Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Make Administrative Updates to The Options Clearing Corporation's Risk Management Policies, 36632-36635 [2019-15971]
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36632
Federal Register / Vol. 84, No. 145 / Monday, July 29, 2019 / Notices
POSTAL SERVICE
Product Change—Priority Mail
Negotiated Service Agreement
Postal ServiceTM.
ACTION: Notice.
AGENCY:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: July 29,
2019.
FOR FURTHER INFORMATION CONTACT:
Sean Robinson, 202–268–8405.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 24, 2019,
it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 541 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2019–172, CP2019–194.
SUMMARY:
Sean Robinson,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2019–16035 Filed 7–26–19; 8:45 am]
BILLING CODE 7710–12–P
Product Change—Priority Mail
Negotiated Service Agreement
Postal ServiceTM.
ACTION: Notice.
AGENCY:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: July 29,
2019.
FOR FURTHER INFORMATION CONTACT:
Sean Robinson, 202–268–8405.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 24, 2019,
it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 540 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2019–171, CP2019–193.
khammond on DSKBBV9HB2PROD with NOTICES
SUMMARY:
Sean Robinson,
Attorney, Corporate and Postal Business Law.
BILLING CODE 7710–12–P
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II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
[Release No. 34–86436; File No. SR–OCC–
2019–006]
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.
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change To Make
Administrative Updates to The Options
Clearing Corporation’s Risk
Management Policies
July 23, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule
19b–4 thereunder,2 notice is hereby
given that on July 12, 2019, 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)(iii) 3 of the Act and
Rule 19b–4(f)(3) 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
POSTAL SERVICE
[FR Doc. 2019–16031 Filed 7–26–19; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
OCC is filing a proposed rule change
to make administrative changes to its
Risk Management Framework Policy
(‘‘RMF Policy’’), Clearing Fund
Methodology Policy (‘‘CFM Policy’’),
Collateral Risk Management Policy
(‘‘CRM Policy’’), Counterparty Credit
Risk Management Policy (‘‘CCRM
Policy’’), Default Management Policy
(‘‘DM Policy’’), Margin Policy, and
Model Risk Management Policy (‘‘MRM
Policy’’) (collectively, ‘‘OCC Policies’’).
The proposed changes to the OCC
Policies are included in confidential
Exhibits 5A–5G. Material proposed to be
added to the OCC Policies as currently
in effect is underlined and material
proposed to be deleted is marked in
strikethrough text. All capitalized terms
not defined herein have the same
meaning as set forth in the OCC ByLaws and Rules.5
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(3).
5 OCC’s By-Laws and Rules can be found on
OCC’s public website: https://optionsclearing.com/
about/publications/bylaws.jsp.
PO 00000
1 15
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(1) Purpose
Background
On September 28, 2016 the
Commission adopted amendments to
Rule 17Ad–22 6 and added new Rule
17Ab2–2 7 pursuant to Section 17A of
the Exchange Act 8 and the Payment,
Clearing, and Settlement Supervision
Act of 2010 9 to establish enhanced
standards for the operation and
governance of those clearing agencies
registered with the Commission that
meet the definition of a ‘‘covered
clearing agency,’’ as defined by Rule
17Ad–22(a)(5) 10 (collectively, the new
and amended rules are herein referred
to as ‘‘CCA Rules’’). The CCA Rules
require that covered clearing agencies
‘‘establish, implement, maintain and
enforce written policies and procedures
reasonably designed to . . .’’ comply
with these enhanced standards. OCC is
a covered clearing agency under the
CCA Rules and therefore is subject to
the CCA Rules. Accordingly, OCC
maintains a number of policies that
have been filed with the Commission
and which need to be updated
periodically so that those policies
remain accurate and consistent with
other OCC rules.
On February 13, 2019, the
Commission approved a proposed rule
change by OCC concerning changes in
OCC’s management structure
specifically related to, at that time,
OCC’s Executive Chairman and Chief
Executive Officer (‘‘CEO’’), Chief
Operating Officer (‘‘COO’’), and Chief
Administrative Officer (‘‘CAO’’)
(collectively referred to as the ‘‘Office of
the Chief Executive Officer’’ or ‘‘Office
2 17
Frm 00068
Fmt 4703
Sfmt 4703
6 17
CFR 240.17Ad–22.
CFR 240.17Ab2–2.
8 15 U.S.C. 78q–1.
9 12 U.S.C. 5461 et seq.
10 17 CFR 240.17Ad–22(a)(5).
