Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Revise The Options Clearing Corporation's Schedule of Fees, 54632-54634 [2016-19431]
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54632
Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
Section 6(b)(4) of the Act,5 which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
Trading Permit Holders and other
persons using its facilities.
The Exchange believes extending the
waiver of ETH Trading Permit and
Bandwidth Packet fees for one of each
type of Trading Permit and Bandwidth
Packet, per affiliated TPH through
December 31, 2016 is reasonable,
equitable and not unfairly
discriminatory, because it promotes and
encourages trading during the ETH
session and applies to all ETH TPHs.
The Exchange believes it’s also
reasonable, equitable and not unfairly
discriminatory to waive fees for Login
IDs related to waived Trading Permits
and/or Bandwidth Packets in order to
promote and encourage ongoing
participation in ETH and also applies to
all ETH TPHs.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
asabaliauskas on DSK3SPTVN1PROD with NOTICES
The Exchange does not believe that
the proposed rule changes will impose
any burden on competition that are not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition
because it applies to all Trading Permit
Holders and encourages Trading Permit
Holders to participate in the ETH
session.
The Exchange does not believe that
the proposed rule changes will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed changes only
affect trading on CBOE. To the extent
that the proposed changes make CBOE
a more attractive marketplace for market
participants at other exchanges, such
market participants are welcome to
become CBOE market participants.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the Proposed
Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 6 and paragraph (f) of Rule
19b–4 7 thereunder. At any time within
60 days of the 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. If the
Commission takes such action, the
Commission will institute proceedings
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:
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–
CBOE–2016–060 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CBOE–2016–060. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
6 15
5 15
U.S.C. 78f(b)(4).
VerDate Sep<11>2014
18:36 Aug 15, 2016
7 17
Jkt 238001
PO 00000
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
Frm 00083
Fmt 4703
Sfmt 4703
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–CBOE–
2016–060 and should be submitted on
or before September 6, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–19443 Filed 8–15–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78526; File No. SR–OCC–
2016–008]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Revise
The Options Clearing Corporation’s
Schedule of Fees
August 10, 2016.
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 July 29,
2016, The Options Clearing Corporation
(‘‘OCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by OCC. OCC filed
the proposed rule change pursuant to
Section 19(b)(3)(A)(ii) 3 of the Act and
Rule 19b–4(f)(2) 4 thereunder so that the
proposal was effective upon filing with
the Commission. The Commission is
publishing this notice to solicit
comments on the rule change from
interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The purpose of this proposed rule
change by OCC is to revise OCC’s
Schedule of Fees effective October 1,
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
1 15
E:\FR\FM\16AUN1.SGM
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Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices
2016, or such later date as OCC may
determine and announce to its Clearing
Members via Information Memo,5 to
implement a change of fees in
conjunction with enhancements to
OCC’s Stock Loan Program (‘‘Program’’).
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
asabaliauskas on DSK3SPTVN1PROD with NOTICES
1. Purpose
The purpose of this proposed rule
change is to revise OCC’s Schedule of
Fees to more adequately cover the
expenses incurred by OCC to operate
the Program, including costs associated
with ongoing and anticipated
operational and risk management
enhancements to the Program. The
revised fee schedule would become
effective on October 1, 2016, or such
later date as OCC may determine and
announce via Information Memo.6
The Program began in 1993 as a tool
for participants to use borrowed and
loaned securities to reduce OCC margin
requirements by reflecting the actual
risks of their inter-market hedged
positions. When the Program began,
OCC implemented a risk management
infrastructure based on the Program’s
scale and complexity. Over time, OCC’s
Clearing Members have discovered that
the Program can provide valuable risk
management and capital efficiency
solutions. Specifically, the credit risk of
a given stock loan transaction in the
Program is significantly lower than a
bilaterally executed stock loan as a
result of OCC’s novation and guarantee
of stock loans in the Program, and
Clearing Members’ stock loans in the
Program are netted against their other
5 On August 8, 2016, pursuant to a telephone
conversation with Commission staff, OCC agreed
that if OCC determines that an effective date later
than October 1, 2016 is required for the fee change
that is the subject of this filing, OCC will re-file a
revised Schedule of Fees specifying the new
effective date. In addition, OCC agreed to the
insertion of clarifying language concerning its
determination of any later effective date in its
description of the proposed rule change.
