Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving a Proposed Rule Change To Codify Procedures for Resizing the Options Clearing Corporation's Clearing Fund on a Monthly Basis and Increasing Such Clearing Fund Size on an Intra-Month Basis, 45690-45691 [2015-18770]
Download as PDF
<![CDATA[
45690
Federal Register / Vol. 80, No. 147 / Friday, July 31, 2015 / Notices
asabaliauskas on DSK5VPTVN1PROD with NOTICES
We periodically inspect the
operations of all funds to ensure their
compliance with the provisions of the
Act and the rules under the Act. Our
staff spends a significant portion of its
time in these inspections reviewing the
information contained in the books and
records required to be kept by rule 31a–
1 and to be preserved by rule 31a–2.
There are 3146 funds currently
operating as of December 31, 2014, all
of which are required to comply with
rule 31a–2. Based on conversations with
representatives of the fund industry and
past estimates, our staff estimates that
each fund currently spends 220 total
hours per year complying with rule
31a–2. Our staff estimates that the 220
hours spent by typical fund would be
split evenly between administrative and
computer operation personnel,5 with
110 hours spent by a general clerk at a
rate of $57 per hour and 110 hours spent
by a senior computer operator at a rate
of $87 per hour.6 Based on these
estimates, our staff estimates that the
total annual burden for all funds to
comply with rule 31a–2 is 692,120
hours at an estimated cost of
$49,832,640.7
The hour burden estimates for
retaining records under rule 31a–2 are
based on our experience with registrants
and our experience with similar
requirements under the Act and the
rules under the Act. The number of
burden hours may vary depending on,
among other things, the complexity of
the fund, the issues faced by the fund,
legible, true, and complete printout of the record;
and (C) means to access, view, and print the
records; and must separately store, for the time
required for preservation of the original record, a
duplicate copy of the record on any medium
allowed by rule 31a–2(f). In the case of records
retained on electronic storage media, the fund, or
person that maintains and preserves records on its
behalf, must establish and maintain procedures: (i)
To maintain and preserve the records, so as to
reasonably safeguard them from loss, alteration, or
destruction; (ii) to limit access to the records to
properly authorized personnel, the directors of the
fund, and the Commission (including its examiners
and other representatives); and (iii) to reasonably
ensure that any reproduction of a non-electronic
original record on electronic storage media is
complete, true, and legible when retrieved.
5 However, the hour burden may be incurred by
a variety of fund staff, and the type of staff position
used for compliance with the rule may vary widely
from fund to fund.
6 The estimated salary rates are derived from
SIFMA’s Office Salaries in the Securities Industry
2013, modified by Commission staff to account for
an 1800-hour work-year and multiplied by 2.93 to
account for bonuses, firm size, employee benefits
and overhead.
7 This estimate is based on the following
calculations: 3146 funds × 220 hours = 692,120 total
hours; 692,120 hours/2 = 346,060 hours; 346,060 ×
$57 rate per hour for a clerk = $19,725,420; 346,060
× $87 rate per hour for a computer operator =
$30,107,220; $19,725,420 + $30,107,220 =
$49,832,640 total cost.
VerDate Sep<11>2014
17:44 Jul 30, 2015
Jkt 235001
and the number of series and classes of
the fund. The estimated average burden
hours are made solely for purposes of
the Paperwork Reduction Act and are
not derived from quantitative,
comprehensive, or even representative
survey or study of the burdens
associated with our rules and forms.
Based on conversations with
representatives of the fund industry and
past estimates, our staff estimates that
the average cost of preserving books and
records required by rule 31a–2 is
approximately $74,782 annually per
fund.8 As discussed previously, there
are 3,146 funds currently operating, for
a total cost of preserving records as
required by rule 31a–2 of approximately
$235,264,172 per year.9 Our staff
understands, however, based on
previous conversations with
representatives of the fund industry,
that even in the absence of rule 31a–2
funds would already spend
approximately half of this amount
($117,632,086) to preserve these same
books and records, as they are also
necessary to prepare financial
statements, meet various state reporting
requirements, and prepare their annual
federal and state income tax returns.
Therefore, we estimate that the total
annual cost burden for all funds as a
result of compliance with rule 31a–2 is
approximately $117,632,086 per year.
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act, and is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules and forms.
The collection of information under
rule 31a–2 is mandatory for all funds.
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless it
displays a currently valid control
number.
