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, 4944-4946 [2018-02124]
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Federal Register / Vol. 83, No. 23 / Friday, February 2, 2018 / Notices
registration statements (see the separate
PRA submissions for Form N–3 (17 CFR
274.11b), Form N–4 (17 CFR 274.11c)
and Form N–6 (17 CFR 274.11d). The
Commission is requesting a burden of
one hour for Rule 11a–2 for
administrative purposes.
The estimate of average burden hours
is made solely for the purposes of the
PRA, and is not derived from a
comprehensive or even a representative
survey or study of the costs of
Commission rules or forms. With regard
to Rule 11a–2, the Commission includes
the estimate of burden hours in the total
number of burden hours estimated for
completing the relevant registration
statements and reported on the separate
PRA submissions for those statements
(see the separate PRA submissions for
Form N–3, Form N–4 and Form N–6).
The information collection requirements
imposed by Rule 11a–2 are mandatory.
Responses to the collection of
information will not be kept
confidential.
Written comments are invited on: (a)
Whether the collection of information is
necessary for the proper performance of
the functions of the Commission,
including whether the information has
practical utility; (b) the accuracy of the
Commission’s estimate of the burden of
the collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
Please direct your written comments
to Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, C/O Remi
Pavlik-Simon, 100 F Street NE,
Washington, DC 20549; or send an email
to: PRA_Mailbox@sec.gov.
Dated: January 30, 2018.
Eduardo A. Aleman,
Assistant Secretary.
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[FR Doc. 2018–02117 Filed 2–1–18; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82596; File No. SR–OCC–
2018–004]
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
January 30, 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
19, 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. 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 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 revise OCC’s Schedule of Fees
effective March 1, 2018, to implement
an increase in clearing fees in
accordance with OCC’s Fee Policy.5 The
proposed changes to the Schedule of
Fees can be found in Exhibit 5 to the
proposed rule change. All capitalized
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 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 D.C. 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 (D.C. Cir. 2017). While the Commission further
analyzes the Capital Plan, it remains in effect as
originally approved by the Commission. See id.
2 17
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terms not defined herein have the same
meaning as set forth in the OCC ByLaws and Rules.6
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 in accordance with its Fee Policy
to set OCC’s fees at a level designed to
cover OCC’s operating expenses and
maintain a Business Risk Buffer of
25%.7 The revised fee schedule would
become effective on March 1, 2018.8
By way of background, OCC
implemented its Capital Plan in 2015,9
which was put in place in light of
proposed regulatory capital
requirements applicable to systemically
important financial market utilities,
such as OCC. As part of OCC’s Capital
Plan, OCC adopted a Fee Policy
whereby OCC would set clearing fees at
a level that covers OCC’s operating
6 OCC’s By-Laws and Rules can be found on
OCC’s public website: https://optionsclearing.com/
about/publications/bylaws.jsp.
7 The Business Risk Buffer is equal to net income
before refunds, dividends, and taxes divided by
total revenue.
8 OCC recently filed a proposed rule change with
the Commission to revise its Fee Policy to provide
that proposed fee changes are required to be
implemented no sooner than thirty (30) days from
the date of filing of the proposed rule change
concerning such fee change (as opposed to sixty
(60) days). See SR–OCC–2018–001. OCC also has
submitted the proposed changes to its Fee Policy to
the Commodity Futures Trading Commission
(‘‘CFTC’’) under CFTC Regulation 40.6 and expects
the proposed changes to be certified on January 24,
2018. OCC notes that implementation of the
proposed fee change on March 1, 2018, requires
either (i) Commission approval of SR–OCC–2018–
001 and certification of the Fee Policy changes in
SR–OCC–2018–001 under CFTC Regulation 40.6 or
(ii) an exception to the 60-day notice period
provision in the Fee Policy authorized by OCC’s
Board of Directors and the holders of all of the
outstanding Class B Common Stock of OCC. OCC’s
Board of Directors unanimously approved, and the
holders of all of the outstanding Class B Common
Stock of OCC unanimously consented to, the
reduction of the 60-day notice period to 30 days on
December 15, 2016.
