Federal Register / Vol. 82, No. 210 / Wednesday, November 1, 2017 / Notices 50707 

10 17 CFR 240.19b–4(f)(6). As required under Rule 

19b–4(f)(6)(iii), the Exchange provided the 

Commission with written notice of its intent to file 

the proposed rule change, along with a brief 

description and the text of the proposed rule 

change, at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. 

11 17 CFR 240.19b–4(f)(6). 

12 17 CFR 240.19b–4(f)(6)(iii). 

13For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

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

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.17Ad–22(e)(4)(ix) and (e)(13). 

4The Commission notes that Exhibit 5 is 

included in the filing, not in this Notice. 

5OCC’s By-Laws and Rules can be found on 

OCC’s public Web site: http://optionsclearing.com/ 

about/publications/bylaws.jsp. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act and Rule 19b– 

4(f)(6) thereunder.10

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 11 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)(iii) 12

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. The Exchange has asked 

the Commission to waive the 30-day 

operative delay so that the proposal may 

become operative immediately upon 

filing. The Commission notes that the 

proposed rule change is based on EDGX 

Rule 21.1(f)(6) and is identical to such 

rule. Thus, the Commission believes 

that waiver of the operative delay is 

consistent with the protection of 

investors and the public because the 

proposal does not present any new or 

novel issues that have not been 

previously considered by the 

Commission. Therefore, the 

Commission hereby waives the 30-day 

operative delay and designates the 

proposal operative upon filing.13

At any time within 60 days of the 

filing of the 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 

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– 

BatsBZX–2017–71 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–BatsBZX–2017–71. 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 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–BatsBZX–2017–71 and 

should be submitted on or before 

November 22, 2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–23732 Filed 10–31–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81955; File No. SR–OCC– 

2017–010] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change 

Related to The Options Clearing 

Corporation’s Default Management 

Policy 

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 

12, 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 primarily 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 

Options Clearing Corporation (‘‘OCC’’) 

would formalize and update OCC’s 

Default Management Policy, which 

would promote compliance with 

multiple requirements applicable to 

OCC under Rule 17Ad–22, including 

Rules 17Ad–22(e)(4)(ix) (Replenishment 

of Resources) and (e)(13) (Default 

Management).3 The Default 

Management Policy is included as 

confidential Exhibit 5.4

The proposed rule change does not 

require any changes to the text of OCC’s 

By-Laws or Rules. All terms with initial 

capitalization that are not otherwise 

defined herein have the same meaning 

as set forth in the OCC By-Laws and 

Rules.5


sradovich on DSK3GMQ082PROD with NOTICES
50708 Federal Register / Vol. 82, No. 210 / Wednesday, November 1, 2017 / Notices 

6Securities Exchange Act Release No. 78961 

(September 28, 2016), 81 FR 70786 (October 13, 

2016) (‘‘CCA Adopting Release’’); see also 17 CFR 

240.17Ad–22. 

7 17 CFR 240.17Ab2–2. 

8 15 U.S.C. 78q–1. 

9 12 U.S.C. 5461 et. seq. 

10 17 CFR 240.17Ad–22(a)(5). 

11 Id. 

12 17 CFR 240.17Ad–22(e)(4)(ix). 

13 17 CFR 240.17Ad–22(e)(13). 

14Examples of such FMUs contemplated by the 

DM Policy are the following securities or 

commodities clearing organizations: The Depository 

Trust Company, National Securities Clearing 

Corporation, and the Chicago Mercantile Exchange. 

In an event of default by one of these securities or 

commodities clearing organizations, or by a 

settlement bank, OCC has authority under certain 

conditions pursuant to Article VIII, Section 

1.(a)(vii) and 5.(b) of the By-Laws to manage the 

default using Clearing Member contributions to the 

Clearing Fund. 

15For purposes of the DM Policy, references to a 

Clearing Member suspension or default contemplate 

the circumstances specified in OCC Rule 1102, 

which constitute events of ‘‘default’’ under 

Interpretation and Policy .01 to the Rule. 

16 In this regard, the DM Policy provides that OCC 

publishes key aspects of its default management 

Rules and procedures on its Web site. The summary 

is available at https://www.theocc.com/riskmanagement/default-rules/. 

17For this purpose, the term Designated Officer 

includes the Executive Chairman, Chief 

Administrative Officer (‘‘CAO’’), Chief Operating 

Officer (‘‘COO’’), Chief Risk Officer (‘‘CRO’’) and 

Executive Vice President—Financial Risk 

Management (‘‘EVP–FRM’’). 

