50700 Federal Register / Vol. 82, No. 210 / Wednesday, November 1, 2017 / Notices 

10 17 CFR 200.30–3(a)(12). 

1A successor in interest is limited to an entity 

that results from a reorganization into another 

jurisdiction or a change in the type of business 

organization. 

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 the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR-BatsEDGX–2017–41 and 

should be submitted on or before 

November 22, 2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–23739 Filed 10–31–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

32884; 812–14683] 

The Relative Value Fund et al. 

October 26, 2017. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice. 

Notice of an application under section 

6(c) of the Investment Company Act of 

1940 (the ‘‘Act’’) for an exemption from 

sections 18(a)(2), 18(c) and 18(i) of the 

Act, under sections 6(c) and 23(c) of the 

Act for an exemption from rule 23c–3 

under the Act, and for an order pursuant 

to section 17(d) of the Act and rule 17d– 

1 under the Act. 

SUMMARY: Applicants request an order to 

permit certain registered closed-end 

management investment companies to 

issue multiple classes of shares and to 

impose asset-based distribution and/or 

service fees, early withdrawal charges 

(‘‘EWCs’’) and early repurchase fees. 

APPLICANTS: The Relative Value Fund 

and the Infinity Core Alternative Fund 

(the ‘‘Initial Funds’’) and Vivaldi Asset 

Management, LLC (the ‘‘Adviser’’). 

DATES: The application was filed on 

August 8, 2016 and amended on March 

8, 2017 and June 30, 2017. 

HEARING OR NOTIFICATION OF HEARING: 

An order granting the requested relief 

will be issued unless the Commission 

orders a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. 

Hearing requests should be received 

by the Commission by 5:30 p.m. on 

November 20, 2017, and should be 

accompanied by proof of service on the 

applicants, in the form of an affidavit, 

or, for lawyers, a certificate of service. 

Pursuant to rule 0–5 under the Act, 

hearing requests should state the nature 

of the writer’s interest, any facts bearing 

upon the desirability of a hearing on the 

matter, the reason for the request, and 

the issues contested. Persons who wish 

to be notified of a hearing may request 

notification by writing to the 

Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090; 

Applicants: Vivaldi Asset Management, 

LLC, 225 W. Wacker Drive, Suite 2100, 

Chicago IL 60606; The Relative Value 

Fund and the Infinity Core Alternative 

Fund c/o UMB Fund Services, Inc., 235 

West Galena Street, Milwaukee, WI 

53212. 

FOR FURTHER INFORMATION CONTACT: 

Rachel Loko, Senior Counsel or Holly 

Hunter-Ceci, Assistant Chief Counsel, at 

(202) 551–6825 (Division of Investment 

Management, Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

Web site by searching for the file 

number, or for an applicant using the 

Company name box, at http://

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Applicants’ Representations 

1. The Relative Value Fund is a 

Delaware statutory trust that is 

registered under the Act as a nondiversified, closed-end management 

investment company. The Relative 

Value Fund’s investment objective is 

long-term capital appreciation. The 

Relative Value Fund seeks to achieve its 

investment objective by generating 

attractive long-term returns with low 

sensitivity to traditional equity and 

fixed income indices through a ‘‘multimanager’’ approach implementing 

strategies including without limitation, 

global macro, opportunistic equity anf 

fixed income, systematic and arbitrage 

strategies that invest in different asset 

classes, securities and derivatives 

instruments. The Infinity Core 

Alternative Fund is a Maryland 

statutory trust that is registered under 

the Act as a non-diversified, 

continuously offered closed-end 

management investment company. The 

Infinity Core Alternative Fund’s 

investment objective is long-term capital 

growth. The Infinity Core Alternative 

Fund seeks to achieve its investment 

objective by operating as a ‘‘fund of 

funds’’ that invests primarily in general 

or limited partnerships, funds, 

corporations, trusts or other investment 

vehicles based primarily in the United 

States that invest or trade in a wide 

range of securities, and, to a lesser 

extent, other property and currency 

interests. The Infinity Core Alternative 

Fund may also make investments meant 

to hedge exposures deemed too risky or 

to invest in strategies not employed by 

investment funds or to hedge a position 

in an investment fund that is locked-up 

or difficult to sell. 