9 See supra note 5.
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expenses plus a Business Risk Buffer of
25%.10 The purpose of the Business
Risk Buffer is to ensure that OCC
accumulates sufficient capital to cover
unexpected fluctuations in operating
expenses, business capital needs, and
regulatory capital requirements.
OCC recently reviewed its current
Schedule of Fees 11 against projected
revenues and expenses for 2018 in
accordance with its Fee Policy, to
determine whether the Schedule of Fees
was sufficient to cover OCC’s
anticipated operating expenses and
achieve a Business Risk Buffer of 25%.
In reviewing the Schedule of Fees, OCC
analyzed: (i) Expenses budgeted for
2018, (ii) projected other revenue
streams for 2018, (iii) projected volume
‘‘mix,’’ and (iv) projected volume
growth for 2018. Based on the foregoing
analysis, OCC determined that the
current fee schedule is set at a level that
would be insufficient to ensure that
OCC achieves its Business Risk Buffer of
25% as required under the Fee Policy.12
OCC arrived at the proposed fee
schedule presented herein by
determining the figures that provide the
best opportunity for OCC to achieve
coverage of its anticipated operating
expenses plus a Business Risk Buffer of
25%.
As a result of the aforementioned
analysis, OCC proposes to revise its
Schedule of Fees as set forth below.13
Current fee schedule
Proposed fee schedule
Trades with contracts of:
Trades with
contracts of:
Current fee
1–1100 ....................................................................
>1100 ......................................................................
OCC proposes to modify its fee
schedule to: (i) Increase its per contract
clearing fee from $0.050 to $0.054 per
contract and (ii) adjust the quantity of
contracts at which the fixed, per trade
clearing fee begins from greater than
1100 contracts per trade to greater than
1018 contracts per trade. The proposed
changes are designed to target a level of
revenues sufficient to cover OCC’s
operating expenses plus a Business Risk
Buffer of 25% while continuing to
maintain OCC’s existing fixed, per trade
fee at a level of $55 per trade.
In accordance with its Fee Policy,
OCC will continue to monitor cleared
contract volume and operating expenses
in order to determine if further revisions
to OCC’s Schedule of Fees are required
so that monies received from clearing
fees cover OCC’s operating expenses
plus a Business Risk Buffer of 25%.14
$0.050/contract .......................................................
$55/trade ................................................................
increase would be set at a level intended
only to facilitate the maintenance of
OCC’s Business Risk Buffer of 25%,
which is designed to ensure that OCC
accumulates sufficient capital to cover
unexpected fluctuations in operating
expenses, business capital needs, and
regulatory capital requirements.
Moreover, OCC believes that the
proposed fee change would result in an
equitable allocation of fees among its
participants because it would be equally
applicable to all market participants. As
a result, OCC believes that the proposed
fee schedule provides for the equitable
allocation of reasonable fees in
accordance with Section 17A(b)(3)(D) of
the Act.17 The proposed rule change is
not inconsistent with the existing rules
of OCC, including any other rules
proposed to be amended.
(B) Clearing Agency’s Statement on
Burden on Competition
Section 17A(b)(3)(D) of the Act,
requires that the rules of a clearing
agency provide for the equitable
allocation of reasonable dues, fees, and
other charges among its participants.15
The proposed fee schedule was set in
accordance with the criteria set forth in
OCC’s Capital Plan, which requires that
OCC’s fees be set at a level designed to
cover OCC’s operating expenses and
maintain a Business Risk Buffer of
25%.16 OCC believes the proposed fee
change is reasonable because the fee
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(2) Statutory Basis
Section 17A(b)(3)(I) of the Act18
requires that the rules of a clearing
agency not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. OCC does not
believe that the proposed rule change
would have any impact or impose a
burden on competition. Although this
proposed rule change affects clearing
members, their customers, and the
markets that OCC serves, OCC believes
that the proposed rule change would not
10 OCC’s Schedule of Fees must also meet the
requirements set forth in Article IX, Section 9 of
OCC’s By-Laws. 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 of Directors;
and 3) accumulate an additional surplus deemed
advisable by the Board of Directors to permit OCC
to meet its obligations to its clearing members and
the public. Clauses 2 and 3 above will only be
invoked at the discretion of OCC’s Board of
Directors and in extraordinary circumstances.
