Self-Regulatory Organizations; The Options Clearing Corporation; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Change To Revise The Options Clearing Corporation's Schedule of Fees, 9562-9564 [2018-04484]
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Federal Register / Vol. 83, No. 44 / Tuesday, March 6, 2018 / Notices
change, as modified by Amendment No.
1 (‘‘Approval Order’’).10
SECURITIES AND EXCHANGE
COMMISSION
On January 31, 2018, pursuant to
Commission Rule of Practice 430,11
NYSE Group, Inc. (‘‘NYSE’’) and The
Nasdaq Stock Market LLC (‘‘Nasdaq’’)
each filed petitions for review of the
Approval Order. Pursuant to
Commission Rule of Practice 431(e), the
Approval Order is stayed by the filing
with the Commission of a notice of
intention to petition for review.12
Pursuant to Rule 431 of the Rules of
Practice,13 the petitions for review of the
Approval Order of NYSE and Nasdaq
are granted.14 Further, the Commission
hereby establishes that any party to the
action or other person may file a written
statement in support of or in opposition
to the Approval Order on or before
March 22, 2018.
[Release No. 34–82793; File No. SR–OCC–
2018–004]
For the reasons stated above, it is
hereby:
Ordered that the petitions of NYSE
and Nasdaq for review of the Division’s
action to approve the proposed rule
change by delegated authority be
granted; and
It is further ordered that any party or
other person may file a statement in
support of or in opposition to the action
made pursuant to delegated authority on
or before March 22, 2018.
It is further ordered that the January
17, 2018 order approving the proposed
rule change, as modified by Amendment
No. 1 (File No. SR–BatsBZX–2017–34),
shall remain stayed pending further
order by the Commission.
By the Commission.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–04512 Filed 3–5–18; 8:45 am]
sradovich on DSK3GMQ082PROD with NOTICES
I. Introduction
On January 19, 2018, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change, File No. SR–
OCC–2018–004, pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’),1 and Rule 19b–4
thereunder.2 The proposed rule change
was immediately effective upon filing
with the Commission pursuant to
Section 19(b)(3)(A) of the Act.3 The
proposed rule change was published for
comment in the Federal Register on
February 2, 2018.4 Under Section
19(b)(3)(C) of the Act,5 the Commission
is hereby: (i) Temporarily suspending
File No. SR–OCC–2018–004; and (ii)
instituting proceedings to determine
whether to approve or disapprove File
No. SR–OCC–2018–004.
II. Description 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,6 which was
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 Securities Exchange Act Release No. 82596 (Jan.
30, 2018), 83 FR 4944 (Feb. 2, 2018) (SR–OCC–
2018–004) (‘‘Notice’’).
5 15 U.S.C. 78s(b)(3)(C).
6 See Notice at 4944–45. OCC also 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 Securities
Exchange Act Release No. 82576 (Jan. 24, 2018), 83
FR 4324 (Jan. 30, 2018) (SR–OCC–2018–001). OCC
submitted the proposed changes to its Fee Policy to
the Commodity Futures Trading Commission
(‘‘CFTC’’) under CFTC Regulation 40.6. OCC stated
that implementation of the proposed fee change on
March 1, 2018 would require either: (i) Commission
2 17
10 See Exchange Act Release No. 82522, 83 FR
3205 (Jan. 23, 2018).
11 17 CFR 201.430.
12 17 CFR 201.431(e).
13 17 CFR 201.431.
14 On February 2, 2018, NYSE filed a corrected
petition for review that the Commission will
consider in lieu of the version filed on January 31,
2018.
22:59 Mar 05, 2018
February 28, 2018.