18OCC Rule 1103 requires OCC to notify all 

Clearing Members of the suspension as soon as 

possible. 

19With respect to pending transactions of a 

suspended Clearing Member, the DM Policy 

provides that these will be handled pursuant to 

OCC Rule 1105, provided that OCC has no 

obligation to accept the trades effected by a 

suspended Clearing Member post-suspension. 

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 

Background 

On September 28, 2016, the 

Commission adopted amendments to 

Rule 17Ad–22 6 and added new Rule 

17Ab2–2 7 pursuant to Section 17A of 

the Securities Exchange Act of 1934, as 

amended, (‘‘Act’’) 8 and the Payment, 

Clearing, and Settlement Supervision 

Act of 2010 (‘‘Payment, Clearing and 

Settlement Supervision Act’’) 9 to 

establish enhanced standards for the 

operation and governance of those 

clearing agencies registered with the 

Commission that meet the definition of 

a ‘‘covered clearing agency,’’ as defined 

by Rule 17Ad–22(a)(5) 10 (collectively, 

the new and amended rules are herein 

referred to as the ‘‘CCA’’ rules). OCC 

meets the definition of a covered 

clearing agency and is therefore subject 

to the requirements of the CCA rules.11

Relevance of OCC’s Default 

Management Policy to Rules 17Ad– 

22(e)(4)(ix) and (e)(13) 

Certain of the CCA rules relate to 

matters that, as described below, are 

addressed by OCC’s Default 

Management Policy (‘‘DM Policy’’). 

Specifically, Rules 17Ad–22(e)(4)(ix) 

and (e)(13) respectively require OCC to, 

among other things, establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to: (i) Effectively 

identify, measure, and manage its credit 

exposures to participants and those 

arising from its payment, clearing and 

settlement processes, including by 

‘‘describing [OCC’s] process to replenish 

any financial resources it may use 

following a default or other event in 

which use of such resources is 

contemplated’’ 12 and (ii) ensure that 

OCC ‘‘has the authority and operational 

capacity to take timely action to contain 

losses and liquidity demands and 

continue to meet its obligations by, at a 

minimum, requiring [OCC’s] 

participants and, when practicable, 

other stakeholders to participate in the 

testing and review of its default 

procedures, including any close-out 

procedure, at least annually and 

following material changes thereto.’’ 13

OCC believes that the DM Policy 

promotes compliance with these 

requirements under Rules 17Ad– 

22(e)(4)(ix) and (e)(13), and an overview 

of the DM Policy is provided below. 

Default Management Policy 

OCC proposes to formalize its DM 

Policy, which would apply in the event 

of a default by a Clearing Member, 

settlement bank or a financial market 

utility with which OCC has a 

relationship (‘‘FMU’’).14 The purpose of 

the policy is to outline OCC’s default 

management framework and describe 

the default management steps that OCC 

has authority to take depending upon 

the facts and circumstances of a default. 

