Federal Register / Vol. 82, No. 210 / Wednesday, November 1, 2017 / Notices 50703 

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 


sradovich on DSK3GMQ082PROD with NOTICES
50704 Federal Register / Vol. 82, No. 210 / Wednesday, November 1, 2017 / Notices 

4 ‘‘Cover 1’’ financial resources refers to the 

requirement that a CCA maintains financial 

resources sufficient to enable it to cover the 

‘‘default of the participant family that would 

potentially cause the largest aggregate credit 

exposure for the [CCA] in extreme but plausible 

market conditions.’’ 17 CFR 240.17Ad– 

22(e)(7)(viii). 5 15 U.S.C. 78q–1(b)(3)(F). 

organization’s bankruptcy, insolvency, 

receivership, suspension of operations 

or similar event, such authority does not 

extend to the similar, but less extreme 

scenarios in which a bank or securities 

or commodities clearing organization 

might be temporarily unable to timely 

make daily settlement with OCC for 

reasons other than its bankruptcy, 

insolvency, receivership or suspension 

of operations or similar events. An 

example of such a related scenario 

would be a disruption of the ordinary 

operations of a settlement bank that 

temporarily prohibits the bank from 

timely effecting settlement payments in 

accordance with OCC’s daily settlement 

cycle. 

The proposed rule change would 

expand upon the existing borrowing 

authority in Article VIII, Section 5(e) of 

OCC’s By-Laws. As expanded, OCC 

would be authorized to borrow (or 

otherwise obtain funds through any 

means determined to be reasonable by 

the Executive Chairman, COO or CAO) 

against the Clearing Fund in the 

extraordinary event that OCC faces a 

liquidity need in order to complete 

same-day settlement. As specified in the 

proposed rule text, the funds obtained 

from any such transaction can be used 

only for their stated purpose, namely, to 

satisfy a need for liquidity for same-day 

settlement. Consistent with the existing 

borrowing authority in Article VIII, 

Section 5(e) of OCC’s By-Laws, OCC 

would be authorized to borrow against 

the Clearing Fund for a period not to 

exceed 30 days, and during such period, 

the funds obtained would not be 

deemed to be charges against the 

Clearing Fund, irrespective of how such 

funds are applied, and 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, in the unlikely event that any 

part of the borrowing were to remain 

outstanding after 30 days, then at the 

close of business on the 30th day (or the 

first Business Day thereafter), such 

amount would be considered an actual 

loss to the Clearing Fund, and OCC 

must immediately allocate such loss in 

accordance with Article VIII, Section 5. 

Like the existing borrowing authority 

in Article VIII, Section 5(e) of OCC’s ByLaws, OCC envisions that the proposed 

expanded authority only would be 

relevant in extraordinary circumstances 

and, even then, only would be used 

where OCC, exercising its discretion, 

believes the employment of this 

particular authority would be 

appropriate to address OCC’s immediate 

liquidity need. 

OCC proposes to amend Sections 1(a), 

5(b) and 5(e) of Article VIII of its ByLaws in order to give effect to the 

expanded borrowing authority 

discussed herein. Section 5(e) of Article 

VIII of OCC’s By-Laws would be 

amended to permit OCC to borrow 

against the Clearing Fund if it 

reasonably believes such borrowing is 

necessary to meet its liquidity needs for 

same-day settlement as a result of the 

failure of any bank or securities or 

commodities clearing organization to 

achieve daily settlement. 

Section 1(a) of Article VIII of OCC’s 

By-Laws would be amended to include 

conforming changes that would reflect 

that the purpose of the Clearing Fund 

includes borrowing against the Clearing 

Fund as permitted under Section 5(e) of 

Article VIII of the By-Laws. 

Section 5(b) of Article VIII of the ByLaws would be amended to include 

conforming changes that would declare 

that any borrowing remaining 

outstanding for less than 30 days may be 

considered, in OCC’s discretion, an 

actual loss and the amount of any such 

loss then shall be charged 

proportionately against all Clearing 

Members’ computed contributions to 

the Clearing Fund as fixed at the time, 

and any borrowing remaining 

outstanding on the 30th day shall be 

considered an actual loss to the Clearing 

Fund and the amount of any such loss 

shall be charged proportionately against 

all Clearing Members’ computed 

contributions to the Clearing Fund as 

fixed at the time. The OCC proposes to 

include discretionary authority to 

declare any borrowing outstanding for 

less than 30 days as an actual loss 

chargeable against the Clearing Fund 

because the proposed borrowing 

authority is intended only to address 

same-day liquidity needs, and intended 

to be promptly repaid upon the bank’s 

or securities or commodities clearing 

organization’s resolution of the 

temporary disruption. In the unlikely 

circumstance that a disruption of a bank 

or securities or commodities clearing 

organization is not timely resolved, OCC 

may need to exercise its discretion to 

declare an actual loss, depending on the 

size of the borrowing, to ensure that 

OCC replenishes its ‘‘Cover 1’’ financial 

resources.4 The requirement to 

recognize any borrowing outstanding 

after 30 days as an actual loss 

chargeable against the Clearing Fund 

would be consistent with the 

requirements of the borrowing authority 

currently permitted by Section 5(e) of 

Article VIII of the By-Laws. 

