Self-Regulatory Organizations; the Options Clearing Corporation; Order Approving Proposed Rule Change To Establish a Regulatory Committee of the Options Clearing Corporation's Board of Directors, 65202-65204 [2019-25587]
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Federal Register / Vol. 84, No. 228 / Tuesday, November 26, 2019 / Notices
All submissions should refer to File
Number SR–NYSECHX–2019–21. 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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
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–NYSECHX–2019–21 and
should be submitted on or before
December 17, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–25585 Filed 11–25–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87577; File No. SR–OCC–
2019–008]
Self-Regulatory Organizations; the
Options Clearing Corporation; Order
Approving Proposed Rule Change To
Establish a Regulatory Committee of
the Options Clearing Corporation’s
Board of Directors
I. Introduction
On September 25, 2019, the Options
Clearing Corporation (‘‘OCC’’) filed with
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
16:47 Nov 25, 2019
II. Background
OCC proposes to establish the OCC
Regulatory Committee (‘‘Committee’’)
and adopt the OCC Regulatory
Committee Charter (‘‘Committee
Charter’’). The Committee would be
composed solely of members of OCC’s
Board of Directors (‘‘Board’’). To
facilitate the establishment of the
Committee, OCC also proposes to
amend Article III, Section 4 of the OCC
By-Laws (‘‘By-Laws’’) and the OCC
Board of Directors Charter and
Corporate Governance Principles
(‘‘Board Charter’’).
Specifically, OCC proposes to amend
the Board Charter and Article III,
Section 4 of OCC’s By-Laws to list the
Committee alongside the other OCC
Board committees. OCC also proposes to
amend its By-Laws consistent with the
Committee Charter regarding the
delegation of authority from the Board
to the Committee as well as the
composition of the Committee. The
Committee Charter would further define
the scope of the Committee’s authority.
For example, the Committee Charter
would authorize the Committee to
access OCC’s books, records, facilities
and personnel and to hire specialists or
rely upon other outside advisors.
Consistent with the charters of OCC’s
other Board-level committees,5 the
Committee Charter would define the
purpose and functions of the Committee
and would set out requirements related
to the composition and meetings of the
Committee, which would, in part, relate
to the governance arrangements
supporting OCC’s compliance with its
regulatory obligations. For example, in
defining the Committee’s purpose, the
Committee Charter would state that the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Notice of Filing infra note 4, at 84 FR 54240.
4 Securities Exchange Act Release No. 87207 (Oct.
3, 2019), 84 FR 54239 (Oct. 9, 2019) (SR–OCC–
2019–008) (‘‘Notice of Filing’’).
5 See Securities Exchange Act Release 84473 (Oct.
23, 2019), 83 FR 54385 (Oct. 29, 2018) (SR–OCC–
2018–012).
2 17
November 20, 2019.
14 17
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2019–
008 (‘‘Proposed Rule Change’’) pursuant
to Section 19(b) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 and Rule 19b–4 2 thereunder to
establish a new committee under OCC’s
Board of Directors.3 The Proposed Rule
Change was published for public
comment in the Federal Register on
October 9, 2019.4 The Commission has
received no comments regarding the
Proposed Rule Change. This order
approves the Proposed Rule Change.
Jkt 250001
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
Board established the Committee to
assist in overseeing OCC’s efforts to
demonstrate compliance with its
regulatory obligations. The functions
and responsibilities with which the
Committee would be charged under the
Committee Charter would include (1)
overseeing OCC management’s action
plans to achieve compliance with any
proposed new regulation; (2) meeting
with regulators to discuss OCC’s efforts
to enhance its regulatory compliance
posture; (3) reviewing annual regulatory
compliance reports provided by OCC
management; and (4) reviewing
documents related to examinations
conducted by OCC’s regulators (e.g.,
examination report letters provided by
regulators, responses to such letters
from OCC). Regarding the composition
and meetings of the Committee, the
Committee would be composed of all
OCC Public Directors, and the
Committee would be obligated to meet
at least quarterly and to maintain
minutes of all Committee meetings.6
The proposed Committee Charter
would also clearly describe direct lines
of responsibility between the Committee
and, as appropriate, either the Board or
members of OCC’s management team.
For example, the Committee Charter
would require that the Committee make
such reports to the Board as deemed
necessary or advisable. The Committee
Charter would also require that OCC’s
Chief Compliance Officer (‘‘CCO’’), or
one of his or her deputies if the CCO is
unavailable, attend meetings of the
Committee. Additionally, the
Committee Charter would require the
Committee to review its charter at least
once every twelve months and submit
the Committee Charter to the Board for
approval.