2. The Adviser, a Delaware limited 

liability company, is registered as an 

investment adviser under the 

Investment Advisers Act of 1940, as 

amended. The Adviser serves as 

investment adviser to the Initial Funds. 

3. The applicants seek an order to 

permit the Initial Funds to issue 

multiple classes of shares and to impose 

asset-based distribution and/or service 

fees and EWCs. 

4. Applicants request that the order 

also apply to any continuously offered 

registered closed-end management 

investment company that may be 

organized in the future for which the 

Adviser, or any entity controlling, 

controlled by, or under common control 

with the Adviser, or any successor in 

interest to any such entity,1 acts as 

investment adviser and which operates 

as an interval fund pursuant to rule 

23c–3 under the Act or provides 

periodic liquidity with respect to its 

shares pursuant to rule 13e–4 under the 


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2Any Fund relying on this relief in the future will 

do so in a manner consistent with the terms and 

conditions of the application. Applicants represent 

that each entity presently intending to rely on the 

requested relief is listed as an applicant. 

3Applicants submit that rule 23c–3 and 

Regulation M under the Exchange Act permit an 

interval fund to make repurchase offers to 

repurchase its shares while engaging in a 

continuous offering of its shares pursuant to Rule 

415 under the Securities Act of 1933, as amended. 

4Any reference to the NASD Sales Charge Rule 

includes any successor or replacement to the NASD 

Sales Charge Rule. 

5See Shareholder Reports and Quarterly Portfolio 

Disclosure of Registered Management Investment 

Companies, Investment Company Act Release No. 

26372 (Feb. 27, 2004) (adopting release) (requiring 

open-end investment companies to disclose fund 

expenses in shareholder reports); and Disclosure of 

Breakpoint Discounts by Mutual Funds, Investment 

Company Act Release No. 26464 (June 7, 2004) 

(adopting release) (requiring open-end investment 

companies to provide prospectus disclosure of 

certain sales load information). 

6Fund of Funds Investments, Investment 

Company Act Rel. Nos. 26198 (Oct. 1, 2003) 

(proposing release) and 27399 (Jun. 20, 2006) 

(adopting release). See also Rules 12d1–1, et seq. of 

the Act. 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’) (each, a ‘‘Future 

Fund’’ and together with the Initial 

Funds, the ‘‘Funds’’).2

5. The Initial Funds are currently 

making a continuous public offering of 

beneficial interest in connection with 

their registration statement. Applicants 

state that additional offerings by any 

Fund relying on the order may be on a 

private placement or public offering 

basis. Shares of the Funds will not be 

listed on any securities exchange nor 

quoted on any quotation medium. The 

Funds do not expect there to be a 

secondary trading market for their 

shares. 

6. If the requested relief is granted, the 

Relative Value Fund will offer Advisor 

Class Shares alongside its current CIA 

Class Shares and the Infinity Core 

Alternative Fund will amend its 

registration statement to continuously 

offer at least one additional class of 

shares (the ‘‘New Class Shares’’) 

alongside its currently offered Initial 

Class Shares. Each of the Adviser Class 

Shares, the CIA Class Shares, the Initial 

Class Shares and the New Class Shares 

will have their own fee and expense 

structure. The Funds may in the future 

offer additional classes of shares and/or 

another sales charges structure. Because 

of the different distribution fees, 

services and any other class expenses 

that may be attributable to the each class 

of shares, the net income attributable to, 

and the dividends payable on, each 

class of shares may differ from each 

other. 

7. Applicants state that, from time to 

time, the Funds may create additional 

classes of shares, the terms of which 

may differ from other share classes in 

the following respects: (i) The amount of 

fees permitted by different distribution 

plans or different service fee 

arrangements; (ii) voting rights with 

respect to a distribution plan of a class; 

(iii) different class designations; (iv) the 

impact of any class expenses directly 

attributable to a particular class of 

shares allocated on a class basis as 

described in the application; (v) any 

differences in dividends and net asset 

value resulting from differences in fees 

under a distribution or service fee 

arrangement or in class expenses; (vi) 

any EWC or other sales load structure; 

and (vii) exchange or conversion 

privileges of the classes as permitted 

under the Act. 

