Document ID: SEC-2018-0275-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2018-02-14T05:00Z

[Federal Register Volume 83, Number 31 (Wednesday, February 14, 2018)]
[Notices]
[Pages 6651-6653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02972]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82657; File No. SR-OCC-2018-005]

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 8, 2018.
    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 29, 2018, 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. Items 
I and II have been prepared primarily by OCC. OCC filed the proposed 
rule change pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ 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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[[Page 6652]]

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 
to introduce a cash management fee that would cover administrative and 
other operational expenses incurred by OCC in connection with 
maintaining cash deposits that are held in OCC's Federal Reserve bank 
account and passing-through to Clearing Members the interest earned on 
such deposits. The proposed changes to the Schedule of Fees can be 
found in Exhibit 5 to the proposed rule change. Material proposed to be 
added to OCC's Fee Schedule as currently in effect is marked by 
underlining and material proposed to be deleted is marked by 
strikethrough text; material proposed to be added to OCC's Fee Schedule 
by proposed rule change SR-OCC-2018-004 is marked by double underlining 
and material proposed to be deleted by proposed rule change SR-OCC-
2018-004 is marked by double strikethrough text. All capitalized terms 
not defined herein have the same 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: http://optionsclearing.com/about/publications/bylaws.jsp.
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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 to introduce a cash management fee that would cover 
administrative and other operational expenses incurred by OCC in 
connection with maintaining cash deposits that are held in OCC's 
Federal Reserve bank account and passing-through to Clearing Members 
the interest earned on such deposits. The revised fee schedule would 
become effective on March 1, 2018.
    By way of background, on January 12, 2018, Commission approved 
changes to OCC's By-Laws and Rules that establish a new minimum cash 
contribution requirement for OCC's Clearing Fund and provide for the 
pass-through to OCC's Clearing Members of interest income earned on 
cash Clearing Fund deposits held in OCC's Federal Reserve bank 
account.\6\ As approved, the minimum cash contribution requirement will 
require OCC's Clearing Members to collectively contribute $3 billion in 
cash to OCC's Clearing Fund, with each Clearing Member's proportionate 
share of the minimum cash requirement being equal in percentage to its 
proportionate share of the Clearing Fund.\7\ In addition, OCC's 
Executive Chairman, Chief Administrative Officer, or Chief Operating 
Officer, upon providing notice to the Risk Committee of OCC's Board of 
Directors, will have the ability, under certain limited circumstances, 
to temporarily increase the amount of cash required to be maintained in 
the Clearing Fund up to an amount that includes the size of the 
Clearing Fund.\8\
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    \6\ See Securities Exchange Act Release No. 34-82502 (January 
12, 2018), 82 FR 2825 (January 19, 2018) (SR-OCC-2017-019).
    \7\ Id. Each Clearing Member's proportionate share of the 
Clearing Fund is determined by the Clearing Fund allocation 
methodology in current Rule 1001.
    \8\ See supra note 6.
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    In connection with the minimum cash Clearing Fund requirement, 
substantially all of OCC's Clearing Fund deposits consisting of cash 
will be held in OCC's Federal Reserve bank account.\9\ OCC will pass 
the interest income earned in such account through to its Clearing 
Members, provided that each such Clearing Member has provided OCC with 
all tax documentation as OCC may from time to time require in order to 
effectuate such payment.\10\ Interest earned will be calculated daily 
based on each Clearing Member's pro rata share of Clearing Fund cash 
deposits.\11\ In maintaining these minimum cash balances in OCC's 
Federal Reserve bank account and facilitating the pass-through of 
interest earned on such balances, OCC will incur certain administrative 
and other operational expenses. These expenses will include the 
operation of the Federal Reserve bank account, certain systems 
enhancements needed to maintain minimum cash deposits and facilitate 
pass-through of interest earned, and staffing costs to operate the cash 
management and funding desk. In order to defray these expenses, OCC is 
proposing to implement a cash management fee.
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    \9\ See supra note 6. OCC retains discretion to maintain a small 
portion of Clearing Fund cash deposits in other accounts (e.g., 
accounts with commercial banks) for various reasons, including 
facilitating normal substitution activity by its Clearing Members.
    \10\ See supra note 6. Interest earned will be calculated daily 
based on each Clearing Member's pro rata share of Clearing Fund cash 
deposits.
    \11\ See supra note 6.
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    The proposed cash management fee would be an annual rate equal to 5 
basis points (0.05%), calculated on a 365-day calendar, and billed 
monthly on each Clearing Member's daily proportionate share of cash on 
deposit in OCC's Federal Reserve bank account.\12\ This proposed change 
is designed to provide OCC with a level of revenue sufficient to cover 
OCC's administrative and operating expenses, as described above.
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    \12\ Accordingly, a Clearing Member can determine the monthly 
amount of its cash management fee by (1) dividing the annual 
interest rate by 365; (2) then multiplying the product by the 
Clearing Member's proportionate share of cash on deposit in OCC's 
Federal Reserve bank account for each calendar day in a given month; 
and (3) taking the sum all of the products in step (2) for the given 
month.
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(2) Statutory Basis
    Section 17A(b)(3)(D) of the Act requires that the rules of a 
clearing agency provide for the equitable allocation of reasonable 
dues, fees, and other charges among its participants.\13\ The proposed 
cash management fee would cover administrative and other operational 
expenses incurred by OCC in connection with passing through to Clearing 
Members the interest earned on Clearing Fund cash deposits that are 
held in an account established by OCC at a Federal Reserve bank. OCC 
believes the proposed fee change is reasonable because the new cash 
management fee would be set at a level intended to cover OCC's expenses 
associated with maintaining a minimum amount of Clearing Fund cash 
(which requirement is designed to satisfy certain liquidity 
requirements under Rule 17Ad-22(e)(7)) and with passing-through to 
Clearing Members the interest earned on such deposits held in OCC's 
Federal Reserve bank account. Moreover, OCC believes that the proposed 
fee change would result in an equitable allocation of fees among its 
participants because it is a fee that would be equally applicable to 
all similarly situated participants (i.e., Clearing Members). 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.\14\ 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\ 17 U.S.C. 78q-1(b)(3)(D).

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[[Page 6653]]

(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act \15\ 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 cash management fee would apply equally to all 
Clearing Members. 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.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \16\ and Rule 19b-4(f)(2) \17\ thereunder. 
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.\18\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \17\ 17 CFR 240.19b-4(f)(2).
    \18\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC Rule 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 [email protected]. Please include 
File Number SR-OCC-2018-005 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-2018-005. 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-2018-005 and 
should be submitted on or before March 7, 2018.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02972 Filed 2-13-18; 8:45 am]
BILLING CODE 8011-01-P