III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Exchange
Act directs the Commission to approve
a proposed rule change of a selfregulatory organization if it finds that
such proposed rule change is consistent
with the requirements of the Exchange
Act and the rules and regulations
thereunder applicable to such
organization.7 After carefully
considering the Proposed Rule Change,
the Commission finds that the proposal
is consistent with the requirements of
the Exchange Act and the rules and
regulations thereunder applicable to
OCC. More specifically, the Commission
finds that the proposal is consistent
6 The Committee Charter would permit the
Committee’s Chair to determine whether to record
minutes of any executive session called by the
Committee.
7 15 U.S.C. 78s(b)(2)(C).
E:\FR\FM\26NON1.SGM
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Federal Register / Vol. 84, No. 228 / Tuesday, November 26, 2019 / Notices
with Section 17A(b)(3)(F) of the
Exchange Act 8 and Rule 17Ad–22(e)(2)
thereunder.9
A. Consistency With Section
17A(b)(3)(F) of the Exchange Act
Section 17A(b)(3)(F) of the Exchange
Act requires, among other things, that
the rules of a clearing agency be
designed to, in general, protect investors
and the public interest.10 Based on its
review of the record, the Commission
believes that the proposed changes are
designed to, in general, protect investors
and the public interest for the reasons
set forth below.
The Committee, as described in the
Proposed Rule Change, would be
established to assist the Board in
overseeing OCC’s efforts to demonstrate
compliance with its regulatory
obligations. The Committee’s
responsibilities would include meeting
with regulators as well as reviewing
compliance reports and materials
related to examinations conducted by
OCC’s regulators. Moreover, the
Committee Charter and By-Laws would
require that the Committee be composed
of OCC’s Public Directors. The
Commission believes that establishing a
Board-level committee for the purpose
of overseeing OCC’s efforts to
demonstrate compliance with its
regulatory obligations would help
ensure that such efforts are being
reviewed and overseen at appropriately
senior levels within the organization,
which in turn should enhance OCC’s
efforts to demonstrate compliance with
its regulatory obligations.
Further, the proposed Committee
Charter would clearly define the
authority and function of the
Committee. For example, the Committee
Charter would provide the Committee
with authority to (1) act on the behalf of
the Board; (2) access OCC’s books,
records, facilitates and personnel; and
(3) hire specialists or rely upon outside
advisors. The authority described in the
proposed Committee Charter would be
consistent with the authority granted to
OCC’s other Board-level committees.11
The Committee Charter would also
clearly describe the Committee’s
obligations regarding meeting
frequency, minutes, and reporting.
Further, the Committee would be
obligated to review the Committee
Charter at least once every twelve
months. Formally defining the
Committee’s characteristics in this
manner—consistent with the
characteristics of OCC’s other Boardlevel committees—should help ensure
that the Committee is imbued with and
sustains a level of attention and stature
consistent with that of OCC’s other
Board-level committees, which in turn
should enhance the Committee’s ability
to achieve its stated mission of
supporting OCC’s efforts to demonstrate
compliance with its regulatory
obligations.
The Commission believes generally
that a clearing agency’s compliance the
applicable securities laws protects
investors and the public interest. As
discussed above, the Commission
believes that the Proposed Rule Change
is designed to ensure that the
Committee’s work will be reviewed,
supervised, and supported at the Board
level, which in turn should enhance the
Committee’s ability to achieve its stated
goal of supporting OCC’s efforts to
demonstrate compliance with its
regulatory obligations. The Commission
believes, therefore, that OCC’s proposal
to establish a Board-level Regulatory
Committee is consistent with, in
general, protecting investors and the
public interest consistent with the
requirements of Section 17A(b)(3)(F) of
the Exchange Act.12
B. Consistency With Rule 17Ad–22(e)(2)
Under the Exchange Act
Rule 17Ad–22(e)(2) under the
Exchange Act requires that a covered
clearing agency establish, implement,
maintain, and enforce written policies
and procedures reasonably designed to
provide for governance arrangements
that address certain criteria.13 Rules
17Ad–22(e)(2)(i) and (v) under the
Exchange Act require that such
governance arrangements are clear and
transparent and specify clear and direct
lines of responsibility.14 Further, the
Commission has expressed the belief
that policies and procedures specifying
clear and direct lines of responsibility
should generally entail documenting the
responsibilities of the board of directors
and senior management.15
As described above, OCC proposes
amend its By-Laws and Board Charter to
list the Committee among OCC’s other
Board-level committees and to specify
the required composition of the
Committee. Additionally, the
Committee Charter would clearly define
the authority and function of the
12 15
8 15
U.S.C. 78q–1(b)(3)(F).
9 17 CFR 240.17Ad–22(e)(2).
10 15 U.S.C. 78q–1(b)(3)(F).
