Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change To Amend Policy Statement Adopted Under Rule 205 Entitled “Back-Up Communication Channel to Internet Access”, 63263-63264 [2013-24768]

Download as PDF Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Notices fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such 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. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 14 of the Act to determine whether the proposed rule change should be approved or 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: emcdonald on DSK67QTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml ); or • Send an email to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2013–102 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–NYSEArca–2013–102. 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 (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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official 14 15 U.S.C. 78s(b)(2)(B). VerDate Mar<15>2010 18:13 Oct 22, 2013 Jkt 232001 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 the Exchange. 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– NYSEArca–2013–102, and should be submittedon or before November 13, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–24767 Filed 10–22–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70704; File No. SR–OCC– 2013–10] Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change To Amend Policy Statement Adopted Under Rule 205 Entitled ‘‘Back-Up Communication Channel to Internet Access’’ October 17, 2013. I. Introduction On August 23, 2013, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change SR–OCC–2013–10 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 September 5, 2013.3 The Commission received no comment letters regarding the proposed rule change. For the reasons discussed below, the Commission is granting approval of the proposed rule change. II. Description OCC is making certain changes to its Policy Statement adopted under OCC Rule 205 4 entitled ‘‘Back-up 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Exchange Act Release No. 34–70289 (August 29, 2013), 78 FR 54707 (September 5, 2013). 4 OCC Rule 205, in relevant part, prescribes that clearing members shall submit instructions, notices, reports, data, and other items to the Corporation by 15 1 15 PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 63263 Communication Channel to Internet Access’’ requiring clearing members that use the internet as their primary means to access OCC’s information and data systems to maintain a secure back-up means of communication in order to provide for business continuance in the event of an internet outage. In 2006, OCC adopted a Policy Statement under Rule 205 requiring clearing members that primarily use the internet to access OCC’s systems to maintain: (i) An OCC-approved method for accessing OCC’s information and data systems in order to perform, on a timely basis, critical business activities in the event of an internet outage (‘‘Back-Up Communication Channel’’), and (ii) separate service arrangements with two independent internet service providers.5 Guidelines were established so that the Back-Up Communication Channel authorized for a particular clearing member was determined in accordance with the firm’s business profile using certain criteria. OCC believes that the existing Policy Statement gives OCC the ability to designate a clearing member within a particular Back-Up Communication Channel category, if the clearing member meets any of the criteria that are enumerated under the particular category.6 For example, a clearing member that: (i) Ranked among the top twenty-five clearing members by cleared volume during a calendar year; (ii) cleared more than one account type as defined in OCC’s By-Laws and Rules; (iii) cleared two or more product types; (iv) conducted Clearing Member Trade Assignment (‘‘CMTA’’) business; (v) input a high volume of daily post-trade activity; (vi) generally utilized multiple forms of collateral; (vii) utilized most ancillary services offered by OCC; or (viii) used a lease line for data transmissions, would generally be designated as a ‘‘Category A’’ firm. ‘‘Category A’’ firms were required to electronic data entry in accordance with procedures prescribed or approved by the OCC. OCC supports the submission of these instructions, notices, reports, data and other items through use of an Internet connection to OCC’s secured Web site. 5 Securities Exchange Act Release No. 53980 (June 14, 2006), 71 FR 36155 (June 23, 2006)(SR– OCC–2006–04). 6 Email from Bruce Kelber, Vice President and Associate General Counsel, OCC, to Wyatt Robinson, Attorney Adviser, Division of Trading and Markets, Securities and Exchange Commission (October 15, 2013) (stating that the criteria used to determine whether a particular firm should be designated as a Category A firm, Category B firm, or Category C firm under OCC’s existing policy statement is intended to be interpreted as ‘‘or’’ statements.) OCC believes that the same interpretation will apply to the Policy Statement after changes pursuant to the proposed rule change are implemented. Id. E:\FR\FM\23OCN1.SGM 23OCN1 emcdonald on DSK67QTVN1PROD with NOTICES 63264 Federal Register / Vol. 78, No. 205 / Wednesday, October 23, 2013 / Notices maintain a T1 line as an acceptable form of Back-Up Communication Channel. A clearing member that: (i) Transacted mid-level cleared volume during a calendar year; (ii) cleared one or more account types as defined in OCC’s ByLaws and Rules; (iii) cleared one or more product types; (iv) input a moderate to small volume of post-trade activity; (v) generally utilized one or two forms of collateral; or (vi) may have utilized a lease line for data transmissions, were generally designated as a ‘‘Category B’’ firm. Under the Policy Statement, ‘‘Category B’’ firms had the option to either maintain a T1 line or ISDN connection as acceptable forms of a Back-Up Communication Channel. A clearing member that: (i) Transacted low-level cleared volume during a calendar year; (ii) cleared no more than one account type as defined in OCC’s By-Laws and Rules; (iii) cleared no more than one product type; (iv) generally utilized one