Document ID: SEC-2016-0206-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2016-02-09T05:00Z

[Federal Register Volume 81, Number 26 (Tuesday, February 9, 2016)]
[Notices]
[Pages 6917-6919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-02443]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77041; File No. SR-OCC-2016-001]

Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Revise the Options Clearing Corporation's Schedule of Fees

February 3, 2016.
    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 January 20, 2016, 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. OCC filed the proposed rule 
change pursuant to Section 19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-
4(f)(2) \4\ thereunder so that the proposal was effective upon filing 
with the Commission. The Commission is publishing this notice to 
solicit comments on the rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The purpose of this proposed rule change by The Options Clearing 
Corporation (``OCC'') is to revise OCC's Schedule of Fees effective 
March 1, 2016, to implement a reduction of clearing fees in accordance 
with OCC's Fee Policy, which was recently adopted as part of OCC's 
Capital Plan.\5\
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    \5\ In 2015, the Commission approved (``Approval Order'') OCC's 
plan for raising additional capital (``Capital Plan''), which was 
put in place in light of proposed regulatory capital requirements 
applicable to systemically important financial market utilities, 
such as OCC. See Securities Exchange Act Release No. 74452 (March 6, 
2015) 80 FR 13058 (March 12, 2015) (SR-OCC-2015-02). OCC also filed 
proposals in the Capital Plan Filing as an advance notice under 
Section 806(e)(1) of the Payment, Clearing, and Settlement 
Supervision Act of 2010. 12 U.S.C. 5465(e)(1). On February 26, 2015, 
the Commission issued a notice of no objection to the advance notice 
filing. See Exchange Act Release No. 74387 (February 26, 2015), 80 
FR 12215 (March 6, 2015) (SR-OCC-2014-813). BATS Global Markets, 
Inc., BOX Options Exchange LLC, KCG Holdings, Inc., Miami 
International Securities Exchange, LLC, and Susquehanna 
International Group, LLP (collectively ``Petitioners'') each filed 
petitions for review of the Approval Order, challenging the action 
taken by delegated authority. The filing of the petitions 
automatically stayed the Approval Order. OCC filed a Motion to Lift 
the Stay on April 2, 2015, and the Petitioners responded. The 
Commission subsequently determined that the automatic stay of 
delegated action should be discontinued, and the Commission granted 
OCC's Motion to Lift Stay of the staff's action in approving by 
delegated authority File No. SR-OCC-2015-02.

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[[Page 6918]]

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 to revise OCC's 
Schedule of Fees in accordance with its new Fee Policy. The revised fee 
schedule would become effective on March 1, 2016.
    By way of background, in 2015, the Commission approved OCC's 
Capital Plan,\6\ which was put in place in light of proposed regulatory 
capital requirements applicable to systemically important financial 
market utilities, such as OCC. As part of OCC's Capital Plan, OCC 
adopted a Fee Policy whereby OCC would set clearing fees at a level 
that covers OCC's operating expenses plus a Business Risk Buffer \7\ of 
25%.\8\ The purpose of the Business Risk Buffer is to ensure that OCC 
accumulates sufficient capital to cover unexpected fluctuations in 
operating expenses, business capital needs, and regulatory capital 
requirements.
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    \6\ See supra note 5.
    \7\ The Business Risk Buffer is equal to net income before 
refunds, dividends, and taxes divided by total revenue.
    \8\ OCC's Schedule of Fees must also meet the requirements set 
forth in Article IX, Section 9 of OCC's By-Laws. In general, Article 
IX, Section 9 of OCC's By-Laws requires that OCC's fee structure be 
designed to: (1) Cover OCC's operating expenses plus a business risk 
buffer, (2) maintain reserves deemed reasonably necessary by OCC's 
Board of Directors, and (3) accumulate an additional surplus deemed 
advisable by the Board of Directors to permit OCC to meet its 
obligations to its clearing members and the public. Clauses 2 and 3 
above will only be invoked at the discretion of OCC's Board of 
Directors and in extraordinary circumstances.
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    OCC analyzed its current Schedule of Fees \9\ against projected 
revenues and projected expenses for 2016 in accordance with its Fee 
Policy. The primary goal of this analysis was to determine a fee 
setting approach for 2016 that covers OCC's anticipated operating 
expenses, seeks to minimize the number of fee resets under normal 
market conditions, and seeks to achieve a Business Risk Buffer of 25%. 
To project revenue (which is a product of cleared contract volume and 
clearing fees per contract), OCC estimated cleared contract volume per 
month for 2016 by computing the average of the previous 12 months of 
actual cleared contract volume data, excluding the high and low volume 
months, and used such average as the anticipated cleared contract 
volume per month for 2016.\10\ For expenses, OCC used projected 2016 
expenses, computed at the end of 2015 as part of OCC's 2016 budgeting 
process. OCC arrived at the fee schedule presented herein by 
determining the figures that would result in a coverage OCC's 
anticipated operating expenses plus a Business Risk Buffer of 25%.
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    \9\ OCC previously revised its Schedule of Fees effective April 
1, 2014, to reinstate permanent reduced fee rates for securities 
options and securities futures that were originally adopted 
effective May 1, 2007. See Securities Exchange Act Release No. 71769 
(March 21, 2014), 79 FR 17214 (March 27, 2014) (SR-OCC-2014-05).
    \10\ In order to validate this approach, OCC back tested its 
volume projecting methodology against data from the previous five 
years and determined that such methodology yields reasonable 
estimate of future contract volume.
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    As a result of the aforementioned analysis, OCC proposes to revise 
its Schedule of Fees as set forth below.\11\
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    \11\ These changes are also reflected in Exhibit 5. Market 
maker/specialist scratch and linkage fees per side will remain 
unchanged at $0.020.

