Document ID: SEC-2021-1137-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Options Clearing Corp.
Posted Date: 2021-08-23T04:00Z

[Federal Register Volume 86, Number 160 (Monday, August 23, 2021)]
[Notices]
[Pages 47174-47176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17966]

[[Page 47174]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92690; File No. SR-OCC-2021-008]

Self-Regulatory Organizations; the Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Make Technical Changes to the By-Laws and Rules of the Options Clearing 
Corporation

August 17, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on August 6, 2021, the Options Clearing 
Corporation (``OCC'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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)(1) \4\ and (f)(4) \5\ 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)(1).
    \5\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    This proposed rule change would amend OCC's By-Laws and Rules to 
(i) correct typographical errors, (ii) make conforming changes intended 
by prior proposed rule change filings, (iii) correct erroneous cross-
references, and (iv) remove certain inoperative provisions and 
clarifying certain other provisions related to OCC's Clearing Member 
Trade Assignment (``CMTA'') process. Amendments to OCC's By-Laws and 
Rules are included in Exhibit 5 of filing SR-OCC-2021-008. Material 
proposed to be added is marked by underlining, and material proposed to 
be deleted is marked with strikethrough text. All terms with initial 
capitalization that are not otherwise defined herein have the same 
meaning as set forth in the By-Laws and Rules.\6\
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    \6\ 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
    OCC is proposing to amend its By-Laws and Rules to (1) correct 
typographical errors, (2) make conforming changes intended by prior 
proposed rule change filings, (3) correct erroneous cross-references 
and (4) remove certain inoperative provisions and clarifying certain 
other provisions related to OCC's CMTA process.
1. Typographical Error Correction
    First, OCC has identified several typographical errors in the text 
of the proposed rule change as submitted to the SEC:
     The definition of ``Clearing Member'' in Article I of the 
By-Laws would be amended to reflect that the plural of the defined term 
``BOUND'' is ``BOUNDs,'' not ``BOUNDS.'' The same change would be made 
to Rule 401(a)(3).
     The definition of ``Equity Exchange'' in Article I of the 
By-Laws would be amended to correct a reference to ``Section VIIA'' of 
the By-Laws. There is no ``Section VIIA'' of the By-Laws; the 
references should be to ``Article VIIA.''
     The definition of ``Hedge Clearing Member'' in Article I 
of the By-Laws would be amended to replace a reference to ``Stock 
Clearing Member,'' which is not a term defined by the By-Laws or Rules, 
with ``Clearing Member.''
     Article IV, Section 3 of the By-Laws would be amended to 
re-insert a comma within a series in the second sentence that was 
inadvertently removed.
     Article IX, Section 5 of the By-Laws would be amended to 
employ more standard American spelling of ``depositories.''
     Article XXI, Section 2(a)(2) of the By-Laws would be 
amended to correct capitalization of the word ``accordance.''
     Interpretations and Policies to Rule 1309 and Rule 1405 
would be renumbered to conform to the standard numbering convention for 
such Interpretations and Policies.
     Rule 1403(a) would be amended to correct the verb tense in 
the second clause.
     Interpretation and Policy .01 to Rule 2210A would be 
amended to correct a typographical error in the possessive of 
``Clearing Member.''
2. Conforming Changes
    Second, OCC has identified instances in which the changes OCC 
intended to make in prior rule change filings were not applied to all 
affected provisions. This proposed rule change would apply conforming 
changes to OCC's By-Laws and Rules reflecting the intended changes to 
the affected provisions:
     Article VI, Section 3(d) of the By-Laws would be deleted. 
The provision allows for Clearing Members to establish and maintain 
Pledge Accounts to the extent permitted by OCC's Rules--Rules which OCC 
eliminated in 2012 when it terminated the Pledge Program.\7\ Because 
OCC's Rules no longer permit Pledge Accounts, Section 3(d) of By-Law 
Article VI is now inoperative and can be eliminated.
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    \7\ See Securities Exchange Act Release (``Exchange Act 
Release'') No. 67706 (Aug. 22, 2012), 77 FR 52082 (Aug. 28, 2012) 
(File No. SR-OCC-2012-10).
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     Article XXVI, Section 1 of the By-Laws would be amended by 
deleting the definition of ``index group.'' That defined term was 
previously deleted from Article XVII because it was not used elsewhere 
in that Article.\8\ Likewise, the term is not used elsewhere in Article 
XXVI. In addition, the definition of ``index multiplier'' would be 
amended to reflect that the referenced definition is found in Article 
I, not Article XVII as currently indicated.
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    \8\ See Exchange Act Release No. 58352 (Aug. 13, 2008), 73 FR 
48421, 48422 (Aug. 19, 2008) (File No. SR-OCC-2008-17).
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     Rule 504(c) would be amended to use the term ``non-
guaranteed settlement,'' rather than ``money-only settlement.'' 
Paragraph (c) was inadvertently excluded from a prior rule change 
filing that applied the same change to other paragraphs of that 
Rule.\9\ Consequently, OCC would also renumber paragraphs (d) through 
(g), as they appeared in that filing, as paragraphs (e) through (h).
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    \9\ See Exchange Act Release No. 63120 (Oct. 15, 2010), 75 FR 
65538 (Oct. 25, 2010) (File No. SR-OCC-2010-17).
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     Interpretation and Policy .14 to Rule 604 would be amended 
to reflect the deletion of a former provision under Rule 604(b)(4). 
Rule 604(b)(4) limited the amount of margin credit of any single issue 
to 10% of the margin

