Document ID: SEC-2021-1362-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Options Clearing Corp.
Posted Date: 2021-10-05T04:00Z

[Federal Register Volume 86, Number 190 (Tuesday, October 5, 2021)]
[Notices]
[Pages 55039-55041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21625]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93195; File No. SR-OCC-2021-009]

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

September 29, 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 September 28, 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 primarily 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 
to implement a fee holiday for the period beginning November 1, 2021, 
and ending December 31, 2021. OCC's schedule of fees is included as 
Exhibit 5 to File No. SR-OCC-2021-009. Material proposed to be added to 
OCC's schedule of fees as currently in effect is underlined and 
material proposed to be deleted is marked in 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: 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

[[Page 55040]]

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 implement a fee holiday for the period beginning 
November 1, 2021, and ending December 31, 2021. OCC's Capital 
Management Policy (``Policy'') provides that OCC reviews its fee 
schedule on a periodic basis in consideration of factors including, but 
not limited to, projected operating expenses, projected volumes, 
anticipated cash flows, and capital needs.\6\ Provided that OCC's 
shareholders' equity (``Equity''), less the minimum persistent amount 
of capital that OCC maintains exclusively to address losses or 
liquidity shortfalls arising from member defaults (the ``Minimum 
Corporate Contribution''),\7\ exceeds 110% of the Target Capital 
Requirement \8\ (``Early Warning'') \9\ plus any amount approved for 
capital expenditures, OCC's Board, or a Committee the Board has 
delegated, may use tools as it considers appropriate to lower costs for 
Clearing Members. Such tools for reducing the cost of clearing include 
lowering fees, declaring a fee holiday, or issuing refunds.\10\
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    \6\ See Exchange Act Release No. 88029 (Jan. 24, 2020), 85 FR 
5500, 5502 (Jan. 30, 2020) (File No. SR-OCC-2019-007) (``Order 
Approving Policy''); Exchange Act Release No. 87257 (Oct. 8, 2019), 
84 FR 55194, 55196 (Oct. 15, 2019) (File No. SR-OCC-2019-805) 
(``Notice of No-Objection to Policy'').
    \7\ See Exchange Act Release No. 92038 (May 27, 2021), 86 FR 
29861 (Jun. 3, 2021) (File No. SR-OCC-2021-003) (order approving 
proposed rule change to establish OCC's persistent minimum skin-in-
the-game); Exchange Act Release No. 91491 (Apr. 7, 2021), 86 FR 
19061 (Apr. 12, 2021) (File No. SR-OCC-2021-801) (notice of no 
objection to advance notice relating to OCC's establishment of 
persistent minimum skin-in-the-game).
    \8\ The Target Capital Requirement is the amount of Equity 
recommended by Management and approved by the Board to ensure 
compliance with regulatory capital requirements and to keep such 
additional amount the Board may approve for capital expenditures. 
See OCC Rule 101.
    \9\ The Early Warning is one of the thresholds under OCC's plan 
for replenishing capital in the event OCC's Equity falls close to or 
below OCC's regulatory capital requirements, as required by SEC Rule 
17Ad-22(e)(15)(iii). See 17 CFR 17Ad-22(e)(15)(iii).
    \10\ See Order Approving Policy, 85 FR at 5502; Notice of No-
Objection to Policy, 84 FR at 55196.
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    OCC has experienced record volumes in 2021 while maintaining 
expenses at or around the budgeted amount. These strong financial 
results put OCC in a position to continue to invest resources in OCC's 
initiative to update and upgrade its technology infrastructure for 
critical clearing and settlement services, risk systems and data 
management,\11\ while at the same time lowering the cost of clearing 
for the users of the markets OCC serves. Accordingly, effective June 1, 
2021, OCC lowered its clearing fee from $0.045 per contract to $0.02 
per contract.\12\
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    \11\ See OCC Technology Changes + Enhancements Reference Guide, 
available at https://www.theocc.com/Participant-Resources (last 
updated July 21, 2021).
    \12\ Exchange Act Release No. 91920 (May 18, 2021), 86 FR 27916 
(May 24, 2021) (File No. SR-OCC-2021-006).
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    As of June 30, 2021, OCC maintained Equity of approximately $693 
million, or approximately $418 million more than the Early Warning.\13\ 
Based on projections of contract volume and expenses, OCC believes that 
it can implement a two-month fee holiday while maintaining sufficient 
revenue to support OCC's operations and capital needs, including 2021 
cash needs related to OCC's technology infrastructure 
transformation.\14\ Accordingly, OCC proposes to modify its fee 
schedule to decrease both its per contract and per trade clearing fees 
to $0 for the last two months of 2021.\15\
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    \13\ See OCC Schedule of Fees, available at https://www.theocc.com/Company-Information/Schedule-of-Fees (under OCC 
Capital Management Reporting, unaudited as of June 30, 2021).
    \14\ OCC has provided confidential data and analysis to the 
Commission in Exhibit 3 to File No. SR-OCC-2021-009.
    \15\ These changes are also reflected in Exhibit 5 to File No. 
SR-OCC-2021-009.