11 OCC previously revised its Schedule of Fees
effective December 1, 2016, to implement a fee
increase in accordance with the Fee Policy. See
Securities Exchange Act Release No. 79028 (October
3, 2016), 81 FR 69885 (October 7, 2016) (SR–OCC–
2016–012).
12 OCC has provided a summary of its analysis in
confidential Exhibit 3 of the filing.
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1–1018
>1018
Proposed fee
$0.054/contract.
$55/trade.
disadvantage or favor any particular
user of OCC’s services in relationship to
another user because the proposed
clearing fees apply equally to all users
of OCC. Accordingly, OCC does not
believe that the proposed rule change
would have any impact or impose a
burden on competition.
(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
Pursuant to Section 19(b)(3)(A)(ii) 19
of the Act, and Rule 19b–4(f)(2)
thereunder,20 the proposed rule change
is filed for immediate effectiveness as it
constitutes a change in fees charged to
OCC Clearing Members. 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,
13 These
changes are also reflected in Exhibit 5.
subsequent changes to OCC’s Schedule of
Fees would be the subject of a subsequent proposed
rule change filed with the Commission.
15 17 U.S.C. 78q–1(b)(3)(D).
16 See supra note 5.
17 17 U.S.C. 78q–1(b)(3)(D).
18 15 U.S.C. 78q–1(b)(3)(I).
19 15 U.S.C. 78s(b)(3)(A)(ii).
20 17 CFR 240.19b–4(f)(2).
14 Any
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or otherwise in furtherance of the
purposes of the Act.21
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:
sradovich on DSK3GMQ082PROD with NOTICES
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–2018–004 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–2018–004. 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
that you wish to make available
publicly.
21 Notwithstanding its immediate effectiveness,
implementation of this rule change will be delayed
until this change is deemed certified under CFTC
Rule 40.6.
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All submissions should refer to File
Number SR–OCC–2018–004 and should
be submitted on orbefore February 23,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–02124 Filed 2–1–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Rule 12d2–2 and Form 25, SEC File No.
270–86, OMB Control No. 3235–0080
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget a
request for approval of extension of the
previously approved collection of
information provided for the following
rule: Rule 12d2–2 (17 CFR 240.12d2–2)
and Form 25 (17 CFR 249.25).
On February 12, 1935, the
Commission adopted Rule 12d2–2,1 and
Form 25 under the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.)
(‘‘Act’’), which sets forth the conditions
and procedures under which a security
may be delisted from an exchange and
withdrawn from registration under
Section 12(b) of the Act.2 The
Commission adopted amendments to
Rule 12d2–2 and Form 25 in 2005.3
Under the adopted Rule 12d2–2, all
issuers and national securities
exchanges seeking to delist and
deregister a security in accordance with
22 17 CFR 200.30–3(a)(12). OCC filed this
proposed rule change for immediate effectiveness
pursuant to Exchange Act Section 19(b)(3)(A)(ii)
and Rule 19b–4(f)(2). As stated above in note 8,
OCC may not implement the proposed change
unless either (i) the Commission issues an Order
approving the proposed rule change SR–OCC–
2018–001 or (ii) an exception to the 60-day notice
period provision in the Fee Policy is authorized by
OCC’s Board of Directors and the holders of all of
the outstanding Class B Common Stock of OCC.
1 See Securities Exchange Act Release No. 98
(February 12, 1935).
