Document ID: SEC-2018-1017-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2018-07-03T04:00Z

[Federal Register Volume 83, Number 128 (Tuesday, July 3, 2018)]
[Notices]
[Pages 31237-31241]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14233]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83529; File No. SR-OCC-2018-802]

Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Advance Notice of and No Objection to The Options 
Clearing Corporation's Proposal To Enter Into a New Credit Facility 
Agreement

June 27, 2018.
    Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, entitled Payment, Clearing 
and Settlement Supervision Act of 2010 (``Clearing Supervision Act'') 
\1\ and Rule 19b-4(n)(1)(i) \2\ under the Securities Exchange Act of 
1934 (``Act''),\3\ notice is hereby given that on May 25, 2018, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') an advance notice as described in 
Items I, II and III below, which Items have been prepared by OCC. On 
June 26, 2018, OCC filed Amendment No. 1 to the advance notice.\4\ The 
Commission is publishing this notice to solicit comments on the advance 
notice from interested persons, and to provide notice that the 
Commission does not object to the changes set forth in the advance 
notice.
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ 15 U.S.C. 78a et seq.
    \4\ Amendment No. 1 replaced and superseded the Initial Filing 
in its entirety. The only substantive change in Amendment No. 1 was 
to remove OCC's proposal to establish certain ``evergreen'' 
provisions for future renewals of its revolving credit facility. 
Amendment No. 1 did not change the purpose, basis, or terms of the 
proposed renewal.
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I. Clearing Agency's Statement of the Terms of Substance of the Advance 
Notice

    This advance notice is filed in connection with a proposed change 
to its operations in the form of the replacement of a revolving credit 
facility that OCC maintains for a 364-day term and that it may use (i) 
in anticipation of a potential default by or suspension of a Clearing 
Member, (ii) to meet obligations arising out of the default or 
suspension of a Clearing Member, (iii) to meet reasonably anticipated 
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, or (iv) to meet obligations arising out of the 
failure of a bank or securities or commodities clearing organization to 
perform its obligations due to its bankruptcy, insolvency, receivership 
or suspension of operations.
    All terms with initial capitalization not defined herein have the 
same meaning as set forth in OCC's By-Laws and Rules.\5\
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    \5\ OCC's By-Laws and Rules can be found on OCC's public 
website: http://optionsclearing.com/about/publications/bylaws.jsp.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Advance Notice

    In its filing with the Commission, OCC included statements 
concerning the purpose of and basis for the advance notice and 
discussed any comments it received on the advance notice. 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 and B below, 
of the most significant aspects of these statements.

(A) Clearing Agency's Statement on Comments on the Advance Notice 
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. OCC 
will notify the Commission of any written comments received by OCC.

(B) Advance Notices Filed Pursuant to Section 806(e) of the Payment, 
Clearing, and Settlement Supervision Act

Description of the Proposed Change
Background
    This advance notice is being filed in connection with a proposed 
change in the form of the replacement of a revolving credit facility 
that OCC maintains for a 364-day term and that it may use (i) in 
anticipation of a potential default by or suspension of a Clearing 
Member, (ii) to meet obligations arising out of the default or 
suspension of a Clearing Member, (iii) to meet reasonably anticipated 
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, or (iv) to meet obligations arising out of the 
failure of a bank or securities or commodities clearing organization to 
perform its obligations due to its bankruptcy, insolvency, receivership 
or suspension of operations (``Permitted Use Circumstances''). In any 
such Permitted Use Circumstance, OCC has certain conditional authority 
under its By-Laws and Rules to borrow or otherwise obtain funds from 
third parties using Clearing Member margin deposits and/or Clearing 
Fund contributions.\6\
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    \6\ See generally Article VIII, Sections 5(a), (b) and (e) of 
OCC's By-Laws; Interpretation and Policy .06 to Article VIII, 
Section 5; OCC Rules 1102 and 1104(b).
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    OCC's existing credit facility (``Existing Facility'') was 
implemented as of June 30, 2017, through the execution of a credit 
agreement among OCC, the administrative agent, collateral agent and the 
lenders that are parties to the agreement from time to time. The 
Existing Facility provides short-term secured borrowings in an 
aggregate principal amount of $2 billion but may be increased to $3 
billion if OCC so requests and sufficient commitments

