Document ID: SEC-2018-0210-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2018-02-02T05:00Z

[Federal Register Volume 83, Number 23 (Friday, February 2, 2018)]
[Notices]
[Pages 4944-4946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02124]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82596; File No. SR-OCC-2018-004]

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

January 30, 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 19, 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, 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)(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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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 
effective March 1, 2018, to implement an increase in clearing fees in 
accordance with OCC's Fee Policy.\5\ The proposed changes to the 
Schedule of Fees can be found in Exhibit 5 to the proposed rule change. 
All capitalized terms not defined herein have the same meaning as set 
forth in the OCC By-Laws and Rules.\6\
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    \5\ OCC's Fee Policy was adopted as part of OCC's plan for 
raising additional capital (``Capital Plan''), which was put in 
place in light of proposed regulatory capital requirements 
applicable to systemically important financial market utilities, 
such as OCC. See Exchange Act Release No. 34-74452 (March 6, 2015), 
80 FR 13058 (March 12, 2015) (SR-OCC-2015-02); Exchange Act Release 
No. 34-74387 (February 26, 2015), 80 FR 12215 (March 6, 2015) (SR-
OCC-2014-813) (``Approval Orders''). BATS Global Markets, Inc., BOX 
Options Exchange LLC, KCG Holdings, Inc., Miami International 
Securities Exchange, LLC, and Susquehanna International Group, LLP 
each filed petitions for review of the Approval Order, challenging 
the action taken by delegated authority. Following review of these 
petitions, on August 8, 2017, the U.S. Court of Appeals for the D.C. 
Circuit remanded the Approval Orders to the Commission to further 
analyze whether the Capital Plan is consistent with the Securities 
Exchange Act of 1934. Susquehanna Int'l Grp., LLP v. SEC, 866 F.3d 
442 (D.C. Cir. 2017). While the Commission further analyzes the 
Capital Plan, it remains in effect as originally approved by the 
Commission. See id.
    \6\ 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 in accordance with its Fee Policy to set OCC's fees at 
a level designed to cover OCC's operating expenses and maintain a 
Business Risk Buffer of 25%.\7\ The revised fee schedule would become 
effective on March 1, 2018.\8\
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    \7\ The Business Risk Buffer is equal to net income before 
refunds, dividends, and taxes divided by total revenue.
    \8\ OCC recently filed a proposed rule change with the 
Commission to revise its Fee Policy to provide that proposed fee 
changes are required to be implemented no sooner than thirty (30) 
days from the date of filing of the proposed rule change concerning 
such fee change (as opposed to sixty (60) days). See SR-OCC-2018-
001. OCC also has submitted the proposed changes to its Fee Policy 
to the Commodity Futures Trading Commission (``CFTC'') under CFTC 
Regulation 40.6 and expects the proposed changes to be certified on 
January 24, 2018. OCC notes that implementation of the proposed fee 
change on March 1, 2018, requires either (i) Commission approval of 
SR-OCC-2018-001 and certification of the Fee Policy changes in SR-
OCC-2018-001 under CFTC Regulation 40.6 or (ii) an exception to the 
60-day notice period provision in the Fee Policy authorized by OCC's 
Board of Directors and the holders of all of the outstanding Class B 
Common Stock of OCC. OCC's Board of Directors unanimously approved, 
and the holders of all of the outstanding Class B Common Stock of 
OCC unanimously consented to, the reduction of the 60-day notice 
period to 30 days on December 15, 2016.
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    By way of background, OCC implemented its Capital Plan in 2015,\9\ 
which was put in place in light of proposed regulatory capital 
requirements applicable to systemically important financial market 
utilities, such as OCC. As part of OCC's Capital Plan, OCC adopted a 
Fee Policy whereby OCC would set clearing fees at a level that covers 
OCC's operating

[[Page 4945]]