6 See supra note 5.
VerDate Sep<11>2014
18:36 Aug 15, 2016
Jkt 238001
positions held at OCC. These factors
have caused significant increases in
both the scale of the Program and the
resulting risk management demands. As
a result of the increased operational and
risk management demands of the
Program, and in light of OCC’s
heightened responsibilities as a
designated Systemically Important
Financial Market Utility, OCC is
considering a number of enhancements
to its operational and risk management
systems and processes, which require
both process redesign and increased
operating expenses. These enhanced
systems and processes would include:
• The capture and validation of trades
prior to facilitating settlement;
• A new position accounting system
to support expanded guarantee of
contract terms such as rebate rate and
term;
• An automated trade correction
mechanism;
• Automated systems to support rematching upon the default of a
participant lending and borrowing the
same security; and,
• Automation of the default
management process for any unmatched
positions and limitation of the close-out
period.
Taking these enhancements into
account, OCC analyzed its pricing for
the Program, which has not been
updated since 2009, against the
Program’s annual revenue as well as the
Program’s expenses assessed against
OCC by the Depository Trust Company
(‘‘DTC’’) and determined that current
pricing would not reflect the expenses
incurred by OCC to make the Program
more robust and sustainable given its
increased scope and risk managements
demands.
OCC arrived at the fee schedule
presented herein by determining pricing
for the Program that: (1) Covers OCC’s
costs in running the Program, including
the transaction fees charged to OCC by
DTC; (2) account for costs incurred by
OCC to make the operational and risk
management enhancements required to
make the Program more robust and
sustainable; and, (3) better reflects the
value the Program provides participants,
particularly to borrowers, by providing
for a centrally cleared and risk managed
stock loan clearing solution. As a result
of the aforementioned analysis, OCC
proposes to revise its Schedule of Fees 7
by adding a monthly 0.4 basis point
annualized charge for borrowers on
average daily notional outstanding
balances in addition to the current $1
clearing fee for both lenders and
7 These
PO 00000
changes are also reflected in Exhibit 5.
Frm 00084
Fmt 4703
Sfmt 4703
54633
borrowers, which would be retained
under the proposed fee change.8
OCC does not believe that its current
pricing schedule reflects the value that
the Program provides to its participants,
particularly to borrowers using the
Program. Securities lending transactions
are typically driven by the need for
borrowers to obtain specific securities.
Lenders, in comparison, do not have a
specific need to lend their securities and
the price of a given stock loan
transaction in part compensates the
lender for the borrower’s credit risk. As
a result, it is common for the borrower
to pay all ancillary fees related to a
given stock loan transaction. Moreover,
while borrowers and lenders both
benefit from the risk management and
capital efficiencies gained by clearing
stock loan transactions through the
Program, on balance, the capital
efficiencies for borrowers are greater.
Furthermore, the implementation of the
aforementioned operational and risk
management enhancements would
provide for a more robust and
sustainable Program, and as a result,
OCC hopes to be able to build on this
foundation in the future to attract a
broader market of securities borrowers
and lenders to the Program, particularly
securities lenders, which would
potentially lead to borrowers in the
Program receiving better loan rates
because there would a greater amount of
willing lenders.
2. Statutory Basis
OCC believes that the proposed rule
change concerning a change to OCC’s
clearing fees is consistent with Section
17A(b)(3)(D) 9 of the Act, because the
proposed fee schedule provides for the
equitable allocation of reasonable fees
among its Clearing Members. OCC
believes the proposed fee change is
reasonable because it is designed to
cover the costs incurred by OCC to
implement operational and risk
management enhancements designed to
make the Program more robust and
sustainable, particularly given the
increased scale and risk management
demands of the Program, and the
increased revenue from the fee change
8 OCC notes that the proposed fee increase is
designed to help defray increased expenses to OCC
from the development and implementation of the
ongoing and anticipated operational and risk
management enhancements discussed above.