[[Page 31238]]

from lenders are received and accepted. To obtain a loan under the 
Existing Facility, OCC must pledge as collateral U.S. dollars, 
securities issued or guaranteed by the U.S. Government or the 
Government of Canada, Standard & Poor's 500 Market Index equities, 
Exchange-Traded Funds (``ETFs''), American Depositary Receipts 
(``ADRs'') or certain government-sponsored enterprise debt securities. 
Certain mandatory prepayments or deposits of additional collateral are 
required depending on changes in the collateral's market value. In 
connection with OCC's past implementation of the Existing Facility, OCC 
filed an advance notice with the Commission on May 4, 2017, and the 
Commission published a Notice of No-Objection on June 30, 2017.\7\
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    \7\ See Securities Exchange Act Release No. 81058 (June 30, 
2017), 82 FR 31370 (July 6, 2017) (SR-OCC-2017-803).
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Description of the Proposal
    Renewal. The Existing Facility is set to expire on June 29, 2018. 
OCC is currently negotiating the terms of a new credit facility (``New 
Facility'') on substantially similar terms as the Existing Facility, 
and the definitive documentation concerning the New Facility is 
expected to be substantially similar to the definitive documentation 
concerning the Existing Facility. The proposed terms and conditions 
that are expected to be applicable to the New Facility, subject to 
agreement by the lenders, are set forth in the Summary of Terms and 
Conditions, which is not a public document.\8\
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    \8\ OCC has separately submitted a request for confidential 
treatment to the Commission regarding the Summary of Terms and 
Conditions, which is included in this filing as Exhibit 3.
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    Certain administrative changes are presently expected in connection 
with the New Facility that include representations, warranties and 
covenants related to applicable regulations and the provision of 
information by OCC in certain circumstances to the lenders and 
administrative agent in connection with regulatory requirements, such 
as ``know your customer'' and anti-money-laundering regulations. The 
conditions regarding the availability of the New Facility, which OCC 
anticipates will be satisfied on or about June 28, 2018, include the 
execution and delivery of (i) a credit agreement between OCC and the 
administrative agent, collateral agent and various lenders under the 
New Facility, (ii) a pledge agreement between OCC and the 
administrative agent or collateral agent, and (iii) such other 
documents as may be required by the parties. The definitive 
documentation concerning the New Facility is expected to be consistent 
with the Summary of Terms and Conditions that is provided as Exhibit 3, 
although it may include certain changes to business terms as may be 
necessary to obtain the agreement of lenders with sufficient funding 
commitments and certain changes as may be necessary regarding 
administrative and operational terms being finalized between the 
parties.
Anticipated Effect on and Management of Risk
    Completing timely settlement is a key aspect of OCC's role as a 
clearing agency performing central counterparty services. Overall, the 
New Facility would continue to promote the reduction of risks to OCC, 
its Clearing Members and the options market in general because it would 
allow OCC to obtain short-term funds in the Permitted Use 
Circumstances. The existence of the New Facility would therefore help 
OCC minimize losses in the event of a Permitted Use Circumstance by 
allowing it to obtain funds on extremely short notice to ensure 
clearance and settlement of transactions in options and other contracts 
without interruption. OCC believes that the reduced settlement risk 
presented by OCC resulting from the New Facility would correspondingly 