2 See Securities Exchange Act Release No. 7011
(February 5, 1963), 28 FR 1506 (February 16, 1963).
3 See Securities Exchange Act Release No. 52029
(July 14, 2005), 70 FR 42456 (July 22, 2005).
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the rules of an exchange must file the
adopted version of Form 25 with the
Commission. The Commission also
adopted amendments to Rule 19d–1
under the Act to require exchanges to
file the adopted version of Form 25 as
notice to the Commission under Section
19(d) of the Act. Finally, the
Commission adopted amendments to
exempt standardized options and
security futures products from Section
12(d) of the Act. These amendments are
intended to simplify the paperwork and
procedure associated with a delisting
and to unify general rules and
procedures relating to the delisting
process.
The Form 25 is useful because it
informs the Commission that a security
previously traded on an exchange is no
longer traded. In addition, the Form 25
enables the Commission to verify that
the delisting and/or deregistration has
occurred in accordance with the rules of
the exchange. Further, the Form 25
helps to focus the attention of delisting
issuers to make sure that they abide by
the proper procedural and notice
requirements associated with a delisting
and/or deregistration. Without Rule
12d2–2 and the Form 25, as applicable,
the Commission would be unable to
fulfill its statutory responsibilities.
There are 21 national securities
exchanges that could possibly be
respondents complying with the
requirements of the Rule and Form 25.4
The burden of complying with Rule
12d2–2 and Form 25 is not evenly
distributed among the exchanges,
however, since there are many more
securities listed on the New York Stock
Exchange, the NASDAQ Stock Market,
and NYSE American than on the other
exchanges. However, for purposes of
this filing, the Commission staff has
assumed that the number of responses is
evenly divided among the exchanges.
Since approximately 800 responses
under Rule 12d2–2 and Form 25 for the
purpose of delisting and/or
deregistration of equity securities are
received annually by the Commission
4 The staff notes that a few of these 21 registered
national securities exchanges only have rules to
permit the listing of standardized options, which
are exempt from Rule 12d2–2 under the Act.
Nevertheless, the staff counted national securities
exchanges that can only list options as potential
respondents because these exchanges could
potentially adopt new rules, subject to Commission
approval under Section 19(b) of the Act, to list and
trade equity and other securities that have to
comply with Rule 12d2–2 under the Act. Notice
registrants that are registered as national securities
exchanges solely for the purposes of trading
securities futures products have not been counted
since, as noted above, securities futures products
are exempt from complying with Rule 12d–2–2
under the Act and therefore do not have to file
Form 25.
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[Federal Register Volume 83, Number 23 (Friday, February 2, 2018)]
[Notices]
[Pages 4944-4946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02124]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82596; File No. SR-OCC-2018-004]
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
January 30, 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 19, 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. 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 proposed rule change from interested persons.
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\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).
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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 revise OCC's Schedule of Fees
effective March 1, 2018, to implement an increase in clearing fees in
accordance with OCC's Fee Policy.\5\ The proposed changes to the
Schedule of Fees can be found in Exhibit 5 to the proposed rule change.
All capitalized terms not defined herein have the same meaning as set
forth in the OCC By-Laws and Rules.\6\
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\5\ 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 D.C.
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 (D.C. Cir. 2017). While the Commission further analyzes the
Capital Plan, it remains in effect as originally approved by the
Commission. See id.
\6\ 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 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 in accordance with its Fee Policy to set OCC's fees at
a level designed to cover OCC's operating expenses and maintain a
Business Risk Buffer of 25%.\7\ The revised fee schedule would become
effective on March 1, 2018.\8\
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\7\ The Business Risk Buffer is equal to net income before
refunds, dividends, and taxes divided by total revenue.
