Self-Regulatory Organizations; the Options Clearing Corporation; Notice of Filing of Proposed Rule Change Concerning Amendments to the Charters for the Membership/Risk Committee, Audit Committee and Performance Committee of OCC's Board of Directors, 3653-3655 [2014-01107]

Download as PDF Federal Register / Vol. 79, No. 14 / Wednesday, January 22, 2014 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71311; File No. SR–OCC– 2014–01] Self-Regulatory Organizations; the Options Clearing Corporation; Notice of Filing of Proposed Rule Change Concerning Amendments to the Charters for the Membership/Risk Committee, Audit Committee and Performance Committee of OCC’s Board of Directors January 15, 2014. 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 January 2, 2014, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by OCC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change This proposed rule change concerns amendments to the Charters for the Membership/Risk Committee (‘‘MRC Charter’’), Audit Committee (‘‘AC Charter’’) and Performance Committee (‘‘PC Charter’’) (collectively, the ‘‘Committee Charters’’) of OCC’s Board of Directors (‘‘Board’’). II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, OCC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements 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. emcdonald on DSK67QTVN1PROD with NOTICES (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (1) Purpose On an annual basis, each Committee is required to review its charter and recommend changes, if any, to the Board for approval. This proposed rule change concerns proposed amendments to the MRC Charter, AC Charter and PC 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Mar<15>2010 16:00 Jan 21, 2014 Jkt 232001 Charter and is a result of that review and approval process.3 All of the proposed amendments have been approved by the Board. Common Changes Each Committee Charter 4 is proposed to be amended to more clearly set forth certain uniform administrative functions of the Membership/Risk Committee (‘‘MRC’’), Audit Committee (‘‘AC’’) and Performance Committee (‘‘PC’’) (collectively, ‘‘Committees’’). Such functions include: (1) Each Committee Chair is responsible for ensuring that important issues discussed at Committee meetings are timely reported to the Board, (2) each Committee Chair is allowed to determine if minutes of executive sessions will be maintained, (3) each Committee will annually confirm that all responsibilities outlined in its charter have been carried out, and (4) the Committees’ and individual members’ performance shall be evaluated on a regular basis and that the results of such assessment are provide [sic] to the Governance Committee (‘‘GC’’) for review. OCC also proposes to amend the MRC Charter, AC Charter and PC Charter to better reflect certain specific functions of MRC, AC and PC, respectively. Such proposed amendments are discussed in greater detail below. Membership/Risk Committee The MRC assists the Board in overseeing OCC’s policies and processes for identifying and addressing strategic, operational and financial risks. The MRC has had longstanding authority to review OCC’s risk management functions and practices, and consistent with that authority, OCC is proposing to amend the MRC Charter to more clearly provide for the MRC’s oversight over the activities of the Chief Risk Officer (‘‘CRO’’). Specifically, the proposed amendments to the MRC Charter will 3 At its meeting on May 21, 2013, OCC’s Board authorized formation of a Governance Committee (‘‘GC’’) and approved the GC Charter at its September 24, 2013, meeting. As set forth in the GC Charter, the purpose of the GC is to review the overall corporate governance of OCC and recommend improvements to OCC’s Board. Changes to the GC Charter are not included in this rule filing because the GC was only recently formed. The GC work is ongoing and the MRC, the AC and the PC continue to discharge their obligations under their respective charters. The GC Charter was submitted as an Advance Notice filing on November 26, 2013. See Securities Exchange Act Release No. 71083 (December 16, 2013), 78 FR 76181 (December 20, 2013), (SR–OCC–2013–807). 4 The current versions of the Committee Charters were approved on December 6, 2013. See Securities Exchange Act Release No. 71022 (December 6, 2013), 78 FR 75659 (December 12, 2013), (SR–OCC– 2013–17). PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 3653 expressly provide that: (1) The MRC will meet at least annually with the CRO in executive session, (2) the MRC has the authority to approve management’s decision to appoint or replace the CRO, (3) the MRC will assess the performance of the CRO and OCC’s Enterprise Risk Management (‘‘ERM’’) Department as well as oversee the structure, staffing and resources of the ERM Department, and (4) the MRC shall approve the CRO’s salary, the MRC Chair will participate in the PC meeting in which compensation for senior management is determined and the MRC Chair has delegated authority to modify the CRO’s prior approved salary based on the discussions at such PC meeting. In addition, OCC proposes to amend the MRC Charter to expressly state that the MRC has authority to review and recommend the OCC Risk Appetite Statement 5 to the Board for approval, and to review and monitor OCC’s risk profile for consistency with such statement. Audit Committee The AC assists the Board in overseeing OCC’s financial reporting process, OCC’s system of internal control and OCC’s auditing, accounting and compliance processes. The AC has had longstanding authority to review OCC’s independent accountant and, consistent with that authority, OCC proposes to amend the AC Charter to more clearly describe such authority. Specifically, OCC proposes to amend the AC Charter to expressly provide that the AC has the authority to pre-approve the appointment and dismissal of OCC’s independent accountant as well as assess OCC’s independent