reduce systemic risk and promote the safety and soundness of the 
clearing system. By drawing on the New Facility, OCC would also be able 
to avoid liquidating margin deposits or Clearing Fund contributions in 
what would likely be volatile market conditions, which would preserve 
funds available to cover any losses resulting from the failure of a 
Clearing Member, bank or other clearing organization.
Consistency With the Payment, Clearing and Settlement Supervision Act
    The stated purpose of the Clearing Supervision Act is to mitigate 
systemic risk in the financial system and promote financial stability 
by, among other things, promoting uniform risk management standards for 
systemically important financial market utilities and strengthening the 
liquidity of systemically important financial market utilities.\9\ 
Section 805(a)(2) of the Clearing Supervision Act \10\ also authorizes 
the Commission to prescribe risk management standards for the payment, 
clearing and settlement activities of designated clearing entities, 
like OCC, for which the Commission is the supervisory agency. Section 
805(b) of the Clearing Supervision Act \11\ states that the objectives 
and principles for risk management standards prescribed under Section 
805(a) shall be to:
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    \9\ 12 U.S.C. 5461(b).
    \10\ 12 U.S.C. 5464(a)(2).
    \11\ 12 U.S.C. 5464(b).
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     Promote robust risk management;
     promote safety and soundness;
     reduce systemic risks; and
     support the stability of the broader financial system.
    The Commission has adopted risk management standards under Section 
805(a)(2) of the Clearing Supervision Act and the Act in furtherance of 
these objectives and principles.\12\ Rule 17Ad-22 requires registered 
clearing agencies, like OCC, to establish, implement, maintain, and 
enforce written policies and procedures that are reasonably designed to 
meet certain minimum requirements for their operations and risk 
management practices on an ongoing basis.\13\ Therefore, the Commission 
has stated \14\ that it believes it is appropriate to review changes 
proposed in advance notices against Rule 17Ad-22 and the objectives and 
principles of these risk management standards as described in Section 
805(b) of the Clearing Supervision Act.\15\
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    \12\ 17 CFR 240. 17Ad-22. See Securities Exchange Act Release 
Nos. 68080 (October 22, 2012), 77 FR 66220 (November 2, 2012) (S7-
08-11) (``Clearing Agency Standards''); 78961 (September 28, 2016), 
81 FR 70786 (October 13, 2016) (S7-03-14) (``Standards for Covered 
Clearing Agencies'').
    \13\ 17 CFR 240.17Ad-22.
    \14\ See supra note 6.
    \15\ 12 U.S.C. 5464(b).
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    OCC believes that the proposed changes are consistent with Section 
805(b)(1) of the Clearing Supervision Act \16\ because the New Facility 
would provide OCC with continued access to a stable and reliable source 
of committed liquidity that can be accessed in a timely manner to meet 
its settlement obligations, contain losses and liquidity pressures and 
mitigate OCC's liquidity risk. Accordingly, OCC believes the proposed 
changes are designed to (i) promote robust risk management; (ii) 
promote safety and soundness; and (iii) reduce systemic risks and 
promote the stability of the broader financial system.
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    \16\ 12 U.S.C. 5464(b)(1).
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    OCC believes that New Facility also is consistent with the 
requirements of Rule 17Ad-22(e)(7) under the Act.\17\ Rule 17Ad-
22(e)(7) requires OCC to establish, implement, maintain and enforce 
written policies and procedures reasonably designed to effectively 
measure, monitor, and manage liquidity risk that arises in or is borne 
by OCC, including measuring, monitoring, and managing its settlement 
and funding