7 17
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Federal Register / Vol. 84, No. 145 / Monday, July 29, 2019 / Notices
of the CEO’’).11 The primary purpose of
the proposed rule change was to: (1)
Reestablish the separation of the roles of
Executive Chairman and CEO and
reallocate authority and responsibilities
between the two roles and (2) remove
the requirement from OCC’s By-Laws
that the Board of Directors (‘‘Board’’)
elect a CAO and delete the references to
a CAO throughout OCC’s By-Laws,
Rules, and Board/Board Committee
charters. OCC proposes to revise the
OCC Policies to align the policies with
these recently approved changes to
OCC’s By-Laws and Rules and to
otherwise enhance the accuracy, clarity,
and consistency of the OCC Policies.
Proposed Changes
OCC proposes to make administrative
changes to the OCC Polices to: (1)
Conform them to the recently approved
management structure changes
implemented in OCC’s By-Laws and
Rules,12 (2) update various internal OCC
policy and procedure names, and (3)
make other non-substantive clarifying
and conforming changes.
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1. Changes To Conform to By-Laws and
Rules
As noted above, OCC recently
adopted a proposed rule change that
separated the roles of Executive
Chairman and CEO, removed the
requirement from OCC’s By-Laws that
the Board elect a CAO, and deleted
references to the CAO throughout OCC’s
By-Laws, Rules, and Board/Board
Committee charters. OCC now proposes
to make conforming revisions to the
OCC Policies to align any
responsibilities or authority of members
of the Office of the CEO in such policies
with the recently approved changes to
OCC’s By-Laws and Rules. The
proposed rule change is intended to
ensure the accuracy of the OCC Policies
and their consistency with OCC’s ByLaws and Rules and is not intended to
substantively change the responsibility
or authority of members of the Office of
the CEO.
OCC proposes to revise sections of its
CFM Policy concerning (i) temporary
increases to the minimum Clearing
Fund cash requirement, (ii) temporary
increases in the overall size of the
Clearing Fund, (iii) escalation of intraday margin calls that exceed 100% of a
11 See Securities Exchange Act Release No. 85129
(February 13, 2019), 84 FR 5129 (February 20, 2019)
(SR–OCC–2018–015) (Order Approving Proposed
Rule Change, as Modified by Partial Amendment
No. 1, Concerning Changes to The Options Clearing
Corporation’s Management Structure). Upon
adoption of the proposed rule change, the Office of
the CEO is now comprised of the Executive
Chairman, CEO, and COO.
12 Id.
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Clearing Member’s net capital, (iv)
notification and approvals of intramonth resizing of the Clearing Fund,
and (v) authority to make proportionate
changes against the Clearing Fund to
reflect the new composition the Office
of the CEO. OCC also proposes to revise
its CCRM Policy to reflect that the CEO
and COO now have the authority to
approve Clearing Members, banks,
liquidity providers, investment
counterparties, and financial market
utility relationships to align with the
recently approved changes to OCC’s ByLaws and Rules re-assigning
responsibility for routine day-to-day
business decisions to these senior
officers.13 OCC also proposes to revise
sections of the CCRM Policy concerning
the Watch Level Reporting process to
reflect the new composition of the
Office of the CEO and appropriately
describe Watch Level notification and
escalation requirements under the new
management structure.
In addition, OCC proposes to revise
its DM Policy to reflect the new
composition of the Office of the CEO
and their responsibilities in the default
management process, including the
authority for any member of the Office
of the CEO to (i) suspend a Clearing
Member, (ii) authorize a draw on OCC’s
credit facilities, (iii) authorize an
extension of daily settlement times
under OCC Rule 505, (iv) defer the
close-out of some or all positions of a
suspended clearing member, and (v)
make proportionate charges against and
require the replenishment of OCC’s
Clearing Fund consistent with OCC’s
By-Laws and Rules. OCC also proposes
to revise its Margin Policy to reflect the
new composition of the Office of the
CEO and the authority of the officers
thereof to approve intra-day margin
calls outside of standard equity trading
hours. OCC would also revise certain of
the OCC Policies to include a defined
term for ‘‘Office of the Chief Executive
Officer.’’
2. Related Policy and Procedure
Updates
As discussed above, the CCA Rules
require OCC to ‘‘establish, implement,
maintain and enforce written policies
and procedures reasonably designed to
. . .’’ comply with the objectives and
standards of the CCA Rules.14 The OCC
Policies currently contain references to
certain related policies and procedures
that OCC maintains in support of the
OCC Policies. These policies and
procedures are reviewed and updated
on a periodic basis, which at times may
PO 00000
13 See
14 See
supra note 11.