11 See Securities Exchange Act Release 84473
(Oct. 23, 2019), 83 FR 54385 (Oct. 29, 2018) (SR–
OCC–2018–012).
VerDate Sep<11>2014
16:47 Nov 25, 2019
Jkt 250001
U.S.C. 78q–1(b)(3)(F).
CFR 240.17Ad–22(e)(2).
14 17 CFR 240.17Ad–22(e)(2)(i) and 17 CFR
240.17Ad–22(e)(2)(v).
15 See Securities Exchange Act Release No. 78961
(Sep. 28, 2016), 81 FR 70786, 70804 (Oct. 13, 2016)
(S7–03–14) (‘‘Covered Clearing Agency Standards’’).
65203
Committee. For example, the Committee
Charter would provide the Committee
with authority to (1) act on the behalf of
the Board; (2) access OCC’s books,
records, facilitates and personnel; and
(3) hire specialists or rely upon outside
advisors. The Committee Charter would
also obligate OCC’s CCO, or one of his
or her deputies if the CCO is
unavailable, to attend meetings of the
Committee. Moreover, the Committee
Charter would obligate the Committee to
review its charter at least once every
twelve months and submit the
Committee Charter to the Board for
approval. The Commission believes,
therefore, that the changes to OCC’s ByLaws and Board Charter as well as the
organizational aspects of the proposed
Committee Charter are consistent with
Exchange Act Rule 17Ad–22(e)(2)(i) and
(v).16
Rule 17Ad–22(e)(2)(iii) under the
Exchange Act requires, in part, that the
governance arrangements required by
Rule 17Ad–22(e)(2) support the public
interest requirements in Section 17A of
the Exchange Act applicable to clearing
agencies.17
As described above, certain aspects of
the Committee Charter relate to the
governance of OCC’s compliance with
its regulatory obligations. For example,
the Committee Charter would state that
the Committee was established to assist
the Board in overseeing OCC’s efforts to
demonstrate compliance with its
regulatory obligations. The Committee’s
functions and responsibilities, as
specified in the Committee Charter,
would include meeting with regulators
to discuss OCC’s efforts to enhance it
compliance posture and reviewing
reports related to OCC’s compliance
posture (e.g., annual regulatory
compliance reports provided by OCC
management, final exam report letters
from OCC’s regulators, and OCC’s
response to regulatory examination
letters). As discussed above, the
Commission believes OCC’s proposal to
establish a Board-level Regulatory
Committee is consistent with, in
general, protecting investors and the
public interest consistent with the
requirements of Section 17A(b)(3)(F) of
the Exchange Act.18 The Commission
believes, therefore, that the
establishment of the Committee through
a detailed charter document is
consistent with Exchange Act Rule
17Ad–22(e)(2)(iii).19
13 17
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
16 17 CFR 240.17Ad–22(e)(2)(i) and 17 CFR
240.17Ad–22(e)(2)(v).
17 17 CFR 240.17Ad–22(e)(2)(iii).
18 15 U.S.C. 78q–1(b)(3)(F).
19 17 CFR 240.17Ad–22(e)(2)(iii).
E:\FR\FM\26NON1.SGM
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65204
Federal Register / Vol. 84, No. 228 / Tuesday, November 26, 2019 / Notices
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the Proposed
Rule Change is consistent with the
requirements of the Exchange Act, and
in particular, the requirements of
Section 17A of the Exchange Act 20 and
the rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,21
that the Proposed Rule Change (SR–
OCC–2019–008) be, and hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–25587 Filed 11–25–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87578; File No. SR–IEX–
2019–12]
Self-Regulatory Organizations;
Investors Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
Table in Rule 11.410(a) To Update the
Market Data Source That the Exchange
Will Use To Determine the Top of Book
Quotation for NYSE Chicago, Inc. and
To Amend Rules 2.220(a)(7) and
11.410(a) To Reflect the Name Change
of Chicago Stock Exchange, Inc. to
NYSE Chicago, Inc.
November 20, 2019.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 15, 2019, the Investors
Exchange LLC (‘‘IEX’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
20 In
approving this Proposed Rule Change, the
Commission has considered the proposed rules’
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
21 15 U.S.C. 78s(b)(2).
22 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
VerDate Sep<11>2014
16:47 Nov 25, 2019
Jkt 250001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Pursuant to the provisions of Section
19(b)(1) under the Act,4 and Rule 19b–
4 thereunder,5 IEX is filing with the
Commission a proposed rule change to
amend the table in Rule 11.410(a) to
update the market data source that the
Exchange will use to determine the Top
of Book 6 quotation for NYSE Chicago,
Inc. (‘‘XCHI’’) and to amend Rules
2.220(a)(7) and 11.410(a) to reflect the
name change of Chicago Stock
Exchange, Inc. to NYSE Chicago, Inc.