1 15
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Self-Regulatory Organizations; The
Options Clearing Corporation;
Suspension of and Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove the Proposed
Rule Change To Revise The Options
Clearing Corporation’s Schedule of
Fees
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adopted as part of its plan to raise
additional capital (‘‘Capital Plan’’).7 As
stated in the Notice, OCC filed the
proposed rule change to revise OCC’s
Schedule of Fees in accordance with its
Fee Policy and set fees at a level
designed to cover OCC’s operating
expenses and maintain a Business Risk
Buffer of 25%.8
OCC stated that it recently reviewed
its current Schedule of Fees 9 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 the Business Risk Buffer. OCC
stated that it analyzed: (i) Expenses
budgeted for 2018; (ii) projected other
revenue streams for 2018; (iii) projected
volume mix; and (iv) projected volume
growth for 2018. After this review, 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 as required
under the Fee Policy.10 OCC stated that
it arrived at the proposed fee schedule
below by determining the figures that
provide the best opportunity for OCC to
achieve coverage of its anticipated
operating expenses plus a Business Risk
Buffer. Accordingly, OCC proposed the
Schedule of Fees set forth in the table
below:
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 60day 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.
7 See Securities Exchange Act Release No. 77112
(February 11, 2016), 81 FR 8294 (February 18, 2016)
(SR–OCC–2015–02) (‘‘Approval Order’’). The
Capital Plan was later subject to judicial review by
the U.S. Court of Appeals for the District of
Columbia Circuit (‘‘D.C. Circuit’’), which remanded
the Approval Order to the Commission to further
analyze whether the Capital Plan is consistent with
the Act. Susquehanna Int’l Grp., LLP v. SEC, 866
F.3d 442 (D.C. Cir. 2017). The Commission’s review
of the Plan on remand is ongoing, and the Capital
Plan remains in effect during this ongoing review.
8 See Notice at 4944–45. 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.
9 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).
10 OCC provided a summary of its analysis in a
confidential Exhibit 3 to the filing.
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Federal Register / Vol. 83, No. 44 / Tuesday, March 6, 2018 / Notices
Current fee schedule
Trades with contracts of:
OCC proposed to modify its Schedule
of Fees 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
1,100 contracts per trade to greater than
1,018 contracts per trade. OCC stated
that the proposed changes are designed
to target a level of revenues sufficient to
cover OCC’s operating expenses plus the
Business Risk Buffer while continuing
to maintain its existing fixed, per trade,
fee at $55 per trade.
OCC stated that in accordance with its
Fee Policy, OCC will continue to
monitor cleared contract volume and
operating expenses to determine if
further revisions to OCC’s Schedule of
Fees are required so that monies
received from clearing fees cover its
operating expenses plus the Business
Risk Buffer.11
III. Summary of Comment Received
sradovich on DSK3GMQ082PROD with NOTICES
On February 22, 2018, the
Commission received a comment letter
on the proposed rule change from
Susquehanna International Group, LLP
(‘‘SIG’’).12 In the comment letter, SIG
expressed concern regarding whether
the information provided by OCC in the
Notice was sufficient to allow for
meaningful public comment on the
proposal.13 Specifically, SIG asserted
that OCC’s Shareholder Exchanges are
incented to overestimate OCC’s
expenses, because such overestimation
would lead to increased dividends.14
SIG asserted further that, without access
to the expense projections filed as a
confidential exhibit to the proposed rule
change, the public has no basis to
believe that the proposed fee increase is
reasonable and no ability to comment
critically on OCC’s supporting
11 Any subsequent changes to OCC’s Schedule of
Fees would be the subject of a subsequent proposed
rule change filed with the Commission.
12 See letter from Richard J. McDonald, SIG, dated
February 14, 2018, to Brent J. Fields, Secretary,
Commission (‘‘SIG Letter’’). See comments on the
proposed rule change (SR–OCC–2018–004), https://
www.sec.gov/comments/sr-occ-2018-004/
occ2018004.htm.
13 SIG Letter at 2.
14 SIG Letter at 3. OCC is owned by Chicago Board
Options Exchange, Incorporated (‘‘CBOE’’);
International Securities Exchange, LLC; NASDAQ
OMX PHLX, LLC; NYSE American LLC; and NYSE
Arca, Inc. See Approval Order at 8294.