The DM Policy focuses on Clearing 

Member default, which OCC believes is 

appropriate because Clearing Member 

default represents a substantial part of 

the overall default risk that is posed to 

OCC in connection with its central 

counterparty clearing services.15

OCC notes that the DM Policy is part 

of a broader framework used by OCC to 

manage the default of a Clearing 

Member, settlement bank or FMU, 

including OCC’s By-Laws, Rules, and 

other policies and procedures. The 

broader framework is designed to 

collectively ensure that OCC would 

appropriately manage any such default 

consistent with OCC’s obligations as a 

covered clearing agency, including 

under Rule 17Ad–22.16

The DM Policy describes the authority 

of OCC’s Board of Directors (‘‘Board’’) or 

a Designated Officer 17 to summarily 

suspend a Clearing Member pursuant to 

OCC Rule 1102(a) in the event the 

Clearing Member defaults. The DM 

Policy further provides that, pursuant to 

OCC Rule 707, OCC may suspend a 

Clearing Member that participates in a 

cross-margining program in the event of 

a default regarding its cross-margining 

accounts. Upon any suspension of a 

Clearing Member, the DM Policy states 

that OCC would immediately notify a 

number of parties, including the 

suspended Clearing Member, regulatory 

authorities, participant and other 

exchanges (as applicable) in which the 

suspended Clearing Member is a 

common member, other Clearing 

Members,18 and OCC’s Board.19

In the event of a Clearing Member 

suspension, the DM Policy provides that 

OCC’s Financial Risk Management 

department (‘‘FRM’’) shall prepare an 

exposure summary report to be 

provided to OCC’s Management 

Committee detailing, among other 

things, the open obligations of the 

suspended Clearing Member, collateral 

deposited by the Clearing Member, 

obligations to other FMUs and a 

summary of related entity exposure. The 

report summarizes the net settlement 

obligation of the suspended Clearing 

Member at the time of default. The DM 

Policy further provides that a 

recommendation as to any liquidity 

needs requiring a draw on OCC’s credit 

facilities would be provided to OCC’s 

Management Committee and 

subsequently be authorized, as 

applicable, by the Executive Chairman, 

CAO, or COO, as provided for in Article 

VIII, Section 5 of the By-Laws. These 

practices ensure that OCC’s 

Management Committee remains 

properly informed and can make 


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20See Rule 610(f) and (g). 

21See OCC By-Law Article VIII, Section 5(d). In 

lieu of charging a loss or deficiency proportionately 

to the computed Clearing Fund contributions of 

non-defaulting Clearing Members, OCC may charge 

the loss or deficiency to current or retained 

earnings. This same discretion applies in 

connection with any loss by reason of the failure 

of a bank or securities or commodities clearing 

organization to perform an obligation to OCC. 

22The DM Policy also provides that any 

determination to defer close-out or hedging 

transactions under the CAP would be reported to 

the Board and/or the Risk Committee, as required 

under OCC Rules 1106. 

appropriate decisions in the default 

management process. 

The DM Policy describes OCC’s 

existing authority under OCC Rule 505 

to extend the time for OCC’s settlement 

obligations (i.e., payment obligations 

owed by OCC to Clearing Members). 

The DM Policy notes that any such 

determination to extend the settlement 

time and the reasons thereof will be 

promptly reported by OCC to the 

Commission and the Commodity 

Futures Trading Commission (‘‘CFTC’’), 

however, the effectiveness of the 

extension is not be conditioned upon 

such reporting. The DM Policy notes 

that such an extension may be necessary 

as a result of a Clearing Member default 

or a failure of a Clearing Member’s 

settlement bank. 

To address situations in which a 

Clearing Member’s settlement bank fails 

or experiences an operational outage 

that prevents the Clearing Member from 

meeting its settlement obligations to 

OCC, the DM Policy provides that OCC 

requires each Clearing Member to 

maintain procedures detailing how it 

would meet its settlement obligations in 

such an event. The DM Policy further 

provides that a Designated Officer 

would determine whether to enact these 

alternate settlement procedures in the 

event that a Clearing Member’s 

settlement bank is unable to perform. 

The DM Policy sets forth the sequence 

or ‘‘waterfall’’ of financial resources that 

OCC may use to meet its obligations in 

the event of a Clearing Member 

suspension to provide certainty 

regarding the order in which these 

resources would be applied. 

Specifically, the DM Policy describes 

that OCC is able to use the following 

financial resources: (i) Margin deposits 

of the suspended Clearing Member; (ii) 

deposits in lieu of margin of the 

suspended Clearing Member; 20 (iii) 

Clearing Fund deposits of the 

suspended Clearing Member; (iv) 

Clearing Fund deposits of nondefaulting Clearing Members; (v) 

Clearing Fund assessments against 

Clearing Members; and (vi) the current 

or retained earnings of OCC, subject to 

the unanimous approval of certain OCC 

shareholders.21

In the case of a suspended Clearing 

Member, the DM Policy outlines the 

means by which OCC may determine 

close out positions and collateral of the 

suspended Clearing Member pursuant to 

OCC’s Rules, including certain 

provisions under Chapter XI of the 

Rules. Based upon recommendations 

from OCC’s risk staff, the EVP–FRM 

may take any one, or any combination, 

of the following actions pursuant to the 

terms of OCC’s By-Laws and Rules: (i) 

Net the suspended Clearing Member’s 

positions by offset; (ii) effect market 

transactions to close out open short 

positions, long positions, and collateral; 

