Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change Related to The Options Clearing Corporation's Fee Policy, 4324-4327 [2018-01676]
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Federal Register / Vol. 83, No. 20 / Tuesday, January 30, 2018 / Notices
By the Commission.
Eduardo A. Aleman,
Assistant Secretary.
with respect to the proposal are
completed.77
IV. Solicitation of Comments
[FR Doc. 2018–01688 Filed 1–29–18; 8:45 am]
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing.
Comments may be submitted by any of
the following methods:
Electronic Comments
Paper Comments
daltland on DSKBBV9HB2PROD with NOTICES
• 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–DTC–2017–803. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the Advance Notice that
are filed with the Commission, and all
written communications relating to the
Advance Notice 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 website 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 DTC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). All comments received
will be posted without change. Persons
submitting comments are cautioned that
we do not redact or edit personal
identifying information from comment
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–DTC–
2017–803 and should be submitted on
or before February 14, 2018.
77 See supra note 2 (concerning the clearing
agency’s related proposed rule change).
18:18 Jan 29, 2018
Jkt 244001
[Release No. 34–82576; File No. SR–OCC–
2018–001]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
• 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–
DTC–2017–803 on the subject line.
VerDate Sep<11>2014
SECURITIES AND EXCHANGE
COMMISSION
2:00 p.m. on Thursday,
February 1, 2018.
PLACE: Closed Commission Hearing
Room 10800.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
Commissioner Jackson, as duty
officer, voted to consider the items
listed for the closed meeting in closed
session, and determined that
Commission business required
consideration earlier than one week
from today. No earlier notice of this
meeting was practicable.
The subject matters of the closed
meeting will be:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Litigation matters;
Resolution of litigation claims; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed; please contact
Brent J. Fields from the Office of the
Secretary at (202) 551–5400.
TIME AND DATE:
Dated: January 26, 2018.
Brent J. Fields,
Secretary.
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January 24, 2018.
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
18, 2018, 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. 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
The proposed rule change by OCC
would make certain revisions to OCC’s
Fee Policy to reduce the permitted
implementation time for proposed
changes to its Schedule of Fees. Under
the proposed rule change, the Fee Policy
would provide that any change to the
Schedule of Fees resulting from a
review of OCC’s fees by the Board of
Directors (‘‘Board’’) as stipulated under
the Fee Policy would be implemented
no sooner than 30 days from the date of
the filing of the proposed fee change
with the Commission, rather than the
minimum 60-day period provided for
currently in the Fee Policy.
The Fee Policy is included as
confidential Exhibit 5 to the filing.
Material proposed to be added to the
Fee Policy as currently in effect is
marked by underlining and material
proposed to be deleted is marked in
strikethrough text. All terms with initial
capitalization that are not otherwise
defined herein have the same meaning
as set forth in the By-Laws and Rules.3
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b\4.
3 OCC’s By-Laws and Rules can be found on
OCC’s public website: https://optionsclearing.com/
about/publications/bylaws.jsp.
2 17
[FR Doc. 2018–01902 Filed 1–26–18; 4:15 pm]
BILLING CODE 8011–01–P
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of Proposed Rule Change
Related to The Options Clearing
Corporation’s Fee Policy
E:\FR\FM\30JAN1.SGM
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Federal Register / Vol. 83, No. 20 / Tuesday, January 30, 2018 / Notices
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
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The purpose of this proposed rule
change is to amend OCC’s Fee Policy 4
to provide that any change to OCC’s
Schedule of Fees resulting from a
review of OCC’s fees by the Board as
stipulated under the Fee Policy 5 would
be implemented no sooner than 30 days
following the filing of the revised
Schedule of Fees as a proposed rule
change with the Commission, rather
than no sooner than 60 days after filing.