[[Page 31239]]

flows on an ongoing and timely basis, and its use of intraday 
liquidity, as specified in the rule.\18\
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    \17\ 17 CFR 240.17Ad-22(e)(7).
    \18\ Id.
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    In particular, Rule 17Ad-22(e)(7)(i) under the Act \19\ directs 
that OCC meet this obligation by, among other things, ``[m]aintaining 
sufficient liquid resources at the minimum in all relevant currencies 
to effect same-day . . . settlement of payment obligations with a high 
degree of confidence under a wide range of foreseeable stress scenarios 
that includes, but is not limited to, the default of the participant 
family that would generate the largest aggregate payment of obligation 
for [OCC] in extreme but plausible market conditions.''
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    \19\ 17 CFR 240.17Ad-22(e)(7)(i).
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    As described above, the New Facility would provide OCC with a 
readily available liquidity resource that would enable it to, among 
other things, continue to meet its obligations in a timely fashion in a 
Permitted Use Circumstance and as an alternative to selling Clearing 
Member collateral under what may be stressed and volatile market 
conditions. For these reasons, OCC believes that the proposal is 
consistent with Rule 17Ad-22(e)(7)(i).\20\
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    \20\ Id.
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    Rule 17Ad-22(e)(7)(ii) under the Act requires OCC to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to hold qualifying liquid resources sufficient to 
satisfy payment obligations owed to Clearing Members.\21\ Rule 17Ad-
22(a)(14) of the Act defines ``qualifying liquid resources'' to 
include, among other things, lines of credit without material adverse 
change provisions, that are readily available and convertible into 
cash.\22\ As with the Existing Facility, the New Facility would not be 
subject to any material adverse change provision and would continue to 
be designed to permit OCC to, among other things, help ensure that OCC 
has sufficient, readily-available qualifying liquid resources to meet 
the cash settlement obligations of its largest Clearing Member Group. 
Therefore, OCC believes that the proposal is consistent with Rule 17Ad-
22(e)(7)(ii).\23\
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    \21\ 17 CFR 240.17Ad-22(e)(7)(ii).
    \22\ 17 CFR 240.17Ad-22(a)(14).
    \23\ 17 CFR 240.17Ad-22(e)(7)(ii).
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    For the foregoing reasons, OCC believes that the proposed changes 
are consistent with Section 805(b)(1) of the Clearing Supervision Act 
\24\ and Rule 17Ad-22(e)(7) \25\ under the Act.
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    \24\ 12 U.S.C. 5464(b)(1).
    \25\ 17 CFR 240.17Ad-22(e)(7).
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Accelerated Commission Action Requested
    Pursuant to Section 806(e)(1)(I) of the Clearing Supervision 
Act,\26\ OCC requests that the Commission notify OCC that it has no 
objection to the New Facility not later than Tuesday, June 26, 2018, 
which is two business days prior to the expected June 28, 2018, 
availability of the New Facility. OCC requests Commission action by 
this date to ensure that there is no period that OCC operates without 
this essential liquidity resource, given its importance to OCC's 
borrowing capacity in connection with its management of liquidity and 
settlement risk and timely completion of clearance and settlement.
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    \26\ 12 U.S.C. 5465(e)(1)(I).
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III. Date of Effectiveness of the Advance Notice and Timing for 
Commission Action

    The proposed change may be implemented if the Commission does not 
object to the proposed change within 60 days of the later of (i) the 
date the proposed change was filed with the Commission or (ii) the date 
any additional information requested by the Commission is received. OCC 
shall not implement the proposed change if the Commission has any 
objection to the proposed change.
    The Commission may extend the period for review by an additional 60 
days if the proposed change raises novel or complex issues, subject to 
the Commission providing the clearing agency with prompt written notice 
of the extension. A proposed change may be implemented in less than 60 
days from the date the advance notice is filed, or the date further 
information requested by the Commission is received, if the Commission 
notifies the clearing agency in writing that it does not object to the 
proposed change and authorizes the clearing agency to implement the 
proposed change on an earlier date, subject to any conditions imposed 
by the Commission.
    OCC shall post notice on its website of proposed changes that are 
implemented. The proposal shall not take effect until all regulatory 
actions required with respect to the proposal are completed.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the advance 
notice is consistent with the Clearing Supervision 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 [email protected]. Please include 
File Number SR-OCC-2018-802 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-OCC-2018-802. 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 website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the advance notice that are filed with the 
Commission, and all written communications relating to the advance 
notice 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 website viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of OCC and on OCC's website at 
https://www.theocc.com/about/publications/bylaws.jsp.
    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-2018-802 and 
should be submitted on or before July 24, 2018.

V. Commission Findings and Notice of No Objection

    Although the Clearing Supervision Act does not specify a standard 
of review for an advance notice, its stated purpose is instructive: To 
mitigate systemic risk in the financial system and promote financial 
stability by, among other things, promoting uniform risk management 
standards for systemically important financial market utilities and 
strengthening the liquidity

