Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change to More Closely Align OCC's By-Laws and Rules with Regulatory Requirements Related to “Statutory Disqualifications”, 20472-20474 [2012-8035]
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20472
Federal Register / Vol. 77, No. 65 / Wednesday, April 4, 2012 / Notices
last priority. The Commission believes
that, as a result of this flexibility, there
may be increased usage of AIM auctions
and the mechanism may attract new
participants, thereby helping to further
competition and to enhance the
possibility of price improvement on
behalf of customers.7
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,8 that the
proposed rule change (SR–C2–2012–
006) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–8036 Filed 4–3–12; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66676; File No. SR–OCC–
2012–03]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of Proposed Rule Change to
More Closely Align OCC’s By-Laws
and Rules with Regulatory
Requirements Related to ‘‘Statutory
Disqualifications’’
March 29, 2012.
emcdonald on DSK29S0YB1PROD with NOTICES
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 March 15,
2012, 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 primarily by OCC.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
7 The Commission notes that Chapter V, Section
18(f)(v) of the Rules of the Boston Exchange Group,
LLC, ‘‘The Price Improvement Period’’ (‘‘PIP’’),
includes a similar provision that permits an options
participant initiating a PIP auction to designate a
lower amount than the 40% to which it is otherwise
entitled upon the conclusion of the PIP auction.
The Commission also recently approved a similar
provision under Rule 6.74A of the Chicago Board
of Options Exchange, Incorporated, with respect to
its AIM auction. See Securities Exchange Act
Release No. 66375 (February 10, 2012), 77 FR 9274
(February 16, 2012) (SR–CBOE–2011–117).
8 15 U.S.C. 78s(b)(2).
9 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
15:28 Apr 03, 2012
Jkt 226001
The proposed rule change would
more closely align OCC’s By-Laws and
Rules with applicable regulatory
requirements related to ‘‘statutory
disqualifications’’ under the Act in
order to reduce the overall
administrative burden on OCC
associated with addressing the statutory
disqualification of OCC clearing
members (‘‘Clearing Members’’) and
applicants for clearing membership
(‘‘Applicants’’) while giving guidance to
Clearing Members and Applicants as to
OCC’s policies with respect to statutory
disqualifications.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
VerDate Mar<15>2010
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
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.3
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
The purpose of this proposed rule
change is to more closely align OCC’s
By-Laws and Rules with applicable
regulatory requirements related to
‘‘statutory disqualifications’’ under the
Act in order to reduce the overall
administrative burden on OCC
associated with addressing the statutory
disqualification of Clearing Members
and Applicants while giving guidance to
Clearing Members and Applicants as to
OCC’s policies with respect to statutory
disqualifications. OCC is also proposing
to amend its ‘‘Fitness Standards for
Directors, Clearing Members and
Others’’ (‘‘Fitness Standards’’) to bring
such standards into conformity with the
proposed amendments to OCC’s ByLaws. The Fitness Standards were
submitted to the Commission in SR–
OCC–2011–12 and approved by the
Commission on October 27, 2011.4
3 The Commission has modified the text of the
summaries prepared by OCC.
4 Securities Exchange Act Release No. 34–65648
(October 27, 2011), 76 FR 68236 (November 3,
2011).
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Frm 00120
Fmt 4703
Sfmt 4703
Background
Persons who have engaged in certain
types of misconduct are subject to
‘‘statutory disqualification,’’ as defined
by Section 3(a)(39) of the Act, and must
undergo a review by the Commission
under Rule 19h–1 of the Act in order to
enter or continue in membership in a
self-regulatory organization (‘‘SRO’’).
Section 17A(b)(4)(A) of the Act provides
that a registered clearing agency may,
and in cases in which the Commission
so orders must, deny participation to
any person subject to a statutory
disqualification. This provision further
requires a registered clearing agency to
provide the Commission with 30 days’
notice before admitting a statutorily
disqualified person to clearing
membership. Rule 19h–1 of the Act
implements these statutory provisions
by requiring notice to the Commission
if a registered clearing agency proposes
either to admit to membership or to
continue as a member a person subject
to a statutory disqualification. Notably,
unlike in the case of a national
securities exchange or registered
securities association, the rule does not
require a registered clearing agency to
file such a notice with respect to
statutory disqualifications of associated
persons of a Member or Applicant. A
registered clearing agency is required to
file such a notice only when the
Member or Applicant itself is subject to
the disqualification.