8. Applicants state that shares of a 

Fund may be subject to an early 

repurchase fee (‘‘Early Repurchase Fee’’) 

at a rate of no greater than 2% of the 

aggregate net asset value of a 

shareholder’s shares repurchased by the 

Fund if the interval between the date of 

purchase of the shares and the valuation 

date with respect to the repurchase of 

those shares is less than one year. Any 

Early Repurchase Fees will apply 

equally to all classes of shares of a 

Fund, consistent with section 18 of the 

Act and rule 18f–3 thereunder. To the 

extent a Fund determines to waive, 

impose scheduled variations of, or 

eliminate any Early Repurchase Fee, it 

will do so consistently with the 

requirements of rule 22d–1 under the 

Act as if the Early Repurchase Fee were 

a CDSL (defined below) and as if the 

Fund were an open-end investment 

company and the Fund’s waiver of, 

scheduled variation in, or elimination 

of, any such Early Repurchase Fee will 

apply uniformly to all shareholders of 

the Fund regardless of class. Applicants 

state that the Initial Funds do not intend 

to impose an Early Repurchase Fee. 

9. Applicants state that the Relative 

Value Fund has adopted a fundamental 

policy to repurchase a specified 

percentage of its shares at net asset 

value on a quarterly basis. Such 

repurchase offers will be conducted 

pursuant to rule 23c–3 under the Act. 

The Infinity Core Alternative Fund 

provides periodic liquidity with respect 

to its shares pursuant to Rule 13e–4 

under the Exchange Act. Each of the 

Future Funds will likewise adopt 

fundamental investment policies and 

make periodic repurchase offers to its 

shareholders in compliance with rule 

23c–3 or will provide periodic liquidity 

with respect to its shares pursuant to 

rule 13e–4 under the Exchange Act.3

Any repurchase offers made by the 

Funds will be made to all holders of 

shares of each such Fund. 

10. Applicants represent that any 

asset-based service and/or distribution 

fees for each class of shares of the Funds 

will comply with the provisions of the 

NASD Rule 2830(d) (‘‘NASD Sales 

Charge Rule’’).4 Applicants also 

represent that each Fund will disclose 

in its prospectus the fees, expenses and 

other characteristics of each class of 

shares offered for sale by the prospectus, 

as is required for open-end multiple 

class funds under Form N–1A. As is 

required for open-end funds, each Fund 

will disclose its expenses in shareholder 

reports, and describe any arrangements 

that result in breakpoints in or 

elimination of sales loads in its 

prospectus.5 In addition, applicants will 

comply with applicable enhanced fee 

disclosure requirements for fund of 

funds, including registered funds of 

hedge funds.6

11. Each of the Funds will comply 

with any requirements that the 

Commission or FINRA may adopt 

regarding disclosure at the point of sale 

and in transaction confirmations about 

the costs and conflicts of interest arising 

out of the distribution of open-end 

investment company shares, and 

regarding prospectus disclosure of sales 

loads and revenue sharing 

arrangements, as if those requirements 

applied to the Fund. In addition, each 

Fund will contractually require that any 

distributor of the Fund’s shares comply 

with such requirements in connection 

with the distribution of such Fund’s 

shares. 

12. Each Fund will allocate all 

expenses incurred by it among the 

various classes of shares based on the 

net assets of that Fund attributable to 

each class, except that the net asset 

value and expenses of each class will 

reflect the expenses associated with the 

distribution plan of that class, service 

fees attributable to that class (if any), 

including transfer agency fees, and any 

other incremental expenses of that class. 

Expenses of a Fund allocated to a 

particular class of shares will be borne 

on a pro rata basis by each outstanding 

share of that class. Applicants state that 

each Fund will comply with the 

provisions of rule 18f–3 under the Act 

as if it were an open-end investment 

company. 