(iii) transfer the positions and related 

collateral to a non-suspended Clearing 

Member; (iv) effect hedging transactions 

to reduce the risk to OCC of open 

positions; (v) conduct a private auction 

of the positions and collateral of the 

suspended Clearing Member; (vi) 

exercise unsegregated and segregated 

long options; (vii) set cash settlement 

values or perform buy-in or sell-out 

processes; and (viii) defer close-out, as 

may be authorized by certain officers of 

OCC.22

In addition, the DM Policy specifies 

that OCC risk staff will develop a Closeout Action Plan (‘‘CAP’’) and present it 

to the EVP–FRM for approval. The DM 

Policy provides that upon approval of 

the CAP by the EVP–FRM, FRM and 

other designated business OCC business 

units and personnel will be responsible 

for its execution. The DM Policy also 

provides that OCC’s legal department 

would advise OCC’s Management 

Committee on OCC’s authority to 

execute the proposed CAP and describe 

the responsibilities for the execution, 

monitoring and reporting of the CAP 

and escalation of issues to OCC’s 

Management Committee. The CAP 

process is designed to ensure that OCC 

has an appropriate process in place to 

analyze its exposures, take into 

consideration current and expected 

market conditions, and evaluate the 

tools and resources available to deal 

with those exposures under the 

circumstances so that OCC can 

appropriately manage any default in a 

manner that would protect Clearing 

Members, investors, the public interest, 

and the markets that OCC serves. 

The DM Policy provides that OCC 

would generally liquidate all positions 

and collateral of a suspended Clearing 

Member, and the proceeds would be 

attributed to the account type from 

which they originated. It also specifies 

that as a registered clearing agency with 

the Commission and a registered 

derivatives clearing organization with 

the CFTC, OCC is required to comply 

with regulatory requirements to 

safeguard customer assets. 

In the event of a default, OCC would 

immediately demand any pledged 

collateral of the suspended Clearing 

Member from custodian(s) to ensure 

those resources are available for default 

management purposes. For example, the 

DM Policy provides that, among other 

things, cash and proceeds from any 

liquidated collateral or demand of 

payment on a letter of credit would be 

placed in the appropriate liquidating 

settlement account, pursuant to OCC 

Rule 1104. The DM Policy further 

provides that all pledged valued margin 

collateral will be moved by the 

Collateral Services Department into an 

OCC account and may be transferred to 

an auction recipient, delivered to a 

liquidating agent or delivered to a 

liquidating settlement account. In the 

case of deposits in lieu of margin, 

however, the DM Policy states that OCC 

would only demand such collateral to 

meet obligations arising from the 

assignment of a related contract. 

After the close-out of the suspended 

Clearing Member is completed, the DM 

Policy describes that the Executive 

Chairman, CAO, or COO would 

determine whether, consistent with 

Article VIII, Section 5(a) of OCC’s ByLaws, an assessment must be made 

against the Clearing Fund in connection 

with the liquidation. In the event of a 

shortfall whereby the close-out of the 

suspended Clearing Member does not 

result in enough resources to cover its 

obligations, the DM Policy states that 

each Clearing Member, consistent with 

Article VIII, Section 6 of OCC’s ByLaws, may be assessed an additional 

amount equal to the amount of its initial 

Clearing Fund deposit, as determined by 

the Executive Chairman, CAO, or COO. 

The DM Policy notes that any such 

assessment decision would be 

communicated via email in accordance 

with the procedure covering the 

assessment process. The DM Policy also 

specifies that a Clearing Member is 

liable for further assessments until the 

balance of OCC’s losses are covered or 

the Clearing Member has withdrawn 

from membership as set forth in Article 

VIII, Sections 6 and 7 of OCC’s By-Laws. 

The DM Policy provides that, on at 

least an annual basis, OCC’s default 

management working group will 

provide OCC’s Management Committee 

with recommended areas for testing, 

including close-out procedures, and that 

the Management Committee is 

responsible for reviewing and ultimately 


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50710 Federal Register / Vol. 82, No. 210 / Wednesday, November 1, 2017 / Notices 

23The DM Policy also provides that Clearing 

Members are required to participate in default 

management testing pursuant to OCC Rules 218(c) 

and (d). See Securities Exchange Act Release No. 

80372 (April 4, 2017), 82 FR 17311 (April 10, 2017) 

(SR–OCC–2017–003). 

24 17 CFR 240.17Ad–22(e)(13). 

25 15 U.S.C. 78q–1(b)(3)(F). 

26 Id. 

27 17 CFR 240.17Ad–22(e)(4)(ix). 

28 17 CFR 240.17Ad–22(e)(13). 

29 Id. 

30 Id. 

31 Id. 

32 17 CFR 240.17Ad–22(e)(4)(ix). 

