[Federal Register Volume 84, Number 230 (Friday, November 29, 2019)]
[Notices]
[Pages 65858-65859]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25841]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87603; File No. SR-OCC-2019-007]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Instituting Proceedings To Determine Whether To Approve or
Disapprove the Proposed Rule Concerning a Proposed Capital Management
Policy That Would Support The Options Clearing Corporation's Function
as a Systemically Important Financial Market Utility
November 22, 2019.
I. Introduction
On August 9, 2019, the Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2019-007 (``Proposed Rule Change'')
pursuant to Section 19(b) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-4 \2\ thereunder to adopt a policy
concerning capital management at OCC, which includes OCC's plan to
replenish its capital in the event it falls close to or below target
capital levels.\3\ The Proposed Rule Change was published for public
comment in the Federal Register on August 27, 2019.\4\ The Commission
received comments regarding the Proposed Rule Change.\5\ On September
11, 2019, OCC filed a partial amendment (``Partial Amendment No. 1'')
to modify the Proposed Rule Change.\6\ On October 8, 2019, the
Comission designated a longer period for Commission action on the
Proposed Rule Change.\7\ The Commission is publishing this order
pursuant to Section 19(b)(2)(B) of the Exchange Act \8\ to institute
proceedings to determine whether to approve or disapprove the Proposed
Rule Change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Notice of Filing infra note 4, at 84 FR 44952.
\4\ Securities Exchange Act Release No. 86725 (Aug. 21, 2019),
84 FR 44952 (Aug. 27, 2019) (SR-OCC-2019-007) (``Notice of
Filing''). OCC also filed a related advance notice (SR-OCC-2019-805)
(``Advance Notice'') with the Commission pursuant to Section
806(e)(1) of Title VIII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, entitled the Payment, Clearing, and
Settlement Supervision Act of 2010 and Rule 19b-4(n)(1)(i) under the
Exchange Act. 12 U.S.C. 5465(e)(1). 15 U.S.C. 78s(b)(1) and 17 CFR
240.19b-4. The Advance Notice was published in the Federal Register
on September 11, 2019. Securities Exchange Act Release No. 86888
(Sep. 5, 2019), 84 FR 47990 (Sep. 11, 2019) (SR-OCC-2019-805).
\5\ Comments are available at https://www.sec.gov/comments/sr-occ-2019-007/srocc2019007.htm.
\6\ See Extension infra note 7, at 84 FR 55189.
\7\ Securities Exchange Act Release No. 87246 (Oct. 8, 2019), 84
FR 55189 (Oct. 15, 2019) (File No. SR-OCC-2019-007) (``Extension'').
\8\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change
OCC now proposes changes to adopt, as part of its rules, a new
policy concerning capital management at OCC (``Capital Management
Policy''). Specifically, the proposed Capital Management Policy would
(i) describe how OCC would determine the amount of liquid net assets
funded by equity (``LNAFBE'') necessary to cover OCC's potential
general business losses; (ii) require OCC to hold a minimum amount of
shareholders equity (``Equity'') sufficient to support the amount of
LNAFBE determined to be necessary; \9\ and (iii) establish a plan for
replenishing OCC's capital in the event that Equity were to fall below
certain thresholds. OCC also proposes to revise its existing rules to
support the terms of the proposed Capital Management policy.
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\9\ LNAFBE would mean cash and cash equivalents to the extent
that such cash and cash equivalents do not exceed Equity.
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III. Proceedings To Determine Whether To Approve or Disapprove File No.
SR-OCC-2019-007 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act to determine whether the Proposed Rule
Change should be approved or disapproved.\10\ Institution of
proceedings is appropriate at this time in view of the legal and policy
issues raised by the Proposed Rule Change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved.
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\10\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Exchange Act,\11\ the
Commission is providing notice of the grounds for disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis and input concerning the Proposed Rule Change's
consistency with the Exchange Act and the rules thereunder, including
the following:
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\11\ Id.
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Section 17A(b)(3)(D) of the Exchange Act, which requires
the rules of a clearing agency provide for the equitable allocation of
reasonable dues, fees, and other charges among its participants; \12\
and
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\12\ 15 U.S.C. 78q-1(b)(3)(D).
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Section 17A(b)(3)(F) of the Exchange Act, which requires,
among
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other things, that the rules of OCC be designed to promote the prompt
and accurate clearance and settlement of securities transactions and to
assure the safeguarding of securities and funds which are in the
custody or control of OCC or for which it is responsible.\13\
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
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Rule 17Ad-22(e)(15) of the Exchange Act, which requires
that a covered clearing agency establish, implement, maintain, and
enforce written policies and procedures reasonably designed to
identify, monitor, and manage the covered clearing agency's general
business risk and hold sufficient liquid net assets funded by equity to
cover potential general business losses so that the covered clearing
agency can continue operations and services as a going concern if those
losses materialize, including by taking the actions described in Rules
17Ad-22(e)(15)(i)-(iii) under the Exchange Act.\14\
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\14\ 17 CFR 240.17Ad-22(e)(15).
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IV. Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
Proposed Rule Change with respect to the issues identified above, as
well as any other concerns they may have with the Proposed Rule Change.
In particular, the Commission invites the written views of interested
persons concerning whether the Proposed Rule Change is consistent with
Sections 17A(b)(3)(D) and 17A(b)(3)(F) of the Exchange Act and Rule
17Ad-22(e)(15) thereunder, cited above, or any other provision of the
Exchange Act, rules, and regulations thereunder.
Although there do not appear to be any issues relevant to approval
or disapproval that would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4, any request for an opportunity to make an oral
presentation.\15\
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\15\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29, 89 Stat. 97 (1975),
grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Acts Amendments of
1975, Report of the Senate Committee on Banking, Housing and Urban
Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess.
30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the Proposed Rule Change should be approved
or disapproved by December 16, 2019. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
December 20, 2019.
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 No. SR-OCC-2019-007 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 No. SR-OCC-2019-007. 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 No. SR-OCC-2019-007 and should
be submitted on or before December 16, 2019. If comments are received,
any rebuttal comments should be submitted on or before December 20,
2019.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-25841 Filed 11-27-19; 8:45 am]
BILLING CODE 8011-01-P