17 CFR 240.17Ad–22.
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36633
result in the consolidation of certain
related procedures or changes in policy
or procedure names. OCC proposes to
revise the OCC Policies to update
internal policy and procedures names to
reflect any changes resulting from these
periodic reviews to ensure the accuracy,
consistency, and clarity of the OCC
Policies. The proposed changes are
administrative in nature and are not
intended to change the substance of the
OCC Policies.
3. Other Non-Substantive Clarifying and
Conforming Changes
OCC also proposes to make a number
of other administrative changes to the
OCC Policies that would improve the
accuracy, consistency, and clarity of
those documents but would not change
the substance or requirements of those
policies. OCC proposes to revise its
RMF Policy to clarify that the term
‘‘Residual Risk’’ represents the level of
risk exposure posed ‘‘to’’ (as opposed to
‘‘from’’) a process or activity after the
application of controls or other riskmitigating factors and to align the
definition and usage of the term
throughout the policy. OCC would also
revise a section header in the RMF
Policy to note that the section in
question discusses OCC’s use of risk
tolerances in addition to OCC’s Risk
Appetite Framework.
OCC proposes to revise its DM Policy
to update cross-references to certain
provisions of OCC’s By-Laws relating to
the Clearing Fund that were recently
relocated to Chapter X of OCC’s Rules.15
The DM Policy would also be revised to
eliminate an incorrect reference to Rule
913, which does not currently exist in
OCC’s Rules. OCC also proposes to
revise its Margin Policy to update crossreferences to relevant chapters of OCC’s
Margins Methodology. Additionally,
OCC would update the Recalibration
section of the policy to clarify that,
consistent with current practice, the
standard historical data look-back
period used for econometric estimation
is ten years for univariate parameters
and 500 days for correlations.16 Finally,
15 See Securities Exchange Act Release No. 83714
(July 26, 2018), 83 FR 37570 (August 1, 2018) (SR–
OCC–2018–803) (Notice of No Objection to
Advance Notice, as Modified by Amendments No.
1 and 2, Concerning Proposed Changes to The
Options Clearing Corporation’s Stress Testing and
Clearing Fund Methodology) and Securities
Exchange Act Release No. 83735 (July 27, 2018), 83
FR 37855 (August 2, 2018) (SR–OCC–2018–008)
(Order Approving Proposed Rule Change, as
Modified by Amendments No. 1 and 2, Related to
The Options Clearing Corporation’s Stress Testing
and Clearing Fund Methodology).
16 See Securities Exchange Act Release No. 83305
(May 23, 2018), 83 FR 24536 (May 29, 2018) (SR–
OCC–2017–811) (Notice of No Objection to
Continued
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Federal Register / Vol. 84, No. 145 / Monday, July 29, 2019 / Notices
OCC proposes to revise its MRM Policy
to clarify that OCC’s Model Risk
Working Group is responsible for
tracking ‘‘model issues and activities’’
as opposed to ‘‘model defects and
remediation.’’
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(2) Statutory Basis
OCC believes the proposed rule
change is consistent with Section 17A of
the Act 17 and the rules thereunder
applicable to OCC. Section 17A(b)(3)(F)
of the Act 18 requires, among other
things, that the rules of a clearing
agency be designed to promote the
prompt and accurate clearance and
settlement of securities transactions
and, to the extent applicable, derivative
agreements, contracts, and transactions
and to assure the safeguarding of
securities and funds which are in the
custody or control of the clearing or
agency or for which it is responsible.
The proposed rule change is designed to
align the OCC Policies with previously
approved changes to OCC’s By-Laws,
Rules, and risk models 19 and otherwise
enhance the accuracy, clarity, and
consistency of the OCC Policies. The
proposed changes would, among other
things, ensure that the OCC Policies
maintain accurate descriptions of the
roles and responsibilities of the Office of
the CEO and reference the appropriate
procedures maintained under the OCC
Policies to effectively carry out the
requirements of those polices and
thereby facilitate the effective operation
of OCC’s core clearance, settlement, and
risk management activities. OCC
believes that the proposed rule change
is therefore designed, in general, to
promote the prompt and accurate
clearance and settlement of securities
and derivatives transactions and assure
the safeguarding of securities and funds
which are in the custody or control of
OCC or for which it is responsible in
accordance with Section 17A(b)(3)(F) of
the Act.20
Rule 17Ad–22(e)(2)(i) 21 requires each
covered clearing agency to establish,
implement, maintain and enforce
written policies and procedures
reasonably designed to provide for
governance arrangements that are clear
and transparent. As discussed above,
Advance Notice Filing Concerning The Options
Clearing Corporation’s Margin Methodology) and
Securities Exchange Act Release No. 83326 (May
24, 2018), 83 FR 25081 (May 31, 2018) (SR–OCC–
2017–022) (Order Approving Proposed Rule Change
Related to The Options Clearing Corporation’s
Margin Methodology).