Article V of OCC’s By-Laws
establishes the qualifications required of
Clearing Members and sets forth the
procedures for admitting persons to
clearing membership, including those
that are or become subject to a statutory
disqualification. Currently,
Interpretation and Policy .03 of Article
V, Section 1 of OCC’s By-Laws provides
that the Membership/Risk Committee
(‘‘Committee’’) will not recommend the
approval of an application for
membership if the Applicant or an
associated person is subject to a
statutory disqualification unless the
Committee makes a finding that ‘‘special
circumstances’’ exist warranting a
waiver of the statutory disqualification.
The requirements of this By-Law are
more stringent than those applied to
registered clearing agencies by the Act
or Commission rules because they
require the Committee to (i) make
specific findings of ‘‘special
circumstances’’ before recommending
membership approval and (ii) address
statutory disqualifications of associated
persons. The By-Laws therefore impose
additional administrative burdens on
OCC that are not required under any
E:\FR\FM\04APN1.SGM
04APN1
emcdonald on DSK29S0YB1PROD with NOTICES
Federal Register / Vol. 77, No. 65 / Wednesday, April 4, 2012 / Notices
statute or rule administered by the
Commission.
Neither Article V of the By-Laws nor
OCC’s Rules currently contain
procedures for notice to OCC that an
Applicant or Clearing Member is subject
to a statutory disqualification, which
provides insufficient guidance to
Applicants and Clearing Members and
exposes OCC to the risk that such notice
may be given on a delayed basis. OCC’s
By-Laws and Rules are also silent as to
the procedures to be followed by a
Clearing Member when it becomes
subject to a statutory disqualification
even though Rule 19h–1 requires a
registered clearing agency to file a
notice if it intends to permit such a firm
to remain a Clearing Member.
As a registered derivatives clearing
organization (‘‘DCO’’), OCC is also
subject to the jurisdiction of the
Commodity Futures Trading
Commission (‘‘CFTC’’). OCC’s By-Laws
also address statutory disqualification
under Section 8a(2)–(4) of the
Commodity Exchange Act (‘‘CEA’’),
which allows the CFTC to refuse to
register or to suspend the registration of
futures commission merchants and
other entities required to register under
the CEA. Neither the CEA nor the
CFTC’s regulations require DCOs to file
a notice similar to that required by Rule
19h–1, and OCC therefore is not
proposing to amend Article V or the
Rules to specifically address statutory
disqualifications under the CEA other
than to clarify that if a principal of a
futures commission merchant is subject
to a statutory disqualification, the
Membership/Risk Committee has
discretion to not recommend the
approval of such futures commission
merchant’s application for membership
pursuant to Section 8a(2) of the CEA or
to determine not to permit such a
futures commission merchant to
continue in Clearing Membership.
In addition to being consistent with
the Commission’s regulations, OCC’s
Fitness Standards, as described above,
were constructed in part to comply with
core principles (‘‘Core Principles’’)
applicable to DCOs as these core
principles were amended by the DoddFrank Wall Street Reform and Consumer
Protection Act and as are set forth in the
CEA. The Fitness Standards establish
certain minimum fitness criteria for
directors, Clearing Members, and their
affiliates sufficient to comply with Core
Principle O as set forth in the CEA.5
However, the Fitness Standards were
also drafted to conform to OCC’s
existing qualification standards for
5 Commodity Exchange Act Section 5b(c)(2)(O); 7
U.S.C. 7a–1(c)(2)(O).
VerDate Mar<15>2010
15:28 Apr 03, 2012
Jkt 226001
Clearing Members, which standards
OCC is now proposing to revise.
Accordingly, OCC proposes to amend
the Fitness Standards to conform them
to the proposed amendments to the
qualification standards for Applicants
and Clearing Members in OCC’s ByLaws.
Proposed By-Law Changes
Article V (Clearing Members) sets
forth the qualifications for Clearing
Members. OCC proposes to amend the
current Article V provisions addressing
statutory disqualifications to eliminate
provisions that require unnecessary
Committee action and to add provisions
designed to ensure that OCC receives
appropriate notice of a statutory
disqualification in order to discharge its
obligations as an SRO. The proposed
amendments are generally based on
similar rules of the National Securities
Clearing Corporation and the Chicago
Board Options Exchange. OCC proposes
to amend Article V, Section 1,
Interpretation and Policy .03
(Experience and Competence) to:
1. Eliminate the requirement that the
Committee must find ‘‘special
circumstances’’ warranting the waiver of
a statutory disqualification in order to
recommend an Applicant’s approval for
clearing membership providing instead
that the Committee may in its discretion
consider a statutory disqualification in
determining whether or not to
recommend approval.