The public may view the background
documentation for this information
collection at the following Web site,
www.reginfo.gov. Comments should be
8 This estimate is based on staff’s 2012 estimate
of costs of preserving books and records required
by rule 31a–2 ($70,000), adjusted for inflation to
January 2015 values using the Personal
Consumption Expenditures Chain-Type Price Index
(‘‘PCE Index’’). The values of the PCE Index are
available from the Bureau of Economic Analysis, a
bureau of the Department of Commerce. See Bureau
of Economic Analysis, Table 2.8.6. Real Personal
Consumption Expenditures by Major Type of
Product, Monthly, Chained Dollars (Last Revised on
March 2, 2015), available at https://www.bea.gov/
iTable/iTable.cfm?ReqID=9&step=1#reqid=9&
step=3&isuri=1&903=83. Thus, $70,000 (2012
estimate) × 11,163.6 (Jan. 2015 PCE Index value)/
10,449.7 (2012 PCE Index value) = $74,782 (Jan.
2015 inflation adjusted estimate).
9 This estimate is based on the following
calculation: 3,146 funds × $74,782 = $235,264,172.
PO 00000
Frm 00052
Fmt 4703
Sfmt 4703
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE., Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: July 27, 2015.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–18765 Filed 7–30–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75528; File No. SR–OCC–
2015–013]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Approving a Proposed Rule Change To
Codify Procedures for Resizing the
Options Clearing Corporation’s
Clearing Fund on a Monthly Basis and
Increasing Such Clearing Fund Size on
an Intra-Month Basis
July 27, 2015.
On June 19, 2015, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2015–
013 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 June 26, 2015.3 The
Commission did not receive any
comments on the proposed rule change.
This order approves the proposed rule
change.
I. Description
According to OCC, it is amending
Rule 1001(a) to codify the Commission’s
recent approval of and non-objection to
procedures for resizing the clearing fund
on a monthly basis and increasing such
clearing fund size on an intra-month
basis to ensure OCC maintains sufficient
financial resources consistent with
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 75260
(June 22, 2015), 80 FR 36867 (June 26, 2015) (SR–
OCC–2015–013).
2 17
E:\FR\FM\31JYN1.SGM
31JYN1
Federal Register / Vol. 80, No. 147 / Friday, July 31, 2015 / Notices
asabaliauskas on DSK5VPTVN1PROD with NOTICES
regulatory requirements
(‘‘Procedures’’).4
Specifically, OCC recently adopted
the Procedures which, according to
OCC, are designed to clarify for clearing
members and market participants the
manner in which OCC would resize the
clearing fund on a monthly basis and, if
necessary, collect additional financial
resources through intra-day margin calls
and intra-month increases of the
clearing fund.5 According to OCC,
under the Procedures, OCC continues to
size the clearing fund on the first
business day of each month, with the
clearing fund size equal to a base
amount and an additional prudential
margin of safety determined by OCC,
currently set at $1.8 billion. The base
amount is equal to the peak five-day
rolling average of clearing fund draws 6
observed over the preceding three
calendar months. Under the Procedures,
OCC must issue an intra-day margin call
in the event that a projected draw on the
clearing fund under stress tests
conducted by OCC exceeds 75% of the
then-current size of OCC’s clearing
fund. In addition, OCC must increase
the size of the clearing fund intra-month
where a projected draw, after taking into
account intra-day margin collected
under the Procedures, exceeds 90% of
the then-current size of the clearing
fund.
According to OCC, it is amending
Rule 1001(a) to codify, in accordance
with the Procedures, the process by
which such clearing fund size: (i) Is
determined and set on a monthly basis,
and (ii) may be increased on an intramonth basis. OCC believes that the
proposed rule change provides greater
transparency to clearing members and
other market participants, because
OCC’s practices with regard to the
monthly sizing of the clearing fund and
OCC’s ability to increase the clearing
fund intra-month in accordance with
the Procedures would be codified in the
text of Rule 1001(a).
4 See Securities Exchange Act Release No. 74980
(May 15, 2015), 80 FR 29364 (May 21, 2015) (SR–
OCC–2015–009) and Securities Exchange Act
Release No. 74981 (May 15, 2015), 80 FR 29367
(May 21, 2015) (SR–OCC–2015–811). OCC recently
amended the Procedures. See Securities Exchange
Act Release No. 75255 (June 22, 2015), 80 FR 36869
(June 26, 2015) (SR–OCC–2015–012) (changing the
method by which certain dashboard reports are
distributed).