Under Section 19(b)(3)(A)(ii) of the
Securities Exchange Act of 1934, as
amended (‘‘Act’’),6 a proposed rule
change takes effect upon filing with the
Commission if it is designated by OCC
as establishing or changing a due, fee or
other charge on any person. This
proposed rule change, however,
specifically concerns the time frame in
which OCC permits itself to implement
4 OCC’s Fee Policy was adopted as part of OCC’s
plan for raising additional capital (‘‘Capital Plan’’),
which was put in place in light of proposed
regulatory capital requirements applicable to
systemically important financial market utilities,
such as OCC. See Exchange Act Release No. 34–
74452 (March 6, 2015), 80 FR 13058 (March 12,
2015) (SR–OCC–2015–02); Exchange Act Release
No. 34–74387 (February 26, 2015), 80 FR 12215
(March 6, 2015) (SR–OCC–2014–813) (‘‘Approval
Orders’’). BATS Global Markets, Inc., BOX Options
Exchange LLC, KCG Holdings, Inc., Miami
International Securities Exchange, LLC, and
Susquehanna International Group, LLP each filed
petitions for review of the Approval Order,
challenging the action taken by delegated authority.
Following review of these petitions, on August 8,
2017, the U.S. Court of Appeals for the DC Circuit
remanded the Approval Orders to the Commission
to further analyze whether the Capital Plan is
consistent with the Securities Exchange Act of
1934. Susquehanna Int’l Grp., LLP v. SEC, 866 F.3d
442 (DC Cir. 2017). While the Commission further
analyzes the Capital Plan, it remains in effect as
originally approved by the Commission. See id.
5 OCC notes that authority to review and approve
changes to OCC’s fees pursuant to the Capital Plan
has been delegated to the Compensation and
Performance Committee of the Board. See OCC
Compensation and Performance Committee Charter,
available at: https://www.optionsclearing.com/
components/docs/about/corporate-information/
performance_committee_charter.pdf.
6 See 15 U.S.C. 78s(b)(3)(A)(ii). Regarding any
such proposed rule change that becomes
immediately effective, however, the Commission
also has certain conditional authority to summarily
temporarily suspend the change and institute
proceedings to determine whether to approve or
disapprove it. See 15 U.S.C. 78s(b)(3)(C).
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any proposed fee change under its Fee
Policy.
In General, Article IX, Section 9 of
OCC’s By-Laws requires that OCC’s fee
structure be designed to: (1) Cover
OCC’s operating expenses plus a
business risk buffer; (2) maintain
reserves deemed reasonably necessary
by OCC’s Board; and (3) accumulate an
additional surplus deemed advisable by
the Board to permit OCC to meet its
obligations to its Clearing Members and
the public.7 In connection with these
requirements, OCC has adopted a Fee
Policy under which the Board
determines OCC’s fee structure. As part
of the Fee Policy, the Board reviews the
existing Schedule of Fees on a quarterly
basis to determine its appropriateness.
Central to the Board’s determination of
the appropriate level of fees is the
requirement to cover OCC’s operating
expenses plus an additional amount
referred to as a ‘‘Business Risk Buffer.’’
The Business Risk Buffer is an amount
of fee revenue that OCC targets above its
anticipated operating expenses to allow
for unexpected fluctuations in operating
expenses, business capital needs, and
regulatory capital requirements. Under
the Fee Policy, OCC generally sets
clearing fees at a level designed to cover
operating expenses plus a Business Risk
Buffer of 25%. In determining the
proper level of fees to achieve this goal,
the Board may rely on a
recommendation of OCC staff that is
based on an analysis of, among other
things, year-to-date revenue and
operating expenses and projected
clearing volume and operating
expenses.
OCC believes that the current 60-day
implementation period under the Fee
Policy (i) increases the difficulty of
projecting appropriate fee levels needed
to cover OCC’s operating expenses plus
the Business Risk Buffer given the
amount of time that passes between
OCC’s analysis and the implementation
of the fee change, (ii) increases the risk
that by the time the fee change is
implemented, the extended delay in
implementation may result in revenues
that diverge further from the target the
Business Risk Buffer (either higher or
lower), and (iii) increases the impact of
a fee change due to the delayed
implementation timing.8 As a result,
7 OCC notes that clauses two and three above
would be invoked only at the discretion of OCC’s
Board and in extraordinary circumstances.