or two forms of collateral; or (v) input minimal amounts of posttrade activity, would generally be designated as a ‘‘Category C’’ firm. ‘‘Category C’’ firms were given the option to maintain an ISDN connection, utilize OCC equipment if the clearing member was located in or near a city where OCC maintains operational center(s), or rely upon fax transmission in the event an internet connection was not available. According to OCC, recent denial of service attacks on financial institutions, along with changes in technology since the Policy Statement was first adopted, have prompted OCC to reassess the potential risks to operations should internet connections supporting clearing member access to OCC’s information and data systems be interrupted. Through this assessment, OCC has determined that its existing policy should be modified to ensure that it is easily understood and properly implemented by the clearing membership. OCC is now updating the Policy Statement to simplify the criteria applied to a given firm in determining the appropriate Back-Up Communication Channel. Instead of having three categories of business profiles that include several criteria to be applied, and offering multiple communication options available to a particular firm, the updated Policy Statement will contain two profiles. Clearing members that rank in the top25 of cleared volume during a calendar year, or act as a facilities manager to one or more clearing firms, will be designated as a ‘‘Category A’’ firm, and will be required to maintain a T1 line VerDate Mar<15>2010 18:13 Oct 22, 2013 Jkt 232001 as its Back-Up Communication Channel. All other firms will be designated as ‘‘Category B’’ firms, and will be required to maintain a T1 line or utilize a fax line, telephone or have ready access to an OCC office location. OCC believes the proposed changes will present minimal to no impact to clearing members. According to OCC, all firms that were previously designated as ‘‘Category A’’ firms under the former policy will continue to be designated as ‘‘Category A’’ firms under the revised policy, and they will still be required to maintain a T1 line. Those firms that will be designated as Category B firms under the revised policy will now have increased flexibility under the back-up options being made available to them, in that they can select between a T1 Line, fax, telephone, or use an OCC office if they are located in a city where OCC maintains an operational center.7 OCC is also clarifying the Policy Statement by expressly adding a requirement for each clearing member to provide OCC with an annual statement that the clearing member: (i) Has been and continues to be in compliance with the Policy Statement since the last reporting period; (ii) has successfully tested its ability to access OCC’s information and data systems using its Back-Up Communication Channel since the last reporting period; and (iii) will notify OCC within a reasonable period of any changes to their internet service providers since the date of the last notice provided to OCC. OCC believes that this modification will help eliminate any ambiguity that may exist with respect to responsibility of clearing members to comply with the Policy Statement and help ensure that OCC has sufficient information to troubleshoot in case of an internet outage, thereby helping to ensure that critical business activities can still be performed in a timely manner. III. Discussion Section 19(b)(2)(C) of the Act 8 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. Section 17A(b)(3)(F) of the Act 9 requires that the rules of a registered clearing agency be designed to, among other things, promote the prompt and accurate clearance and settlement of securities transactions. The Commission finds that the rule change is consistent with Section 17A(b)(3)(F) of the Act 10 because revising the Policy Statement to simplify the criteria used to determine the authorized Back-Up Communication Channel(s) that may be used by a given clearing member should reduce the administrative oversight by OCC and clearing members associated with making such determinations, freeing up resources otherwise directed to this purpose. Furthermore, OCC’s requirement that a clearing member confirm its ability to access OCC’s systems through testing should help to ensure that critical business activities can still be performed in a timely manner even in the event of an internet outage. IV. 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 11 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,12 that the proposed rule change (File No. SR– OCC–2013–10) be and hereby is approved.13 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.14 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–24768 Filed 10–22–13; 8:45 am] BILLING CODE 8011–01–P 7 In preparation for the revisions to the Policy Statement, OCC has acquired new fax servers that have increased bandwidth to support multiple users that may select facsimile transmission as their available back-up communication method. Meanwhile, the telephone features used by OCC’s Member Service staff are equipped so that calls are automatically routed to an available representative in the event a firm’s designated contact is unavailable. Finally, OCC has confirmed that: the number of Category B firms located in a city where OCC maintains an office that do not currently maintain a T1 line is sufficiently small enough so that OCC will be able to accommodate those firms who may need to utilize OCC’s equipment in the event of an Internet outage. 8 15 U.S.C. 78s(b)(2)(C). PO 00000 Frm 00107 Fmt 4703 Sfmt 9990 9 15 U.S.C. 78q–1(b)(3)(F). 10 Id. 11 15 U.S.C. 78q–1. U.S.C. 78s(b)(2). 13 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 14 17 CFR 200.30–3(a)(12). 12 15 E:\FR\FM\23OCN1.SGM 23OCN1

Agencies

[Federal Register Volume 78, Number 205 (Wednesday, October 23, 2013)]
[Notices]
[Pages 63263-63264]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24768]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70704; File No. SR-OCC-2013-10]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving Proposed Rule Change To Amend Policy Statement Adopted 
Under Rule 205 Entitled ``Back-Up Communication Channel to Internet 
Access''

October 17, 2013.