Moreover, OCC would continue to monitor Program
revenue and expenses in order to determine if
further revisions to OCC’s Schedule of Fees are
required so that revenue is commensurate with
expenses and the services provided. Any
subsequent changes to OCC’s Schedule of Fees
would be the subject of a subsequent proposed rule
change filed with the Commission.
9 17 U.S.C. 78q–1(b)(3)(D).
E:\FR\FM\16AUN1.SGM
16AUN1
54634
Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices
is anticipated to help offset the
increased expenses incurred by OCC to
make such enhancements. These
enhancements would strengthen the
Program’s operational resiliency and
risk management capabilities,
potentially enabling the introduction of
further enhancements that would allow
the Program to service a broader market
of participants, which in turn would
provide economic benefits and lower
risk for both borrowers and lenders.
Moreover, OCC believes that the
proposed fee schedule would provide
for an equitable allocation of clearing
fees to users of the Program.
Specifically, OCC would retain the $1
new loan transaction clearing fee for
both lenders and borrowers, and the
proposed fee change would impose an
additional monthly 0.4 basis point
annualized charge for borrowers based
on average daily notional outstanding
balances to more appropriately allocate
costs of the Program to those users
benefiting most from the Program. The
proposed fee change would therefore
better align Program fees with the
industry, in which is it common
practice for borrowers to bear additional
costs associated with stock loan
transactions. The proposed rule change
is not inconsistent with the existing
rules of OCC, including any other rules
proposed to be amended.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
(B) Clearing Agency’s Statement on
Burden on Competition
OCC does not believe that the
proposed rule change would have any
impact or impose a burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.10 Although this
proposed rule change would assess an
additional fee against borrowers
utilizing the Program that is not
assessed against lenders, as explained
above, OCC believes that the proposed
rule change appropriately aligns how
fees are assessed with the economic and
risk management benefits of the
Program, and enables OCC to provide a
more robust Program that will expand
its user base and benefit borrowers.
Also, the proposed fee changes would
not disadvantage or favor any particular
borrower or lender utilizing the Program
in relationship to another borrower or
lender, respectively, because the
proposed clearing fees apply equally to
all users of the Program. Accordingly,
OCC does not believe that the proposed
rule change would have any impact or
impose a burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule
Change Received From Members,
Participants or Others
Written comments 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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act 11 and Rule
19b–4(f)(2) thereunder.12 At any time
within 60 days of the 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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Robert W. Errett,
Deputy Secretary.
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–2016–008 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–OCC–2016–008. 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
U.S.C. 78s(b)(3)(A)(ii).
12 17 CFR 240.19b–4(f)(2).
U.S.C. 78q–1(b)(3)(I).
VerDate Sep<11>2014
18:36 Aug 15, 2016
Jkt 238001
[FR Doc. 2016–19431 Filed 8–15–16; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–78533; File No. SR–
NASDAQ–2016–086]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Granting Approval of a Proposed Rule
Change, as Modified by Amendment
No. 1 Thereto, To List and Trade the
Shares of the VanEck Vectors Long/
Flat Commodity ETF
August 10, 2016.
I. Introduction
On June 10, 2016, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the VanEck Vectors Long/
Flat Commodity ETF (‘‘Fund’’) under
Nasdaq Rule 5735. The Commission
13 17
11 15
10 15
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
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 OCC and on OCC’s Web site at
https://www.theocc.com/components/
docs/legal/rules_and_bylaws/sr_occ_16_
008.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–2016–008 and should
be submitted on or before September 6,
2016.
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\16AUN1.SGM
16AUN1
]]>Agencies
[Federal Register Volume 81, Number 158 (Tuesday, August 16, 2016)]
[Notices]
[Pages 54632-54634]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19431]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78526; File No. SR-OCC-2016-008]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Revise The Options Clearing Corporation's Schedule of Fees
August 10, 2016.
