Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change Concerning Amendments to the Charters for the Membership/Risk Committee, Audit Committee and Performance Committee of OCC's Board of Directors, 12538-12540 [2014-04796]
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12538
Federal Register / Vol. 79, No. 43 / Wednesday, March 5, 2014 / Notices
exchanges and non-exchange markets,
because co-location exists to advance
that competition. Further, excessive fees
for co-location services, including for
wireless technology, would serve to
impair an exchange’s ability to compete
for order flow rather than burdening
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
mstockstill on DSK4VPTVN1PROD with NOTICES
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) by its
terms does not become operative for 30
days after the date of this filing, or such
shorter time as the Commission may
designate if consistent with the
protection of investors and the public
interest, the proposed rule change has
become effective pursuant to Section
19(b)(3)(A) of the Act 8 and Rule 19b–
4(f)(6) 9 thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative for 30 days after the
date of filing. However, Rule 19b–
4(f)(6)(iii) permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing. The Exchange
stated that the proposal will promote
competition for distribution of market
data by offering an optional and
innovative product enhancement and is
in response to requests from clients that
wish to utilize the technology. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest so that BX can
immediately offer the remote Multi-cast
ITCH Wave Ports to clients that believe
it can enhance the efficiency of their
8 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
provide the Commission with written notice of its
intent to file the proposed rule change, along with
a brief description and text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission. The
Exchange has met this requirement.
trading.10 The Commission also notes
that it approved a similar Nasdaq
offering for Nasdaq clients colocated at
third party data centers to receive
Nasdaq TotalView ITCH market data.11
Accordingly, the Commission hereby
grants the Exchange’s request and
designates the proposal operative upon
filing.
At any time within 60 days of filing
of the 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.
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–
BX–2014–005 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–BX–2014–005. 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
9 17
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10 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
11 See Exchange Act Release No. 68735 (January
25, 2013); 78 FR 6842 (January 31, 2013) (order
approving SR–NASDAQ–2012–119).
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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
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 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–BX–
2014–005, and should be submitted on
or before March 26, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–04793 Filed 3–4–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71627; File No. SR–OCC–
2014–01]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Approving Proposed Rule Change
Concerning Amendments to the
Charters for the Membership/Risk
Committee, Audit Committee and
Performance Committee of OCC’s
Board of Directors
February 27, 2014.
I. Introduction
On January 2, 2014, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2014–01
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 January 22, 2014.3 The
Commission received no comment
letters. For the reasons discussed below,
the Commission is granting approval of
the proposed rule change.
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 71311
(January 15, 2014), 79 FR 3653 (January 22, 2014).
1 15
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Federal Register / Vol. 79, No. 43 / Wednesday, March 5, 2014 / Notices
II. Description
Pursuant to the proposed rule change,
as approved, OCC is amending its
charters for the Membership/Risk
Committee (‘‘MRC Charter’’), Audit
Committee (‘‘AC Charter’’) and
Performance Committee (‘‘PC Charter’’)
(collectively, ‘‘Committee Charters’’) of
OCC’s Board of Directors (‘‘Board’’).
Changes Common to the MRC, AC, and
PC
OCC is amending the Committee
Charters 4 to more clearly set forth
certain uniform administrative
functions to provide that: (i) Each
committee chair is responsible for
ensuring that important issues
discussed at committee meetings are
reported timely to the Board; (ii) each
committee chair shall determine if
minutes of executive sessions are to be
maintained, taking into consideration
the sensitivity of the matters discussed
and the possibility that candor might be
limited if minutes are maintained; (iii)
each committee confirm annually that
all responsibilities outlined in its
Committee Charter have been carried
out; and (iv) each committee evaluate its
performance, and the performance of its
individual members, on a regular basis
and provide results of such assessment
to the Governance Committee (‘‘GC’’) for
review. As described in more detail
below, OCC is also amending the
Committee Charters to reflect certain
changes specific to the charters of MRC,
AC, and PC, respectively.