13. Applicants state that each Fund 

may impose an EWC on shares 

submitted for repurchase that have been 

held less than a specified period and 

may waive the EWC for certain 

categories of shareholders or 

transactions to be established from time 

to time. Applicants state that each Fund 

will apply the EWC (and any waivers or 


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scheduled variations, or elimination of 

the EWC) uniformly to all shareholders 

in a given class and consistently with 

the requirements of rule 22d–1 under 

the Act as if the Funds were open-end 

investment companies. 

14. Each Fund operating as an interval 

fund pursuant to rule 23c–3 under the 

Act may offer its shareholders an 

exchange feature under which the 

shareholders of the Fund may, in 

connection with such Fund’s periodic 

repurchase offers, exchange their shares 

of the Fund for shares of the same class 

of (i) registered open-end investment 

companies or (ii) other registered 

closed-end investment companies that 

comply with rule 23c–3 under the Act 

and continuously offer their shares at 

net asset value, that are in the Fund’s 

group of investment companies 

(collectively, ‘‘Other Funds’’). Shares of 

a Fund operating pursuant to rule 23c– 

3 that are exchanged for shares of Other 

Funds will be included as part of the 

amount of the repurchase offer amount 

for such Fund as specified in rule 23c– 

3 under the Act. Any exchange option 

will comply with rule 11a–3 under the 

Act, as if the Fund were an open-end 

investment company subject to rule 

11a–3. In complying with rule 11a–3, 

each Fund will treat an EWC as if it 

were a contingent deferred sales load 

(‘‘CDSL’’). 

Applicants’ Legal Analysis 

Multiple Classes of Shares 

1. Section 18(a)(2) of the Act provides 

that a closed-end investment company 

may not issue or sell a senior security 

that is a stock unless certain 

requirements are met. Applicants state 

that the creation of multiple classes of 

shares of the Funds may violate section 

18(a)(2) because the Funds may not 

meet such requirements with respect to 

a class of shares that may be a senior 

security. 

2. Section 18(c) of the Act provides, 

in relevant part, that a closed-end 

investment company may not issue or 

sell any senior security if, immediately 

thereafter, the company has outstanding 

more than one class of senior security. 

Applicants state that the creation of 

multiple classes of shares of the Funds 

may be prohibited by section 18(c), as 

a class may have priority over another 

class as to payment of dividends 

because shareholders of different classes 

would pay different fees and expenses. 

3. Section 18(i) of the Act provides 

that each share of stock issued by a 

registered management investment 

company will be a voting stock and 

have equal voting rights with every 

other outstanding voting stock. 

Applicants state that multiple classes of 

shares of the Funds may violate section 

18(i) of the Act because each class 

would be entitled to exclusive voting 

rights with respect to matters solely 

related to that class. 

4. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security or transaction or any 

class or classes of persons, securities or 

transactions from any provision of the 

Act, or from any rule or regulation 

under the Act, if and to the extent such 

exemption is necessary or appropriate 

in the public interest and consistent 

with the protection of investors and the 

purposes fairly intended by the policy 

and provisions of the Act. Applicants 

request an exemption under section 6(c) 

from sections 18(a)(2), 18(c) and 18(i) to 

permit the Funds to issue multiple 

classes of shares. 

5. Applicants submit that the 

proposed allocation of expenses relating 

to distribution and voting rights among 

multiple classes is equitable and will 

not discriminate against any group or 

class of shareholders. Applicants submit 

that the proposed arrangements would 

permit a Fund to facilitate the 

distribution of its securities and provide 

investors with a broader choice of 

shareholder services. Applicants assert 

that the proposed closed-end 

investment company multiple class 

structure does not raise the concerns 

underlying section 18 of the Act to any 

greater degree than open-end 

investment companies’ multiple class 

structures that are permitted by rule 

18f–3 under the Act. Applicants state 

that each Fund will comply with the 

provisions of rule 18f–3 as if it were an 

open-end investment company. 