accountant’s qualifications, performance and independence. These proposed changes align with best practices and reflect the AC’s oversight of the external auditor to better assure independence in connection with the performance of the external auditors’ function and services. In addition, OCC proposes to amend the AC Charter to reflect the AC’s oversight role in the structure, staffing and resources of OCC’s Internal Audit Department, to recognize that OCC’s Internal Audit Department will utilize co-sourced resources 6 and that OCC’s 5 OCC’s Risk Appetite Statement is a key component of its enterprise risk management program. The Risk Appetite Statement assists OCC management and its Board to more effectively communicate and monitor OCC’s tolerance for risk taking. The Risk Appetite Statement sets the standards on which all of OCC’s risk identification, measurement, monitoring, and testing are based. 6 Co-sourced resources are consultants hired on a temporary basis to assist with a particular project when OCC’s Internal Audit Department staff is E:\FR\FM\22JAN1.SGM Continued 22JAN1 3654 Federal Register / Vol. 79, No. 14 / Wednesday, January 22, 2014 / Notices emcdonald on DSK67QTVN1PROD with NOTICES Chief Audit Executive (‘‘CAE’’) will recommend to the AC a co-sourced resource hour budget. The CAE is the head of OCC’s Internal Audit Department and reports to OCC’s Chairman and to the AC Chair. The CAE is a new title provided to the current senior staff person in OCC’s Internal Audit Department. If the budget is approved, it is proposed that the CAE will be delegated authority to (1) hire internal audit cosourced service providers to augment OCC’s Internal Audit Department, as necessary, or for any other practical purpose, (2) review the performance of the internal audit co-sourcing service providers, and exercise final approval on the appointment, retention and discharge of such service providers, and (3) approve the scope of services to be performed by internal audit co-sourcing service providers. OCC proposes that the AC will oversee any co-sourcing activity while delegating the administrative aspects of the arrangement to the CAE in order to efficiently manage the process while not overburdening the AC. Moreover, OCC proposes to amend the AC Charter to provide that the AC shall approve the CAE’s salary, to require the AC Chair to participate in the PC meeting in which compensation for senior management is determined and to delegate authority to the AC Chair to modify the CAE’s prior approved salary based on the discussion at such PC meeting. Performance Committee The PC assists the Board in (i) overseeing the overall performance of OCC in promptly and accurately delivering, clearance, settlement and other designated industry services, and the accomplishment of other periodically established corporate goals and objectives in light of OCC’s role as a systemically important financial market utility; (ii) recommending the compensation of the Chairman, the Management Vice Chairman, and President to the Board and approving the compensation of certain other officers, and (iii) reviewing and approving the structure and design of employee compensation, incentive and benefit programs. In connection therewith, OCC proposes to amend the PC Charter to provide that (1) the PC Chair will meet at least annually in private sessions with the GC Chair to discuss the performance of key officers, and (2) the PC will meet annually to otherwise fully engaged and requires additional resources or skill sets to complete a project on a timely basis. VerDate Mar<15>2010 16:00 Jan 21, 2014 Jkt 232001 discuss compensation levels of key officers and that the Chairs of the AC and MRC will be invited to attend such meeting with respect to the compensations levels of the CAE and CRO, respectively. necessary or appropriate in furtherance of the purposes of the Act. (2) Statutory Basis Written comments on the proposed rule change were not and are not intended to be solicited with respect to the proposed rule change and none have been received. OCC believes that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act 7 and the rules and regulations thereunder because the proposed amendments to the Committee Charters clarify the roles of the Committees and will help ensure that OCC’s governance structure is designed to protect investors and the public interest. By adopting certain proposed clarifying amendments to the MRC Charter, AC Charter and PC Charter that specify the duties and operations of such Committees, OCC will further ensure, as required under Rule 17Ad– 22(d)(8), a clear and transparent governance structure that will fulfill the public interests requirements in Section 17A of the Act, support the objectives of OCC’s owners and participants, and promote the effectiveness of OCC’s risk management procedures.8 The proposed rule change is not inconsistent with the existing rules of OCC, including any other rules proposed to be amended. (B) Clearing Agency’s Statement on Burden on Competition OCC does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.9 This proposed rule change will help ensure that OCC meets regulatory requirements that it has a clear and transparent governance structure, as well as clarify the duties and operation of the Committees, through the amendment of the Committee Charters. To the extent OCC’s clearing members are affected by the proposed rule change, OCC believes that, by clarifying the terms of the Committee Charters, OCC will not disadvantage or favor any particular user in relationship to another user because all of its participants will equally have greater certainty and visibility concerning OCC’s governance arrangements and that such clarification will facilitate the prompt and accurate settlement of securities transactions. Accordingly, OCC does not believe that the proposed rule will impose any burden on competition that is not 7 15 U.S.C. 78q–1(b)(3)(F). CFR 240.17Ad–22(d)(8). 