2. Eliminate the requirement that the
Committee address the status of
associated persons who are subject to
statutory disqualifications.
3. Establish procedures requiring
Clearing Members and Applicants to
provide notice of a statutory
disqualification.
4. Eliminate the second paragraph of
subsection c. The definition of statutory
disqualification in subsection a.
includes the conduct covered by Section
15(b)(4)(B) of the Act, making the
second paragraph of subsection c.
redundant.
OCC proposes to amend Chapter II
and Chapter XII of its Rules to:
1. Establish procedures applicable to
Clearing Members who are or become
subject to a statutory disqualification to
provide that: (i) OCC has the discretion
not to permit any such Clearing Member
to continue in Clearing Membership, (ii)
such Clearing Member must notify OCC
of any statutory disqualification and
may seek to continue in Clearing
Membership, (iii) a failure to notify OCC
of a statutory disqualification may be
deemed a violation of OCC’s rules, (iv)
OCC may convene a Disciplinary
Committee to conduct a hearing
PO 00000
Frm 00121
Fmt 4703
Sfmt 4703
20473
concerning a Clearing Member’s
statutory disqualification, (v) OCC has
discretion to waive such provisions if
another self-regulatory organization is
conducting a proceeding addressing a
Clearing Member’s statutory
disqualification with respect to the same
matter, and (vi) OCC has discretion to
waive the hearing provisions if OCC
intends to grant the Clearing Member’s
application to continue in Clearing
Membership in certain circumstances.
2. Add Interpretation and Policy .01
to Rule 1201 in order to clarify that a
decision to suspend or expel a Clearing
Member after a disciplinary proceeding
under Chapter XII of the Rules would be
grounds for summary suspension under
Chapter XI of the Rules.
OCC also proposes to amend its
Fitness Standards to conform them to
the proposed amendments to OCC’s ByLaws.
OCC believes that the proposed
changes to its By-Laws are consistent
with the purposes and requirements of
Section 17A of the Act 6 and the rules
and regulations thereunder applicable to
OCC because they are designed to more
closely align OCC’s By-Laws and Rules
with applicable regulatory
requirements, establish standard
notification and other procedures,
provide Clearing Members with
guidance as to OCC’s policies regarding
statutory disqualifications, facilitate the
timely filing of notices pursuant to Rule
19h–1 should OCC determine to admit
to membership or continue in
membership any person subject to a
statutory disqualification and are not
designed to permit unfair
discrimination in the admission of
participants or among participants in
the use of OCC. The proposed rule
change is not inconsistent with any
rules of OCC.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
OCC believes that the proposed rule
change will not impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments relating to the
proposed rule change have not been
solicited or received. OCC will notify
the Commission of any written
comments received by OCC.
6 15
E:\FR\FM\04APN1.SGM
U.S.C. 78q–1.
04APN1
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Federal Register / Vol. 77, No. 65 / Wednesday, April 4, 2012 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will: (A) by
order approve or disapprove the
proposed rule change or (B) institute
proceedings to determine whether the
proposed rule change should be
disapproved.
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
emcdonald on DSK29S0YB1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–OCC–2012–03. 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 Web site (https://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 Web site viewing and
printing in the Commission’s Public
Reference Section, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of 10
15:28 Apr 03, 2012
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.7
Kevin O’Neill,
Deputy Secretary.
[FR Doc. 2012–8035 Filed 4–3–12; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml) or
Send an email to rulecomments@sec.gov. Please include File
Number SR–OCC–2012–03 on the
subject line.
VerDate Mar<15>2010
a.m. and 3 p.m. Copies of such filings
will also be available for inspection and
copying at the principal office of OCC
and on OCC’s Web site at https://
www.optionsclearing.com/components/
docs/legal/rules_and_bylaws/
sr_occ_12_03.pdf.
All comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–OCC–2012–03 and should
be submitted on or before April 25,
2012.
Jkt 226001
Administrator’s Line of Succession
Designation, No. 1–A, Revision 33
This document replaces and
supersedes ‘‘Line of Succession
Designation No. 1–A, Revision 32.’’