5 Id.
6 According to OCC, clearing fund draws are the
amounts that OCC would have been required to
draw against the clearing fund under the daily
idiosyncratic default and minor systemic default
scenario calculations conducted by OCC (i.e., the
amount of projected losses not covered by margin
deposits or deposits in lieu of margin).
VerDate Sep<11>2014
17:44 Jul 30, 2015
Jkt 235001
II. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Act 7 directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
such organization.
The Commission finds that the
proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act 8 and
Rule 17Ad–22(b)(3) of the Act.9 Rule
17Ad–22(b)(3) of the Act requires OCC
to establish, implement, maintain and
enforce written policies and procedures
reasonably designed to maintain
sufficient financial resources to
withstand, at a minimum, a default by
the participant family to which it has
the largest exposure in extreme but
plausible market conditions.10 OCC is
amending Rule 1001(a) to reflect the
process by which OCC determines its
clearing fund size on a monthly basis
and increases its clearing fund size on
an intra-month basis. As stated above,
OCC already adopted Procedures that
reflect this change.11 By amending Rule
1001(a) to codify the Procedures, as
described above, and thus permitting
OCC to take action pursuant to the
Procedures, OCC should be able to be
more responsive to sudden increases in
exposure and less sensitive to short-run
reductions in exposure that could
inappropriately reduce the overall size
of the clearing fund. As a result, OCC
should be in a better position to
maintain sufficient financial resources
to withstand, at a minimum, a default
by the participant family to which it has
the largest exposure in extreme but
plausible market conditions.
For these same reasons, OCC’s rule
change is consistent with Section
17A(b)(3)(F) of the Act,12 which
requires, in part, that the rules of a
clearing agency 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 the clearing agency or for
which it is responsible. By maintaining
financial resources in this manner, OCC
is less likely to be subject to disruptions
in its operations as a result of a default
of a participant family, thereby
facilitating the prompt and accurate
clearance and settlement of securities
PO 00000
7 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
9 17 CFR 240.17Ad–22(b)(3).
10 Id.
11 See supra note 4.
12 15 U.S.C. 78q-1(b)(3)(F).
8 15
Frm 00053
Fmt 4703
Sfmt 4703
45691
transactions and assuring the
safeguarding of securities and funds
which are in the custody or control of
OCC or for which it is responsible.
III. 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 13 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,14 that the
proposed rule change (SR–OCC–2015–
013) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–18770 Filed 7–30–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75530; File No. SR–
NYSEARCA–2015–66]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the NYSE Arca
Options Fee Schedule
July 27, 2015.
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on July 20,
2015, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE Arca Options Fee Schedule (‘‘Fee
Schedule’’). The Exchange proposes to
13 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
14 15 U.S.C. 78s(b)(2).
15 17 CFR 200.30–3(a)(12).
1 15 U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
E:\FR\FM\31JYN1.SGM
31JYN1
]]>Agencies
[Federal Register Volume 80, Number 147 (Friday, July 31, 2015)]
[Notices]
[Pages 45690-45691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18770]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75528; File No. SR-OCC-2015-013]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving a Proposed Rule Change To Codify Procedures for
Resizing the Options Clearing Corporation's Clearing Fund on a Monthly
Basis and Increasing Such Clearing Fund Size on an Intra-Month Basis
July 27, 2015.
On June 19, 2015, The Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2015-013 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 June 26, 2015.\3\ The Commission did not
receive any comments on the proposed rule change. This order approves
the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 75260 (June 22, 2015),
80 FR 36867 (June 26, 2015) (SR-OCC-2015-013).
---------------------------------------------------------------------------
I. Description
According to OCC, it is amending Rule 1001(a) to codify the
Commission's recent approval of and non-objection to procedures for
resizing the clearing fund on a monthly basis and increasing such
clearing fund size on an intra-month basis to ensure OCC maintains
sufficient financial resources consistent with
[[Page 45691]]
regulatory requirements (``Procedures'').\4\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 74980 (May 15,
2015), 80 FR 29364 (May 21, 2015) (SR-OCC-2015-009) and Securities
Exchange Act Release No. 74981 (May 15, 2015), 80 FR 29367 (May 21,
2015) (SR-OCC-2015-811). OCC recently amended the Procedures. See
Securities Exchange Act Release No. 75255 (June 22, 2015), 80 FR
36869 (June 26, 2015) (SR-OCC-2015-012) (changing the method by
which certain dashboard reports are distributed).