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Fee schedule                          Proposed fee holiday from November 1, 2021 to
                                                     December 31, 2021
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                         Clearing Fees                Clearing Fees
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Trades with contracts of 0-2,750..  $0.02/contract............  Trades with contracts  $0/contract.
                                                                 of 0-2,750.
Trades with contracts of more than  $55/trade.................  Trades with contracts  $0/trade.
 2,750.                                                          of more than 2,750.
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    OCC proposes to make the fee change effective November 1, 2021, 
because OCC believes that this date is the first date that the industry 
could be prepared to process the new fee without disruption based on 
consultations with market participants.\16\ Effective the first trading 
day of 2022, clearing fees will revert to the fee schedule in effect 
before November 1, 2021 and OCC will remove the fee holiday from its 
schedule of fees.
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    \16\ OCC notes that a mid-month change to clearing fees could 
introduce operational disruption to Clearing Members due to the 
impact on their billing processes.
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(2) Statutory Basis
    Section 17A(b)(3)(D) of the Act \17\ requires that the rules of a 
clearing agency provide for the equitable allocation of reasonable 
dues, fees, and other charges among its participants. OCC believes that 
the proposed fee holiday is reasonable because it is designed to 
decrease the cost of clearing while maintaining sufficient reserves in 
the form of liquid net assets to cover OCC's operating expenses and 
address potential business or operational losses so that OCC can 
continue to meet its obligations as a systemically important financial 
market utility to Clearing Members and the general public if such 
losses were to materialize (including through a recovery or orderly 
wind-down of critical operations and services) and thereby facilitating 
compliance with certain requirements of Rule 17Ad-22(e)(15)(ii).\18\
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    \17\ 15 U.S.C. 78q-1(b)(3)(D).
    \18\ 17 CFR 240.17Ad-22(e)(15)(ii).
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    In determining the appropriateness of a fee holiday, the CPC 
considered a variety of factors, including the projected revenue loss 
that would result from a two-month fee holiday, projected expenses, 
projected average daily volume, and a scenario analysis modeling the 
sensitivity of operating income, adjusting for different clearing fee 
levels.\19\ The CPC also considered OCC's cash needs through 2021 to 
support its technology transformation initiative. OCC believes that the 
proposed fee holiday is reasonable and consistent with its existing By-
Laws and Rules. OCC also believes that the proposed fee holiday 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 holiday provides for the 
equitable

[[Page 55041]]

allocation of reasonable fees in accordance with Section 17A(b)(3)(D) 
of the Act.\20\
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    \19\ A summary of the analyses is included in confidential 
Exhibit 3 to File No. SR-OCC-2021-009.
    \20\ 15 U.S.C. 78q-1(b)(3)(D).
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    The proposed rule change is not inconsistent with the existing 
rules of OCC, including any other rules proposed to be amended.

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

    Section 17A(b)(3)(I) of the Act \21\ 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 fee holiday applies 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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    \21\ 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) \22\ of the Act, and Rule 19b-
4(f)(2) thereunder,\23\ the proposed rule change is filed for immediate 
effectiveness as it constitutes a change in fees charged to OCC's 
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, 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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    \22\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \23\ 17 CFR 240.19b-4(f)(2).
    \24\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC 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-2021-009 on the subject line.

Paper Comments

     Send paper comments in triplicate to Vanessa Countryman, 
Secretary, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-OCC-2021-009. 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.
    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-2021-009 and should be 
submitted on or before October 26, 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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21625 Filed 10-4-21; 8:45 am]
BILLING CODE 8011-01-P