21:39 Mar 05, 2018
Trades with contracts of:
Current fee
1–1,100 ...................................................................
>1,100 .....................................................................
VerDate Sep<11>2014
Proposed fee schedule
Jkt 244001
$0.050/contract ......................................................
$55/trade ................................................................
analysis.15 In addition, SIG
characterized OCC’s proposal to
increase fees as a negative consequence
of the Capital Plan.16
IV. Suspension of File No. SR–OCC–
2018–004
Pursuant to Section 19(b)(3)(C) of the
Act,17 at any time within 60 days of the
date of filing of a proposed rule change
pursuant to Section 19(b)(1) of the
Act,18 the Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization 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. As discussed
further below, the Commission believes
a temporary suspension of the proposed
rule change is warranted here to allow
for additional analysis of the proposed
rule change’s consistency with the Act
and the rules thereunder. In particular,
the Commission finds that it is
appropriate in the public interest, for
the protection of investors, and
otherwise in furtherance of the purposes
of the Act, to temporarily suspend the
proposed rule change to consider
whether the proposed rule change
satisfies the standards under the Act
and the rules thereunder requiring,
among other things, that clearing agency
rules provide for the equitable
allocation of reasonable dues, fees and
other charges among its participants.
15 SIG
Letter at 2.
at 1. OCC’s Board of Directors decided that
OCC was significantly undercapitalized, and,
therefore, proposed an expedited plan to
substantially increase OCC’s capitalization. See
Approval Order at 8294. Subsequent to the
Approval Order, parties, including SIG, filed a
petition for review of the Approval Order in the DC
Circuit, challenging the Commission’s Approval
Order. The DC Circuit ultimately remanded the case
to the Commission for further proceedings without
reaching the merits of the Capital Plan.
Susquehanna, 866 F.3d at 443. The court did not
vacate the Approval Order prior to remand, instead
leaving the Capital Plan in place and remanding to
give the Commission an opportunity to reevaluate
the Capital Plan. Id. at 451. As noted above, the
Commission’s reconsideration of the Capital Plan is
ongoing.
17 15 U.S.C. 78s(b)(3)(C).
18 15 U.S.C. 78s(b)(1).
16 Id.
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
1–1,018
>1,018
Proposed fee
$0.054/contract.
$55/trade.
V. Proceedings To Determine Whether
To Approve or Disapprove File No. SR–
OCC–2018–004
The Commission is instituting
proceedings pursuant to Sections
19(b)(3)(C) 19 and 19(b)(2)(B) of the
Act 20 to determine whether the
proposed rule change should be
approved or disapproved.
Institution of proceedings does not
indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, the
Commission seeks and encourages
interested persons to provide additional
comment on the proposed rule change
to inform the Commission’s analysis of
whether to disapprove the proposed
rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,21 the Commission is providing
notice of the grounds for disapproval
under consideration. As noted above,
the Fee Policy to which the proposed
rule change relates was adopted as part
of OCC’s Capital Plan, and the Capital
Plan remains subject to Commission
review.22 The commenter asserts that
the fee increase contradicts previous
statements by OCC regarding ‘‘OCC’s
assurances of low fees in its Capital Plan
submissions,’’ calls into question the
consistency of the Capital Plan with the
Act, and is otherwise without basis.23
The Commission believes it is
appropriate to institute proceedings to
assess whether the considerations
currently before the Commission in
connection with its review of the
Capital Plan on remand are implicated
by the issues raised by the proposed fee
change.24 Moreover, the commenter
19 15 U.S.C. 78s(b)(3)(C). Once the Commission
temporarily suspends a proposed rule change,
Section 19(b)(3)(C) of the Act requires that the
Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule
change should be approved or disapproved.
20 15 U.S.C. 78s(b)(2)(B).
21 15 U.S.C. 78s(b)(2)(B).