17 15 U.S.C. 78q–1.
18 15 U.S.C. 78q–1(b)(3)(F).
19 See supra notes 11, 12, 15, and 16 and
associated text.
20 15 U.S.C. 78q–1(b)(3)(F).
21 17 CFR 240.17Ad–22(e)(2)(i).
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the proposed rule change is designed to
align the OCC Policies with previously
approved changes to OCC’s By-Laws
and Rules and otherwise enhance the
accuracy, clarity, and consistency of the
OCC Policies. The proposed changes
would, among other things, ensure that
the OCC Policies maintain accurate
descriptions of the roles and
responsibilities of the Office of the CEO
and reference the appropriate
procedures maintained under the OCC
Policies to effectively carry out the
requirements of those polices. OCC
therefore believes the proposed rule
change is consistent with Rule 17Ad–
22(e)(2)(i).22 Moreover, OCC believes
the proposed rule change promotes
compliance with the CCA Rules 23
generally by improving the accuracy,
clarity, and consistency of the OCC
Policies so that they remain reasonably
designed to achieve the standards and
requirements thereunder.
(B) Clearing Agency’s Statement on
Burden on Competition
Section 17A(b)(3)(I) of the Act 24
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. The proposed
rule change is intended to make
clarifying and conforming changes to
OCC’s internal policies in connection
with the implementation of a proposed
rule change that was previously
approved by the Commission 25 and
other administrative updates that would
have no impact on Clearing Members or
other market participants. 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.
23 17
CFR 240.17Ad–22.
24 15 U.S.C. 78q–1(b)(3)(I).
25 See supra notes 11, 12, 15, and 16 and
associated text.
Frm 00070
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–2019–006 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–OCC–2019–006. 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
26 15
22 Id.
PO 00000
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Pursuant to Section 19(b)(3)(A)(iii) 26
of the Act, and Rule 19b–4(f)(3)
thereunder,27 the proposed rule change
is filed for immediate effectiveness as it
is concerned solely with the
administration of OCC. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.28
Fmt 4703
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U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(3).
28 Notwithstanding its immediate effectiveness,
implementation of this rule change will be delayed
until this change is deemed certified under CFTC
Regulation 40.6.
27 17
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Federal Register / Vol. 84, No. 145 / Monday, July 29, 2019 / Notices
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–2019–006 and should
be submitted on or before August 19,
2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–15971 Filed 7–26–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33563; 812–15010]
PFS Funds and Castle Investment
Management, LLC.; Notice of
Application
July 23, 2019.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
khammond on DSKBBV9HB2PROD with NOTICES
AGENCY:
Notice of an application under section
6(c) of the Investment Company Act of
1940 (‘‘Act’’) for an exemption from
section 15(a) of the Act and rule 18f–2
under the Act, as well as from certain
disclosure requirements in rule 20a–1
under the Act, Item 19(a)(3) of Form N–
1A, Items 22(c)(1)(ii), 22(c)(1)(iii),
22(c)(8) and 22(c)(9) of Schedule 14A
under the Securities Exchange Act of
1934, and sections 6–07(2)(a), (b), and
(c) of Regulation S–X (‘‘Disclosure
Requirements’’). The requested
exemption would permit an investment
adviser to hire and replace certain subadvisers without shareholder approval
and grant relief from the Disclosure
Requirements as they relate to fees paid
to the sub-advisers.
APPLICANTS: PFS Funds (the ‘‘Trust’’), a
Massachusetts business trust that is
29 17
CFR 200.30–3(a)(12).
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registered under the Act as an open-end
management investment company, and
Castle Investment Management, LLC
(the ‘‘Initial Adviser’’), a Virginia
limited liability company that is
registered as an investment adviser
under the Investment Advisers Act of
1940 (collectively with the Trust, the
‘‘Applicants’’).
FILING DATES: The application was filed
on March 13, 2019 and amended on
June 14, 2019, July 10, 2019, and July
12, 2019.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application 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 August 19, 2019, and
should be accompanied by proof of
service on the 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 Street
NE, Washington, DC 20549–1090.
Applicants: John H. Lively, Esq.,
Practus, LLC, 11300 Tomahawk Creek
Parkway, Suite 310, Leawood, KS
66211.
