Document ID: SEC-2013-2044-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Options Clearing Corporation
Posted Date: 2013-12-02T05:00Z

[Federal Register Volume 78, Number 231 (Monday, December 2, 2013)]
[Notices]
[Pages 72135-72137]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28721]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70935; File No. SR-OCC-2013-20]

Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Clarify OCC's Existing Policy Regarding Use of Clearing Fund Assets in 
Anticipation of a Clearing Member Default

November 25, 2013.
    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 November 15, 2013, 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)(i) \3\ of the Act and Rule 19b-
4(f)(4)(1) \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 parties.
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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)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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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 is to clarify OCC's 
existing policy regarding use of clearing fund assets in anticipation 
of a clearing member default. Specifically, OCC proposes to add an 
interpretation and policy to Article VIII, Section 5 of OCC's By-Laws 
to make clear that OCC has the authority to use cash or securities 
deposited by clearing members in OCC's clearing fund to borrow, or to 
otherwise obtain, funds from third parties in anticipation of a 
potential default by, or suspension of, a clearing member.

[[Page 72136]]

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 clarify OCC's 
existing policy regarding use of clearing fund assets in anticipation 
of a clearing member default. Specifically, OCC is proposing to add an 
interpretation and policy to Article VIII, Section 5 of its By-Laws to 
provide greater transparency for clearing members and others regarding 
an existing by-law and to clarify its authority to use cash or 
securities deposited by clearing members in OCC's clearing fund to 
borrow, or otherwise obtain, funds from third parties in anticipation 
of a clearing member default.\5\
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    \5\ OCC, in connection with the renewal of its credit facility, 
represented to the Commission that it will add such a clarification 
to its By-Laws. See Exchange Act Release No. 34-70596 (October 2, 
2013), 78 FR 62719 (October 22, 2013), (SR-OCC-2013-806).
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    Article VIII, Section 5 of OCC's By-Laws concerns application of 
OCC's clearing fund. Section 5(e)(i) permits OCC to use assets in the 
clearing fund to borrow, or otherwise obtain, funds from third parties 
in the event that OCC deems it necessary or advisable to meet 
obligations arising out of the default or suspension of a Clearing 
Member or any action taken by OCC pursuant to Chapter XI of the Rules 
or otherwise.\6\ OCC has interpreted Article VIII, Section 5(e)(i) to 
provide OCC with the authority to use clearing fund assets to borrow, 
or otherwise obtain, funds from third parties in anticipation of a 
clearing member default or suspension should OCC deem such use of 
assets necessary or advisable to meet obligations that may arise from 
such potential clearing member default or suspension.\7\ However, OCC 
believes that it would be helpful to clarify such authority and, 
accordingly, proposes to add Interpretation and Policy .06 to Article 
VIII, Section 5. Interpretation and Policy .06 will clarify that OCC's 
authority under Section 5(e)(i) of Article VIII applies to both 
situations in which a clearing member default or suspension that has 
already occurred, and in anticipation of potential default or 
suspension of a clearing member.
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    \6\ Chapter XI sets out rules pertaining to suspension of OCC 
Clearing Members.
    \7\ OCC has long believed that it should not have to make the 
decision to suspend a clearing member as a precondition to borrowing 
against the clearing fund. Accordingly, in 2004, OCC amended Article 
VIII, Section 5(e) to clarify that OCC may use clearing fund assets 
as collateral for loans whenever OCC deems such borrowings to be 
necessary or advisable in order to meet obligations arising out of 
the default or suspension of a clearing member or any action taken 
by OCC in connection therewith pursuant to Chapter XI of its Rules 
or otherwise (emphasis added). OCC has consistently interpreted the 
``or otherwise'' language in the preceding sentence that was added 
to the By-Laws in 2004 to allow OCC to borrow against the clearing 
fund prior to a clearing member default or suspension. See 
Securities Exchange Act Release No. 34-50526 (October 13, 2004), 69 
FR 61701 (October 20, 2004), (SR-OCC-2004-13).
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(2) Statutory Basis
    OCC believes the proposed rule change is consistent with Section 
17A(b)(3)(F) of the Act \8\ and the rules and regulations thereunder 
because it will increase the protection of investors and the public 
interest by allowing OCC to use clearing fund assets to borrow or 
otherwise obtain funds from third parties in anticipation of a clearing 
member default or suspension, in addition to a default or suspension 
that actually occurred, and thereby limit systemic risk. In addition, 
OCC believes that the proposed rule is consistent with Rule 17Ad-
22(b)(3) \9\ because by providing additional flexibility with respect 
to the timing of borrowings it will enhance OCC's ability to maintain 
sufficient financial resources to withstand a significant clearing 
member default. 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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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
    \9\ 17 CFR 240.17Ad-22(b)(3).
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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 that is not necessary or appropriate in 
furtherance of the purposes of the Act.\10\ This proposed rule change 
clarifies long standing policy regarding the conditions under which OCC 
may use securities or cash that clearing members deposit in OCC's 
clearing fund, and will apply to all clearing members. Accordingly, OCC 
believes that the proposed modifications would not disadvantage or 
favor any particular user in relationship to another user.
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    \10\ 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 that not necessary or appropriate in 
furtherance of the purposes of the Act.

(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)(i) of the Act \11\ and Rule 19b-
4(f)(1) \12\ thereunder, the proposed rule change is filed for 
immediate effectiveness because it constitutes a stated policy, 
practice or interpretation with respect to the meaning, administration 
or enforcement of an existing rule. Notwithstanding the foregoing, 
implementation of this rule change will be delayed until it is deemed 
certified under CFTC Regulation Sec.  40.6. At any time within 60 days 
of the filing of such 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.\13\
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    \11\ 15 U.S.C. 78s(b)(3)(A)(i).
    \12\ 17 CFR 240.19b-4(f)(1).
    \13\ 15 U.S.C. 78s(b)(3)(C).
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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-2013-20 on the subject line.

[[Page 72137]]

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-OCC-2013-20. 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 of submission. 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 Section, 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_13_20.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-2013-20 and 
should be submitted on or before December 23, 2013.
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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\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28721 Filed 11-29-13; 8:45 am]
BILLING CODE 8011-01-P