Line of Succession Designation No. 1–
A, Revision 33:
Effective immediately, the
Administrator’s Line of Succession
Designation is as follows:
(a) In the event of my inability to
perform the functions and duties of my
position, or my absence from the office,
the Deputy Administrator will assume
all functions and duties of the
Administrator. In the event the Deputy
Administrator and I are both unable to
perform the functions and duties of the
position or are absent from our offices,
I designate the officials in listed order
below, if they are eligible to act as
Administrator under the provisions of
the Federal Vacancies Reform Act of
1998 (5 U.S.C. 3345–3349d), to serve as
Acting Administrator with full authority
to perform all acts which the
Administrator is authorized to perform:
(1) Chief of Staff;
(2) General Counsel;
(3) Chief Operating Officer;
(4) Associate Administrator, Office of
Disaster Assistance; and
(5) Regional Administrator for Region
8.
(b) Notwithstanding the provisions of
SBA Standard Operating Procedure 00
01 2, ‘‘absence from the office,’’ as used
7 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00122
Fmt 4703
Sfmt 4703
in reference to myself in paragraph (a)
above, means the following:
(1) I am not present in the office and
cannot be reasonably contacted by
phone or other electronic means, and
there is an immediate business necessity
for the exercise of my authority; or
(2) I am not present in the office and,
upon being contacted by phone or other
electronic means, I determine that I
cannot exercise my authority effectively
without being physically present in the
office.
(c) An individual serving in an acting
capacity in any of the positions listed in
subparagraphs (a)(1) through (5), unless
designated as such by the
Administrator, is not also included in
this Line of Succession. Instead, the
next non-acting incumbent in the Line
of Succession shall serve as Acting
Administrator.
(d) This designation shall remain in
full force and effect until revoked or
superseded in writing by the
Administrator, or by the Deputy
Administrator when serving as Acting
Administrator.
(e) Serving as Acting Administrator
has no effect on the officials listed in
subparagraphs (a)(1) through (5), above,
with respect to their full-time position’s
authorities, duties and responsibilities
(except that such official cannot both
recommend and approve an action).
Dated: March 15, 2012
Karen G. Mills,
Administrator.
[FR Doc. 2012–8015 Filed 4–3–12; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
Delegation of Authority; Delegation of
Authority No. 24 to the Chief Operating
Officer
U.S. Small Business
Administration.
ACTION: Notice of delegation of
authority.
AGENCY:
DATES: Effective March 15, 2012.
SUMMARY: This is notice that the
Administrator of Small Business
Administration (SBA) has delegated to
the Chief Operating Officer (COO) of
SBA management and supervisory
authority, with certain limited
exceptions noted below, over the Office
of the Chief Information Officer and the
Office of Management and
Administration, and responsibility for
coordinating and collaborating with
other relevant officers within the
Agency so as to achieve the mission and
goals of the Agency.
E:\FR\FM\04APN1.SGM
04APN1
Agencies
[Federal Register Volume 77, Number 65 (Wednesday, April 4, 2012)]
[Notices]
[Pages 20472-20474]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8035]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66676; File No. SR-OCC-2012-03]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change to More Closely Align OCC's
By-Laws and Rules with Regulatory Requirements Related to ``Statutory
Disqualifications''
March 29, 2012.
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 March 15, 2012, 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 primarily by OCC. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change would more closely align OCC's By-Laws and
Rules with applicable regulatory requirements related to ``statutory
disqualifications'' under the Act in order to reduce the overall
administrative burden on OCC associated with addressing the statutory
disqualification of OCC clearing members (``Clearing Members'') and
applicants for clearing membership (``Applicants'') while giving
guidance to Clearing Members and Applicants as to OCC's policies with
respect to statutory disqualifications.
II. Self-Regulatory Organization'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.\3\
---------------------------------------------------------------------------
\3\ The Commission has modified the text of the summaries
prepared by OCC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of this proposed rule change is to more closely align
OCC's By-Laws and Rules with applicable regulatory requirements related
to ``statutory disqualifications'' under the Act in order to reduce the
overall administrative burden on OCC associated with addressing the
statutory disqualification of Clearing Members and Applicants while
giving guidance to Clearing Members and Applicants as to OCC's policies
with respect to statutory disqualifications. OCC is also proposing to
amend its ``Fitness Standards for Directors, Clearing Members and
Others'' (``Fitness Standards'') to bring such standards into
conformity with the proposed amendments to OCC's By-Laws. The Fitness
Standards were submitted to the Commission in SR-OCC-2011-12 and
approved by the Commission on October 27, 2011.\4\
---------------------------------------------------------------------------
\4\ Securities Exchange Act Release No. 34-65648 (October 27,
2011), 76 FR 68236 (November 3, 2011).