Early Withdrawal Charges 

1. Section 23(c) of the Act provides, 

in relevant part, that no registered 

closed-end investment company shall 

purchase securities of which it is the 

issuer, except: (a) On a securities 

exchange or other open market; (b) 

pursuant to tenders, after reasonable 

opportunity to submit tenders given to 

all holders of securities of the class to 

be purchased; or (c) under other 

circumstances as the Commission may 

permit by rules and regulations or 

orders for the protection of investors. 

2. Rule 23c–3 under the Act permits 

an ‘‘interval fund’’ to make repurchase 

offers of between five and twenty-five 

percent of its outstanding shares at net 

asset value at periodic intervals 

pursuant to a fundamental policy of the 

interval fund. Rule 23c–3(b)(1) under 

the Act permits an interval fund to 

deduct from repurchase proceeds only a 

repurchase fee, not to exceed two 

percent of the proceeds, that is paid to 

the interval fund and is reasonably 

intended to compensate the fund for 

expenses directly related to the 

repurchase. 

3. Section 23(c)(3) provides that the 

Commission may issue an order that 

would permit a closed-end investment 

company to repurchase its shares in 

circumstances in which the repurchase 

is made in a manner or on a basis that 

does not unfairly discriminate against 

any holders of the class or classes of 

securities to be purchased. 

4. Applicants request relief under 

section 6(c), discussed above, and 

section 23(c)(3) from rule 23c–3 to the 

extent necessary for the Funds to 

impose EWCs on shares of the Funds 

submitted for repurchase that have been 

held for less than a specified period. 

5. Applicants state that the EWCs they 

intend to impose are functionally 

similar to CDSLs imposed by open-end 

investment companies under rule 6c–10 

under the Act. Rule 6c–10 permits openend investment companies to impose 

CDSLs, subject to certain conditions. 

Applicants note that rule 6c–10 is 

grounded in policy considerations 

supporting the employment of CDSLs 

where there are adequate safeguards for 

the investor and state that the same 

policy considerations support 

imposition of EWCs in the interval fund 

context. In addition, applicants state 

that EWCs may be necessary for the 

distributor to recover distribution costs. 

Applicants represent that any EWC 

imposed by the Funds will comply with 

rule 6c–10 under the Act as if the rule 

were applicable to closed-end 

investment companies. The Funds will 

disclose EWCs in accordance with the 

requirements of Form N–1A concerning 

CDSLs. 

Asset-Based Distribution and/or Service 

Fees 

1. Section 17(d) of the Act and rule 

17d–1 under the Act prohibit an 

affiliated person of a registered 

investment company, or an affiliated 

person of such person, acting as 

principal, from participating in or 

effecting any transaction in connection 

with any joint enterprise or joint 

arrangement in which the investment 

company participates unless the 

Commission issues an order permitting 

the transaction. In reviewing 

applications submitted under section 

17(d) and rule 17d–1, the Commission 

considers whether the participation of 

the investment company in a joint 

enterprise or joint arrangement is 

consistent with the provisions, policies 

and purposes of the Act, and the extent 

to which the participation is on a basis 


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

2 17 CFR 240.19b–4. 

3To the extent that a loss resulting from any of 

the events referred to in Article VIII, Section 5(b) 

is recoverable out of the Clearing Fund pursuant to 

Article VIII, Section 5(a), the provisions of Article 

VIII, Section 5(a) control and render the provisions 

of Article VIII, Section 5(b) inapplicable. 

different from or less advantageous than 

that of other participants. 

2. Rule 17d–3 under the Act provides 

an exemption from section 17(d) and 

rule 17d–1 to permit open-end 

investment companies to enter into 

distribution arrangements pursuant to 

rule 12b–1 under the Act. Applicants 

request an order under section 17(d) and 

rule 17d–1 under the Act to the extent 

necessary to permit the Fund to impose 

asset-based distribution and/or service 

fees. Applicants have agreed to comply 

with rules 12b–1 and 17d–3 as if those 

rules applied to closed-end investment 

companies, which they believe will 

resolve any concerns that might arise in 

connection with a Fund financing the 

distribution of its shares through assetbased distribution fees. 