9 15 U.S.C. 78q–1(b)(3)(I). 8 17 PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others 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 such 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–2014–01 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–2014–01. 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 E:\FR\FM\22JAN1.SGM 22JAN1 Federal Register / Vol. 79, No. 14 / Wednesday, January 22, 2014 / Notices 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 20549–1090 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of OCC and on OCC’s Web site: https://www.theocc.com/components/ docs/legal/rules_and_bylaws/sr_occ_14_ 01.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–2014–01 and should be submitted on or before February 12, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–01107 Filed 1–21–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71310; File No. SR–MIAX– 2014–01] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Quarterly Options Series Program To Eliminate the Cap on the Number of Additional Series That May Be Listed per Expiration Month for Each Quarterly Options Series in ETF Options emcdonald on DSK67QTVN1PROD with NOTICES January 15, 2014. Pursuant to the provisions of 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 January 13, 2014, Miami International Securities Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I and II below, which Items have been prepared by the 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 16:00 Jan 21, 2014 Jkt 232001 Exchange. 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 is filing a proposal to amend Rule 404 to eliminate the cap on the number of additional series that may be listed per expiration month for each Quarterly Option Series (‘‘QOS’’) in exchange-traded fund (‘‘ETF’’) options. The text of the proposed rule change is available on the Exchange’s Web site at https://www.miaxoptions.com/filter/ wotitle/rule_filing, at MIAX’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange 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. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to amend Exchange Rule 404 to eliminate the cap on the number of additional series that may be listed per expiration month for each QOS in ETF options.3 This is a competitive filing that is based on proposals recently submitted by NYSE Arca, Inc. (‘‘NYSE Acra’’) and NYSE MKT LLC (‘‘NYSE MKT’’).4 As set out in Exchange Rule 404.03, the Exchange may list QOS for up to five currently listed options classes that are options on ETFs. The Exchange may also list QOS 3 A Quarterly Option Series is a series of an option class that is approved for listing and trading on the Exchange in which the series is opened for trading on any business day, and that expires at the close of business on the last business day of a calendar quarter. The Exchange lists series that expire at the end of the next consecutive four (4) calendar quarters, as well as the fourth quarter of the next calendar year. See Rule 404.03. 4 See Securities Exchange Act Release Nos. 70855 (November 13, 2013) 78 FR 69493 (November 19, 2013) (SR–NYSEArca–2013–120); 70854 (November 13, 2013) 78 FR 69465 (November 19, 2013) (SR– NYSEMKT–2013–90). PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 3655 on any option classes that are selected by other securities exchanges that employ a similar program under their respective rules. Currently, for each QOS in ETF options that has been initially listed on the Exchange, the Exchange may list up to 60 additional series per expiration month.5 The Exchange is proposing to amend Rule 404.03(d) to make the treatment of QOS in ETF options consistent with the treatment of QOS on other options exchanges.6 The Exchange believes that the proposed revision to the QOS Program would provide market participants with the ability to better tailor their trading to meet their investment objectives, including hedging securities positions, by permitting the Exchange to list additional QOS in ETF options that meet such objectives. The Exchange has observed that situations arise in which additional strike prices in smaller intervals would be valuable to investors. However, due to the cap on additional QOS series the Exchange cannot always provide these important at-the-money strikes. Elimination of the cap would remedy this issue. Currently, the Exchange lists quarterly expiration options on ETFs, but the cap restricts the number of strikes on these options, which often results in a lack of strike continuity. For example, the Exchange lists quarterly expiration options on SPDR Gold Trust (‘‘GLD’’). On January 2, 2013, the Exchange could have initially listed December 31, 2013 quarterly expiration options (‘‘December 2013 Quarterlies’’) on GLD, which closed the previous trading day at $162.02, with initial strikes from $115 to $210, and additional strikes in $1 intervals from $131 to $189. But during 2013, GLD has closed at a range of $115.94 to $163.67 and is currently trading around $118. As a result of the cap, the Exchange could not offer December 2013 Quarterlies on GLD in $1 intervals within $10 of the closing price of GLD because the number of strikes would exceed the cap of 60 additional strikes. Consequently, the Exchange is not able to list important atthe-money strikes due to the cap on additional strikes. While the Exchange has the ability to delist strikes with no open interest so that it may list strikes that are closer to the money, delisting is not always possible. If all of the existing strikes have open interest, the Exchange cannot delist strikes so that it may list strikes closer to the money. 5 See Exchange Rule 404.03(d). NYSE Arca Rule 6.4 Commentary .08(ii) and NYSE MKT Rule 903 Commentary .09(d). 6 See E:\FR\FM\22JAN1.SGM 22JAN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 14 (Wednesday, January 22, 2014)]
[Notices]
[Pages 3653-3655]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01107]