mstockstill on DSK4VPTVN1PROD with NOTICES
Changes Specific to the Committee
Membership/Risk Committee
Section I of the MRC Charter states, in
relevant part, that the Board established
the MRC to assist the Board in
overseeing OCC’s policies and processes
for identifying and addressing strategic,
operational, and financial risks. OCC is
amending the MRC Charter to more
clearly provide for the MRC’s oversight
of the Chief Risk Officer (‘‘CRO’’)
activities by requiring that the MRC: (i)
Meet at least annually with the CRO and
other corporate officers deemed
appropriate in separate executive
sessions; (ii) decide whether to approve
management’s recommendation to
appoint or replace the CRO; (iii) assess
the performance of the CRO and the
Enterprise Risk Management (‘‘ERM’’)
Department; (iv) oversee the structure,
staffing and resources of the ERM
Department; (v) decide whether to
4 The original 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) [File No.
SR–OCC–2013–17].
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17:13 Mar 04, 2014
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approve any CRO annual compensation
or salary adjustments, but delegate to
the MRC Chair the ability to modify the
approved amount as a result of the MRC
Chair’s participation in the annual
meeting of the PC; (vi) review and
recommend OCC’s ‘‘Risk Appetite
Statement’’ 5 for annual Board approval;
and (vii) review and monitor OCC’s risk
profile for consistency with OCC’s ‘‘Risk
Appetite Statement.’’
Audit Committee
Section I of the AC Charter states, in
relevant part, that the Board established
an AC to assist the Board in overseeing
OCC’s financial reporting process,
OCC’s system of internal control, and
OCC’s auditing, accounting, and
compliance processes. OCC is amending
the AC Charter to more clearly provide
that the AC: (i) Monitor and evaluate the
independent accountant’s
qualifications, performance, and
independence and, based upon such
evaluations, recommend the
independent accountant’s appointment
or dismissal; 6 (ii) resolve any
disagreements between management
and the independent accountant
regarding financial reporting; and (iii)
review reports obtained from and
prepared by the independent accountant
to evaluate the independent
accountant’s qualifications,
performance, and independence.
OCC is also amending the AC Charter
to clarify the committee’s duties and
responsibilities with respect to OCC’s
Internal Audit Department by requiring
that the AC: (i) Review and approve the
Internal Audit Department Charter to
ensure that there are no unjustified
scope restrictions or limitations placed
on the Internal Audit Department; (ii)
decide whether to approve
management’s recommendation to
appoint or replace the Chief Audit
Executive (‘‘CAE’’); (iii) review the
Internal Audit Department process for
establishing the risk-based annual
internal audit plan and monitor progress
against the plan; (iv) review reports and
other communications prepared by the
Internal Audit Department and inquire
of management regarding steps taken to
deal with items raised; (v) assess the
performance of the CAE and Internal
Audit Department; (vi) decide whether
5 The ‘‘Risk Appetite Statement’’ sets the
standards on which all of OCC’s risk identification,
measurement, monitoring, and testing are based.
OCC believes that the OCC’s Risk Appetite
Statement is a key component of its enterprise risk
management program.
6 OCC believes that this change will 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.
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12539
to approve the CAE’s annual
compensation, but delegate to the AC
Chair the ability to modify the approved
amount as a result of the MRC Chair’s
participation in the annual meeting of
the PC; and (vii) oversee the structure,
staffing and resources of the Internal
Audit Department.
In addition, OCC is amending the AC
Charter to provide that the Internal
Audit Department may utilize cosourcing service providers.7
Specifically, the amended rule change,
as approved, allows the AC to delegate
authority to the CAE to: (i) Hire internal
audit co-sourcing service providers, on
an as needed basis, to review particular
areas of OCC, augment resources
available within the Internal Audit
Department, or for any other practical
purpose; (ii) review the performance of
the internal audit co-sourcing service
providers; (iii) exercise final approval
on the appointment, retention, or
discharge of the audit firm; and (iv)
approve the scope of services to be
performed by the internal audit-co
sourcing service provider.
