Document ID: SEC-2015-1067-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2015-06-26T04:00Z

[Federal Register Volume 80, Number 123 (Friday, June 26, 2015)]
[Notices]
[Pages 36867-36869]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15693]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75260; File No. SR-OCC-2015-013]

Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Codify Procedures for 
Resizing the Options Clearing Corporation's Clearing Fund on a Monthly 
Basis and Increasing Such Clearing Fund Size on an Intra-Month Basis

June 22, 2015.
    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 June 19, 2015, 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

    The Commission recently approved a proposed rule change, and issued 
a Notice of No-Objection to an Advance Notice Filing, concerning the 
establishment of procedures to resize OCC's Clearing Fund and the 
addition of financial resources through intra-day margin calls and/or 
an intra-month increase of the Clearing Fund.\3\ This proposed rule 
change by OCC would codify the authority granted to OCC through such 
approval and non-objection by amending the second sentence of Rule 
1001(a).
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    \3\ See Securities Exchange Act Release No. 74980 (May 15, 
2015), 80 FR 29364 (May 21, 2015) (SR-OCC-2015-009). See also 
Securities Exchange Act Release No. 74981 (May 15, 2015), 80 FR 
29367 (May 21, 2015) (SR-OCC-2014-811).
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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
    OCC is submitting this proposed rule change to amend Rule 1001(a) 
in order to codify the Commission's recent approval of and non-
objection to procedures for resizing the Clearing Fund on a monthly 
basis and increasing such Clearing Fund size on an intra-month basis to 
ensure OCC maintains sufficient financial resources consistent with 
regulatory requirements.\4\
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    \4\ Id.
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    On October 16, 2014, OCC filed a notice reflecting emergency action 
taken to permit it to increase the size of the Clearing Fund intra-
month to ensure that it had sufficient financial resources to cover the 
potential loss associated with a Clearing Member default that presented 
the largest exposure to OCC under extreme but plausible market 
conditions.\5\ The Commission since has

[[Page 36868]]

approved, pursuant to Section 19(b)(2) of the Act,\6\ and issued a 
Notice of No-Objection to, pursuant to Section 806(e)(1)(I) of the 
Payment, Clearing, and Settlement Supervision Act of 2010,\7\ OCC's 
adoption of procedures designed to clarify for Clearing Members and 
market participants the manner in which OCC would resize the Clearing 
Fund on a monthly basis and, if necessary, collect additional financial 
resources through intra-day margin calls and intra-month increases of 
the Clearing Fund (``Procedures'').\8\ Under the Procedures, OCC 
continues to size the Clearing Fund on the first business day of each 
month, with the Clearing Fund size equal to a base amount and an 
additional prudential margin of safety determined by OCC, currently set 
at $1.8 billion. The base amount is equal to the peak five-day rolling 
average of Clearing Fund draws \9\ observed over the preceding three 
calendar months. However, under the Procedures, OCC must issue an 
intra-day margin call in the event that a projected draw on the 
Clearing Fund under stress tests conducted by OCC exceeds 75% of the 
then-current size of OCC's Clearing Fund. In addition, OCC must 
increase the size of the Clearing Fund intra-month where a projected 
draw, after taking into account intra-day margin collected under the 
Procedures, exceeds 90% of the then-current size of the Clearing Fund.
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    \5\ See Securities Exchange Act Release No. 73579 (November 12, 
2014), 79 FR 68747 (November 18, 2014) (SR-OCC-2014-807). On 
November 13, 2014, OCC filed SR- OCC-2014-21 with the Commission to 
delete the second sentence of Rule 1001(a), preserving the suspended 
effectiveness of that sentence until such time as the Commission 
approves or disapproves SR-OCC-2014-21. See Securities Exchange Act 
Release No. 73685 (November 25, 2014), 79 FR 71479 (December 2, 
2014) (SR-OCC-2014-21). SR-OCC-2014-21 remains pending because on 
March 2, 2015 the Commission published an order instituting 
proceedings to determine whether to approve or disapprove the 
filing. See Securities Exchange Act Release No. 74406 (March 2, 
2015), 80 FR 12232 (March 6, 2015) (SR-OCC-2014-21).
    \6\ 15 U.S.C. 78s(b)(2).
    \7\ 12 U.S.C. 5465(e)(1)(I).
    \8\ See Footnote 3 above. Since the Commission issued such 
approval and Notice of No-Objection, OCC has amended the Procedures 
as set forth in SR-OCC-2015-012.
    \9\ Clearing Fund draws are the amounts that OCC would have been 
required to draw against the Clearing Fund under the daily 
idiosyncratic default and minor systemic default scenario 
calculations conducted by OCC (i.e., the amount of projected losses 
not covered by margin deposits or deposits in lieu of margin).
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    OCC is proposing to amend Rule 1001(a) to codify, in accordance 
with the Procedures, the process by which such Clearing Fund size: (i) 
is determined and set on a monthly basis, and (ii) may be increased on 
an intra-month basis. The proposed rule change provides greater 
transparency to Clearing Members and other market participants, because 
OCC's practices with regard to the monthly sizing of the Clearing Fund 
and OCC's ability to increase the Clearing Fund intra-month in 
accordance with the Procedures would be codified in the text of Rule 
1001(a).
2. Statutory Basis
    OCC believes the proposed rule change is consistent with Section 
17A(b)(3)(F) of the Act,\10\ and the rules and regulations thereunder 
because it would safeguard securities and funds in the custody and 
control of OCC. The Commission has already found that the Procedures 
are consistent with the Act, and the rules and regulations thereunder--
more specifically, the Commission found that the Procedures are 
consistent with Rule 17Ad-22(b)(3) since they should ensure that OCC is 
capable of obtaining sufficient financial resources in a timely manner 
to withstand the default of a clearing member presenting the largest 
exposure to OCC.\11\ By codifying the Procedures, as described above, 
as well as permitting OCC to take action pursuant to the Procedures, 
the proposed rule change would provide OCC with the authority necessary 
to resize its Clearing Fund pursuant to the Procedures and thereby 
safeguard securities and funds in the custody and control of OCC. In 
addition, the proposed rule change would ensure that market 
participants have sufficient information to identify and evaluate the 
risks and costs of using OCC's services since the proposed rule change 
would be incorporated into OCC's Rules (which are made available to the 
public on OCC's public Web site), in compliance with Rule 17Ad-
22(d)(9).\12\ 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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    \10\ 15 U.S.C. 78q-1(b)(3)(F).
    \11\ 17 CFR 240.17Ad-22(b)(3).
    \12\ 17 CFR 240.17Ad-22(d)(9).
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(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any 
burden on competition.\13\ OCC believes that the proposed rule change 
would not unfairly inhibit access to OCC's services or disadvantage or 
favor any particular user in relationship to another user because OCC 
would continue to size and increase the size of the Clearing Fund as 
per the Procedures for which the Commission issued its approval and 
non-objection to and without regard to any particular user or Clearing 
Member that makes Clearing Fund contributions.
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    \13\ 15 U.S.C. 78q-1(b)(3)(I).
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    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 
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-2015-013 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-2015-013. 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/

[[Page 36869]]

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 OCC and 
on OCC's Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_15_013.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-2015-013 and should be submitted on 
or before July 17, 2015.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-15693 Filed 6-25-15; 8:45 am]
 BILLING CODE 8011-01-P