Document ID: SEC-2013-1500-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2013-08-21T04:00Z

[Federal Register Volume 78, Number 162 (Wednesday, August 21, 2013)]
[Notices]
[Pages 51786-51788]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-20335]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70207; File No. SR-OCC-2013-12]

Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Revise Its By-Laws and 
Rules To Make Structural Changes to OCC's Membership/Risk Committee 
Regarding Public Directors and the Process for Designating Membership/
Risk Committee Members

August 15, 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 August 2, 2013, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II 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

    OCC proposes to revise its By-Laws and Rules to make structural 
changes to OCC's Membership/Risk Committee (``MRC'') regarding Public 
Directors and the process for designating MRC members.

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 By-Laws 
and Rules to make structural changes to OCC's MRC regarding Public 
Directors \3\ and the process for designating MRC members. The proposed 
rule change would require that at least one Public Director must serve 
on the MRC, that the MRC Chairman be a Public Director, and that all 
MRC members would be designated on an annual basis.
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    \3\ In relevant part, Article III, Section 6A of OCC's By-Laws 
defines a Public Director as a person who is ``not affiliated with 
any national securities exchange or national securities association 
or with any broker or dealer in securities[.]''
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    Currently, Article III, Section 9 of OCC's By-Laws specifies that 
at the first meeting of the Board of Directors that follows each annual 
meeting the Board must designate the Chairman of the Board, the Vice 
Chairman of the Board, and at least three other Member Directors to 
serve on the MRC. The By-Laws would be modified to provide that at 
least one Public Director must serve on the MRC and that the MRC 
Chairman must be a Public Director. These modifications would 
correspond to OCC's existing practice of having at least one Public 
Director serve on the MRC, and OCC believes that including this 
requirement in the By-Laws would help ensure that the MRC will continue

[[Page 51787]]

to operate in a manner that is appropriately free from outside 
influence and that therefore helps protect the interests of investors 
and the public.
    The proposed rule change would also eliminate the requirement from 
the By-Laws that MRC members must be designated at the first meeting of 
OCC's Board of Directors that follows each annual meeting. Instead, the 
only timing requirement in the By-Laws would be for MRC members to be 
designated annually. OCC believes this change to the By-Laws would 
provide OCC's Board with appropriate flexibility to decide when it is 
best for new MRC member designations to be made.
    As amended, Article III, Section 9 of OCC's By-Laws would provide 
that the Public Director(s) would be nominated to serve on the MRC by 
the Chairman of the Board and that any nomination would be subject to 
approval by the Board of Directors. Article III, Section 9 would also 
provide that the Chairman of the MRC would be required to be a Public 
Director. If more than one Public Director is nominated to serve on the 
MRC, the Chairman of the Board would nominate one of the Public 
Directors to serve as the MRC Chairman. Any such nomination by the 
Chairman of the Board would be subject to Board approval. OCC also 
proposes to make technical corrections in Article III, Section 9 to 
eliminate specific references to Article V of the By-Laws and Chapter 
VI of the Rules in order to avoid any erroneous inference that those 
are the only provisions of the By-Laws and Rules that set forth powers 
and duties of the MRC, which are in fact contained in many other 
provisions of the By-Laws and Rules as well.\4\
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    \4\ For example, see Article I, Section G (6) of the By-Laws and 
Rules 214(b), 305(c), and 309(e).
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(2) Statutory Basis
    OCC believes that the proposed rule change is consistent with 
Section 17A(b)(3)(F) \5\ of the Act \6\ and the rules and regulations 
thereunder, including Rule 17Ad-22(d)(8),\7\ because these requirements 
with respect to Public Directors in OCC's By-Laws would protect 
investors and the public interest by promoting the continued operation 
of the MRC in a manner that is appropriately free from outside 
influence. By including in the By-Laws the existing practice of having 
at least one Public Director serve on the MRC and by further requiring 
that the MRC Chairman be a Public Director, the proposed modifications 
would help ensure that OCC's governance arrangements are clear and 
transparent, fulfill the public interests requirements in Section 17A, 
support the objectives of owners and participants, and promote the 
effectiveness of OCC's risk management procedures.\8\ OCC further 
believes that the proposed change to the By-Laws to require a Public 
Director to serve as the MRC Chairman is consistent with explanatory 
note 3.2.14 to Principle 2 of the Principles for Financial Market 
Infrastructures that recommends that a risk committee be chaired by a 
sufficiently knowledgeable independent board member.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ 15 U.S.C. 78a et. seq.
    \7\ 17 CFR 240.17Ad-22(d)(8).
    \8\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose a 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.\9\ With respect to any burden 
on competition among clearing agencies, OCC is the only clearing agency 
that performs central counterparty services for the options markets.
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    \9\ 15 U.S.C. 78q-1(b)(3)(I).
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    Changes to the rules of a clearing agency may have an impact on the 
participants in a clearing agency and the markets that the clearing 
agency serves. This proposed rule change primarily affects OCC in that 
it would require at least one Public Director to serve on the MRC, the 
MRC Chairman to be a Public Director, and all MRC members to be 
designated on an annual basis. OCC does not believe that these changes 
with respect to governance would treat any clearing member or group of 
clearing members disparately or otherwise disparately affect access to 
or use of any of OCC's facilities or disadvantage or favor any user in 
relationship to any other such user. In fact, OCC believes that the 
proposed requirement that at least one member be a Public Director and 
that the MRC Chairman be a Public Director would promote competition by 
lessening the influence that any particular clearing member may have on 
the MRC.
    For the foregoing reasons, OCC believes that the proposed rule 
change is in the public interest, that it would be consistent with the 
requirements of the Act applicable to clearing agencies, and would not 
impose any burden on competition that is unnecessary or inappropriate 
in furtherance of the purposes of the Act because the changes would 
help ensure that the MRC continues to operate in a manner that is 
appropriately free from outside influence and therefore help promote 
the purposes of the Act and Rule 17Ad-22(d)(8) \10\ thereunder as 
described above.
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    \10\ 17 CFR 240.17Ad-22(d)(8).
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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

    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 such 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-2013-12 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2013-12. 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

[[Page 51788]]

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: 
http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_13_12.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-2013-12 
and should be submitted on or before September 11, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-20335 Filed 8-20-13; 8:45 am]
BILLING CODE 8011-01-P