Approving Proposed Rule Change To 

Clarify That OCC Would not Treat a 

Futures Transaction That Is an 

Exchange-for-Physical or Block Trade 

as a Non-Competitively Executed 

Trade if the Exchange on Which Such 

Trade Is Executed Has Provided OCC 

With Representations That it Has 

Policies or Procedures Requiring That 

Such Trades Be Executed at 

Reasonable Prices and That Such 

Price Is Validated by the Exchange 

February 19, 2015. 

On December 19, 2014, the Options 

Clearing Corporation (‘‘OCC’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change File No. SR–OCC– 

2014–23 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 January 6, 2015.3 The 

Commission did not receive any 

comments on the proposed rule change. 

This order approves the proposed rule 

change. 

I. Description 

OCC is modifying its By-Laws to add 

an interpretation and policy to Section 

7 of Article XII of its By-Laws to clarify 

that OCC will not treat a futures 

transaction that is an exchange-forphysical (‘‘EFP’’) 4 or block trade in 

futures (‘‘Block Trade’’) 5 as a noncompetitively executed trade, and 

therefore subject to delayed novation, if 

the exchange on which the EFP or Block 

Trade is executed has provided OCC 

with representations that it has rules, 

policies or procedures requiring that 

such trades be executed at reasonable 

prices and that such prices are validated 

by the exchange. 

Background 

According to OCC, under OCC’s ByLaws, the novation of confirmed trades 

(i.e., transactions in options, futures, or 

other ‘‘cleared contracts’’ effected 

through an exchange and submitted to 

OCC for clearing) occurs at the 

‘‘commencement time’’ for such 

transactions.6 The ‘‘commencement 

time’’ for most confirmed trades is when 

daily position reports are made 

available to clearing members.7

However, transactions in certain cleared 

products and certain types of 

transactions, including noncompetitively executed EFPs and Block 

Trades, have delayed commencement 

times that are tailored to address risks 

specific to such products or 

transactions,8 including, but not limited 

to, those risks presented by off-market 

transactions. 

When OCC began clearing EFPs and 

Block Trades, it established that the 

commencement time for such 

transactions is expressly conditioned 

upon the receipt by OCC of variation 

payments due from purchasing and 

selling clearing members because EFPs 

and Block Trades could be executed 

away from the market and be executed 

at other than market prices. These 

factors were viewed as creating 

heightened exposure to OCC if a 

clearing member defaults on a trade 

executed at an off-market price and, as 

a result, Article XII, Section 7 of OCC’s 

By-Laws establishes that the 

commencement time for an EFP or 

Block Trade is the time of the first 

variation payment after the trade is 

reported to OCC (typically 9:00 a.m. 

Central Time the following business 

day).9 OCC delays its novation of these 

non-competitively executed futures 

trades because OCC is bound to pay the 

first variation settlement amount to the 

counterparty once novation has 

occurred, and if the agreed-upon price 

at which the trade is entered differs 

from the competitive market price, there 

is an increased likelihood that OCC may 


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