FOR FURTHER INFORMATION CONTACT: Jill
Corrigan, Senior Counsel, at (202) 551–
8929, or Parisa Haghshenas, Branch
Chief, at (202) 551–6723 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
website by searching for the file
number, or an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
SUMMARY OF THE APPLICATION:
1. An Adviser will serve as the
investment adviser to each Sub-advised
Series pursuant to an investment
advisory agreement with the Trust (the
‘‘Investment Management
Agreement’’).1 Under the terms of each
1 Applicants request relief with respect to the
named Applicants, as well as to any future series
of the Trust and any other registered open-end
PO 00000
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36635
Investment Management Agreement, the
Adviser, subject to the supervision of
the board of trustees of the Trust (the
‘‘Board’’) will provide continuous
investment management of the assets of
each Sub-advised Series. Consistent
with the terms of each Investment
Management Agreement, the Adviser
may, subject to the approval of the
Board, delegate portfolio management
responsibilities of all or a portion of the
assets of a Sub-advised Series to one or
more Sub-Advisers 2 The Adviser will
continue to have overall responsibility
for the management and investment of
the assets of each Sub-advised Series.
The Adviser will evaluate, select and
recommend Sub-Advisers to manage the
assets of a Sub-advised Series and will
oversee, monitor, and review the SubAdvisers and their performance and
recommend the removal or replacement
of Sub-Advisers.
2. Applicants request an order to
permit the Adviser, subject to Board
approval, to enter into investment subadvisory agreements with the SubAdvisers (each, a ‘‘Sub-Advisory
Agreement’’) and materially amend such
Sub-Advisory Agreements without
obtaining the shareholder approval
required under section 15(a) of the Act
and rule 18f–2 under the Act.3
Applicants also seek an exemption from
the Disclosure Requirements to permit a
Sub-advised Series to disclose (as both
a dollar amount and a percentage of the
Sub-advised Series’ net assets): (a) The
aggregate fees paid to the Adviser and
management investment company or series thereof
that: (a) Is advised by the Initial Adviser, its
successors, or any entity controlling, controlled by
or under common control with the Initial Adviser
or its successors (each, an ‘‘Adviser’’); (b) uses the
multi-manager structure described in the
application; and (c) complies with the terms and
conditions set forth in the application (each, a
‘‘Sub-advised Series’’). For purposes of the
requested order, ‘‘successor’’ is limited to an entity
that results from a reorganization into another
jurisdiction or a change in the type of business
organization.
2 A ‘‘Sub-Adviser’’ for a Sub-advised Series is (1)
an indirect or direct ‘‘wholly-owned subsidiary’’ (as
such term is defined in the Act) of the Adviser for
that Sub-advised Series, or (2) a sister company of
the Adviser for that Sub-advised Series that is an
indirect or direct ‘‘wholly-owned subsidiary’’ of the
same company that, indirectly or directly, wholly
owns the Adviser (each of (1) and (2) a ‘‘WhollyOwned Sub-Adviser’’ and collectively, the
‘‘Wholly-Owned Sub-Advisers’’), or (3) not an
‘‘affiliated person’’ (as such term is defined in
section 2(a)(3) of the Act) of the Sub-advised Series
or the Adviser, except to the extent that an
affiliation arises solely because the Sub-Adviser
serves as a sub-adviser to a Sub-advised Series
(‘‘Non-Affiliated Sub-Adviser’’).
3 The requested relief will not extend to any subadviser, other than a Wholly-Owned Sub-Adviser,
who is an affiliated person, as defined in section
2(a)(3) of the Act, of the Sub-advised Series, the
Trust or of the Adviser, other than by reason of
serving as a sub-adviser to one or more of the Subadvised Series (‘‘Affiliated Sub-Adviser’’).
E:\FR\FM\29JYN1.SGM
29JYN1
]]>Agencies
[Federal Register Volume 84, Number 145 (Monday, July 29, 2019)]
[Notices]
[Pages 36632-36635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15971]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86436; File No. SR-OCC-2019-006]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Make Administrative Updates to The Options Clearing Corporation's Risk
Management Policies
July 23, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on July 12, 2019, 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)(iii) \3\ of the
Act and Rule 19b-4(f)(3) \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)(iii).
\4\ 17 CFR 240.19b-4(f)(3).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
OCC is filing a proposed rule change to make administrative changes
to its Risk Management Framework Policy (``RMF Policy''), Clearing Fund
Methodology Policy (``CFM Policy''), Collateral Risk Management Policy
(``CRM Policy''), Counterparty Credit Risk Management Policy (``CCRM
Policy''), Default Management Policy (``DM Policy''), Margin Policy,
and Model Risk Management Policy (``MRM Policy'') (collectively, ``OCC
Policies'').