expenses plus a Business Risk Buffer of 25%.\10\ The purpose of the 
Business Risk Buffer is to ensure that OCC accumulates sufficient 
capital to cover unexpected fluctuations in operating expenses, 
business capital needs, and regulatory capital requirements.
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    \9\ See supra note 5.
    \10\ OCC's Schedule of Fees must also meet the requirements set 
forth in Article IX, Section 9 of OCC's By-Laws. In general, Article 
IX, Section 9 of OCC's By-Laws requires that OCC's fee structure be 
designed to: 1) cover OCC's operating expenses plus a business risk 
buffer; 2) maintain reserves deemed reasonably necessary by OCC's 
Board of Directors; and 3) accumulate an additional surplus deemed 
advisable by the Board of Directors to permit OCC to meet its 
obligations to its clearing members and the public. Clauses 2 and 3 
above will only be invoked at the discretion of OCC's Board of 
Directors and in extraordinary circumstances.
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    OCC recently reviewed its current Schedule of Fees \11\ against 
projected revenues and expenses for 2018 in accordance with its Fee 
Policy, to determine whether the Schedule of Fees was sufficient to 
cover OCC's anticipated operating expenses and achieve a Business Risk 
Buffer of 25%. In reviewing the Schedule of Fees, OCC analyzed: (i) 
Expenses budgeted for 2018, (ii) projected other revenue streams for 
2018, (iii) projected volume ``mix,'' and (iv) projected volume growth 
for 2018. Based on the foregoing analysis, OCC determined that the 
current fee schedule is set at a level that would be insufficient to 
ensure that OCC achieves its Business Risk Buffer of 25% as required 
under the Fee Policy.\12\ OCC arrived at the proposed fee schedule 
presented herein by determining the figures that provide the best 
opportunity for OCC to achieve coverage of its anticipated operating 
expenses plus a Business Risk Buffer of 25%.
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    \11\ OCC previously revised its Schedule of Fees effective 
December 1, 2016, to implement a fee increase in accordance with the 
Fee Policy. See Securities Exchange Act Release No. 79028 (October 
3, 2016), 81 FR 69885 (October 7, 2016) (SR-OCC-2016-012).
    \12\ OCC has provided a summary of its analysis in confidential 
Exhibit 3 of the filing.
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    As a result of the aforementioned analysis, OCC proposes to revise 
its Schedule of Fees as set forth below.\13\
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    \13\ These changes are also reflected in Exhibit 5.

----------------------------------------------------------------------------------------------------------------
                     Current fee schedule                                    Proposed fee schedule
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                                                                  Trades with
      Trades with contracts of:             Current fee          contracts of:             Proposed fee
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1-1100..............................  $0.050/contract........            1-1018  $0.054/contract.
>1100...............................  $55/trade..............             >1018  $55/trade.
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    OCC proposes to modify its fee schedule to: (i) Increase its per 
contract clearing fee from $0.050 to $0.054 per contract and (ii) 
adjust the quantity of contracts at which the fixed, per trade clearing 
fee begins from greater than 1100 contracts per trade to greater than 
1018 contracts per trade. The proposed changes are designed to target a 
level of revenues sufficient to cover OCC's operating expenses plus a 
Business Risk Buffer of 25% while continuing to maintain OCC's existing 
fixed, per trade fee at a level of $55 per trade.
    In accordance with its Fee Policy, OCC will continue to monitor 
cleared contract volume and operating expenses in order to determine if 
further revisions to OCC's Schedule of Fees are required so that monies 
received from clearing fees cover OCC's operating expenses plus a 
Business Risk Buffer of 25%.\14\
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    \14\ Any subsequent changes to OCC's Schedule of Fees would be 
the subject of a subsequent proposed rule change filed with the 
Commission.
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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.\15\ The proposed 
fee schedule was set in accordance with the criteria set forth in OCC's 
Capital Plan, which requires that OCC's fees be set at a level designed 
to cover OCC's operating expenses and maintain a Business Risk Buffer 
of 25%.\16\ OCC believes the proposed fee change is reasonable because 
the fee increase would be set at a level intended only to facilitate 
the maintenance of OCC's Business Risk Buffer of 25%, which is designed 
to ensure that OCC accumulates sufficient capital to cover unexpected 
fluctuations in operating expenses, business capital needs, and 
regulatory capital requirements. Moreover, OCC believes that the 
proposed fee change would result in an equitable allocation of fees 
among its participants because it would be equally applicable to all 
market participants. 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.\17\ 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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    \15\ 17 U.S.C. 78q-1(b)(3)(D).
    \16\ See supra note 5.
    \17\ 17 U.S.C. 78q-1(b)(3)(D).
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(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act\18\ 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 clearing fees apply equally to all users of OCC. 
Accordingly, OCC does not believe that the proposed rule change would 
have any impact or impose a burden on competition.
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    \18\ 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

    Pursuant to Section 19(b)(3)(A)(ii) \19\ of the Act, and Rule 19b-
4(f)(2) thereunder,\20\ the proposed rule change is filed for immediate 
effectiveness as it constitutes a change in fees charged to OCC 
Clearing Members. 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,

[[Page 4946]]

or otherwise in furtherance of the purposes of the Act.\21\
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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \20\ 17 CFR 240.19b-4(f)(2).
    \21\ 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-2018-004 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-2018-004. 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-2018-004 and 
should be submitted on or before February 23, 2018.
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    \22\ 17 CFR 200.30-3(a)(12). OCC filed this proposed rule change 
for immediate effectiveness pursuant to Exchange Act Section 
19(b)(3)(A)(ii) and Rule 19b-4(f)(2). As stated above in note 8, OCC 
may not implement the proposed change unless either (i) the 
Commission issues an Order approving the proposed rule change SR-
OCC-2018-001 or (ii) an exception to the 60-day notice period 
provision in the Fee Policy is authorized by OCC's Board of 
Directors and the holders of all of the outstanding Class B Common 
Stock of OCC.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02124 Filed 2-1-18; 8:45 am]
 BILLING CODE 8011-01-P