---------------------------------------------------------------------------
Background
Persons who have engaged in certain types of misconduct are subject
to ``statutory disqualification,'' as defined by Section 3(a)(39) of
the Act, and must undergo a review by the Commission under Rule 19h-1
of the Act in order to enter or continue in membership in a self-
regulatory organization (``SRO''). Section 17A(b)(4)(A) of the Act
provides that a registered clearing agency may, and in cases in which
the Commission so orders must, deny participation to any person subject
to a statutory disqualification. This provision further requires a
registered clearing agency to provide the Commission with 30 days'
notice before admitting a statutorily disqualified person to clearing
membership. Rule 19h-1 of the Act implements these statutory provisions
by requiring notice to the Commission if a registered clearing agency
proposes either to admit to membership or to continue as a member a
person subject to a statutory disqualification. Notably, unlike in the
case of a national securities exchange or registered securities
association, the rule does not require a registered clearing agency to
file such a notice with respect to statutory disqualifications of
associated persons of a Member or Applicant. A registered clearing
agency is required to file such a notice only when the Member or
Applicant itself is subject to the disqualification.
Article V of OCC's By-Laws establishes the qualifications required
of Clearing Members and sets forth the procedures for admitting persons
to clearing membership, including those that are or become subject to a
statutory disqualification. Currently, Interpretation and Policy .03 of
Article V, Section 1 of OCC's By-Laws provides that the Membership/Risk
Committee (``Committee'') will not recommend the approval of an
application for membership if the Applicant or an associated person is
subject to a statutory disqualification unless the Committee makes a
finding that ``special circumstances'' exist warranting a waiver of the
statutory disqualification. The requirements of this By-Law are more
stringent than those applied to registered clearing agencies by the Act
or Commission rules because they require the Committee to (i) make
specific findings of ``special circumstances'' before recommending
membership approval and (ii) address statutory disqualifications of
associated persons. The By-Laws therefore impose additional
administrative burdens on OCC that are not required under any
[[Page 20473]]
statute or rule administered by the Commission.
Neither Article V of the By-Laws nor OCC's Rules currently contain
procedures for notice to OCC that an Applicant or Clearing Member is
subject to a statutory disqualification, which provides insufficient
guidance to Applicants and Clearing Members and exposes OCC to the risk
that such notice may be given on a delayed basis. OCC's By-Laws and
Rules are also silent as to the procedures to be followed by a Clearing
Member when it becomes subject to a statutory disqualification even
though Rule 19h-1 requires a registered clearing agency to file a
notice if it intends to permit such a firm to remain a Clearing Member.
As a registered derivatives clearing organization (``DCO''), OCC is
also subject to the jurisdiction of the Commodity Futures Trading
Commission (``CFTC''). OCC's By-Laws also address statutory
disqualification under Section 8a(2)-(4) of the Commodity Exchange Act
(``CEA''), which allows the CFTC to refuse to register or to suspend
the registration of futures commission merchants and other entities
required to register under the CEA. Neither the CEA nor the CFTC's
regulations require DCOs to file a notice similar to that required by
Rule 19h-1, and OCC therefore is not proposing to amend Article V or
the Rules to specifically address statutory disqualifications under the
CEA other than to clarify that if a principal of a futures commission
merchant is subject to a statutory disqualification, the Membership/
Risk Committee has discretion to not recommend the approval of such
futures commission merchant's application for membership pursuant to
Section 8a(2) of the CEA or to determine not to permit such a futures
commission merchant to continue in Clearing Membership.
In addition to being consistent with the Commission's regulations,
OCC's Fitness Standards, as described above, were constructed in part
to comply with core principles (``Core Principles'') applicable to DCOs
as these core principles were amended by the Dodd-Frank Wall Street
Reform and Consumer Protection Act and as are set forth in the CEA. The
Fitness Standards establish certain minimum fitness criteria for
directors, Clearing Members, and their affiliates sufficient to comply
with Core Principle O as set forth in the CEA.\5\ However, the Fitness
Standards were also drafted to conform to OCC's existing qualification
standards for Clearing Members, which standards OCC is now proposing to
revise. Accordingly, OCC proposes to amend the Fitness Standards to
conform them to the proposed amendments to the qualification standards
for Applicants and Clearing Members in OCC's By-Laws.