The proposed changes to the OCC Policies are included in
confidential Exhibits 5A-5G. Material proposed to be added to the OCC
Policies as currently in effect is underlined and material proposed to
be deleted is marked in strikethrough text. All capitalized terms not
defined herein have the same meaning as set forth in the OCC By-Laws
and Rules.\5\
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\5\ 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
Background
On September 28, 2016 the Commission adopted amendments to Rule
17Ad-22 \6\ and added new Rule 17Ab2-2 \7\ pursuant to Section 17A of
the Exchange Act \8\ and the Payment, Clearing, and Settlement
Supervision Act of 2010 \9\ to establish enhanced standards for the
operation and governance of those clearing agencies registered with the
Commission that meet the definition of a ``covered clearing agency,''
as defined by Rule 17Ad-22(a)(5) \10\ (collectively, the new and
amended rules are herein referred to as ``CCA Rules''). The CCA Rules
require that covered clearing agencies ``establish, implement, maintain
and enforce written policies and procedures reasonably designed to . .
.'' comply with these enhanced standards. OCC is a covered clearing
agency under the CCA Rules and therefore is subject to the CCA Rules.
Accordingly, OCC maintains a number of policies that have been filed
with the Commission and which need to be updated periodically so that
those policies remain accurate and consistent with other OCC rules.
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\6\ 17 CFR 240.17Ad-22.
\7\ 17 CFR 240.17Ab2-2.
\8\ 15 U.S.C. 78q-1.
\9\ 12 U.S.C. 5461 et seq.
\10\ 17 CFR 240.17Ad-22(a)(5).
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On February 13, 2019, the Commission approved a proposed rule
change by OCC concerning changes in OCC's management structure
specifically related to, at that time, OCC's Executive Chairman and
Chief Executive Officer (``CEO''), Chief Operating Officer (``COO''),
and Chief Administrative Officer (``CAO'') (collectively referred to as
the ``Office of the Chief Executive Officer'' or ``Office
[[Page 36633]]
of the CEO'').\11\ The primary purpose of the proposed rule change was
to: (1) Reestablish the separation of the roles of Executive Chairman
and CEO and reallocate authority and responsibilities between the two
roles and (2) remove the requirement from OCC's By-Laws that the Board
of Directors (``Board'') elect a CAO and delete the references to a CAO
throughout OCC's By-Laws, Rules, and Board/Board Committee charters.
OCC proposes to revise the OCC Policies to align the policies with
these recently approved changes to OCC's By-Laws and Rules and to
otherwise enhance the accuracy, clarity, and consistency of the OCC
Policies.
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\11\ See Securities Exchange Act Release No. 85129 (February 13,
2019), 84 FR 5129 (February 20, 2019) (SR-OCC-2018-015) (Order
Approving Proposed Rule Change, as Modified by Partial Amendment No.
1, Concerning Changes to The Options Clearing Corporation's
Management Structure). Upon adoption of the proposed rule change,
the Office of the CEO is now comprised of the Executive Chairman,
CEO, and COO.
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Proposed Changes
OCC proposes to make administrative changes to the OCC Polices to:
(1) Conform them to the recently approved management structure changes
implemented in OCC's By-Laws and Rules,\12\ (2) update various internal
OCC policy and procedure names, and (3) make other non-substantive
clarifying and conforming changes.
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\12\ Id.
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1. Changes To Conform to By-Laws and Rules
As noted above, OCC recently adopted a proposed rule change that
separated the roles of Executive Chairman and CEO, removed the
requirement from OCC's By-Laws that the Board elect a CAO, and deleted
references to the CAO throughout OCC's By-Laws, Rules, and Board/Board
Committee charters. OCC now proposes to make conforming revisions to
the OCC Policies to align any responsibilities or authority of members
of the Office of the CEO in such policies with the recently approved
changes to OCC's By-Laws and Rules. The proposed rule change is
intended to ensure the accuracy of the OCC Policies and their
consistency with OCC's By-Laws and Rules and is not intended to
substantively change the responsibility or authority of members of the
Office of the CEO.