[[Page 47175]]

deposited by Clearing Members. OCC intended to remove that limitation 
when it eliminated preferred stock as a form of margin asset.\10\ 
Consequently, the Interpretation and Policy's application of that now 
defunct provision to sub-accounts is no longer relevant.
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    \10\ See Exchange Act Release No. 72206 (May 21, 2014), 79 FR 
30674, 30675 (May 28, 2014) (File No. SR-OCC-2014-07). As OCC 
explained, the limitation on margin credit was no longer necessary 
after eliminating preferred stock as an acceptable form of margin 
asset because additional charges for concentration positions are 
already determined under OCC's System for Theoretical Analysis and 
Numerical Simulations (``STANS'').
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     Rule 705 would be amended to reflect that interests or 
gains received or accrued on the investment of margins deposited in 
respect of cross margin accounts shall belong to the Corporation or the 
Participating CCO(s) (rather than ``and'') as may be determined by 
mutual agreement between the parties, consistent with unmarked changes 
in the text as filed in connection with a prior proposed rule 
change.\11\
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    \11\ See Exchange Act Release No. 58258 (July 30, 2008), 73 FR 
46133 (Aug. 7, 2008) (File No. SR-OCC-2008-12.
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     Interpretation and Policy .02 to Rule 1106 would be 
renumbered as .01, consistent with the deletion of the immediately 
Interpretation and Policy by a previous proposed rule change.\12\
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    \12\ See Exchange Act Release No. 67835 (Sept. 12, 2012), 77 FR 
57602 (Sept. 18, 2012) (File No. SR-OCC-2012-14).
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     Rule 2205 would be amended to reflect that OCC shall 
``make available,'' rather than ``issue,'' information concerning stock 
loan positions and stock borrow positions resulting from Stock Loans, 
consistent with unmarked changes in the text as filed in connection 
with prior proposed rule changes.\13\
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    \13\ See Exchange Act Release No. 80171 (Mar. 8, 2017), 82 FR 
13690 (Mar. 14, 2017) (File No. SR-OCC-2017-004); Exchange Act 
Release No. 59294 (Jan. 23, 2009), 74 FR 5958 (Feb. 3, 2009) (File 
No. SR-OCC-2008-20).
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3. Correcting Erroneous Cross-References
    Third, OCC has identified erroneous cross-references to provisions 
that have been renumbered by prior rule changes. This proposed rule 
change would correct these erroneous cross-references.\14\ In the case 
of erroneous cross-references to definitions found in Article I of the 
By-Laws or Rule 101, OCC is proposing to replace citations to numbered 
paragraphs with references to the defined term. OCC believes citations 
to numbered paragraphs are unnecessary for definition sections that are 
alphabetized,\15\ and referring to the definitions by term rather than 
number will help avoid the need to update cross-references whenever the 
definition sections are amended.
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    \14\ Specifically, OCC would update the cross-references in the 
bracketed parentheticals that identify By-Laws or Rules supplemented 
or replaced by Article XII, Section 4A; Article XIII, Sections 1 and 
3; Article XV, Section 1; Article XVI, Section 1; and Article XVII, 
Section 1 of the By-Laws and Rules 1401, 1402, 1403, 1404, 1503, 
1703, 1704, 1805, and 2704. OCC would also amend erroneous cross-
references in Rules 101, 304(a), 309(f), and 803 and Article XV, 
Section 1 of the By-Laws. The rationale for these amendments and the 
identification of the intervening rule filings that renumbered the 
referenced provisions is included in Exhibit 3 to File No. SR-OCC-
2021-008.
    Notwithstanding the amendments to Article XV, that Article 
remains inoperative until further notice by OCC. See Exchange Act 
Release No. 58977 (Nov. 19, 2008), 73 FR 72097, 72098 (Nov. 26, 
2008) (File No. SR-OCC-2008-09).
    \15\ The practice of referring to definition sections by number 
dates to OCC's original practice of adding new definitions 
sequentially to the end of the definition sections, which OCC ceased 
when it alphabetized the definition sections. See Exchange Act 
Release No. 30327 (Jan. 31, 1992), 57 FR 4785-01 (Feb. 7, 1992) 
(File No. SR-OCC-92-4).
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4. Amendments to CMTA Processes
    Finally, OCC is proposing to remove references to certain 
identifiers related to the Clearing Member Trade Assignment (``CMTA'') 
process that were never implemented. Specifically, the provisions 
related to the Customer CMTA Indicator, CMTA Customer Identifier, and 
IB Identifier in Article I of the By-Laws, Rule 401, and Rule 407 
contemplated that participant exchanges would adopt rules to implement 
them, which did not occur.\16\ OCC proposes to remove the changes 
applied when it added the capacity for those identifiers.\17\