[[Page 31240]]

of systemically important financial market utilities.\27\ Section 
805(a)(2) of the Clearing Supervision Act authorizes the Commission to 
prescribe risk management standards for the payment, clearing, and 
settlement activities of designated clearing entities and financial 
institutions engaged in designated activities for which it is the 
supervisory agency or the appropriate financial regulator.\28\ Section 
805(b) of the Clearing Supervision Act \29\ states that the objectives 
and principles for the risk management standards prescribed under 
Section 805(a) shall be to:
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    \27\ 12 U.S.C. 5461(b).
    \28\ 12 U.S.C. 5464(a)(2).
    \29\ 12 U.S.C. 5464(b).
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     Promote robust risk management;
     promote safety and soundness;
     reduce systemic risks; and
     support the stability of the broader financial system.\30\
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    \30\ Id.
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    The Commission has adopted risk management standards under Section 
805(a)(2) of the Clearing Supervision Act \31\ and Section 17A of the 
Act (``Rule 17Ad-22'').\32\ Rule 17Ad-22 requires registered clearing 
agencies to establish, implement, maintain, and enforce written 
policies and procedures that are reasonably designed to meet certain 
minimum requirements for their operations and risk management practices 
on an ongoing basis.\33\ Therefore, it is appropriate for the 
Commission to review changes proposed in advance notices against Rule 
17Ad-22 and the objectives and principles of the risk management 
standards described in Section 805(b) of the Clearing Supervision 
Act.\34\ As discussed below, the Commission believes that the proposal 
in this advance notice is consistent with the objectives and principles 
described in Section 805(b) of the Clearing Supervision Act,\35\ and in 
Rule 17Ad-22 under the Act, particularly Rule 17Ad-22(e)(7).\36\
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    \31\ 12 U.S.C. 5464(a)(2).
    \32\ See 17 CFR 240.17Ad-22.
    \33\ Id.
    \34\ 12 U.S.C. 5464(b).
    \35\ Id.
    \36\ See 17 CFR 240.17Ad-22(e)(7).
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A. Consistency With Section 805(b) of the Clearing Supervision Act

    The Commission believes that the changes proposed in the advance 
notice are consistent with Section 805(b) of the Clearing Supervision 
Act because they: (i) Promote robust risk management; (ii) are 
consistent with promoting safety and soundness; and (iii) are 
consistent with reducing systemic risks and promoting the stability of 
the broader financial system.
    The Commission believes that the changes proposed in the advance 
notice are consistent with promoting robust risk management, in 
particular management of liquidity risk presented to OCC. Renewing and 
maintaining a credit facility for this purpose and in the manner 
proposed by OCC would diversify the liquidity resources that OCC may 
use to resolve a Member default. As such, the Commission believes that 
the proposal would promote robust risk management practices at OCC, 
consistent with Section 805(b) of the Clearing Supervision Act.\37\
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    \37\ 12 U.S.C. 5464(b).
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    The Commission also believes that the changes proposed in the 
advance notice are consistent with promoting safety and soundness. As 
described above, the currently proposed credit facility would provide 
OCC with an additional liquidity resource in the event of a Member 
default. This liquidity would promote safety and soundness for Members 
because it would provide OCC with a readily available liquidity 
resource that would enable OCC to continue to meet its respective 
obligations in a timely fashion in the event of a Member default, 
thereby helping to contain losses and liquidity pressures from that 
default. As such, the Commission believes it is consistent with 
promoting safety and soundness as contemplated in Section 805(b) of the 
Clearing Supervision Act.\38\
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    \38\ Id.
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    In addition, the Commission believes that the proposal contained in 
the advance notice is consistent with reducing systemic risks and 
promoting the stability of the broader financial system. As mentioned 
above, allowing OCC to enter into the currently proposed credit 
facility would enable OCC, which has been designated a systemically 
important FMU,\39\ to maintain an additional liquidity resource that 
OCC may access to help manage a Member default and avoid a gap in 
availability of this liquidity resource. Accordingly, the Commission 
believes that the proposal would help to reduce the systemic risk of 
OCC, which in turn would help to support the stability of the broader 
financial system, consistent with Section 805(b) of the Clearing 
Supervision Act.\40\
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    \39\ The Financial Stability Oversight Council designated OCC a 
systemically important financial market utility on July 18, 2012. 
See Financial Stability Oversight Council 2012 Annual Report, 
Appendix A, http://www.treasury.gov/initiatives/fsoc/Documents/2012%20Annual%20Report.pdf.
    \40\ Id.
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B. Consistency With Rule 17Ad-22(e)(7)