OCC proposes to revise sections of its CFM Policy concerning (i)
temporary increases to the minimum Clearing Fund cash requirement, (ii)
temporary increases in the overall size of the Clearing Fund, (iii)
escalation of intra-day margin calls that exceed 100% of a Clearing
Member's net capital, (iv) notification and approvals of intra-month
resizing of the Clearing Fund, and (v) authority to make proportionate
changes against the Clearing Fund to reflect the new composition the
Office of the CEO. OCC also proposes to revise its CCRM Policy to
reflect that the CEO and COO now have the authority to approve Clearing
Members, banks, liquidity providers, investment counterparties, and
financial market utility relationships to align with the recently
approved changes to OCC's By-Laws and Rules re-assigning responsibility
for routine day-to-day business decisions to these senior officers.\13\
OCC also proposes to revise sections of the CCRM Policy concerning the
Watch Level Reporting process to reflect the new composition of the
Office of the CEO and appropriately describe Watch Level notification
and escalation requirements under the new management structure.
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\13\ See supra note 11.
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In addition, OCC proposes to revise its DM Policy to reflect the
new composition of the Office of the CEO and their responsibilities in
the default management process, including the authority for any member
of the Office of the CEO to (i) suspend a Clearing Member, (ii)
authorize a draw on OCC's credit facilities, (iii) authorize an
extension of daily settlement times under OCC Rule 505, (iv) defer the
close-out of some or all positions of a suspended clearing member, and
(v) make proportionate charges against and require the replenishment of
OCC's Clearing Fund consistent with OCC's By-Laws and Rules. OCC also
proposes to revise its Margin Policy to reflect the new composition of
the Office of the CEO and the authority of the officers thereof to
approve intra-day margin calls outside of standard equity trading
hours. OCC would also revise certain of the OCC Policies to include a
defined term for ``Office of the Chief Executive Officer.''
2. Related Policy and Procedure Updates
As discussed above, the CCA Rules require OCC to ``establish,
implement, maintain and enforce written policies and procedures
reasonably designed to . . .'' comply with the objectives and standards
of the CCA Rules.\14\ The OCC Policies currently contain references to
certain related policies and procedures that OCC maintains in support
of the OCC Policies. These policies and procedures are reviewed and
updated on a periodic basis, which at times may result in the
consolidation of certain related procedures or changes in policy or
procedure names. OCC proposes to revise the OCC Policies to update
internal policy and procedures names to reflect any changes resulting
from these periodic reviews to ensure the accuracy, consistency, and
clarity of the OCC Policies. The proposed changes are administrative in
nature and are not intended to change the substance of the OCC
Policies.
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\14\ See 17 CFR 240.17Ad-22.
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3. Other Non-Substantive Clarifying and Conforming Changes
OCC also proposes to make a number of other administrative changes
to the OCC Policies that would improve the accuracy, consistency, and
clarity of those documents but would not change the substance or
requirements of those policies. OCC proposes to revise its RMF Policy
to clarify that the term ``Residual Risk'' represents the level of risk
exposure posed ``to'' (as opposed to ``from'') a process or activity
after the application of controls or other risk-mitigating factors and
to align the definition and usage of the term throughout the policy.
OCC would also revise a section header in the RMF Policy to note that
the section in question discusses OCC's use of risk tolerances in
addition to OCC's Risk Appetite Framework.
OCC proposes to revise its DM Policy to update cross-references to
certain provisions of OCC's By-Laws relating to the Clearing Fund that
were recently relocated to Chapter X of OCC's Rules.\15\ The DM Policy
would also be revised to eliminate an incorrect reference to Rule 913,
which does not currently exist in OCC's Rules. OCC also proposes to
revise its Margin Policy to update cross-references to relevant
chapters of OCC's Margins Methodology. Additionally, OCC would update
the Recalibration section of the policy to clarify that, consistent
with current practice, the standard historical data look-back period
used for econometric estimation is ten years for univariate parameters
and 500 days for correlations.\16\ Finally,
[[Page 36634]]
OCC proposes to revise its MRM Policy to clarify that OCC's Model Risk
Working Group is responsible for tracking ``model issues and
activities'' as opposed to ``model defects and remediation.''
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\15\ See Securities Exchange Act Release No. 83714 (July 26,
2018), 83 FR 37570 (August 1, 2018) (SR-OCC-2018-803) (Notice of No
Objection to Advance Notice, as Modified by Amendments No. 1 and 2,
Concerning Proposed Changes to The Options Clearing Corporation's
Stress Testing and Clearing Fund Methodology) and Securities
Exchange Act Release No. 83735 (July 27, 2018), 83 FR 37855 (August
2, 2018) (SR-OCC-2018-008) (Order Approving Proposed Rule Change, as
Modified by Amendments No. 1 and 2, Related to The Options Clearing
Corporation's Stress Testing and Clearing Fund Methodology).