8 OCC notes that, as a practical matter, it typically
implements changes to its Schedule of Fees on the
first of the month. As a result, the actual delay in
implementing a proposed fee change may be
significantly longer than 60 days depending on the
timing of Board approval of any fee change and
subsequent filing of the associated proposed rule
change.
PO 00000
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4325
OCC may need to make more frequent
and/or more dramatic changes to its
Schedule of Fees in order to maintain its
target Business Risk Buffer, resulting in
less stability in fees for OCC’s
participants. OCC believes that reducing
the 60-day implementation period to 30
days would allow for fee adjustments
that are based on revenue and expense
data that is more current, and therefore
projections that are more accurate. OCC
believes the proposed rule change
would therefore improve its ability to
set fees at an appropriate level to meet
its requirements under the Capital Plan
while still providing adequate notice to
its participants of any proposed fee
changes.
(2) Statutory Basis
Section 17A(b)(3)(D) of the Act 9
requires that the rules of a clearing
agency provide for the equitable
allocation of reasonable dues, fees, and
other charges among its participants. In
addition, Rule 17Ad–22(e)(21) 10
requires that a covered clearing agency
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to be efficient and
effective in meeting the requirements of
its participants and the markets it
serves. OCC believes the proposed rule
change is consistent with Section
17A(b)(3)(D) of the Act 11 and the rules
thereunder because allowing earlier
implementation of changes to OCC’s
Schedule of Fees would ensure that the
fees charged to Clearing Members are
based on based on revenue and expense
data that is more current, and therefore
projections that are more accurate. As a
result, OCC believes it would be able to
implement fee changes that are more
accurately calibrated to meet the
requirements of its Fee Policy and
Capital Plan, which in turn would foster
the equitable allocation of reasonable
dues, fees and other charges among
Clearing Members. OCC also believes
that the proposed rule change is
consistent with Rule 17Ad–22(e)(21) 12
because the shortened implementation
period would improve OCC’s ability to
implement a Schedule of Fees that is
based on revenue and expense data that
is more current and indicative of OCC’s
business, and therefore, the change
would enhance OCC’s ability to be costeffective in meeting the requirements of
its Clearing Members.
9 15
U.S.C. 78q–1(b)(3)(D).
CFR 240.17Ad–22(e)(21).
11 15 U.S.C. 78q–1(b)(3)(D).
12 17 CFR 240.17Ad–22(e)(21).
10 17
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Federal Register / Vol. 83, No. 20 / Tuesday, January 30, 2018 / Notices
(B) Clearing Agency’s Statement on
Burden on Competition
Section 17A(b)(3)(I) of the Act 13
requires that the rules of a clearing
agency not impose any burden on
competition not necessary or
appropriate in furtherance of the Act.
OCC believes that the proposed rule
change would not have any impact or
impose a burden on competition. The
proposed changes to the Fee Policy
would not disadvantage or favor any
particular user in relationship to
another user because the potential for
earlier implementation of changes to the
Schedule of Fees would apply equally
to all Clearing Members and market
participants. Moreover, the proposed
rule change would continue to allow for
a notification period of at least 30 days
following the filing of a revised
Schedule of Fees with the Commission
before such a proposed fee change could
be implemented. As a result, OCC
believes that the proposed rule change
would not have any impact or impose
a burden on competition.
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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
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
OCC respectfully requests that the
Commission approve the proposed rule
change on an accelerated basis pursuant
to Section 19(b)(2)(C)(iii) of the Act.14
OCC believes that good cause exists for
the Commission to accelerate the
effectiveness of the proposed rule
change because the proposed changes to
the Fee Policy would improve OCC’s
ability to implement fee changes that are
more accurately calibrated to meet the
13 15
14 15
U.S.C. 78q–1(b)(3)(I).
U.S.C. 78s(b)(2)(C)(iii).