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        Trades with contracts of:                  Current fee                        Proposed fee
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1-500....................................  $0.050/contract............  $0.041/contract.
501-1000.................................  $0.040/contract............  $0.032/contract.
1001-2000................................  $0.030/contract............  $0.024/contract.
>2000....................................  $55.00/trade...............  $46.00/trade.
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    OCC anticipates that the proposed changes to OCC's Schedule of Fees 
would result in an average decrease in clearing fees of 19%. Moreover, 
and in accordance with its Fee Policy, OCC will continue to monitor 
cleared contract volume and operating expenses in order to determine if 
further revisions to OCC's Schedule of Fees are required so that monies 
received from clearing fees cover OCC's operating expenses plus a 
Business Risk Buffer of 25%.\12\
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    \12\ Any subsequent changes to OCC's Schedule of Fees would be 
the subject of a subsequent proposed rule change filed with the 
Commission.
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2. Statutory Basis
    OCC believes that the proposed rule change concerning a reduction 
to OCC's clearing fees is consistent with Section 17A(b)(3)(D) \13\ of 
the Act, because the proposed fee schedule provides for the equitable 
allocation of reasonable fees among its clearing members and other 
market participants pursuant to criteria set forth in OCC's Capital 
Plan, which has been approved by the Commission.\14\ The revised fee 
schedule would result in lower clearing fees for OCC's clearing members 
and other market participants and would be equally applicable to all 
market participants. The proposed rule change is not inconsistent with 
the existing rules of OCC, including any other rules proposed to be 
amended.
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    \13\ 17 U.S.C. 78q-1(b)(3)(D).
    \14\ See supra note 5.
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(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would have an 
impact or impose a burden on competition.\15\ Although this proposed 
rule change affects clearing members, their customers, and the markets 
that OCC serves, OCC believes that the proposed rule change would not 
disadvantage or favor any particular user of OCC's services in 
relationship to another user because the proposed clearing fees apply 
equally to all users of OCC. Accordingly, OCC does not believe that the 
proposed rule change would have any impact or impose a burden on 
competition.
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    \15\ 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.

[[Page 6919]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective upon filing \16\ 
pursuant to Section 19(b)(3)(A)(ii) of the Act \17\ and Rule 19b-
4(f)(2) thereunder \18\ because it constitutes a change in fees imposed 
by OCC on its clearing members and other market participants using 
OCC's services. 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.
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    \16\ Notwithstanding the immediate effectiveness of the proposed 
rule change and OCC's anticipated implementation date of March 1, 
2016, implementation of this rule change is also contingent on it 
being deemed certified under CFTC Regulation Sec.  40.6.
    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 17 CFR 240.19b-4(f)(2).
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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-2016-001 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-OCC-2016-001. 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_16_001.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-2016-001 and should be submitted on 
or before March 1, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-02443 Filed 2-8-16; 8:45 am]
 BILLING CODE 8011-01-P