22 See supra note 7.
23 SIG Letter at 2.
24 The Commission notes that one of the issues
before us in considering the Capital Plan is the
contention by some of those commenting on the
Plan that the Plan will lead to an increase in fees.
In responding to these comments in our initial
approval of the Plan, we observed that ‘‘[t]he
Exchange Act rule filing requirements for fee
changes provide an opportunity for public comment
and an opportunity for the Commission to review
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06MRN1
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Federal Register / Vol. 83, No. 44 / Tuesday, March 6, 2018 / Notices
argues that, without access to the
information provided by OCC on a
confidential basis, the public cannot
‘‘meaningfully comment on the
propriety of the proposed fee
increase.’’ 25 The Commission is also
instituting proceedings to allow for
additional consideration and comment
on this and other issues raised by the
commenter. Finally, the Commission
believes that OCC’s proposed rule
change raises questions as to whether it
is consistent with Section 17A(b)(3)(D)
of the Act,26 which requires clearing
agency rules to provide for the equitable
allocation of reasonable dues, fees and
other charges among its participants.
VI. Request for Written Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the proposed
fee change. In particular, the
Commission invites the written views of
interested persons concerning whether
the proposed fee change is consistent
with Section 17A(b)(3)(D) of the Act 27
or any other provision of the Act, rules,
and regulations thereunder. 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 No. 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 No.
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
No. SR–OCC–2018–004 and should be
submitted on or before March 27, 2018.
Any person who wishes to file a rebuttal
to any other person’s submission must
file that rebuttal on or before April 10,
2018.
VII. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,28 that File
No. SR–OCC–2018–004, be and hereby
is, temporarily suspended. In addition,
the Commission is instituting
proceedings to determine whether the
proposed rule changes should be
approved or disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–04484 Filed 3–5–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33038; File No. 812–14760]
Alcentra Capital Corporation, et al.
the change, summarily suspend it and institute
proceedings to ultimately approve or disapprove
the change, as applicable, to ensure an SRO’s rules
meet regulatory requirements.’’ See Approval Order
at 8303.
25 SIG Letter at 3.
26 17 CFR 240.17Ad–22(d)(7).
27 15 U.S.C. 78q–1(b)(3)(D).
VerDate Sep<11>2014
21:39 Mar 05, 2018
Jkt 244001
February 28, 2018.
Securities and Exchange
Commission (‘‘Commission’’).
AGENCY:
28 15
29 17
PO 00000
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(12).
Frm 00091
Fmt 4703
Sfmt 4703
ACTION:
Notice.
Notice of application for an order
under sections 17(d) and 57(i) of the
Investment Company Act of 1940 (the
‘‘Act’’) and rule 17d–1 under the Act to
permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
SUMMARY OF APPLICATION: Applicants
request an order to permit business
development companies (‘‘BDCs’’) and
certain closed-end management
investment companies to co-invest in
portfolio companies with each other and
with affiliated investment funds.
APPLICANTS: Alcentra Capital
Corporation (the ‘‘Company’’); Alcentra
BDC Equity Holdings, LLC (the
‘‘Subsidiary’’); Alcentra Middle Market
Fund IV, L.P. (the ‘‘Existing CoInvestment Affiliate’’); Alcentra NY,
LLC (‘‘Alcentra NY’’); The Dreyfus
Corporation (‘‘Dreyfus’’); Dreyfus
Alcentra Global Credit Income 2024
Target Term Fund, Inc. (‘‘DCF’’); Stira
Alcentra Global Credit Fund (‘‘Stira
Alcentra,’’ and together with the
Company and DCF, the ‘‘Existing
Regulated Funds’’); and Stira
Investment Adviser, LLC (‘‘Stira
Adviser’’).
FILING DATES: The application was filed
on April 10, 2017 and amended on
August 21, 2017, October 27, 2017,
January 26, 2018, and February 14,
2018.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
will be issued unless the Commission
orders a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on March 26, 2018, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to Rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F St.
