Document ID: SEC-2020-1308-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Options Clearing Corp.
Posted Date: 2020-08-18T04:00Z

[Federal Register Volume 85, Number 160 (Tuesday, August 18, 2020)]
[Notices]
[Pages 50858-50860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17966]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89534; File No. SR-OCC-2020-009]

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

August 12, 2020.
    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 July 31, 2020, 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. 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 proposed 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 proposed rule change by OCC would revise OCC's Schedule of Fees 
effective September 1, 2020, to implement a decrease in clearing fees. 
OCC's Schedule of Fees is included in Exhibit 5 to File No. SR-OCC-
2020-009. Material proposed to be added to OCC's Schedule of Fees as 
currently in effect is underlined and material proposed to be deleted 
is marked in strikethrough text. All capitalized terms not defined 
herein have the same

[[Page 50859]]

meaning as set forth in the OCC By-Laws and Rules.\5\
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    \5\ OCC's By-Laws and Rules can be found on OCC's public 
website: https://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules.
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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
    The purpose of this proposed rule change is to revise OCC's 
Schedule of Fees effective September 1, 2020, to implement a decrease 
in clearing fees. Under OCC's capital management policy, if OCC's 
Equity exceeds 110 percent of the Target Capital Requirement plus the 
amount of approved capital expenditures, OCC's Board may reduce the 
cost of clearing by lowering fees, declaring a fee holiday, or issuing 
refunds.\6\ As of December 31, 2019, OCC maintained shareholders' 
equity of approximately $351.3 million.\7\ OCC has experienced record 
volumes in 2020 while maintaining expenses at or around the budgeted 
amount. Accordingly, OCC proposes to modify its fee schedule to: (i) 
Decrease its per contract clearing fee from $0.055 to $0.045 per 
contract; and (ii) adjust the quantity of contracts at which the fixed, 
per trade clearing fee begins from trades with more than 999 contracts 
per trade to trades with more than 1222 contracts per trade as set 
forth in the Schedule of Fees depicted below.\8\
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    \6\ See Securities Exchange Release No. 88029 (Jan. 24, 2020), 
85 Fed. Red. 5500, 5502 (Jan. 30, 2020) (File No. SR-OCC-2019-007) 
and Securities Exchange Release No. 87257 (Oct. 8, 2019), 84 FR 
55194, 55196 (Oct. 15, 2019) (File No. SR-OCC-2019-805).
    \7\ See OCC Audited Financials 2019 available at https://www.theocc.com/getattachment/b12dec99-78ee-4ac0-b83e-94ec65ca7e94/attachment.aspx.
    \8\ These changes are also reflected in Exhibit 5 to File No. 
SR-OCC-2020-009.

                                                  Clearing Fees
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----------------------------------------------------------------------------------------------------------------
Current fee schedule                                 Proposed fee schedule
----------------------------------------------------------------------------------------------------------------
Clearing fees                                            Clearing fees
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Trades with contracts of 0-999.......  $0.055/contract........  Trades with contracts    $0.045/contract.
                                                                 of 0-1222.
Trades with contracts of more than     $55/trade..............  Trades with contracts    $55/trade.
 999.                                                            of more than 1222.
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    OCC proposes to make the fee change effective September 1, 2020, 
because OCC believes that this date is the first date that the industry 
could be prepared to process the new fee without disruption based on 
consultations with market participants.\9\
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    \9\ OCC notes that a mid-month change to clearing fees could 
introduce operational disruption to Clearing Members due to the 
impact on their billing processes.
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(2) Statutory Basis
    Section 17A(b)(3)(D) of the Act \10\ requires that the rules of a 
clearing agency provide for the equitable allocation of reasonable 
dues, fees, and other charges among its participants. OCC believes that 
the proposed fee change is reasonable because it is designed to 
decrease the cost of clearing while maintaining sufficient reserves in 
the form of liquid net assets to cover OCC's operating expenses and 
address potential business or operational losses so that OCC can 
continue to meet its obligations as a systemically important financial 
market utility to Clearing Members and the general public if such 
losses were to materialize (including through a recovery or orderly 
wind-down of critical operations and services) and thereby facilitate 
compliance with certain requirements of Rule 17Ad-22(e)(15)(ii).\11\
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    \10\ 15 U.S.C. 78q-1(b)(3)(D).
    \11\ 17 CFR 240.17Ad-22(e)(15)(ii).
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    In determining the appropriate level of the proposed fee decrease, 
OCC's Board and Compensation and Performance Committee considered a 
variety of factors, including projected average daily volume, operating 
income, and margin and a scenario analysis modeling the sensitivity of 
operating income and margin, adjusting for different volume levels, 
clearing fees and potential year-end refunds against the thresholds set 
forth in OCC's Capital Management Policy. The Compensation and 
Performance Committee also considered a sensitivity analysis assessing 
the minimum average daily volume required to support the proposed 
decrease.\12\ OCC believes that the proposed decrease in clearing fees 
is reasonable and consistent with its existing By-Laws and Rules. OCC 
also believes that the proposed fee change would result in an equitable 
allocation of fees among its participants because it would be equally 
applicable to all market participants transacting at a given level of 
contract volume. As a result, OCC believes that the proposed fee 
schedule provides for the equitable allocation of reasonable fees in 
accordance with Section 17A(b)(3)(D) of the Act.\13\
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    \12\ A summary of the scenario and sensitivity analyses is 
included in confidential Exhibit 3 to File No. SR-OCC-2020-009.
    \13\ 15 U.S.C. 78q-1(b)(3)(D).
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    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 \14\ 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 that the proposed rule change would have any impact or impose a 
burden on competition. 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

[[Page 50860]]

would have any impact or impose a burden on competition.
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    \14\ 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

    Pursuant to Section 19(b)(3)(A)(ii) \15\ of the Act, and Rule 19b-
4(f)(2) thereunder,\16\ the proposed rule change is filed for immediate 
effectiveness as it constitutes a change in fees charged to OCC 
Clearing Members. 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.\17\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
    \17\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC Regulation 40.6.
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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-2020-009 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-2020-009. 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 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 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 such 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-2020-009 and 
should be submitted on or before September 8, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.

[FR Doc. 2020-17966 Filed 8-17-20; 8:45 am]
BILLING CODE 8011-01-P