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 July 29, 2016, The Options Clearing Corporation (``OCC'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I, II, and III below, which Items
have been prepared by OCC. OCC filed the proposed rule change pursuant
to Section 19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-4(f)(2) \4\
thereunder so that the proposal was effective upon filing with the
Commission. The Commission is publishing this notice to solicit
comments on the rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The purpose of this proposed rule change by OCC is to revise OCC's
Schedule of Fees effective October 1,
[[Page 54633]]
2016, or such later date as OCC may determine and announce to its
Clearing Members via Information Memo,\5\ to implement a change of fees
in conjunction with enhancements to OCC's Stock Loan Program
(``Program'').
---------------------------------------------------------------------------
\5\ On August 8, 2016, pursuant to a telephone conversation with
Commission staff, OCC agreed that if OCC determines that an
effective date later than October 1, 2016 is required for the fee
change that is the subject of this filing, OCC will re-file a
revised Schedule of Fees specifying the new effective date. In
addition, OCC agreed to the insertion of clarifying language
concerning its determination of any later effective date in its
description of the proposed rule change.
---------------------------------------------------------------------------
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
The purpose of this proposed rule change is to revise OCC's
Schedule of Fees to more adequately cover the expenses incurred by OCC
to operate the Program, including costs associated with ongoing and
anticipated operational and risk management enhancements to the
Program. The revised fee schedule would become effective on October 1,
2016, or such later date as OCC may determine and announce via
Information Memo.\6\
---------------------------------------------------------------------------
\6\ See supra note 5.
---------------------------------------------------------------------------
The Program began in 1993 as a tool for participants to use
borrowed and loaned securities to reduce OCC margin requirements by
reflecting the actual risks of their inter-market hedged positions.
When the Program began, OCC implemented a risk management
infrastructure based on the Program's scale and complexity. Over time,
OCC's Clearing Members have discovered that the Program can provide
valuable risk management and capital efficiency solutions.
Specifically, the credit risk of a given stock loan transaction in the
Program is significantly lower than a bilaterally executed stock loan
as a result of OCC's novation and guarantee of stock loans in the
Program, and Clearing Members' stock loans in the Program are netted
against their other positions held at OCC. These factors have caused
significant increases in both the scale of the Program and the
resulting risk management demands. As a result of the increased
operational and risk management demands of the Program, and in light of
OCC's heightened responsibilities as a designated Systemically
Important Financial Market Utility, OCC is considering a number of
enhancements to its operational and risk management systems and
processes, which require both process redesign and increased operating
expenses. These enhanced systems and processes would include:
The capture and validation of trades prior to facilitating
settlement;
A new position accounting system to support expanded
guarantee of contract terms such as rebate rate and term;
An automated trade correction mechanism;
Automated systems to support re-matching upon the default
of a participant lending and borrowing the same security; and,
Automation of the default management process for any
unmatched positions and limitation of the close-out period.
Taking these enhancements into account, OCC analyzed its pricing
for the Program, which has not been updated since 2009, against the
Program's annual revenue as well as the Program's expenses assessed
against OCC by the Depository Trust Company (``DTC'') and determined
that current pricing would not reflect the expenses incurred by OCC to
make the Program more robust and sustainable given its increased scope
and risk managements demands.
OCC arrived at the fee schedule presented herein by determining
pricing for the Program that: (1) Covers OCC's costs in running the
Program, including the transaction fees charged to OCC by DTC; (2)
account for costs incurred by OCC to make the operational and risk
management enhancements required to make the Program more robust and
sustainable; and, (3) better reflects the value the Program provides
participants, particularly to borrowers, by providing for a centrally
cleared and risk managed stock loan clearing solution. As a result of
the aforementioned analysis, OCC proposes to revise its Schedule of
Fees \7\ by adding a monthly 0.4 basis point annualized charge for
borrowers on average daily notional outstanding balances in addition to
the current $1 clearing fee for both lenders and borrowers, which would
be retained under the proposed fee change.\8\
---------------------------------------------------------------------------
\7\ These changes are also reflected in Exhibit 5.