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\5\ Commodity Exchange Act Section 5b(c)(2)(O); 7 U.S.C. 7a-
1(c)(2)(O).
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Proposed By-Law Changes
Article V (Clearing Members) sets forth the qualifications for
Clearing Members. OCC proposes to amend the current Article V
provisions addressing statutory disqualifications to eliminate
provisions that require unnecessary Committee action and to add
provisions designed to ensure that OCC receives appropriate notice of a
statutory disqualification in order to discharge its obligations as an
SRO. The proposed amendments are generally based on similar rules of
the National Securities Clearing Corporation and the Chicago Board
Options Exchange. OCC proposes to amend Article V, Section 1,
Interpretation and Policy .03 (Experience and Competence) to:
1. Eliminate the requirement that the Committee must find ``special
circumstances'' warranting the waiver of a statutory disqualification
in order to recommend an Applicant's approval for clearing membership
providing instead that the Committee may in its discretion consider a
statutory disqualification in determining whether or not to recommend
approval.
2. Eliminate the requirement that the Committee address the status
of associated persons who are subject to statutory disqualifications.
3. Establish procedures requiring Clearing Members and Applicants
to provide notice of a statutory disqualification.
4. Eliminate the second paragraph of subsection c. The definition
of statutory disqualification in subsection a. includes the conduct
covered by Section 15(b)(4)(B) of the Act, making the second paragraph
of subsection c. redundant.
OCC proposes to amend Chapter II and Chapter XII of its Rules to:
1. Establish procedures applicable to Clearing Members who are or
become subject to a statutory disqualification to provide that: (i) OCC
has the discretion not to permit any such Clearing Member to continue
in Clearing Membership, (ii) such Clearing Member must notify OCC of
any statutory disqualification and may seek to continue in Clearing
Membership, (iii) a failure to notify OCC of a statutory
disqualification may be deemed a violation of OCC's rules, (iv) OCC may
convene a Disciplinary Committee to conduct a hearing concerning a
Clearing Member's statutory disqualification, (v) OCC has discretion to
waive such provisions if another self-regulatory organization is
conducting a proceeding addressing a Clearing Member's statutory
disqualification with respect to the same matter, and (vi) OCC has
discretion to waive the hearing provisions if OCC intends to grant the
Clearing Member's application to continue in Clearing Membership in
certain circumstances.
2. Add Interpretation and Policy .01 to Rule 1201 in order to
clarify that a decision to suspend or expel a Clearing Member after a
disciplinary proceeding under Chapter XII of the Rules would be grounds
for summary suspension under Chapter XI of the Rules.
OCC also proposes to amend its Fitness Standards to conform them to
the proposed amendments to OCC's By-Laws.
OCC believes that the proposed changes to its By-Laws are
consistent with the purposes and requirements of Section 17A of the Act
\6\ and the rules and regulations thereunder applicable to OCC because
they are designed to more closely align OCC's By-Laws and Rules with
applicable regulatory requirements, establish standard notification and
other procedures, provide Clearing Members with guidance as to OCC's
policies regarding statutory disqualifications, facilitate the timely
filing of notices pursuant to Rule 19h-1 should OCC determine to admit
to membership or continue in membership any person subject to a
statutory disqualification and are not designed to permit unfair
discrimination in the admission of participants or among participants
in the use of OCC. The proposed rule change is not inconsistent with
any rules of OCC.
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\6\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
OCC believes that the proposed rule change will not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Written comments relating to the proposed rule change have not been
solicited or received. OCC will notify the Commission of any written
comments received by OCC.
[[Page 20474]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change or (B)
institute proceedings to determine whether the proposed rule change
should be disapproved.
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 (https://www.sec.gov/rules/sro.shtml) or
Send an email to rule-comments@sec.gov. Please include File Number
SR-OCC-2012-03 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2012-03. 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 Web site (https://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 Web site viewing and
printing in the Commission's Public Reference Section, 100 F Street
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filings will also be available for
inspection and copying at the principal office of OCC and on OCC's Web
site at https://www.optionsclearing.com/components/docs/legal/rules_and_bylaws/sr_occ_12_03.pdf.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-OCC-2012-03
and should be submitted on or before April 25, 2012.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2012-8035 Filed 4-3-12; 8:45 am]
BILLING CODE 8011-01-P