Document ID: SEC-2014-1835-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2014-11-03T05:00Z

[Federal Register Volume 79, Number 212 (Monday, November 3, 2014)]
[Notices]
[Pages 65277-65279]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26009]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73449; File No. SR-OCC-2014-19 ]

Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Permit the Executive 
Chairman, the President or a Delegate of Such Officer To Approve 
Requests by a Hedge Clearing Member To Become a Market Loan Clearing 
Member

October 28, 2014.
    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 24, 2014, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    This proposed rule change by OCC would amend OCC's By-Laws to 
permit the Executive Chairman, the President or a delegate of such 
officer to approve requests by a Hedge Clearing Member to become a 
Market Loan Clearing Member, provided that such delegate is an officer 
of the rank of Senior Vice President or higher.

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 this proposed rule change is permit the Executive 
Chairman, the President or their delegate to approve business expansion 
requests of Hedge Clearing Members \3\ to become Market Loan Clearing 
Members.\4\ Delegates of the Executive Chairman and/or the President 
must be an officer of the rank of Senior Vice President or higher. 
Currently, OCC's By-Laws require that requests of a Hedge Clearing 
Member to become a Market Loan Clearing Member be processed through 
OCC's business expansion process, which involves review and approval by 
OCC's Risk Committee (``Committee''). As described below, this type of 
business expansion request is operational and administrative in nature 
and OCC does not believe review and approval of this type of business 
expansion request requires the Committee to assess the risk of such 
designation. Accordingly, OCC proposes to amend its rules to permit the 
Executive Chairman, the President, or their delegate to approve 
business expansion requests of Hedge Clearing Members to become Market 
Loan Clearing Members without further review by the Committee, provided 
that any delegate be an officer of the rank of Senior Vice President or 
higher.
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    \3\ See OCC By-Laws, Article 1.H(1). See also, OCC By-Laws, 
Article V, Section 1, Interpretation and Policy .07.
    \4\ See OCC By-Laws, Article 1.M(4). See also, OCC By-Laws, 
Article V, Section 1, Interpretation and Policy .07A.
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    By way of background, the Committee is responsible for reviewing 
and approving clearing member requests to clear a type or a kind of 
transaction for which it is not currently approved to clear through OCC 
(i.e., a business expansion request).\5\ The Committee has delegated 
the Executive Chairman, the Management Vice Chairman, the President, or 
their delegate with authority to review and approve business expansion 
requests in response to requests by clearing members for expedited 
review. Such approval is then subject to the Committee's review and 
ratification at its next regularly scheduled meeting. If a clearing 
member does not request expedited review of a business expansion 
request then such request will be reviewed by the Committee at a 
regularly scheduled

[[Page 65278]]

meeting of the Committee, and not by the Executive Chairman, the 
Management Vice Chairman, the President, or their delegate.
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    \5\ See OCC By-Laws, Article V, Section 1, Interpretation and 
Policy .03(e).
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    In the case of a Hedge Clearing Member requesting a business 
expansion in order to be approved as Market Loan Clearing Member, the 
clearing member will have already been subject a robust risk review by 
the Committee concerning such clearing member's ability to participate 
in stock loan activity at OCC. Accordingly, the review of the Market 
Loan business expansion request by either the Committee and/or the 
Executive Chairman, the Management Vice Chairman, the President, or 
their delegate would be primarily operational in nature and involve 
ensuring that the clearing member: (1) Is a U.S. Clearing Member, (2) 
is a member of a Loan Market,\6\ (3) is a participant of the Depository 
Trust Company and has executed certain agreements with the Depository 
Trust Company, and (4) executes applicable agreements with OCC.\7\ The 
Committee and/or the Executive Chairman, the Management Vice Chairman, 
the President, or their delegate would also review the current 
financial risk profile of the clearing member in connection with the 
business expansion request in order to verify that the clearing member 
continues to meet OCC's financial requirements. OCC believes that a 
second risk review by the Committee would be duplicative because the 
Committee has already analyzed and approved the clearing member's 
ability to participate in stock loan activity at OCC. In addition, OCC 
does not believe that review and approval of this type of business 
expansion request is an appropriate use of the Committee's time given 
other, more substantive, issues the Committee must consider. Therefore, 
OCC proposes to amend Article V, Section 1, Interpretation and Policy 
.03 of its By-Laws to provide the Executive Chairman, the President, or 
their delegate with the authority to approve the business expansion 
requests of Hedge Clearing Members to become Market Loan Clearing 
Members without further review by the Committee, provided that any 
delegate be an officer of the rank of Senior Vice President or higher. 
OCC will implement appropriate procedures to ensure that Hedge Clearing 
Members meet the requirements to become Market Loan Clearing Members 
and participate and the Market Loan Program.
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    \6\ See OCC By-Laws, Article 1.L(5).
    \7\ See, OCC By-Laws, Article V, Section 1, Interpretation and 
Policy .07A.
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2. Statutory Basis
    OCC believes that the proposed rule change is consistent with 
Section 17A(b)(3)(F) of Act \8\ because it is designed to remove 
impediments to a national system for the prompt and accurate clearance 
and settlement of securities transactions through the removal of 
administrative and ministerial obligations of the Committee. By 
providing the Executive Chairman, the President or their delegate the 
authority to review and approve the business expansion requests of 
Hedge Clearing Members that would like to become Market Loan Clearing 
Members without further review by the Committee, clearing members and 
their customers will not be subject to an additional and time-consuming 
review by the Committee. In addition, the proposed rule change will 
allow the Committee to focus on substantive risk issues. The proposed 
rule change is not inconsistent with any rules of OCC, including those 
proposed to be amended.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose a 
burden on competition.\9\ The proposed rule change will ensure that OCC 
may provide timely and efficient services to its clearing members 
because it will remove administrative and ministerial steps associated 
with certain types of business expansion requests. The proposed rule 
change will apply to all clearing members and will not substantively 
change the requirements for Hedge Clearing Member to be approved as 
Market Loan Clearing Members. The Committee's review and approval of a 
Market Loan Clearing Member business expansion requests from a Hedge 
Clearing Member would be duplicative of prior action by the Committee 
since a Market Loan Clearing Member must first be approved as a Hedge 
Clearing Member, and the Committee will have already considered 
substantive issues concerning a clearing member's ability to 
participate in stock loan activity cleared through OCC when the 
clearing member was designated as a Hedge Clearing Member. Accordingly, 
OCC does not believe that the proposed rule will impose any burden on 
competition.
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    \9\ 15 U.S.C. 78q-1(b)(3)(I).
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(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-2014-19 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-2014-19. 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

[[Page 65279]]

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 OCC and on OCC's 
Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_14_19.pdf.
    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-OCC-2014-19 
and should be submitted on or before November 24, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26009 Filed 10-31-14; 8:45 am]
BILLING CODE 8011-01-P