[[Page 3653]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71311; File No. SR-OCC-2014-01]


Self-Regulatory Organizations; the Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change Concerning Amendments to the 
Charters for the Membership/Risk Committee, Audit Committee and 
Performance Committee of OCC's Board of Directors

January 15, 2014.
    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 January 2, 2014, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared 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.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    This proposed rule change concerns amendments to the Charters for 
the Membership/Risk Committee (``MRC Charter''), Audit Committee (``AC 
Charter'') and Performance Committee (``PC Charter'') (collectively, 
the ``Committee Charters'') of OCC's Board of Directors (``Board'').

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, OCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. OCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

(1) Purpose
    On an annual basis, each Committee is required to review its 
charter and recommend changes, if any, to the Board for approval. This 
proposed rule change concerns proposed amendments to the MRC Charter, 
AC Charter and PC Charter and is a result of that review and approval 
process.\3\ All of the proposed amendments have been approved by the 
Board.
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    \3\ At its meeting on May 21, 2013, OCC's Board authorized 
formation of a Governance Committee (``GC'') and approved the GC 
Charter at its September 24, 2013, meeting. As set forth in the GC 
Charter, the purpose of the GC is to review the overall corporate 
governance of OCC and recommend improvements to OCC's Board. Changes 
to the GC Charter are not included in this rule filing because the 
GC was only recently formed. The GC work is ongoing and the MRC, the 
AC and the PC continue to discharge their obligations under their 
respective charters. The GC Charter was submitted as an Advance 
Notice filing on November 26, 2013. See Securities Exchange Act 
Release No. 71083 (December 16, 2013), 78 FR 76181 (December 20, 
2013), (SR-OCC-2013-807).
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Common Changes
    Each Committee Charter \4\ is proposed to be amended to more 
clearly set forth certain uniform administrative functions of the 
Membership/Risk Committee (``MRC''), Audit Committee (``AC'') and 
Performance Committee (``PC'') (collectively, ``Committees''). Such 
functions include: (1) Each Committee Chair is responsible for ensuring 
that important issues discussed at Committee meetings are timely 
reported to the Board, (2) each Committee Chair is allowed to determine 
if minutes of executive sessions will be maintained, (3) each Committee 
will annually confirm that all responsibilities outlined in its charter 
have been carried out, and (4) the Committees' and individual members' 
performance shall be evaluated on a regular basis and that the results 
of such assessment are provide [sic] to the Governance Committee 
(``GC'') for review.
---------------------------------------------------------------------------