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requirements of its Fee Policy and
Capital Plan. As describe above, OCC
believes that the current 60-day
implementation period under the Fee
Policy (i) increases the difficulty of
projecting appropriate fee levels needed
to cover OCC’s operating expenses plus
the Business Risk Buffer given the
amount of time that passes between
OCC’s analysis and the implementation
of the fee change, (ii) increases the risk
that by the time the fee change is
implemented, the extended delay in
implementation may result in revenues
that diverge further from the target the
Business Risk Buffer (either higher or
lower), and (iii) increases the impact of
a fee change due to the delayed
implementation timing. As a result,
OCC may need to make more frequent
and/or more dramatic changes to its
Schedule of Fees in order to maintain its
target Business Risk Buffer, resulting in
less stability in fees for OCC’s
participants. OCC believes that reducing
the 60-day implementation period to 30
days would allow for fee adjustments
that are based on revenue and expense
data that is more current, and therefore
projections that are more accurate and
fee levels that are generally more stable.
Accordingly, OCC believes the proposed
rule change promotes OCC’s ability to
comply with its obligations under the
Act to be efficient and effective in
meeting the requirements of its
participants and the markets it serves.
While the proposed rule change
would reduce the 60-day notification
period prior to implementing fee
changes under the Fee Policy, any
proposed fee change would still require
at least a 30-day notification period
prior to implementation and would
continue to be subject to the
Commission’s rule filing process,
including the notice and public
comment period. OCC believes that the
proposed 30-day implementation
period, along with the Commission’s
rule filing process, would continue to
provide Clearing Members and other
market participants with appropriate
and adequate notice of fee changes so
that they are able to take any necessary
action to prepare for the proposed fee
change. Moreover, participants would
continue to have an opportunity to
comment on any fee changes prior to
such fee change being implemented,
and the Commission would continue to
review all such fee changes as part of
the proposed rule change process. OCC
notes that the proposed rule change
would not alter the manner in which
OCC determines potential fee changes
under its Fee Policy or the applicability
PO 00000
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of any such fee changes to its Clearing
Members and market participants.
For all of the reasons above, OCC
requests that the Commission approve
the proposed rule change on an
accelerated basis because there is good
cause consistent with 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–
OCC–2018–001 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–2018–001. 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 website (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 website 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 website at
https://www.theocc.com/about/
publications/bylaws.jsp.
All comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
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that you wish to make available
publicly.
All submissions should refer to File
Number SR–OCC–2018–001 and should
be submitted on or before February 14,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–01676 Filed 1–29–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82581; File No. SR–NSCC–
2017–805]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing and
Extension of the Review Period of an
Advance Notice To Adopt a Recovery
& Wind-down Plan and Related Rules
January 24, 2018.
Pursuant to Section 806(e)(1) of Title
VIII of the Dodd-Frank Wall Street
Reform and Consumer Protection Act
entitled the Payment, Clearing, and
Settlement Supervision Act of 2010
(‘‘Clearing Supervision Act’’) and Rule
19b–4(n)(1)(i) under the Securities
Exchange Act of 1934 (‘‘Act’’),1 notice is
hereby given that on December 18, 2017,
National Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
advance notice SR–NSCC–2017–805
(‘‘Advance Notice’’) as described in
Items I and II below, which Items have
been prepared by the clearing agency.2
The Commission is publishing this
notice to solicit comments on the
Advance Notice from interested persons
and to extend the review period of the
Advance Notice for an additional 60
days pursuant to Section 806(e)(1)(H) of
the Clearing Supervision Act.3
I. Clearing Agency’s Statement of the
Terms of Substance of the Advance
Notice
The advance notice of NSCC proposes
to (1) adopt the Recovery & Wind-down
Plan of NSCC (‘‘R&W Plan’’ or ‘‘Plan’’);
15 17
CFR 200.30–3(a)(12).
U.S.C. 5465(e)(1) and 17 CFR 240.19b–
4(n)(1)(i), respectively.
2 On December 18, 2017, NSCC filed the Advance
Notice as a proposed rule change (SR–NSCC–2017–
017) with the Commission pursuant to Section
19(b)(1) of the Act, 15 U.S.C. 78s(b)(1), and Rule
19b–4 thereunder, 17 CFR 240.19b–4. A copy of the
proposed rule change is available at https://
www.dtcc.com/legal/sec-rule-filings.
3 12 U.S.C. 5465(e)(1)(H).