\16\ See Securities Exchange Act Release No. 83305 (May 23,
2018), 83 FR 24536 (May 29, 2018) (SR-OCC-2017-811) (Notice of No
Objection to Advance Notice Filing Concerning The Options Clearing
Corporation's Margin Methodology) and Securities Exchange Act
Release No. 83326 (May 24, 2018), 83 FR 25081 (May 31, 2018) (SR-
OCC-2017-022) (Order Approving Proposed Rule Change Related to The
Options Clearing Corporation's Margin Methodology).
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(2) Statutory Basis
OCC believes the proposed rule change is consistent with Section
17A of the Act \17\ and the rules thereunder applicable to OCC. Section
17A(b)(3)(F) of the Act \18\ requires, among other things, that the
rules of a clearing agency be designed to promote the prompt and
accurate clearance and settlement of securities transactions and, to
the extent applicable, derivative agreements, contracts, and
transactions and to assure the safeguarding of securities and funds
which are in the custody or control of the clearing or agency or for
which it is responsible. The proposed rule change is designed to align
the OCC Policies with previously approved changes to OCC's By-Laws,
Rules, and risk models \19\ and otherwise enhance the accuracy,
clarity, and consistency of the OCC Policies. The proposed changes
would, among other things, ensure that the OCC Policies maintain
accurate descriptions of the roles and responsibilities of the Office
of the CEO and reference the appropriate procedures maintained under
the OCC Policies to effectively carry out the requirements of those
polices and thereby facilitate the effective operation of OCC's core
clearance, settlement, and risk management activities. OCC believes
that the proposed rule change is therefore designed, in general, to
promote the prompt and accurate clearance and settlement of securities
and derivatives transactions and assure the safeguarding of securities
and funds which are in the custody or control of OCC or for which it is
responsible in accordance with Section 17A(b)(3)(F) of the Act.\20\
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\17\ 15 U.S.C. 78q-1.
\18\ 15 U.S.C. 78q-1(b)(3)(F).
\19\ See supra notes 11, 12, 15, and 16 and associated text.
\20\ 15 U.S.C. 78q-1(b)(3)(F).
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Rule 17Ad-22(e)(2)(i) \21\ requires each covered clearing agency to
establish, implement, maintain and enforce written policies and
procedures reasonably designed to provide for governance arrangements
that are clear and transparent. As discussed above, the proposed rule
change is designed to align the OCC Policies with previously approved
changes to OCC's By-Laws and Rules and otherwise enhance the accuracy,
clarity, and consistency of the OCC Policies. The proposed changes
would, among other things, ensure that the OCC Policies maintain
accurate descriptions of the roles and responsibilities of the Office
of the CEO and reference the appropriate procedures maintained under
the OCC Policies to effectively carry out the requirements of those
polices. OCC therefore believes the proposed rule change is consistent
with Rule 17Ad-22(e)(2)(i).\22\ Moreover, OCC believes the proposed
rule change promotes compliance with the CCA Rules \23\ generally by
improving the accuracy, clarity, and consistency of the OCC Policies so
that they remain reasonably designed to achieve the standards and
requirements thereunder.
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\21\ 17 CFR 240.17Ad-22(e)(2)(i).
\22\ Id.
\23\ 17 CFR 240.17Ad-22.
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(B) Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act \24\ 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. The proposed rule change is intended to make
clarifying and conforming changes to OCC's internal policies in
connection with the implementation of a proposed rule change that was
previously approved by the Commission \25\ and other administrative
updates that would have no impact on Clearing Members or other market
participants. Accordingly, OCC does not believe that the proposed rule
change would have any impact or impose a burden on competition.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78q-1(b)(3)(I).
\25\ See supra notes 11, 12, 15, and 16 and associated text.
---------------------------------------------------------------------------
(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)(iii) \26\ of the Act, and Rule 19b-
4(f)(3) thereunder,\27\ the proposed rule change is filed for immediate
effectiveness as it is concerned solely with the administration of OCC.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.\28\
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\26\ 15 U.S.C. 78s(b)(3)(A)(iii).
\27\ 17 CFR 240.19b-4(f)(3).
\28\ Notwithstanding its immediate effectiveness, implementation
of this rule change will be delayed until this change is deemed
certified under CFTC Regulation 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-2019-006 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2019-006. 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
[[Page 36635]]
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-2019-006 and
should be submitted on or before August 19, 2019.
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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-15971 Filed 7-26-19; 8:45 am]
BILLING CODE 8011-01-P