I. Introduction

    On August 23, 2013, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change SR-OCC-2013-10 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 September 5, 2013.\3\ The Commission received 
no comment letters regarding the proposed rule change. For the reasons 
discussed below, the Commission is granting approval of the proposed 
rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Exchange Act Release No. 34-70289 (August 29, 2013), 78 FR 
54707 (September 5, 2013).
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II. Description

    OCC is making certain changes to its Policy Statement adopted under 
OCC Rule 205 \4\ entitled ``Back-up Communication Channel to Internet 
Access'' requiring clearing members that use the internet as their 
primary means to access OCC's information and data systems to maintain 
a secure back-up means of communication in order to provide for 
business continuance in the event of an internet outage.
---------------------------------------------------------------------------

    \4\ OCC Rule 205, in relevant part, prescribes that clearing 
members shall submit instructions, notices, reports, data, and other 
items to the Corporation by electronic data entry in accordance with 
procedures prescribed or approved by the OCC. OCC supports the 
submission of these instructions, notices, reports, data and other 
items through use of an Internet connection to OCC's secured Web 
site.
---------------------------------------------------------------------------

    In 2006, OCC adopted a Policy Statement under Rule 205 requiring 
clearing members that primarily use the internet to access OCC's 
systems to maintain: (i) An OCC-approved method for accessing OCC's 
information and data systems in order to perform, on a timely basis, 
critical business activities in the event of an internet outage 
(``Back-Up Communication Channel''), and (ii) separate service 
arrangements with two independent internet service providers.\5\
---------------------------------------------------------------------------

    \5\ Securities Exchange Act Release No. 53980 (June 14, 2006), 
71 FR 36155 (June 23, 2006)(SR-OCC-2006-04).
---------------------------------------------------------------------------

    Guidelines were established so that the Back-Up Communication 
Channel authorized for a particular clearing member was determined in 
accordance with the firm's business profile using certain criteria. OCC 
believes that the existing Policy Statement gives OCC the ability to 
designate a clearing member within a particular Back-Up Communication 
Channel category, if the clearing member meets any of the criteria that 
are enumerated under the particular category.\6\ For example, a 
clearing member that: (i) Ranked among the top twenty-five clearing 
members by cleared volume during a calendar year; (ii) cleared more 
than one account type as defined in OCC's By-Laws and Rules; (iii) 
cleared two or more product types; (iv) conducted Clearing Member Trade 
Assignment (``CMTA'') business; (v) input a high volume of daily post-
trade activity; (vi) generally utilized multiple forms of collateral; 
(vii) utilized most ancillary services offered by OCC; or (viii) used a 
lease line for data transmissions, would generally be designated as a 
``Category A'' firm. ``Category A'' firms were required to

[[Page 63264]]

maintain a T1 line as an acceptable form of Back-Up Communication 
Channel.
---------------------------------------------------------------------------

    \6\ Email from Bruce Kelber, Vice President and Associate 
General Counsel, OCC, to Wyatt Robinson, Attorney Adviser, Division 
of Trading and Markets, Securities and Exchange Commission (October 
15, 2013) (stating that the criteria used to determine whether a 
particular firm should be designated as a Category A firm, Category 
B firm, or Category C firm under OCC's existing policy statement is 
intended to be interpreted as ``or'' statements.) OCC believes that 
the same interpretation will apply to the Policy Statement after 
changes pursuant to the proposed rule change are implemented. Id.
---------------------------------------------------------------------------