Finally, OCC is amending the AC
Charter to provide that the AC will meet
at least annually with management, the
Chief Compliance Officer, the CAE, and
the independent accountants, in
separate executive sessions, to discuss
any matters that either side believes
warrants private discussion.
Performance Committee
OCC is amending the PC Charter to
require, among other things, that: (i) The
PC Chair meet at least annually in
private session with the GC Chair to
discuss the performance of key officers;
(ii) the PC meet at least annually with
the Chief Executive Officer and any
other corporate officers deemed
appropriate by the PC to discuss and
review key officers’ performance and
compensation levels; (iii) the PC meet
annually to determine compensation
levels of key officers; 8 (iv) the PC Chair
recuse himself from discussion of his
individual compensation, benefits, or
perquisites, except as otherwise
requested by the other members of the
Committee; and (v) the functions and
responsibilities of the PC be amended to
also include review performance and
compensation of key employees, to
7 Co-sourcing service providers 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.
8 The AC and MRC Chairs shall be invited to
attend such meeting to discuss the performance of
the CAE and CRO, respectively, and to advise on
the compensation levels approved for such officers
as provided for in each Committee’s Charter.
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Federal Register / Vol. 79, No. 43 / Wednesday, March 5, 2014 / Notices
appoint and remove members of the
Administrative Committee and to
oversee the Administrative Committee,
confirm annually that all charter
responsibilities have been carried out,
and to evaluate the committee’s and PC
members’ performance on a regular
basis.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary .
III. Discussion
SECURITIES AND EXCHANGE
COMMISSION
Section 19(b)(2)(C) of the Act 9 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 10 requires that the rules of a
clearing agency that is registered with
the Commission be designed to, among
other things, protect investors and the
public interest.
The Commission finds that the
proposed rule change is consistent with
Section 17A(b)(3)(F) of the Act 11
because the amendments to the
Committee Charters should clarify the
role and responsibilities of each of the
Committees within OCC’s governance
structure. Furthermore, consistent with
Rule 17Ad–22(d)(8) 12 under the Act, the
amendments to the Committee Charters
should help ensure that OCC has
governance arrangements that are clear
and transparent, support the objectives
of OCC’s owners and participants, and
promote the effectiveness of OCC’s risk
management procedures.
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 13 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,14 that the
proposed rule change (File No. SR–
OCC–2014–01) be and hereby is
approved.15
mstockstill on DSK4VPTVN1PROD with NOTICES
9 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
11 Id.
12 17 CFR 240.17Ad–22(d)(8).
13 15 U.S.C. 78q–1.
14 15 U.S.C. 78s(b)(2).
15 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).
10 15
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17:13 Mar 04, 2014
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[FR Doc. 2014–04796 Filed 3–4–14; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–71631; File No. SR–
NYSEArca–2014–02]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change Amending Its
Rules in Order To Clarify the
Applicability and Functionality of
Certain Order Types on the Exchange
February 27, 2014.
I. Introduction
On January 8, 2014, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend its rules in order to
clarify the applicability and
functionality of certain option order
types on the Exchange. The proposed
rule change was published for comment
in the Federal Register on January 21,
2014.3 The Commission received no
comment letters regarding the proposed
rule change. This order approves the
proposed rule change.
II. Description of the Proposal
The Exchange has proposed to amend
Rule 6.62 in order to clarify the
applicability and functionality of certain
option order types. The Exchange states
that it is not proposing to change or alter
any obligations, rights, policies or
practices enumerated within its rules.