33 15 U.S.C. 78q–1(b)(3)(I). 

approving the overall test plan.23 In 

addition, the DM Policy specifies that 

the default management working group 

maintains the authority to approve 

individual test plans and overall plan 

changes, but that any changes to the 

overall plan would be reported to and 

reviewed by OCC’s Management 

Committee. The DM Policy further 

provides that testing is recommended 

and performed more frequently than 

annually if a material change is made to 

OCC’s default management procedures 

or if it is deemed necessary by OCC’s 

default management working group. 

These provisions are designed to ensure 

that OCC maintains policies and 

procedures reasonably designed to 

satisfy the requirements of Rule 17Ad– 

22(e)(13) 24 relating to the testing and 

review of its default procedures. 

In addition, the DM Policy outlines 

the execution of the testing plan and the 

review of the results of the testing plan, 

including the production of annual 

reports to OCC’s Management 

Committee and Risk Committee 

regarding the results of OCC’s default 

tests to provide appropriate oversight 

over the default testing process. 

(2) Statutory Basis 

Section 17A(b)(3)(F) of the Act 25

requires, among other things, that the 

rules of a clearing agency be designed to 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, and, in general, protect 

investors and the public interest. The 

DM Policy focuses on the processes that 

OCC would use to take timely action to 

contain losses and liquidity demands in 

an event of default by a Clearing 

Member, such as closing out open 

positions and collateral of a defaulted 

Clearing Member, using alternate 

settlement bank procedures or relying 

on Clearing Fund contributions of 

Clearing Members under certain 

conditions. In this regard, the DM Policy 

is designed to ensure that OCC can 

maintain its resilience in the event of a 

default, thereby enabling OCC to 

continue to provide its clearance and 

settlement services to the public in such 

circumstances. Accordingly, OCC 

believes that the DM Policy is designed 

to (i) protect investors and the public 

interest, and (ii) promote the prompt 

and accurate clearance and settlement of 

securities transactions in a manner 

consistent with Section 17A(b)(3)(F) of 

the Act.26

Rules 17Ad–22(e)(4)(ix) and (e)(13) 

respectively require a covered clearing 

agency to, among other things, establish, 

implement, maintain, and enforce 

written policies and procedures 

reasonably designed to: (i) Effectively 

identify, measure, and manage its credit 

exposures to participants and those 

arising from its payment, clearing and 

settlement processes, including by 

describing its process to replenish any 

financial resources it may use following 

a default or other event in which use of 

such resources is contemplated 27 and 

(ii) ensure that it has the authority and 

operational capacity to take timely 

action to contain losses and liquidity 

demands and continue to meet its 

obligations by, at a minimum, requiring 

its participants and, when practicable, 

other stakeholders to participate in the 

testing and review of its default 

procedures, including any close-out 

procedure, at least annually and 

following material changes thereto.28

OCC believes that the proposed rule 

change is consistent with Rule 17Ad– 

22(e)(13) 29 because the DM Policy, 

among other things, sets forth OCC’s 

authority and operational capabilities to 

take timely action to contain losses and 

liquidity demands and continue to meet 

its obligations. For example, the DM 

Policy sets forth the procedures by 

which OCC would suspend a Clearing 

Member as well as the waterfall of 

financial resources that OCC would use 

to contain losses arising from the 

Clearing Member’s default. The DM 

Policy also sets forth, among other 

things, the various means by which OCC 

may close-out the positions of a 

suspended Clearing Member and the 

process it uses to make such 

determinations, which OCC believes 

helps ensure that OCC has sufficient 

operational capacity take timely action 

to contain losses and liquidity demands 

and continue to meet its obligations 

consistent with Rule 17Ad–22(e)(13).30

In addition, OCC believes that the DM 

Policy is consistent with the testing 

requirement in Rule 17Ad–22(e)(13) 31

because the DM Policy sets forth OCC’s 

processes for managing annual testing, 

or more frequent testing following a 

change to OCC’s default management 

procedures. 