3. For the reasons stated above, 

applicants submit that the exemptions 

requested under section 6(c) are 

necessary and appropriate in the public 

interest and are consistent with the 

protection of investors and the purposes 

fairly intended by the policy and 

provisions of the Act. Applicants further 

submit that the relief requested 

pursuant to section 23(c)(3) will be 

consistent with the protection of 

investors and will insure that applicants 

do not unfairly discriminate against any 

holders of the class of securities to be 

purchased. Finally, applicants state that 

the Funds’ imposition of asset-based 

distribution and/or service fees is 

consistent with the provisions, policies 

and purposes of the Act and does not 

involve participation on a basis different 

from or less advantageous than that of 

other participants. 

Applicants’ Condition 

Applicants agree that any order 

granting the requested relief will be 

subject to the following condition: 

Each Fund relying on the order will 

comply with the provisions of rules 6c– 

10, 12b–1, 17d–3, 18f–3, 22d–1, and, 

where applicable, 11a–3 under the Act, 

as amended from time to time, as if 

those rules applied to closed-end 

management investment companies, 

and will comply with the NASD Sales 

Charge Rule, as amended from time to 

time, as if that rule applied to all closedend management investment 

companies. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–23695 Filed 10–31–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81956; File No. SR–OCC– 

2017–017] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change 

Concerning Liquidity for Same Day 

Settlement 

October 26, 2017. 

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 October 

13, 2017, 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 the 

OCC would revise OCC’s By-Laws to 

expand upon existing authority to 

borrow against the Clearing Fund. 

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 

The purpose of the proposed change 

is to modify the tools available to OCC 

in order to provide a mechanism for 

addressing the risks of liquidity 

shortfalls, specifically, in the 

extraordinary situation where OCC faces 

a liquidity need to meet its same-day 

settlement obligations as a result of a 

bank or securities or commodities 

clearing organization failing to achieve 

daily settlement. 

Proposed Changes 

Current Practice 

Presently, Article VIII, Section 5(e) of 

OCC’s By-Laws provides OCC with the 

authority to borrow against the Clearing 

Fund in two circumstances. First, 

Article VIII, Section 5(e) of OCC’s ByLaws provides OCC the authority to 

borrow where OCC ‘‘deems it necessary 

or advisable to borrow or otherwise 

obtain funds from third parties in order 

to meet obligations arising out of the 

default or suspension of a Clearing 

Member or any action taken by the 

Corporation in connection therewith 

pursuant to Chapter XI of the Rules or 

otherwise.’’ Second, Article VIII, 

Section 5(e) of OCC’s By-Laws provides 

OCC the authority to borrow against the 

Clearing Fund where OCC ‘‘sustains a 

loss reimbursable out of the Clearing 

Fund pursuant to [Article VIII, Section 

5(b) of OCC’s By-Laws] but [OCC] elects 

to borrow or otherwise obtain funds 

from third parties in lieu of immediately 

charging such loss to the Clearing 

Fund.’’ In order for a loss to be 

reimbursable out of the Clearing Fund 

under Article VIII, Section 5(b) of OCC’s 

By-Laws, it must arise from a situation 

in which any bank or securities or 

commodities clearing organization has 

failed ‘‘to perform any obligation to 

[OCC] when due because of its 

bankruptcy, insolvency, receivership, 

suspension of operations, or because of 

any similar event.’’ 3

Under either of the two 

aforementioned circumstances, OCC is 

authorized to borrow against the 

Clearing Fund for a period not to exceed 

30 days, and during such period, the 

borrowing shall not affect the amount or 

timing of any charges otherwise 

required to be made against the Clearing 

Fund pursuant to Article VIII, Section 5. 

However, if any part of the borrowing 

remains outstanding after 30 days, then 

at the close of business on the 30th day 

(or the first Business Day thereafter) 

such amount must be considered an 

actual loss to the Clearing Fund, and 

OCC must immediately allocate such 

loss in accordance with Article VIII, 

Section 5. 

Proposed Change 

While Article VIII, Section 5(e) of 

OCC’s By-Laws currently provides for 

borrowing authority in the more 

extreme scenarios involving a bank’s or 

securities or commodities clearing 


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