    A clearing member that: (i) Transacted mid-level cleared volume 
during a calendar year; (ii) cleared one or more account types as 
defined in OCC's By-Laws and Rules; (iii) cleared one or more product 
types; (iv) input a moderate to small volume of post-trade activity; 
(v) generally utilized one or two forms of collateral; or (vi) may have 
utilized a lease line for data transmissions, were generally designated 
as a ``Category B'' firm. Under the Policy Statement, ``Category B'' 
firms had the option to either maintain a T1 line or ISDN connection as 
acceptable forms of a Back-Up Communication Channel.
    A clearing member that: (i) Transacted low-level cleared volume 
during a calendar year; (ii) cleared no more than one account type as 
defined in OCC's By-Laws and Rules; (iii) cleared no more than one 
product type; (iv) generally utilized one or two forms of collateral; 
or (v) input minimal amounts of post-trade activity, would generally be 
designated as a ``Category C'' firm. ``Category C'' firms were given 
the option to maintain an ISDN connection, utilize OCC equipment if the 
clearing member was located in or near a city where OCC maintains 
operational center(s), or rely upon fax transmission in the event an 
internet connection was not available.
    According to OCC, recent denial of service attacks on financial 
institutions, along with changes in technology since the Policy 
Statement was first adopted, have prompted OCC to reassess the 
potential risks to operations should internet connections supporting 
clearing member access to OCC's information and data systems be 
interrupted. Through this assessment, OCC has determined that its 
existing policy should be modified to ensure that it is easily 
understood and properly implemented by the clearing membership.
    OCC is now updating the Policy Statement to simplify the criteria 
applied to a given firm in determining the appropriate Back-Up 
Communication Channel. Instead of having three categories of business 
profiles that include several criteria to be applied, and offering 
multiple communication options available to a particular firm, the 
updated Policy Statement will contain two profiles. Clearing members 
that rank in the top-25 of cleared volume during a calendar year, or 
act as a facilities manager to one or more clearing firms, will be 
designated as a ``Category A'' firm, and will be required to maintain a 
T1 line as its Back-Up Communication Channel. All other firms will be 
designated as ``Category B'' firms, and will be required to maintain a 
T1 line or utilize a fax line, telephone or have ready access to an OCC 
office location.
    OCC believes the proposed changes will present minimal to no impact 
to clearing members. According to OCC, all firms that were previously 
designated as ``Category A'' firms under the former policy will 
continue to be designated as ``Category A'' firms under the revised 
policy, and they will still be required to maintain a T1 line. Those 
firms that will be designated as Category B firms under the revised 
policy will now have increased flexibility under the back-up options 
being made available to them, in that they can select between a T1 
Line, fax, telephone, or use an OCC office if they are located in a 
city where OCC maintains an operational center.\7\
---------------------------------------------------------------------------

    \7\ In preparation for the revisions to the Policy Statement, 
OCC has acquired new fax servers that have increased bandwidth to 
support multiple users that may select facsimile transmission as 
their available back-up communication method. Meanwhile, the 
telephone features used by OCC's Member Service staff are equipped 
so that calls are automatically routed to an available 
representative in the event a firm's designated contact is 
unavailable. Finally, OCC has confirmed that: the number of Category 
B firms located in a city where OCC maintains an office that do not 
currently maintain a T1 line is sufficiently small enough so that 
OCC will be able to accommodate those firms who may need to utilize 
OCC's equipment in the event of an Internet outage.
---------------------------------------------------------------------------

    OCC is also clarifying the Policy Statement by expressly adding a 
requirement for each clearing member to provide OCC with an annual 
statement that the clearing member: (i) Has been and continues to be in 
compliance with the Policy Statement since the last reporting period; 
(ii) has successfully tested its ability to access OCC's information 
and data systems using its Back-Up Communication Channel since the last 
reporting period; and (iii) will notify OCC within a reasonable period 
of any changes to their internet service providers since the date of 
the last notice provided to OCC. OCC believes that this modification 
will help eliminate any ambiguity that may exist with respect to 
responsibility of clearing members to comply with the Policy Statement 
and help ensure that OCC has sufficient information to troubleshoot in 
case of an internet outage, thereby helping to ensure that critical 
business activities can still be performed in a timely manner.

III. Discussion

    Section 19(b)(2)(C) of the Act \8\ 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. Section 17A(b)(3)(F) of the Act \9\ requires that the 
rules of a registered clearing agency be designed to, among other 
things, promote the prompt and accurate clearance and settlement of 
securities transactions.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(2)(C).
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The Commission finds that the rule change is consistent with 
Section 17A(b)(3)(F) of the Act \10\ because revising the Policy 
Statement to simplify the criteria used to determine the authorized 
Back-Up Communication Channel(s) that may be used by a given clearing 
member should reduce the administrative oversight by OCC and clearing 
members associated with making such determinations, freeing up 
resources otherwise directed to this purpose. Furthermore, OCC's 
requirement that a clearing member confirm its ability to access OCC's 
systems through testing should help to ensure that critical business 
activities can still be performed in a timely manner even in the event 
of an internet outage.
---------------------------------------------------------------------------

    \10\ Id.
---------------------------------------------------------------------------

IV. 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 \11\ and the 
rules and regulations thereunder.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (File No. SR-OCC-2013-10) be and 
hereby is approved.\13\
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    \12\ 15 U.S.C. 78s(b)(2).
    \13\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24768 Filed 10-22-13; 8:45 am]
BILLING CODE 8011-01-P