2. Statutory Basis 

Section 17A(b)(3)(F) of the Act 5

requires, among other things, that the 

rules of a clearing agency be designed to 

perfect the mechanism of a national 

system for the prompt and accurate 

clearance and settlement of securities 

transactions. The proposed rule change 

is designed to ensure that OCC can 

continue to promptly settle the 

securities and derivatives transactions it 

clears by enhancing the existing tools 

OCC has to address liquidity shortfalls. 

Specifically, the proposed rule change 

would expand the existing borrowing 

authority in OCC’s By-Laws to also 

authorize borrowing in the 

extraordinary event that OCC faces a 

liquidity need in order to complete 

same day settlement, independent of 

whether OCC has suffered a loss 

resulting from the bankruptcy or similar 

event of a bank or securities or 

commodities clearing organization. 

It is conceivable, though extremely 

unlikely, that parties may fail to make 

timely settlement with OCC as the result 

of an event that does not result in a loss 

to OCC from the bankruptcy, 

insolvency, resolution, suspension of 

operations or similar event of a bank or 

securities or commodities clearing 

organization. A hypothetical example of 

one such event might be a temporary 

disruption to the ordinary operation of 

a settlement bank resulting from a 

technology issue. The issue presents no 

concern about the bank’s 

creditworthiness (or the 

creditworthiness of any Clearing 

Member that has selected such 

institution as its settlement bank) but 

the bank’s technology issue nonetheless 

temporarily interferes with the ability of 

the bank to timely move funds in 

accordance with OCC’s daily settlement 

cycle. In this hypothetical, the most 

likely alternative for OCC is to exercise 

its ability under Rule 505 to extend the 

settlement window to the close of 

Fedwire. The proposed rule change 

would provide OCC with an alternative 

tool with which to address the type of 

extraordinary circumstance highlighted 

by OCC’s hypothetical. The proposed 

rule change would improve OCC’s 

ability to address the situation in the 

hypothetical example because use of the 

proposed expanded borrowing authority 

would enable OCC to borrow against the 

Clearing Fund in order to avoid 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 82, No. 210 / Wednesday, November 1, 2017 / Notices 50705 

6 Id. 

7 17 CFR 240.17Ad–22(e)(7)(viii). 

8 15 U.S.C. 78q–1(b)(3)(I). 

9 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

disrupting its ordinary settlement cycle 

(and thusly, to avoid imposing the same 

disruption on Clearing Members), 

thereby avoiding the need to extend the 

settlement window and allowing OCC to 

settle transactions in a more timely 

fashion. In this regard, OCC believes the 

proposed rule change is designed to 

promote the prompt and accurate 

clearance and settlement of securities 

transactions, in accordance with the 

requirements of Section 17A(b)(3)(F) of 

the Act.6

Additionally, Rule 17Ad–22(e)(7)(viii) 

requires that a covered clearing agency 

(‘‘CCA’’) address foreseeable liquidity 

shortfalls that would not be covered by 

the CCA’s liquid resources and seek to 

avoid unwinding, revoking, or delaying 

the same-day settlement of payment 

obligations.7 As stated above, OCC 

believes that it could be foreseeable, 

though extremely unlikely, that a bank 

or securities or commodities clearing 

organization may fail to make timely 

settlement with OCC as the result of an 

event that does not result in a loss to 

OCC from the bankruptcy, insolvency, 

resolution, suspension of operations or 

similar event of such bank or securities 

or commodities clearing organization. 

The proposed rule change would 

improve OCC’s ability to address such 

situations by expanding OCC’s 

borrowing authority to enable OCC to 

borrow against the Clearing Fund in 

order to avoid disrupting its ordinary 

settlement cycle (and thusly, to avoid 

imposing the same disruption on 

Clearing Members). 

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 8

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 the proposed rule change would 

have any impact or impose any burden 

on competition. The primary purpose of 

the proposed rule change is to enhance 

the existing tools OCC has to address 

liquidity shortfalls by expanding the 

existing borrowing authority in OCC’s 

By-Laws to also authorize borrowing in 

the extraordinary event that OCC faces 

a liquidity need in order to complete 

same day settlement. The proposed rule 

change would apply equally to all 

Clearing Members and would not affect 

Clearing Members’ access to OCC’s 

services or disadvantage or favor any 

particular user in relationship to 

another user. As such, OCC believes that 

the proposed changes would not have 

any impact or impose any burden on 

competition. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants or Others 

Written comments 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 Commissions 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–2017–017 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–2017–017. 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_

017.pdf. 

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–OCC–2017–017 and should 

be submitted on or before November 22, 

2017. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–23736 Filed 10–31–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81950; File No. SR– 

BatsBZX–2017–71] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Update Rule 

21.1 To Adopt a New Time in Force 

Applicable to the Exchange’s Equity 

Options Platform 

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 

20, 2017, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’) (formerly known as Bats 

BZX Exchange, Inc.) filed with the 

Securities and Exchange Commission 


sradovich on DSK3GMQ082PROD with NOTICES