Rather, according to the Exchange, this
proposal is designed to reduce the
potential for investor confusion as to the
functionality and applicability of certain
option order types presently available
on the Exchange.4
The Exchange’s proposed revisions to
Rule 6.62 would provide greater detail
as to the existing functionality of certain
order types, including:
• Rule 6.62(a)—Market Order. The
Exchange has proposed to amend Rule
6.62(a) to specify that: (1) Market Orders
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 71293
(January 14, 2014), 79 FR 3429 (‘‘Notice’’).
4 See Notice, 79 FR at 3429.
1 15
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
entered before the opening of trading
will be eligible for trading during the
Opening Auction Process; (2) Market
Orders entered during Core Trading
Hours will be rejected if, at the time the
order is received, there is no National
Best Bid (‘‘NBB’’) and no National Best
Offer (‘‘NBO’’) (collectively, ‘‘NBBO’’)
disseminated by the Options Pricing
Reporting Authority (‘‘OPRA’’) for the
relevant option series; and (3) if at the
time the Exchange receives a Market
Order to buy (sell) there is an NBB
(NBO) but no NBO (NBB) being
disseminated, the Market Order will be
processed pursuant to Rule 6.60(a).5
• Rule 6.62(d)(1)–(2)—Stop Orders
and Stop Limit Orders. The Exchange
has proposed to amend Rule 6.62(d)(1)–
(2) to specify that it will reject Stop
Orders and Stop Limit Orders to buy
entered with a stop price below the bid
at the time the order is entered and Stop
Orders and Stop Limit Orders to sell
entered with a stop price above the offer
at the time the order is entered.6
• Rule 6.62(o)—NOW Order. The
Exchange has proposed to clarify that a
NOW Order that is not marketable
against the NBBO when submitted to
the Exchange will be rejected.7
• Rule 6.62(t)—Liquidity Adding
Order. The Exchange has proposed to
clarify that this order type may only be
entered with a Day time-in-force
modifier.8
The Exchange’s additional proposed
revisions to Rule 6.62 would be threefold. First, the Exchange has proposed
to specify in Rules 6.62(d)(5), 6.62(g)
and 6.62(i) that Stock Contingency
Orders, One-cancels-the-other Orders,
and Single Stock Future/Option Orders,
respectively, are only eligible for open
outcry trading.9 Second, the Exchange
has proposed to decommission the
functionality supporting the Inside
Limit Order defined in Rule 6.62(c) and
the Tracking Order defined in Rule
6.62(d)(6) due to a lack of demand for
these order types. The Exchange states
that it does not intend to re-introduce
these order types in the future, and thus
proposes to delete the text of these
5 See proposed Rule 6.62(a); see also Notice, 79
FR at 3430.
6 See proposed Rules 6.62(d)(1)–(2); see also
Notice, 79 FR at 3430. The Commission notes that
proposed Rule 6.62(d)(1)–(2) accurately sets forth
this additional specification, but the Exchange’s
description of this rule change in the purpose
section of its filing refers to stop prices above the
bid or below the offer (instead of below the bid or
above the offer) triggering rejection.
7 See proposed Rule 6.62(o); see also Notice, 79
FR at 3430.
8 See proposed Rule 6.62(t); see also Notice, 79 FR
at 3430.
9 See proposed Rules 6.62(d)(5), 6.62(g) and
6.62(i); see also Notice, 79 FR at 3430.
E:\FR\FM\05MRN1.SGM
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Agencies
[Federal Register Volume 79, Number 43 (Wednesday, March 5, 2014)]
[Notices]
[Pages 12538-12540]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-04796]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71627; File No. SR-OCC-2014-01]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change Concerning Amendments to the
Charters for the Membership/Risk Committee, Audit Committee and
Performance Committee of OCC's Board of Directors
February 27, 2014.
I. Introduction
On January 2, 2014, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2014-01 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 January 22, 2014.\3\ The Commission received no
comment letters. 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\ Securities Exchange Act Release No. 71311 (January 15,
2014), 79 FR 3653 (January 22, 2014).