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    \16\ See OCC Rule 401(a) (``Such confirmed trade information 
shall also include a Customer CMTA Indicator, a CMTA Customer 
Identifier, and an IB Identifier to the extent required under 
applicable Exchange rules.'').
    \17\ See Exchange Act Release No. 51350 (Mar. 9, 2005), 70 FR 
12934 (Mar. 16, 2005) (File No. SR-OCC-2004-19).
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    OCC would also clarify Rule 407(b) to address situations where the 
account designated by the Carrying Clearing Member to receive confirmed 
trades is not approved to hold a specific confirmed trade. Rule 407(b) 
does not provide for what happens in this event. In such cases, it is 
OCC's practice to default to the Carrying Clearing Member's customer or 
segregated futures account, as applicable, or, if the Carrying Clearing 
Member does not maintain such an account, to the Carrying Clearing 
Member's firm account. In addition, OCC would delete the last sentence 
of Rule 407(b), which provides for default accounts if an Executing 
Clearing Member failed to designate a default account for failed 
transactions. Executing Clearing Members are required to make a 
designation prior to engaging in transactions, so the situation this 
provision is intended to address could not occur. Therefore, this last 
sentence is unnecessary and can be eliminated. OCC believes that these 
proposed changes help to clarify OCC's Rules with respect to default 
accounts and reflect OCC's current practice.
(2) Statutory Basis
    OCC believes the proposed rule changes are consistent with Section 
17A of the Securities Exchange Act of 1934 (``Exchange Act'') and the 
rules and regulations thereunder. Section 17A(b)(3)(F) \18\ of the 
Exchange Act requires, among other things, that the rules of a clearing 
agency be designed to promote the prompt and accurate clearance and 
settlement of securities and derivatives transactions and protect 
investors and the public interest. By correcting typographical errors, 
omissions and erroneous cross-references in OCC's By-Laws and Rules, as 
well as removing inoperative provisions, the proposed rule changes 
facilitate the administration of existing rules intended to promote the 
prompt and accurate clearance and settlement of securities and 
derivatives transactions and protect investors and the public interest.
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    \18\ 15 U.S.C. 78q-1(b)(3)(F).
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    In addition, Rule 17Ad-22(e)(1) requires OCC to, among other 
things, maintain written policies and procedures reasonably designed 
to, among other things, ensure a well-founded, clear, transparent, and 
enforceable legal basis for each aspect of OCC's activities.\19\ By 
correcting errors and omissions in the text as filed with the SEC and 
removing inoperative provisions, the changes discussed above are 
intended to support the maintenance of OCC's By-Laws and Rules and 
improve their clarity and transparency. The proposed rule change is not 
inconsistent with any existing rules of OCC, including any other rules 
proposed to be amended.
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    \19\ 17 CFR 240.17Ad-22(e)(1).
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(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Exchange Act 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 Exchange Act.\20\ As 
discussed above, the proposed changes would correct typographical 
errors, omissions and erroneous cross-references and remove certain

[[Page 47176]]

inoperative provisions. These proposed changes are technical in nature 
and would not impact the rights or obligations of Clearing Members or 
other participants in a way that would benefit or disadvantage any 
participant versus another participant. Accordingly, OCC does not 
believe that the proposed corrections to its By-Laws and Rules have any 
impact, or impose any burden, on competition.
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    \20\ 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 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) \21\ of the Act, and Rule 19b-
4(f)(1) \22\ and (f)(4) \23\ thereunder, the proposed rule change is 
filed for immediate effectiveness. 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. The proposal shall not take effect until all 
regulatory actions required with respect to the proposal are 
completed.\24\
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    \21\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \22\ 17 CFR 240.19b-4(f)(1).
    \23\ 17 CFR 240.19b-4(f)(4).
    \24\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under Commodity Futures Trading Commission 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-2021-008 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-2021-008. 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/Company-Information/Documents-and-Archives/By-Laws-and-Rules.
    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-2021-008 and 
should be submitted on or before September 13, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-17966 Filed 8-20-21; 8:45 am]
BILLING CODE 8011-01-P