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1 12
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and (2) amend NSCC’s Rules &
Procedures (‘‘Rules’’) 4 in order to adopt
Rule 41 (Corporation Default), Rule 42
(Wind-down of the Corporation), and
Rule 60 (Market Disruption and Force
Majeure) (each a ‘‘Proposed Rule’’ and,
collectively, the ‘‘Proposed Rules’’). The
advance notice would also propose to
re-number the current Rule 42 (Winddown of a Member, Fund Member or
Insurance Carrier/Retirement Services
Member) to Rule 40, which is currently
reserved for future use.
The R&W Plan would be maintained
by NSCC in compliance with Rule
17Ad–22(e)(3)(ii) under the Act by
providing plans for the recovery and
orderly wind-down of NSCC
necessitated by credit losses, liquidity
shortfalls, losses from general business
risk, or any other losses, as described
below.5 The Proposed Rules are
designed to (1) facilitate the
implementation of the R&W Plan when
necessary and, in particular, allow
NSCC to effectuate its strategy for
winding down and transferring its
business; (2) provide Members and
Limited Members with transparency
around critical provisions of the R&W
Plan that relate to their rights,
responsibilities and obligations; and (3)
provide NSCC with the legal basis to
implement those provisions of the R&W
Plan when necessary, as described
below.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Advance Notice
In its filing with the Commission, the
clearing agency included statements
concerning the purpose of and basis for
the Advance Notice and discussed any
comments it received on the Advance
Notice. The text of these statements may
be examined at the places specified in
Item IV below. The clearing agency has
prepared summaries, set forth in
sections A and B below, of the most
significant aspects of such statements.
(A) Clearing Agency’s Statement on
Comments on the Advance Notice
Received from Members, Participants or
Others
While NSCC has not solicited or
received any written comments relating
to this proposal, NSCC has conducted
outreach to Members in order to provide
them with notice of the proposal. NSCC
will notify the Commission of any
written comments received by NSCC.
4 Capitalized terms used herein and not otherwise
defined herein are defined in the Rules, available
at www.dtcc.com/∼/media/Files/Downloads/legal/
rules/nscc_rules.pdf.
5 17 CFR 240.17Ad–22(e)(3)(ii).
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4327
(B) Advance Notice Filed Pursuant to
Section 806(e) of the Clearing
Supervision Act
Description of Proposed Changes
NSCC is proposing to adopt the R&W
Plan to be used by the Board and
management of NSCC in the event
NSCC encounters scenarios that could
potentially prevent it from being able to
provide its critical services as a going
concern. The R&W Plan would identify
(i) the recovery tools available to NSCC
to address the risks of (a) uncovered
losses or liquidity shortfalls resulting
from the default of one or more
Members, and (b) losses arising from
non-default events, such as damage to
its physical assets, a cyber-attack, or
custody and investment losses, and (ii)
the strategy for implementation of such
tools. The R&W Plan would also
establish the strategy and framework for
the orderly wind-down of NSCC and the
transfer of its business in the remote
event the implementation of the
available recovery tools does not
successfully return NSCC to financial
viability.
As discussed in greater detail below,
the R&W Plan would provide, among
other matters, (i) an overview of the
business of NSCC and its parent, The
Depository Trust & Clearing Corporation
(‘‘DTCC’’); (ii) an analysis of NSCC’s
intercompany arrangements and critical
links to other financial market
infrastructures (‘‘FMIs’’); (iii) a
description of NSCC’s services, and the
criteria used to determine which
services are considered critical; (iv) a
description of the NSCC and DTCC
governance structure; (v) a description
of the governance around the overall
recovery and wind-down program; (vi) a
discussion of tools available to NSCC to
mitigate credit/market and liquidity
risks, including recovery indicators and
triggers, and the governance around
management of a stress event along a
‘‘Crisis Continuum’’ timeline; (vii) a
discussion of potential non-default
losses and the resources available to
NSCC to address such losses, including
recovery triggers and tools to mitigate
such losses; (viii) an analysis of the
recovery tools’ characteristics, including
how they are comprehensive, effective,
and transparent, how the tools provide
appropriate incentives to Members to,
among other things, control and monitor
the risks they may present to NSCC, and
how NSCC seeks to minimize the
negative consequences of executing its
recovery tools; and (ix) the framework
and approach for the orderly winddown and transfer of NSCC’s business,
including an estimate of the time and
E:\FR\FM\30JAN1.SGM
30JAN1
]]>Agencies
[Federal Register Volume 83, Number 20 (Tuesday, January 30, 2018)]
[Notices]
[Pages 4324-4327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01676]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82576; File No. SR-OCC-2018-001]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change Related to The Options
Clearing Corporation's Fee Policy
January 24, 2018.