---------------------------------------------------------------------------
Specifically, OCC recently adopted the Procedures which, according
to OCC, are designed to clarify for clearing members and market
participants the manner in which OCC would resize the clearing fund on
a monthly basis and, if necessary, collect additional financial
resources through intra-day margin calls and intra-month increases of
the clearing fund.\5\ According to OCC, under the Procedures, OCC
continues to size the clearing fund on the first business day of each
month, with the clearing fund size equal to a base amount and an
additional prudential margin of safety determined by OCC, currently set
at $1.8 billion. The base amount is equal to the peak five-day rolling
average of clearing fund draws \6\ observed over the preceding three
calendar months. Under the Procedures, OCC must issue an intra-day
margin call in the event that a projected draw on the clearing fund
under stress tests conducted by OCC exceeds 75% of the then-current
size of OCC's clearing fund. In addition, OCC must increase the size of
the clearing fund intra-month where a projected draw, after taking into
account intra-day margin collected under the Procedures, exceeds 90% of
the then-current size of the clearing fund.
---------------------------------------------------------------------------
\5\ Id.
\6\ According to OCC, clearing fund draws are the amounts that
OCC would have been required to draw against the clearing fund under
the daily idiosyncratic default and minor systemic default scenario
calculations conducted by OCC (i.e., the amount of projected losses
not covered by margin deposits or deposits in lieu of margin).
---------------------------------------------------------------------------
According to OCC, it is amending Rule 1001(a) to codify, in
accordance with the Procedures, the process by which such clearing fund
size: (i) Is determined and set on a monthly basis, and (ii) may be
increased on an intra-month basis. OCC believes that the proposed rule
change provides greater transparency to clearing members and other
market participants, because OCC's practices with regard to the monthly
sizing of the clearing fund and OCC's ability to increase the clearing
fund intra-month in accordance with the Procedures would be codified in
the text of Rule 1001(a).
II. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act \7\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that the proposed rule change is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to such
organization.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78s(b)(2)(C).
---------------------------------------------------------------------------
The Commission finds that the proposed rule change is consistent
with Section 17A(b)(3)(F) of the Act \8\ and Rule 17Ad-22(b)(3) of the
Act.\9\ Rule 17Ad-22(b)(3) of the Act requires OCC to establish,
implement, maintain and enforce written policies and procedures
reasonably designed to maintain sufficient financial resources to
withstand, at a minimum, a default by the participant family to which
it has the largest exposure in extreme but plausible market
conditions.\10\ OCC is amending Rule 1001(a) to reflect the process by
which OCC determines its clearing fund size on a monthly basis and
increases its clearing fund size on an intra-month basis. As stated
above, OCC already adopted Procedures that reflect this change.\11\ By
amending Rule 1001(a) to codify the Procedures, as described above, and
thus permitting OCC to take action pursuant to the Procedures, OCC
should be able to be more responsive to sudden increases in exposure
and less sensitive to short-run reductions in exposure that could
inappropriately reduce the overall size of the clearing fund. As a
result, OCC should be in a better position to maintain sufficient
financial resources to withstand, at a minimum, a default by the
participant family to which it has the largest exposure in extreme but
plausible market conditions.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78q-1(b)(3)(F).
\9\ 17 CFR 240.17Ad-22(b)(3).
\10\ Id.
\11\ See supra note 4.
---------------------------------------------------------------------------
For these same reasons, OCC's rule change is consistent with
Section 17A(b)(3)(F) of the Act,\12\ which requires, in part, that the
rules of a clearing agency 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 the clearing agency or for which it is
responsible. By maintaining financial resources in this manner, OCC is
less likely to be subject to disruptions in its operations as a result
of a default of a participant family, thereby facilitating the prompt
and accurate clearance and settlement of securities transactions and
assuring the safeguarding of securities and funds which are in the
custody or control of OCC or for which it is responsible.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
III. 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 \13\ and the
rules and regulations thereunder.
---------------------------------------------------------------------------
\13\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (SR-OCC-2015-013) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Robert W. Errett,
Deputy Secretary.
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 2015-18770 Filed 7-30-15; 8:45 am]
BILLING CODE 8011-01-P