OCC also believes that the DM Policy 

is consistent with Rule 17Ad– 

22(e)(4)(ix) 32 because the DM Policy 

describes the process by which OCC 

may initiate a Clearing Fund assessment 

to replenish financial resources that 

may be used following a default and 

attendant suspension of a Clearing 

Member. Specifically, the DM Policy 

provides that where the liquidation of a 

suspended Clearing Member results in a 

shortfall, certain officers of OCC may 

require that all Clearing Members be 

assessed an additional amount equal to 

the amount of their respective Clearing 

Fund deposits, consistent with OCC’s 

By-Laws, and that a Clearing Member is 

liable for further assessments until the 

balance of OCC’s losses are covered or 

the Clearing Member has withdrawn 

from membership as set forth in OCC’s 

By-Laws. In addition, the DM Policy 

also provides that, pursuant to the 

waterfall of financial resources used in 

the event of a Clearing Member 

suspension, OCC could use current or 

retained earnings, consistent with OCC’s 

By-Laws, to continue meeting its 

financial obligations. 

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 

Section 17A(b)(3)(I) of the Act 33

requires that the rules of a clearing 

agency not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. OCC does not 

believe that the proposed rule change 

would impact or impose any burden on 

competition. As a general matter, the 

DM Policy describes the processes OCC 

would follow in a default that are 

already set forth in OCC’s approved ByLaws and Rules. More specifically, the 

proposed rule change sets forth in a 

single document the framework OCC 

would use to manage the default 

primarily of a Clearing Member, as well 

as the default of a settlement bank or 

FMU. Because any individual Clearing 

Member, settlement bank, or FMU 

under the DM Policy is equally subject 

to the aspects of OCC’s default 

management framework that apply to it, 

the proposed rule change would not 

provide any such entity with a 

competitive advantage over any other 

similar entity. OCC notes that, in 

managing any potential default, OCC 

focuses on the risk posed to OCC by 

such default. Accordingly, to the extent, 

for example, that OCC were to close-out 

the open positions of one suspended 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 82, No. 210 / Wednesday, November 1, 2017 / Notices 50711 

34 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Clearing Member in a different manner 

than it were to close-out the open 

positions of another Clearing Member, 

such differences result from the risks 

posed to OCC by each Clearing 

Member’s respective positions. 

Moreover, the treatment of customer 

versus proprietary positions in a default 

scenario are not specifically addressed 

in the DM Policy, which as noted sets 

forth a general framework for managing 

defaults, but rather in OCC’s existing 

By-Laws and Rules. Further, the 

proposed rule change would not affect 

Clearing Members’ access to OCC’s 

services or impose any direct burdens 

on Clearing Members. 

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 impact or 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–2017–010 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–2017–010. 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 OCC and on OCC’s Web site at 

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

docs/legal/rules_and_bylaws/sr_occ_17_

010.pdf. 

All comments received will be posted 

without change. Persons submitting 

comments are cautioned that the 

Commission does 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–OCC–2017–010 and should 

be submitted on or before November 22, 

2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

Authority.34

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–23735 Filed 10–31–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81962; File No. SR– 

BatsBZX–2017–70] 

Self-Regulatory Organizations; Bats 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Reflect in 

the Exchange’s Governing Documents, 

Rulebook and Fees Schedules, a NonSubstantive Corporate Branding 

Change, Including Changes to the 

Company’s Name, the Intermediate’s 

Name, and the Exchange’s Name 

October 26, 2017. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on October 

16, 2017, Bats BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange filed a proposed rule 

change with respect to amendments of 

the Second Amended and Restated 

Certificate of Incorporation (the 

‘‘Company’s Certificate’’) and Third 

Amended and Restated Bylaws (the ’’ 

Company’s Bylaws’’) of its parent 

corporation, CBOE Holdings, Inc. 

(‘‘CBOE Holdings’’ or the ‘‘Company’’) 

to change the name of the Company to 

Cboe Global Markets, Inc. With respect 

to CBOE V, LLC, an intermediate 

Holding Company of the Exchange (the 

‘‘Intermediate’’), the Exchange proposes 

to amend the Certificate of Formation 

and Limited Liability Company 

Operating Agreement of CBOE V, LLC 

(the ‘‘Operating Agreement’’), in 

connection with a related name change 

for the Intermediate. The Exchange also 

proposes to amend its Amended and 

Restated Certificate of Incorporation (the 

‘‘Exchange Certificate’’), Sixth Amended 

and Restated Bylaws of Bats BZX 

Exchange, Inc. (the ‘‘Exchange 

Bylaws’’), rulebook and fees schedules 

(collectively ‘‘operative documents’’) in 

connection with the name change of its 

parent Company, Intermediate, and the 

Exchange. 


sradovich on DSK3GMQ082PROD with NOTICES