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 18, 2018, 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. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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\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
The proposed rule change by OCC would make certain revisions to
OCC's Fee Policy to reduce the permitted implementation time for
proposed changes to its Schedule of Fees. Under the proposed rule
change, the Fee Policy would provide that any change to the Schedule of
Fees resulting from a review of OCC's fees by the Board of Directors
(``Board'') as stipulated under the Fee Policy would be implemented no
sooner than 30 days from the date of the filing of the proposed fee
change with the Commission, rather than the minimum 60-day period
provided for currently in the Fee Policy.
The Fee Policy is included as confidential Exhibit 5 to the filing.
Material proposed to be added to the Fee Policy as currently in effect
is marked by underlining and material proposed to be deleted is marked
in strikethrough text. All terms with initial capitalization that are
not otherwise defined herein have the same meaning as set forth in the
By-Laws and Rules.\3\
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\3\ OCC's By-Laws and Rules can be found on OCC's public
website: https://optionsclearing.com/about/publications/bylaws.jsp.
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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
[[Page 4325]]
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 amend OCC's Fee
Policy \4\ to provide that any change to OCC's Schedule of Fees
resulting from a review of OCC's fees by the Board as stipulated under
the Fee Policy \5\ would be implemented no sooner than 30 days
following the filing of the revised Schedule of Fees as a proposed rule
change with the Commission, rather than no sooner than 60 days after
filing. Under Section 19(b)(3)(A)(ii) of the Securities Exchange Act of
1934, as amended (``Act''),\6\ a proposed rule change takes effect upon
filing with the Commission if it is designated by OCC as establishing
or changing a due, fee or other charge on any person. This proposed
rule change, however, specifically concerns the time frame in which OCC
permits itself to implement any proposed fee change under its Fee
Policy.
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\4\ OCC's Fee Policy was adopted as part of OCC's plan for
raising additional capital (``Capital Plan''), which was put in
place in light of proposed regulatory capital requirements
applicable to systemically important financial market utilities,
such as OCC. See Exchange Act Release No. 34-74452 (March 6, 2015),
80 FR 13058 (March 12, 2015) (SR-OCC-2015-02); Exchange Act Release
No. 34-74387 (February 26, 2015), 80 FR 12215 (March 6, 2015) (SR-
OCC-2014-813) (``Approval Orders''). BATS Global Markets, Inc., BOX
Options Exchange LLC, KCG Holdings, Inc., Miami International
Securities Exchange, LLC, and Susquehanna International Group, LLP
each filed petitions for review of the Approval Order, challenging
the action taken by delegated authority. Following review of these
petitions, on August 8, 2017, the U.S. Court of Appeals for the DC
Circuit remanded the Approval Orders to the Commission to further
analyze whether the Capital Plan is consistent with the Securities
Exchange Act of 1934. Susquehanna Int'l Grp., LLP v. SEC, 866 F.3d
442 (DC Cir. 2017). While the Commission further analyzes the
Capital Plan, it remains in effect as originally approved by the
Commission. See id.
\5\ OCC notes that authority to review and approve changes to
OCC's fees pursuant to the Capital Plan has been delegated to the
Compensation and Performance Committee of the Board. See OCC
Compensation and Performance Committee Charter, available at: https://www.optionsclearing.com/components/docs/about/corporate-information/performance_committee_charter.pdf.
\6\ See 15 U.S.C. 78s(b)(3)(A)(ii). Regarding any such proposed
rule change that becomes immediately effective, however, the
Commission also has certain conditional authority to summarily
temporarily suspend the change and institute proceedings to
determine whether to approve or disapprove it. See 15 U.S.C.