NE, Washington, DC 20549–1090.
Applicants: Alcentra Capital
Corporation, Alcentra Middle Market
Fund IV, L.P, Alcentra NY, LLC,
Alcentra BDC Equity Holdings, LLC,
The Dreyfus Corporation, and Dreyfus
E:\FR\FM\06MRN1.SGM
06MRN1
]]>Agencies
[Federal Register Volume 83, Number 44 (Tuesday, March 6, 2018)]
[Notices]
[Pages 9562-9564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04484]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82793; File No. SR-OCC-2018-004]
Self-Regulatory Organizations; The Options Clearing Corporation;
Suspension of and Order Instituting Proceedings To Determine Whether To
Approve or Disapprove the Proposed Rule Change To Revise The Options
Clearing Corporation's Schedule of Fees
February 28, 2018.
I. Introduction
On January 19, 2018, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change, File No. SR-OCC-2018-004, pursuant to Section
19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule
19b-4 thereunder.\2\ The proposed rule change was immediately effective
upon filing with the Commission pursuant to Section 19(b)(3)(A) of the
Act.\3\ The proposed rule change was published for comment in the
Federal Register on February 2, 2018.\4\ Under Section 19(b)(3)(C) of
the Act,\5\ the Commission is hereby: (i) Temporarily suspending File
No. SR-OCC-2018-004; and (ii) instituting proceedings to determine
whether to approve or disapprove File No. SR-OCC-2018-004.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ Securities Exchange Act Release No. 82596 (Jan. 30, 2018),
83 FR 4944 (Feb. 2, 2018) (SR-OCC-2018-004) (``Notice'').
\5\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
II. Description 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,\6\ which was adopted as part of its
plan to raise additional capital (``Capital Plan'').\7\ As stated in
the Notice, OCC filed the proposed rule change to revise OCC's Schedule
of Fees in accordance with its Fee Policy and set fees at a level
designed to cover OCC's operating expenses and maintain a Business Risk
Buffer of 25%.\8\
---------------------------------------------------------------------------
\6\ See Notice at 4944-45. OCC also 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
Securities Exchange Act Release No. 82576 (Jan. 24, 2018), 83 FR
4324 (Jan. 30, 2018) (SR-OCC-2018-001). OCC submitted the proposed
changes to its Fee Policy to the Commodity Futures Trading
Commission (``CFTC'') under CFTC Regulation 40.6. OCC stated that
implementation of the proposed fee change on March 1, 2018 would
require 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.
\7\ See Securities Exchange Act Release No. 77112 (February 11,
2016), 81 FR 8294 (February 18, 2016) (SR-OCC-2015-02) (``Approval
Order''). The Capital Plan was later subject to judicial review by
the U.S. Court of Appeals for the District of Columbia Circuit
(``D.C. Circuit''), which remanded the Approval Order to the
Commission to further analyze whether the Capital Plan is consistent
with the Act. Susquehanna Int'l Grp., LLP v. SEC, 866 F.3d 442 (D.C.
Cir. 2017). The Commission's review of the Plan on remand is
ongoing, and the Capital Plan remains in effect during this ongoing
review.
\8\ See Notice at 4944-45. 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.
---------------------------------------------------------------------------
OCC stated that it recently reviewed its current Schedule of Fees
\9\ 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 the Business
Risk Buffer. OCC stated that it analyzed: (i) Expenses budgeted for
2018; (ii) projected other revenue streams for 2018; (iii) projected
volume mix; and (iv) projected volume growth for 2018. After this
review, 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 as required under the Fee Policy.\10\ OCC stated that it
arrived at the proposed fee schedule below by determining the figures
that provide the best opportunity for OCC to achieve coverage of its
anticipated operating expenses plus a Business Risk Buffer.
Accordingly, OCC proposed the Schedule of Fees set forth in the table
below:
---------------------------------------------------------------------------
\9\ 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).