\8\ OCC notes that the proposed fee increase is designed to help
defray increased expenses to OCC from the development and
implementation of the ongoing and anticipated operational and risk
management enhancements discussed above. Moreover, OCC would
continue to monitor Program revenue and expenses in order to
determine if further revisions to OCC's Schedule of Fees are
required so that revenue is commensurate with expenses and the
services provided. Any subsequent changes to OCC's Schedule of Fees
would be the subject of a subsequent proposed rule change filed with
the Commission.
---------------------------------------------------------------------------
OCC does not believe that its current pricing schedule reflects the
value that the Program provides to its participants, particularly to
borrowers using the Program. Securities lending transactions are
typically driven by the need for borrowers to obtain specific
securities. Lenders, in comparison, do not have a specific need to lend
their securities and the price of a given stock loan transaction in
part compensates the lender for the borrower's credit risk. As a
result, it is common for the borrower to pay all ancillary fees related
to a given stock loan transaction. Moreover, while borrowers and
lenders both benefit from the risk management and capital efficiencies
gained by clearing stock loan transactions through the Program, on
balance, the capital efficiencies for borrowers are greater.
Furthermore, the implementation of the aforementioned operational and
risk management enhancements would provide for a more robust and
sustainable Program, and as a result, OCC hopes to be able to build on
this foundation in the future to attract a broader market of securities
borrowers and lenders to the Program, particularly securities lenders,
which would potentially lead to borrowers in the Program receiving
better loan rates because there would a greater amount of willing
lenders.
2. Statutory Basis
OCC believes that the proposed rule change concerning a change to
OCC's clearing fees is consistent with Section 17A(b)(3)(D) \9\ of the
Act, because the proposed fee schedule provides for the equitable
allocation of reasonable fees among its Clearing Members. OCC believes
the proposed fee change is reasonable because it is designed to cover
the costs incurred by OCC to implement operational and risk management
enhancements designed to make the Program more robust and sustainable,
particularly given the increased scale and risk management demands of
the Program, and the increased revenue from the fee change
[[Page 54634]]
is anticipated to help offset the increased expenses incurred by OCC to
make such enhancements. These enhancements would strengthen the
Program's operational resiliency and risk management capabilities,
potentially enabling the introduction of further enhancements that
would allow the Program to service a broader market of participants,
which in turn would provide economic benefits and lower risk for both
borrowers and lenders. Moreover, OCC believes that the proposed fee
schedule would provide for an equitable allocation of clearing fees to
users of the Program. Specifically, OCC would retain the $1 new loan
transaction clearing fee for both lenders and borrowers, and the
proposed fee change would impose an additional monthly 0.4 basis point
annualized charge for borrowers based on average daily notional
outstanding balances to more appropriately allocate costs of the
Program to those users benefiting most from the Program. The proposed
fee change would therefore better align Program fees with the industry,
in which is it common practice for borrowers to bear additional costs
associated with stock loan transactions. 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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\9\ 17 U.S.C. 78q-1(b)(3)(D).
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(B) Clearing Agency's Statement on Burden on Competition
OCC does not believe that the proposed rule change would have any
impact or impose a burden on competition not necessary or appropriate
in furtherance of the purposes of the Act.\10\ Although this proposed
rule change would assess an additional fee against borrowers utilizing
the Program that is not assessed against lenders, as explained above,
OCC believes that the proposed rule change appropriately aligns how
fees are assessed with the economic and risk management benefits of the
Program, and enables OCC to provide a more robust Program that will
expand its user base and benefit borrowers. Also, the proposed fee
changes would not disadvantage or favor any particular borrower or
lender utilizing the Program in relationship to another borrower or
lender, respectively, because the proposed clearing fees apply equally
to all users of the Program. Accordingly, OCC does not believe that the
proposed rule change would have any impact or impose a burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act.
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\10\ 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 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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act \11\ and Rule 19b-4(f)(2) thereunder.\12\ At
any time within 60 days of the 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.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
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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-2016-008 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2016-008. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference 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 such filing also will be available
for inspection and copying at the principal office of OCC and on OCC's
Web site at https://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_16_008.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-2016-008
and should be submitted on or before September 6, 2016.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19431 Filed 8-15-16; 8:45 am]
BILLING CODE 8011-01-P