\8\ OCC recently filed a proposed rule change with the
Commission to revise its Fee Policy to provide that proposed fee
changes are required to be implemented no sooner than thirty (30)
days from the date of filing of the proposed rule change concerning
such fee change (as opposed to sixty (60) days). See SR-OCC-2018-
001. OCC also has submitted the proposed changes to its Fee Policy
to the Commodity Futures Trading Commission (``CFTC'') under CFTC
Regulation 40.6 and expects the proposed changes to be certified on
January 24, 2018. OCC notes that implementation of the proposed fee
change on March 1, 2018, requires either (i) Commission approval of
SR-OCC-2018-001 and certification of the Fee Policy changes in SR-
OCC-2018-001 under CFTC Regulation 40.6 or (ii) an exception to the
60-day notice period provision in the Fee Policy authorized by OCC's
Board of Directors and the holders of all of the outstanding Class B
Common Stock of OCC. OCC's Board of Directors unanimously approved,
and the holders of all of the outstanding Class B Common Stock of
OCC unanimously consented to, the reduction of the 60-day notice
period to 30 days on December 15, 2016.
---------------------------------------------------------------------------
By way of background, OCC implemented its Capital Plan in 2015,\9\
which was put in place in light of proposed regulatory capital
requirements applicable to systemically important financial market
utilities, such as OCC. As part of OCC's Capital Plan, OCC adopted a
Fee Policy whereby OCC would set clearing fees at a level that covers
OCC's operating
[[Page 4945]]
expenses plus a Business Risk Buffer of 25%.\10\ The purpose of the
Business Risk Buffer is to ensure that OCC accumulates sufficient
capital to cover unexpected fluctuations in operating expenses,
business capital needs, and regulatory capital requirements.
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\9\ See supra note 5.
\10\ OCC's Schedule of Fees must also meet the requirements set
forth in Article IX, Section 9 of OCC's By-Laws. 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 of Directors; and 3) accumulate an additional surplus deemed
advisable by the Board of Directors to permit OCC to meet its
obligations to its clearing members and the public. Clauses 2 and 3
above will only be invoked at the discretion of OCC's Board of
Directors and in extraordinary circumstances.
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OCC recently reviewed its current Schedule of Fees \11\ against
projected revenues and expenses for 2018 in accordance with its Fee
Policy, to determine whether the Schedule of Fees was sufficient to
cover OCC's anticipated operating expenses and achieve a Business Risk
Buffer of 25%. In reviewing the Schedule of Fees, OCC analyzed: (i)
Expenses budgeted for 2018, (ii) projected other revenue streams for
2018, (iii) projected volume ``mix,'' and (iv) projected volume growth
for 2018. Based on the foregoing analysis, OCC determined that the
current fee schedule is set at a level that would be insufficient to
ensure that OCC achieves its Business Risk Buffer of 25% as required
under the Fee Policy.\12\ OCC arrived at the proposed fee schedule
presented herein by determining the figures that provide the best
opportunity for OCC to achieve coverage of its anticipated operating
expenses plus a Business Risk Buffer of 25%.
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\11\ OCC previously revised its Schedule of Fees effective
December 1, 2016, to implement a fee increase in accordance with the
Fee Policy. See Securities Exchange Act Release No. 79028 (October
3, 2016), 81 FR 69885 (October 7, 2016) (SR-OCC-2016-012).
\12\ OCC has provided a summary of its analysis in confidential
Exhibit 3 of the filing.
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As a result of the aforementioned analysis, OCC proposes to revise
its Schedule of Fees as set forth below.\13\
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\13\ These changes are also reflected in Exhibit 5.
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Current fee schedule Proposed fee schedule
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Trades with
Trades with contracts of: Current fee contracts of: Proposed fee
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1-1100.............................. $0.050/contract........ 1-1018 $0.054/contract.
>1100............................... $55/trade.............. >1018 $55/trade.