    \4\ The current versions of the Committee Charters were approved 
on December 6, 2013. See Securities Exchange Act Release No. 71022 
(December 6, 2013), 78 FR 75659 (December 12, 2013), (SR-OCC-2013-
17).
---------------------------------------------------------------------------

    OCC also proposes to amend the MRC Charter, AC Charter and PC 
Charter to better reflect certain specific functions of MRC, AC and PC, 
respectively. Such proposed amendments are discussed in greater detail 
below.
Membership/Risk Committee
    The MRC assists the Board in overseeing OCC's policies and 
processes for identifying and addressing strategic, operational and 
financial risks. The MRC has had longstanding authority to review OCC's 
risk management functions and practices, and consistent with that 
authority, OCC is proposing to amend the MRC Charter to more clearly 
provide for the MRC's oversight over the activities of the Chief Risk 
Officer (``CRO''). Specifically, the proposed amendments to the MRC 
Charter will expressly provide that: (1) The MRC will meet at least 
annually with the CRO in executive session, (2) the MRC has the 
authority to approve management's decision to appoint or replace the 
CRO, (3) the MRC will assess the performance of the CRO and OCC's 
Enterprise Risk Management (``ERM'') Department as well as oversee the 
structure, staffing and resources of the ERM Department, and (4) the 
MRC shall approve the CRO's salary, the MRC Chair will participate in 
the PC meeting in which compensation for senior management is 
determined and the MRC Chair has delegated authority to modify the 
CRO's prior approved salary based on the discussions at such PC 
meeting.
    In addition, OCC proposes to amend the MRC Charter to expressly 
state that the MRC has authority to review and recommend the OCC Risk 
Appetite Statement \5\ to the Board for approval, and to review and 
monitor OCC's risk profile for consistency with such statement.
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    \5\ OCC's Risk Appetite Statement is a key component of its 
enterprise risk management program. The Risk Appetite Statement 
assists OCC management and its Board to more effectively communicate 
and monitor OCC's tolerance for risk taking. The Risk Appetite 
Statement sets the standards on which all of OCC's risk 
identification, measurement, monitoring, and testing are based.
---------------------------------------------------------------------------

Audit Committee
    The AC assists the Board in overseeing OCC's financial reporting 
process, OCC's system of internal control and OCC's auditing, 
accounting and compliance processes. The AC has had longstanding 
authority to review OCC's independent accountant and, consistent with 
that authority, OCC proposes to amend the AC Charter to more clearly 
describe such authority. Specifically, OCC proposes to amend the AC 
Charter to expressly provide that the AC has the authority to pre-
approve the appointment and dismissal of OCC's independent accountant 
as well as assess OCC's independent accountant's qualifications, 
performance and independence. These proposed changes align with best 
practices and reflect the AC's oversight of the external auditor to 
better assure independence in connection with the performance of the 
external auditors' function and services. In addition, OCC proposes to 
amend the AC Charter to reflect the AC's oversight role in the 
structure, staffing and resources of OCC's Internal Audit Department, 
to recognize that OCC's Internal Audit Department will utilize co-
sourced resources \6\ and that OCC's

[[Page 3654]]

Chief Audit Executive (``CAE'') will recommend to the AC a co-sourced 
resource hour budget. The CAE is the head of OCC's Internal Audit 
Department and reports to OCC's Chairman and to the AC Chair. The CAE 
is a new title provided to the current senior staff person in OCC's 
Internal Audit Department.
---------------------------------------------------------------------------