    The Commission believes that the proposed changes associated with 
the New Facility are consistent with the requirements of Rule 17Ad-
22(e)(7) under the Act.\41\ This rule requires that a covered clearing 
agency establish, implement, maintain, and enforce written policies and 
procedures reasonably designed to ``effectively measure, monitor, and 
manage the liquidity risk that arises in or is borne by [it], including 
measuring, monitoring, and managing its settlement and funding flows on 
an ongoing and timely basis, and its use of intraday liquidity.'' \42\
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    \41\ 17 CFR 240.17Ad-22(e)(7).
    \42\ Id.
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    In particular, Rule 17Ad-22(e)(7)(i) directs that a covered 
clearing agency meet this obligation by, among other things, 
``[m]aintaining sufficient liquid resources at the minimum in all 
relevant currencies to effect same-day . . . settlement of payment 
obligations with a high degree of confidence under a wide range of 
foreseeable stress scenarios that includes, but is not limited to, the 
default of the participant family that would generate the largest 
aggregate payment obligation for the covered clearing agency in extreme 
but plausible conditions.'' \43\
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    \43\ 17 CFR 240.17Ad-22(e)(7)(i).
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    The Commission believes that the changes proposed by the advance 
notice are consistent with the requirements of Rules 17Ad-22(e)(7) 
under the Act.\44\ Rule 17Ad-22(e)(7) requires OCC to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to effectively measure, monitor, and manage 
liquidity risk that arises in or is borne by OCC, including measuring, 
monitoring, and managing its settlement and funding flows on an ongoing 
and timely basis, and its use of intraday liquidity, as specified in 
the rule.\45\
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    \44\ 17 CFR 240.17Ad-22(e)(7).
    \45\ Id.
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    In particular, Rule 17Ad-22(e)(7)(i) under the Act \46\ requires 
that registered clearing agencies establish, implement, maintain and 
enforce written policies and procedures reasonably designed to 
``effectively measure, monitor, and manage the liquidity risk that 
arises in or is borne by [it], including measuring, monitoring, and 
managing its settlement and funding flows on an ongoing and timely 
basis, and its use of intraday liquidity by . . . [m]aintaining 
sufficient liquid resources at the minimum in all relevant currencies 
to effect same-day . . . settlement of

[[Page 31241]]

payment obligations with a high degree of confidence under a wide range 
of foreseeable stress scenarios that includes, but is not limited to, 
the default of the participant family that would generate the largest 
aggregate payment of obligation for the covered clearing agency in 
extreme but plausible conditions.''
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    \46\ 17 CFR 240.17Ad-22(e)(7)(i).
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    As described above, the currently proposed credit facility would 
provide OCC with a readily available liquidity resource that would 
enable OCC to continue to meet its respective obligations in a timely 
fashion in the event of a Member default, thereby helping to contain 
losses and liquidity pressures from that default. Additionally, the 
currently proposed credit facility would allow OCC to avoid a gap in 
liquidity coverage and better allow OCC to continually maintain 
sufficient liquidity resources. Therefore, the Commission believes that 
the proposal is consistent with Rule 17Ad-22(e)(7)(i).
    Rule 17Ad-22(e)(7)(ii) under the Act requires OCC to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to hold qualifying liquid resources sufficient to 
satisfy payment obligations owed to clearing members.\47\ Rule 17Ad-
22(a)(14) of the Act defines ``qualifying liquid resources'' to 
include, among other things, lines of credit without material adverse 
change provisions, that are readily available and convertible into 
cash.\48\ As described above, the currently proposed credit facility 
would permit OCC to enter into a single credit facility designed to 
help ensure that OCC has sufficient, readily-available qualifying 
liquid resources to meet the cash settlement obligations of its largest 
family of affiliated members. Therefore, the Commission believes that 
the proposal is consistent with Rule 17Ad-22(e)(7)(ii).
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    \47\ 17 CFR 240.17Ad-22(e)(7)(ii).
    \48\ 17 CFR 240.17Ad-22(a)(14).
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VI. Conclusion

    It is therefore noticed, pursuant to Section 806(e)(1)(I) of the 
Clearing Supervision Act, that the Commission does not object to the 
advance notice SR-OCC-2018-802 and OCC can and hereby is authorized to 
implement the change as of the date of this notice.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2018-14233 Filed 7-2-18; 8:45 am]
BILLING CODE 8011-01-P