78s(b)(3)(C).
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In General, Article IX, Section 9 of OCC's By-Laws requires that
OCC's fee structure be designed to: (1) Cover OCC's operating expenses
plus a business risk buffer; (2) maintain reserves deemed reasonably
necessary by OCC's Board; and (3) accumulate an additional surplus
deemed advisable by the Board to permit OCC to meet its obligations to
its Clearing Members and the public.\7\ In connection with these
requirements, OCC has adopted a Fee Policy under which the Board
determines OCC's fee structure. As part of the Fee Policy, the Board
reviews the existing Schedule of Fees on a quarterly basis to determine
its appropriateness. Central to the Board's determination of the
appropriate level of fees is the requirement to cover OCC's operating
expenses plus an additional amount referred to as a ``Business Risk
Buffer.'' The Business Risk Buffer is an amount of fee revenue that OCC
targets above its anticipated operating expenses to allow for
unexpected fluctuations in operating expenses, business capital needs,
and regulatory capital requirements. Under the Fee Policy, OCC
generally sets clearing fees at a level designed to cover operating
expenses plus a Business Risk Buffer of 25%. In determining the proper
level of fees to achieve this goal, the Board may rely on a
recommendation of OCC staff that is based on an analysis of, among
other things, year-to-date revenue and operating expenses and projected
clearing volume and operating expenses.
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\7\ OCC notes that clauses two and three above would be invoked
only at the discretion of OCC's Board and in extraordinary
circumstances.
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OCC believes that the current 60-day implementation period under
the Fee Policy (i) increases the difficulty of projecting appropriate
fee levels needed to cover OCC's operating expenses plus the Business
Risk Buffer given the amount of time that passes between OCC's analysis
and the implementation of the fee change, (ii) increases the risk that
by the time the fee change is implemented, the extended delay in
implementation may result in revenues that diverge further from the
target the Business Risk Buffer (either higher or lower), and (iii)
increases the impact of a fee change due to the delayed implementation
timing.\8\ As a result, OCC may need to make more frequent and/or more
dramatic changes to its Schedule of Fees in order to maintain its
target Business Risk Buffer, resulting in less stability in fees for
OCC's participants. OCC believes that reducing the 60-day
implementation period to 30 days would allow for fee adjustments that
are based on revenue and expense data that is more current, and
therefore projections that are more accurate. OCC believes the proposed
rule change would therefore improve its ability to set fees at an
appropriate level to meet its requirements under the Capital Plan while
still providing adequate notice to its participants of any proposed fee
changes.
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\8\ OCC notes that, as a practical matter, it typically
implements changes to its Schedule of Fees on the first of the
month. As a result, the actual delay in implementing a proposed fee
change may be significantly longer than 60 days depending on the
timing of Board approval of any fee change and subsequent filing of
the associated proposed rule change.
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(2) Statutory Basis
Section 17A(b)(3)(D) of the Act \9\ requires that the rules of a
clearing agency provide for the equitable allocation of reasonable
dues, fees, and other charges among its participants. In addition, Rule
17Ad-22(e)(21) \10\ requires that a covered clearing agency establish,
implement, maintain and enforce written policies and procedures
reasonably designed to be efficient and effective in meeting the
requirements of its participants and the markets it serves. OCC
believes the proposed rule change is consistent with Section
17A(b)(3)(D) of the Act \11\ and the rules thereunder because allowing
earlier implementation of changes to OCC's Schedule of Fees would
ensure that the fees charged to Clearing Members are based on based on
revenue and expense data that is more current, and therefore
projections that are more accurate. As a result, OCC believes it would
be able to implement fee changes that are more accurately calibrated to
meet the requirements of its Fee Policy and Capital Plan, which in turn
would foster the equitable allocation of reasonable dues, fees and
other charges among Clearing Members. OCC also believes that the
proposed rule change is consistent with Rule 17Ad-22(e)(21) \12\
because the shortened implementation period would improve OCC's ability
to implement a Schedule of Fees that is based on revenue and expense
data that is more current and indicative of OCC's business, and
therefore, the change would enhance OCC's ability to be cost-effective
in meeting the requirements of its Clearing Members.