    \6\ Co-sourced resources are consultants hired on a temporary 
basis to assist with a particular project when OCC's Internal Audit 
Department staff is otherwise fully engaged and requires additional 
resources or skill sets to complete a project on a timely basis.
---------------------------------------------------------------------------

    If the budget is approved, it is proposed that the CAE will be 
delegated authority to (1) hire internal audit co-sourced service 
providers to augment OCC's Internal Audit Department, as necessary, or 
for any other practical purpose, (2) review the performance of the 
internal audit co-sourcing service providers, and exercise final 
approval on the appointment, retention and discharge of such service 
providers, and (3) approve the scope of services to be performed by 
internal audit co-sourcing service providers. OCC proposes that the AC 
will oversee any co-sourcing activity while delegating the 
administrative aspects of the arrangement to the CAE in order to 
efficiently manage the process while not overburdening the AC.
    Moreover, OCC proposes to amend the AC Charter to provide that the 
AC shall approve the CAE's salary, to require the AC Chair to 
participate in the PC meeting in which compensation for senior 
management is determined and to delegate authority to the AC Chair to 
modify the CAE's prior approved salary based on the discussion at such 
PC meeting.
Performance Committee
    The PC assists the Board in (i) overseeing the overall performance 
of OCC in promptly and accurately delivering, clearance, settlement and 
other designated industry services, and the accomplishment of other 
periodically established corporate goals and objectives in light of 
OCC's role as a systemically important financial market utility; (ii) 
recommending the compensation of the Chairman, the Management Vice 
Chairman, and President to the Board and approving the compensation of 
certain other officers, and (iii) reviewing and approving the structure 
and design of employee compensation, incentive and benefit programs. In 
connection therewith, OCC proposes to amend the PC Charter to provide 
that (1) the PC Chair will meet at least annually in private sessions 
with the GC Chair to discuss the performance of key officers, and (2) 
the PC will meet annually to discuss compensation levels of key 
officers and that the Chairs of the AC and MRC will be invited to 
attend such meeting with respect to the compensations levels of the CAE 
and CRO, respectively.
(2) Statutory Basis
    OCC believes that the proposed rule change is consistent with 
Section 17A(b)(3)(F) of the Act \7\ and the rules and regulations 
thereunder because the proposed amendments to the Committee Charters 
clarify the roles of the Committees and will help ensure that OCC's 
governance structure is designed to protect investors and the public 
interest. By adopting certain proposed clarifying amendments to the MRC 
Charter, AC Charter and PC Charter that specify the duties and 
operations of such Committees, OCC will further ensure, as required 
under Rule 17Ad-22(d)(8), a clear and transparent governance structure 
that will fulfill the public interests requirements in Section 17A of 
the Act, support the objectives of OCC's owners and participants, and 
promote the effectiveness of OCC's risk management procedures.\8\ The 
proposed rule change is not inconsistent with the existing rules of 
OCC, including any other rules proposed to be amended.
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    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ 17 CFR 240.17Ad-22(d)(8).
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(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.\9\ This proposed rule change 
will help ensure that OCC meets regulatory requirements that it has a 
clear and transparent governance structure, as well as clarify the 
duties and operation of the Committees, through the amendment of the 
Committee Charters. To the extent OCC's clearing members are affected 
by the proposed rule change, OCC believes that, by clarifying the terms 
of the Committee Charters, OCC will not disadvantage or favor any 
particular user in relationship to another user because all of its 
participants will equally have greater certainty and visibility 
concerning OCC's governance arrangements and that such clarification 
will facilitate the prompt and accurate settlement of securities 
transactions. Accordingly, OCC does not believe that the proposed rule 
will impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
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    \9\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    Written comments on the proposed rule change were not and are not 
intended to be solicited with respect to the proposed rule change and 
none have been received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    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 such 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-2014-01 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-2014-01. 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

[[Page 3655]]

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 20549-1090 on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of OCC and on OCC's Web site: https://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_14_01.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-2014-01 
and should be submitted on or before February 12, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01107 Filed 1-21-14; 8:45 am]
BILLING CODE 8011-01-P

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