---------------------------------------------------------------------------
[[Page 12539]]
II. Description
Pursuant to the proposed rule change, as approved, OCC is amending
its charters for the Membership/Risk Committee (``MRC Charter''), Audit
Committee (``AC Charter'') and Performance Committee (``PC Charter'')
(collectively, ``Committee Charters'') of OCC's Board of Directors
(``Board'').
Changes Common to the MRC, AC, and PC
OCC is amending the Committee Charters \4\ to more clearly set
forth certain uniform administrative functions to provide that: (i)
Each committee chair is responsible for ensuring that important issues
discussed at committee meetings are reported timely to the Board; (ii)
each committee chair shall determine if minutes of executive sessions
are to be maintained, taking into consideration the sensitivity of the
matters discussed and the possibility that candor might be limited if
minutes are maintained; (iii) each committee confirm annually that all
responsibilities outlined in its Committee Charter have been carried
out; and (iv) each committee evaluate its performance, and the
performance of its individual members, on a regular basis and provide
results of such assessment to the Governance Committee (``GC'') for
review. As described in more detail below, OCC is also amending the
Committee Charters to reflect certain changes specific to the charters
of MRC, AC, and PC, respectively.
---------------------------------------------------------------------------
\4\ The original 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) [File
No. SR-OCC-2013-17].
---------------------------------------------------------------------------
Changes Specific to the Committee
Membership/Risk Committee
Section I of the MRC Charter states, in relevant part, that the
Board established the MRC to assist the Board in overseeing OCC's
policies and processes for identifying and addressing strategic,
operational, and financial risks. OCC is amending the MRC Charter to
more clearly provide for the MRC's oversight of the Chief Risk Officer
(``CRO'') activities by requiring that the MRC: (i) Meet at least
annually with the CRO and other corporate officers deemed appropriate
in separate executive sessions; (ii) decide whether to approve
management's recommendation to appoint or replace the CRO; (iii) assess
the performance of the CRO and the Enterprise Risk Management (``ERM'')
Department; (iv) oversee the structure, staffing and resources of the
ERM Department; (v) decide whether to approve any CRO annual
compensation or salary adjustments, but delegate to the MRC Chair the
ability to modify the approved amount as a result of the MRC Chair's
participation in the annual meeting of the PC; (vi) review and
recommend OCC's ``Risk Appetite Statement'' \5\ for annual Board
approval; and (vii) review and monitor OCC's risk profile for
consistency with OCC's ``Risk Appetite Statement.''
---------------------------------------------------------------------------
\5\ The ``Risk Appetite Statement'' sets the standards on which
all of OCC's risk identification, measurement, monitoring, and
testing are based. OCC believes that the OCC's Risk Appetite
Statement is a key component of its enterprise risk management
program.
---------------------------------------------------------------------------
Audit Committee
Section I of the AC Charter states, in relevant part, that the
Board established an AC to assist the Board in overseeing OCC's
financial reporting process, OCC's system of internal control, and
OCC's auditing, accounting, and compliance processes. OCC is amending
the AC Charter to more clearly provide that the AC: (i) Monitor and
evaluate the independent accountant's qualifications, performance, and
independence and, based upon such evaluations, recommend the
independent accountant's appointment or dismissal; \6\ (ii) resolve any
disagreements between management and the independent accountant
regarding financial reporting; and (iii) review reports obtained from
and prepared by the independent accountant to evaluate the independent
accountant's qualifications, performance, and independence.
---------------------------------------------------------------------------
\6\ OCC believes that this change will 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.