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\9\ 15 U.S.C. 78q-1(b)(3)(D).
\10\ 17 CFR 240.17Ad-22(e)(21).
\11\ 15 U.S.C. 78q-1(b)(3)(D).
\12\ 17 CFR 240.17Ad-22(e)(21).
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[[Page 4326]]
(B) Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act \13\ requires that the rules of a
clearing agency not impose any burden on competition not necessary or
appropriate in furtherance of the Act. OCC believes that the proposed
rule change would not have any impact or impose a burden on
competition. The proposed changes to the Fee Policy would not
disadvantage or favor any particular user in relationship to another
user because the potential for earlier implementation of changes to the
Schedule of Fees would apply equally to all Clearing Members and market
participants. Moreover, the proposed rule change would continue to
allow for a notification period of at least 30 days following the
filing of a revised Schedule of Fees with the Commission before such a
proposed fee change could be implemented. As a result, OCC believes
that the proposed rule change would not have any impact or impose a
burden on competition.
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\13\ 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 the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
OCC respectfully requests that the Commission approve the proposed
rule change on an accelerated basis pursuant to Section
19(b)(2)(C)(iii) of the Act.\14\ OCC believes that good cause exists
for the Commission to accelerate the effectiveness of the proposed rule
change because the proposed changes to the Fee Policy would improve
OCC's ability to implement fee changes that are more accurately
calibrated to meet the requirements of its Fee Policy and Capital Plan.
As describe above, OCC believes that the current 60-day implementation
period under the Fee Policy (i) increases the difficulty of projecting
appropriate fee levels needed to cover OCC's operating expenses plus
the Business Risk Buffer given the amount of time that passes between
OCC's analysis and the implementation of the fee change, (ii) increases
the risk that by the time the fee change is implemented, the extended
delay in implementation may result in revenues that diverge further
from the target the Business Risk Buffer (either higher or lower), and
(iii) increases the impact of a fee change due to the delayed
implementation timing. As a result, OCC may need to make more frequent
and/or more dramatic changes to its Schedule of Fees in order to
maintain its target Business Risk Buffer, resulting in less stability
in fees for OCC's participants. OCC believes that reducing the 60-day
implementation period to 30 days would allow for fee adjustments that
are based on revenue and expense data that is more current, and
therefore projections that are more accurate and fee levels that are
generally more stable. Accordingly, OCC believes the proposed rule
change promotes OCC's ability to comply with its obligations under the
Act to be efficient and effective in meeting the requirements of its
participants and the markets it serves.
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\14\ 15 U.S.C. 78s(b)(2)(C)(iii).
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While the proposed rule change would reduce the 60-day notification
period prior to implementing fee changes under the Fee Policy, any
proposed fee change would still require at least a 30-day notification
period prior to implementation and would continue to be subject to the
Commission's rule filing process, including the notice and public
comment period. OCC believes that the proposed 30-day implementation
period, along with the Commission's rule filing process, would continue
to provide Clearing Members and other market participants with
appropriate and adequate notice of fee changes so that they are able to
take any necessary action to prepare for the proposed fee change.
Moreover, participants would continue to have an opportunity to comment
on any fee changes prior to such fee change being implemented, and the
Commission would continue to review all such fee changes as part of the
proposed rule change process. OCC notes that the proposed rule change
would not alter the manner in which OCC determines potential fee
changes under its Fee Policy or the applicability of any such fee
changes to its Clearing Members and market participants.
For all of the reasons above, OCC requests that the Commission
approve the proposed rule change on an accelerated basis because there
is good cause consistent with 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 [email protected]. Please include
File Number SR-OCC-2018-001 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-2018-001. 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 website (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 website 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 website at
https://www.theocc.com/about/publications/bylaws.jsp.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information
[[Page 4327]]
that you wish to make available publicly.
All submissions should refer to File Number SR-OCC-2018-001 and
should be submitted on or before February 14, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Eduardo A. Aleman,
Assistant Secretary.
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\15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2018-01676 Filed 1-29-18; 8:45 am]
BILLING CODE 8011-01-P