\10\ OCC provided a summary of its analysis in a confidential
Exhibit 3 to the filing.
[[Page 9563]]
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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
----------------------------------------------------------------------------------------------------------------
1-1,100............................. $0.050/contract........ 1-1,018 $0.054/contract.
>1,100.............................. $55/trade.............. >1,018 $55/trade.
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OCC proposed to modify its Schedule of Fees 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 1,100 contracts per trade to greater than
1,018 contracts per trade. OCC stated that the proposed changes are
designed to target a level of revenues sufficient to cover OCC's
operating expenses plus the Business Risk Buffer while continuing to
maintain its existing fixed, per trade, fee at $55 per trade.
OCC stated that in accordance with its Fee Policy, OCC will
continue to monitor cleared contract volume and operating expenses to
determine if further revisions to OCC's Schedule of Fees are required
so that monies received from clearing fees cover its operating expenses
plus the Business Risk Buffer.\11\
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\11\ 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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III. Summary of Comment Received
On February 22, 2018, the Commission received a comment letter on
the proposed rule change from Susquehanna International Group, LLP
(``SIG'').\12\ In the comment letter, SIG expressed concern regarding
whether the information provided by OCC in the Notice was sufficient to
allow for meaningful public comment on the proposal.\13\ Specifically,
SIG asserted that OCC's Shareholder Exchanges are incented to
overestimate OCC's expenses, because such overestimation would lead to
increased dividends.\14\ SIG asserted further that, without access to
the expense projections filed as a confidential exhibit to the proposed
rule change, the public has no basis to believe that the proposed fee
increase is reasonable and no ability to comment critically on OCC's
supporting analysis.\15\ In addition, SIG characterized OCC's proposal
to increase fees as a negative consequence of the Capital Plan.\16\
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\12\ See letter from Richard J. McDonald, SIG, dated February
14, 2018, to Brent J. Fields, Secretary, Commission (``SIG
Letter''). See comments on the proposed rule change (SR-OCC-2018-
004), https://www.sec.gov/comments/sr-occ-2018-004/occ2018004.htm.
\13\ SIG Letter at 2.
\14\ SIG Letter at 3. OCC is owned by Chicago Board Options
Exchange, Incorporated (``CBOE''); International Securities
Exchange, LLC; NASDAQ OMX PHLX, LLC; NYSE American LLC; and NYSE
Arca, Inc. See Approval Order at 8294.
\15\ SIG Letter at 2.
\16\ Id. at 1. OCC's Board of Directors decided that OCC was
significantly undercapitalized, and, therefore, proposed an
expedited plan to substantially increase OCC's capitalization. See
Approval Order at 8294. Subsequent to the Approval Order, parties,
including SIG, filed a petition for review of the Approval Order in
the DC Circuit, challenging the Commission's Approval Order. The DC
Circuit ultimately remanded the case to the Commission for further
proceedings without reaching the merits of the Capital Plan.
Susquehanna, 866 F.3d at 443. The court did not vacate the Approval
Order prior to remand, instead leaving the Capital Plan in place and
remanding to give the Commission an opportunity to reevaluate the
Capital Plan. Id. at 451. As noted above, the Commission's
reconsideration of the Capital Plan is ongoing.
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IV. Suspension of File No. SR-OCC-2018-004
Pursuant to Section 19(b)(3)(C) of the Act,\17\ at any time within
60 days of the date of filing of a proposed rule change pursuant to
Section 19(b)(1) of the Act,\18\ the Commission summarily may
temporarily suspend the change in the rules of a self-regulatory
organization 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. As
discussed further below, the Commission believes a temporary suspension
of the proposed rule change is warranted here to allow for additional
analysis of the proposed rule change's consistency with the Act and the
rules thereunder. In particular, the Commission finds that it is
appropriate in the public interest, for the protection of investors,
and otherwise in furtherance of the purposes of the Act, to temporarily
suspend the proposed rule change to consider whether the proposed rule
change satisfies the standards under the Act and the rules thereunder
requiring, among other things, that clearing agency rules provide for
the equitable allocation of reasonable dues, fees and other charges
among its participants.