---------------------------------------------------------------------------
OCC is also amending the AC Charter to clarify the committee's
duties and responsibilities with respect to OCC's Internal Audit
Department by requiring that the AC: (i) Review and approve the
Internal Audit Department Charter to ensure that there are no
unjustified scope restrictions or limitations placed on the Internal
Audit Department; (ii) decide whether to approve management's
recommendation to appoint or replace the Chief Audit Executive
(``CAE''); (iii) review the Internal Audit Department process for
establishing the risk-based annual internal audit plan and monitor
progress against the plan; (iv) review reports and other communications
prepared by the Internal Audit Department and inquire of management
regarding steps taken to deal with items raised; (v) assess the
performance of the CAE and Internal Audit Department; (vi) decide
whether to approve the CAE's annual compensation, but delegate to the
AC Chair the ability to modify the approved amount as a result of the
MRC Chair's participation in the annual meeting of the PC; and (vii)
oversee the structure, staffing and resources of the Internal Audit
Department.
In addition, OCC is amending the AC Charter to provide that the
Internal Audit Department may utilize co-sourcing service providers.\7\
Specifically, the amended rule change, as approved, allows the AC to
delegate authority to the CAE to: (i) Hire internal audit co-sourcing
service providers, on an as needed basis, to review particular areas of
OCC, augment resources available within the Internal Audit Department,
or for any other practical purpose; (ii) review the performance of the
internal audit co-sourcing service providers; (iii) exercise final
approval on the appointment, retention, or discharge of the audit firm;
and (iv) approve the scope of services to be performed by the internal
audit-co sourcing service provider.
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\7\ Co-sourcing service providers 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.
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Finally, OCC is amending the AC Charter to provide that the AC will
meet at least annually with management, the Chief Compliance Officer,
the CAE, and the independent accountants, in separate executive
sessions, to discuss any matters that either side believes warrants
private discussion.
Performance Committee
OCC is amending the PC Charter to require, among other things,
that: (i) The PC Chair meet at least annually in private session with
the GC Chair to discuss the performance of key officers; (ii) the PC
meet at least annually with the Chief Executive Officer and any other
corporate officers deemed appropriate by the PC to discuss and review
key officers' performance and compensation levels; (iii) the PC meet
annually to determine compensation levels of key officers; \8\ (iv) the
PC Chair recuse himself from discussion of his individual compensation,
benefits, or perquisites, except as otherwise requested by the other
members of the Committee; and (v) the functions and responsibilities of
the PC be amended to also include review performance and compensation
of key employees, to
[[Page 12540]]
appoint and remove members of the Administrative Committee and to
oversee the Administrative Committee, confirm annually that all charter
responsibilities have been carried out, and to evaluate the committee's
and PC members' performance on a regular basis.
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\8\ The AC and MRC Chairs shall be invited to attend such
meeting to discuss the performance of the CAE and CRO, respectively,
and to advise on the compensation levels approved for such officers
as provided for in each Committee's Charter.
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III. Discussion
Section 19(b)(2)(C) of the Act \9\ 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 \10\ requires that the
rules of a clearing agency that is registered with the Commission be
designed to, among other things, protect investors and the public
interest.
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\9\ 15 U.S.C. 78s(b)(2)(C).
\10\ 15 U.S.C. 78q-1(b)(3)(F).
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The Commission finds that the proposed rule change is consistent
with Section 17A(b)(3)(F) of the Act \11\ because the amendments to the
Committee Charters should clarify the role and responsibilities of each
of the Committees within OCC's governance structure. Furthermore,
consistent with Rule 17Ad-22(d)(8) \12\ under the Act, the amendments
to the Committee Charters should help ensure that OCC has governance
arrangements that are clear and transparent, support the objectives of
OCC's owners and participants, and promote the effectiveness of OCC's
risk management procedures.
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\11\ Id.
\12\ 17 CFR 240.17Ad-22(d)(8).
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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 \13\ and the
rules and regulations thereunder.
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\13\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (File No. SR-OCC-2014-01) be and
hereby is approved.\15\
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\14\ 15 U.S.C. 78s(b)(2).
\15\ 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).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary .
[FR Doc. 2014-04796 Filed 3-4-14; 8:45 am]
BILLING CODE 8011-01-P