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OCC proposes to modify its fee schedule to: (i) Increase its per
contract clearing fee from $0.050 to $0.054 per contract and (ii)
adjust the quantity of contracts at which the fixed, per trade clearing
fee begins from greater than 1100 contracts per trade to greater than
1018 contracts per trade. The proposed changes are designed to target a
level of revenues sufficient to cover OCC's operating expenses plus a
Business Risk Buffer of 25% while continuing to maintain OCC's existing
fixed, per trade fee at a level of $55 per trade.
In accordance with its Fee Policy, OCC will continue to monitor
cleared contract volume and operating expenses in order to determine if
further revisions to OCC's Schedule of Fees are required so that monies
received from clearing fees cover OCC's operating expenses plus a
Business Risk Buffer of 25%.\14\
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\14\ Any subsequent changes to OCC's Schedule of Fees would be
the subject of a subsequent proposed rule change filed with the
Commission.
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(2) Statutory Basis
Section 17A(b)(3)(D) of the Act, requires that the rules of a
clearing agency provide for the equitable allocation of reasonable
dues, fees, and other charges among its participants.\15\ The proposed
fee schedule was set in accordance with the criteria set forth in OCC's
Capital Plan, which requires that OCC's fees be set at a level designed
to cover OCC's operating expenses and maintain a Business Risk Buffer
of 25%.\16\ OCC believes the proposed fee change is reasonable because
the fee increase would be set at a level intended only to facilitate
the maintenance of OCC's Business Risk Buffer of 25%, which is designed
to ensure that OCC accumulates sufficient capital to cover unexpected
fluctuations in operating expenses, business capital needs, and
regulatory capital requirements. Moreover, OCC believes that the
proposed fee change would result in an equitable allocation of fees
among its participants because it would be equally applicable to all
market participants. As a result, OCC believes that the proposed fee
schedule provides for the equitable allocation of reasonable fees in
accordance with Section 17A(b)(3)(D) of the Act.\17\ 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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\15\ 17 U.S.C. 78q-1(b)(3)(D).
\16\ See supra note 5.
\17\ 17 U.S.C. 78q-1(b)(3)(D).
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(B) Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act\18\ requires that the rules of a
clearing agency not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. OCC does not
believe that the proposed rule change would have any impact or impose a
burden on competition. Although this proposed rule change affects
clearing members, their customers, and the markets that OCC serves, OCC
believes that the proposed rule change would not disadvantage or favor
any particular user of OCC's services in relationship to another user
because the proposed clearing fees apply equally to all users of OCC.
Accordingly, OCC does not believe that the proposed rule change would
have any impact or impose a burden on competition.
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\18\ 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
Pursuant to Section 19(b)(3)(A)(ii) \19\ of the Act, and Rule 19b-
4(f)(2) thereunder,\20\ the proposed rule change is filed for immediate
effectiveness as it constitutes a change in fees charged to OCC
Clearing Members. 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,
[[Page 4946]]
or otherwise in furtherance of the purposes of the Act.\21\
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\19\ 15 U.S.C. 78s(b)(3)(A)(ii).
\20\ 17 CFR 240.19b-4(f)(2).
\21\ Notwithstanding its immediate effectiveness, implementation
of this rule change will be delayed until this change is deemed
certified under CFTC Rule 40.6.
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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 [email protected]. Please include
File Number SR-OCC-2018-004 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-2018-004. 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 that you wish to make available publicly.
All submissions should refer to File Number SR-OCC-2018-004 and
should be submitted on or before February 23, 2018.
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\22\ 17 CFR 200.30-3(a)(12). OCC filed this proposed rule change
for immediate effectiveness pursuant to Exchange Act Section
19(b)(3)(A)(ii) and Rule 19b-4(f)(2). As stated above in note 8, OCC
may not implement the proposed change unless either (i) the
Commission issues an Order approving the proposed rule change SR-
OCC-2018-001 or (ii) an exception to the 60-day notice period
provision in the Fee Policy is authorized by OCC's Board of
Directors and the holders of all of the outstanding Class B Common
Stock of OCC.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02124 Filed 2-1-18; 8:45 am]
BILLING CODE 8011-01-P