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\17\ 15 U.S.C. 78s(b)(3)(C).
\18\ 15 U.S.C. 78s(b)(1).
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V. Proceedings To Determine Whether To Approve or Disapprove File No.
SR-OCC-2018-004
The Commission is instituting proceedings pursuant to Sections
19(b)(3)(C) \19\ and 19(b)(2)(B) of the Act \20\ to determine whether
the proposed rule change should be approved or disapproved.
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\19\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\20\ 15 U.S.C. 78s(b)(2)(B).
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Institution of proceedings does not indicate that the Commission
has reached any conclusions with respect to any of the issues involved.
Rather, the Commission seeks and encourages interested persons to
provide additional comment on the proposed rule change to inform the
Commission's analysis of whether to disapprove the proposed rule
change.
Pursuant to Section 19(b)(2)(B) of the Act,\21\ the Commission is
providing notice of the grounds for disapproval under consideration. As
noted above, the Fee Policy to which the proposed rule change relates
was adopted as part of OCC's Capital Plan, and the Capital Plan remains
subject to Commission review.\22\ The commenter asserts that the fee
increase contradicts previous statements by OCC regarding ``OCC's
assurances of low fees in its Capital Plan submissions,'' calls into
question the consistency of the Capital Plan with the Act, and is
otherwise without basis.\23\ The Commission believes it is appropriate
to institute proceedings to assess whether the considerations currently
before the Commission in connection with its review of the Capital Plan
on remand are implicated by the issues raised by the proposed fee
change.\24\ Moreover, the commenter
[[Page 9564]]
argues that, without access to the information provided by OCC on a
confidential basis, the public cannot ``meaningfully comment on the
propriety of the proposed fee increase.'' \25\ The Commission is also
instituting proceedings to allow for additional consideration and
comment on this and other issues raised by the commenter. Finally, the
Commission believes that OCC's proposed rule change raises questions as
to whether it is consistent with Section 17A(b)(3)(D) of the Act,\26\
which requires clearing agency rules to provide for the equitable
allocation of reasonable dues, fees and other charges among its
participants.
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\21\ 15 U.S.C. 78s(b)(2)(B).
\22\ See supra note 7.
\23\ SIG Letter at 2.
\24\ The Commission notes that one of the issues before us in
considering the Capital Plan is the contention by some of those
commenting on the Plan that the Plan will lead to an increase in
fees. In responding to these comments in our initial approval of the
Plan, we observed that ``[t]he Exchange Act rule filing requirements
for fee changes provide an opportunity for public comment and an
opportunity for the Commission to review the change, summarily
suspend it and institute proceedings to ultimately approve or
disapprove the change, as applicable, to ensure an SRO's rules meet
regulatory requirements.'' See Approval Order at 8303.
\25\ SIG Letter at 3.
\26\ 17 CFR 240.17Ad-22(d)(7).
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VI. Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
proposed fee change. In particular, the Commission invites the written
views of interested persons concerning whether the proposed fee change
is consistent with Section 17A(b)(3)(D) of the Act \27\ or any other
provision of the Act, rules, and regulations thereunder. 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:
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\27\ 15 U.S.C. 78q-1(b)(3)(D).
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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 No. 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 No. 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 No. SR-OCC-2018-004 and should
be submitted on or before March 27, 2018. Any person who wishes to file
a rebuttal to any other person's submission must file that rebuttal on
or before April 10, 2018.
VII. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\28\ that File No. SR-OCC-2018-004, be and hereby is, temporarily
suspended. In addition, the Commission is instituting proceedings to
determine whether the proposed rule changes should be approved or
disapproved.
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\28\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-04484 Filed 3-5-18; 8:45 am]
BILLING CODE 8011-01-P
