Document ID: SEC-2012-1777-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2012-11-02T04:00Z

[Federal Register Volume 77, Number 213 (Friday, November 2, 2012)]
[Notices]
[Pages 66196-66197]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-26856]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68113; File No. SR-OCC-2012-15]

Self-Regulatory Organizations; Options Clearing Corporation; 
Order Approving Proposed Rule Change Relating to Financial Reporting by 
Canadian Clearing Members

October 26, 2012.

I. Introduction

    On September 5, 2012, the Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change SR-OCC-2012-15 pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder.\2\ The proposed rule change was published 
for comment in the Federal Register on September 19, 2012.\3\ The 
Commission received no comment letters. This order approves the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 67851 (September 13, 
2012), 77 FR 58194 (September 19, 2012).
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II. Description

    The proposed rule change would make technical ``housekeeping'' 
changes to OCC's By-Laws and Rules relating to financial reporting by 
Canadian clearing members to reflect the Investment Industry Regulatory 
Organization of Canada's (``IIROC'') adoption of the International 
Financial Reporting Standards.
    OCC Rule 310, through cross-references to interpretive provisions 
of OCC Rule 306--Financial Reports and

[[Page 66197]]

OCC Rule 308-Audits, allows Canadian clearing members to elect to file 
their Joint Regulatory Financial Questionnaire and Reports (``JRFQR'') 
with OCC, instead of filing SEC Form X-17A-5, to discharge their 
financial reporting requirements to OCC. In addition, other provisions 
of OCC's rules (Rules 301, 302, 303, 304, 306 and 308) reference 
information Canadian clearing members report on their JRFQR. IIROC, the 
primary regulator of Canada's securities industry, replaced the JRFQR 
with ``Form 1'' of the International Financial Reporting Standards. OCC 
proposes to replace references to the JRFQR within its By-Laws and 
Rules with references to ``Form 1.'' \4\ OCC also proposes to add an 
Interpretation and Policy to Rule 304 in response to a change in how 
IIROC requires regulated entities to report capital withdrawals.
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    \4\ OCC does not propose to amend Rule 310 since it does not 
specifically use the term, ``Joint Regulatory Financial 
Questionnaire and Reports.''
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    OCC, as part of its financial surveillance program, requires 
Canadian clearing members to submit their JRFQR, a financial report 
similar to SEC Form X-17A-5, to OCC at the end of each month. OCC also 
monitors the financial health of such clearing members using the 
capital levels reported on their JRFQRs. In 2011, IIROC replaced the 
JRFQR with Form 1. Among other things, Form 1 aligns the reporting of 
certain financial liabilities to U.S. Generally Accepted Accounting 
Principles (``GAAP''). Canadian clearing members that use Form 1 report 
the same, and in some cases more conservative, amounts of regulatory 
capital to OCC as they had using the JRFQR. Moreover, OCC believes that 
the change does not impair OCC's ability to conduct diligent financial 
surveillance of Canadian clearing members. Accordingly, OCC proposes to 
replace references to the ``JRFQR'' within its By-Laws and Rules with 
references to ``Form 1.''
    The IIROC also altered how its regulated entities report capital 
withdrawals. IIROC previously required capital withdrawals to be 
reported on monthly financial reports; however, IIROC amended its 
standards and now requires firms to obtain approval for withdrawals of 
capital following notice thereof. OCC had, when applicable, adjusted 
Canadian clearing member's reported capital levels in light of 
withdrawals reflected in financial reports in order to determine if the 
firm's capital falls within OCC's standards. With the change 
implemented by IIROC, that information is no longer be available to OCC 
via monthly financial reports submitted by Canadian clearing members. 
To ensure it is aware of such capital withdrawals, OCC proposes to add 
an Interpretation and Policy to Rule 304, which would require Canadian 
clearing members to submit capital withdrawal notifications to OCC when 
such requests are submitted to IIROC.

III. Discussion

    Section 17A(b)(3) (F) of the Act \5\ requires that, among other 
things, a clearing agency be organized and its rules designed to 
safeguard securities and funds in its custody or control or for which 
it is responsible. The proposed rule change will allow OCC to 
efficiently monitor the financial health of its clearing members and is 
intended to facilitate Canadian clearing members' compliance with OCC's 
By-Laws and Rules by aligning OCC's financial reporting requirements, 
as they pertain to Canadian clearing members, with those of the IIROC. 
It is also intended to ensure OCC has appropriate information about 
Canadian clearing members' capital withdrawals, which will no longer be 
reported to OCC on a monthly basis. As such, it will help OCC to 
safeguard the securities and funds in its custody or control or for 
which it is responsible.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F)
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \6\ and the 
rules and regulations thereunder.
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    \6\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (File No. SR-OCC-2012-15) be, and 
hereby is, approved.\8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact of efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-26856 Filed 11-1-12; 8:45 am]
BILLING CODE 8011-01-P