The Exchange has designated this rule
change as ‘‘non-controversial’’ under
Section 19(b)(3)(A) of the Act 7 and
provided the Commission with the
notice required by Rule 19b–4(f)(6)
thereunder.8
The text of the proposed rule change
is available at the Exchange’s website at
www.iextrading.com, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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 statement may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
table in IEX Rule 11.410(a) to update the
market data source that the Exchange
will use to determine the Top of Book
quotation for NYSE Chicago, Inc.
(‘‘XCHI’’) and to amend IEX Rules
2.220(a)(7) and 11.410(a) to reflect the
name change of Chicago Stock
Exchange, Inc to NYSE Chicago, Inc.
Specifically, the Exchange proposes to
amend and update the table in Rule
11.410(a) specifying the primary and
secondary sources for XCHI as a result
4 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
6 See IEX Rule 11.410(a)(1).
7 15 U.S.C. 78s(b)(3)(A).
8 17 CFR 240.19b–4.
5 17
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Frm 00092
Fmt 4703
Sfmt 4703
of XCHI’s establishment of NYSE
Chicago BBO, NYSE Chicago Trades and
NYSE Chicago Integrated Feed (‘‘NYSE
Chicago Market Data Feeds’’ or ‘‘direct
feeds’’).9 As specified in Rule
11.410(a)(2), the Exchange uses market
data from each away trading center that
produces a Protected Quotation 10 to
determine its Top of Book quotation, as
well as the NBBO 11 for certain
reporting, regulatory and compliance
systems within IEX. As proposed, the
Exchange will use securities
information processor (‘‘SIP’’) data, i.e.,
CQS SIP data for securities reported
under the Consolidated Quotation
Services and Consolidated Tape
Association plans and UQDF SIP data
for securities reported under the Nasdaq
Unlisted Trading Privileges national
market system plan, to determine XCHI
Top of Book quotes. No secondary
source is proposed to be specified as SIP
data will be used exclusively. While the
Exchange uses proprietary market data
feeds to determine the Protected
Quotations of all but one of the other
away markets,12 as specified in Rule
11.410, it has determined to utilize the
SIP quote feeds for XCHI because the
Exchange is in the process of
implementing technology changes to
support use of the NYSE Chicago
Market Data Feeds. Once these changes
are complete, IEX will file a rule change
under Section 19(b) of the Act and Rule
19b–4 thereunder to amend relevant
portions of Rule 11.410 once these steps
are complete, to again specify that the
Exchange will use XCHI’s direct feeds as
the primary source of XCHI’s Protected
Quotations.13 The Exchange notes that it
is not necessary to utilize the XCHI
direct feed in order to determine XCHI
Top of Book quotes and thereby enable
the Exchange to comply with applicable
requirements of Regulation NMS with
respect to its Top of Book quotes. The
Exchange also notes that other
exchanges also use SIP market data
feeds to determine Top of Book quotes
for some away markets, including XCHI,
pursuant to effective rule filings.14
The Exchange is also proposing a
conforming change to Rule 11.410(a)(2)
to reflect that, as proposed, the
Exchange will not use proprietary
market data feeds as the primary source
9 See Securities Exchange Act Release No. 87389
(October 23, 2019), 84 FR 57904 (October 29, 2019)
(SR–NYSECHX–2019–15).
10 See IEX Rule 1.160(bb).
11 See IEX Rule 1.160(u).
12 The Exchange uses CQS/UQDF SIP data as the
exclusive source of market data for NYSE National
(XCIS). See IEX Rule 11.410(a).
13 See supra note 5[sic].
14 See, e.g., Nasdaq Stock Market Rule 4759(a).
E:\FR\FM\26NON1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 228 (Tuesday, November 26, 2019)]
[Notices]
[Pages 65202-65204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25587]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87577; File No. SR-OCC-2019-008]
Self-Regulatory Organizations; the Options Clearing Corporation;
Order Approving Proposed Rule Change To Establish a Regulatory
Committee of the Options Clearing Corporation's Board of Directors
November 20, 2019.
I. Introduction
On September 25, 2019, the Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2019-008 (``Proposed Rule Change'')
pursuant to Section 19(b) of the Securities Exchange Act of 1934
(``Exchange Act'') \1\ and Rule 19b-4 \2\ thereunder to establish a new
committee under OCC's Board of Directors.\3\ The Proposed Rule Change
was published for public comment in the Federal Register on October 9,
2019.\4\ The Commission has received no comments regarding the Proposed
Rule Change. This order approves the Proposed Rule Change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Notice of Filing infra note 4, at 84 FR 54240.
\4\ Securities Exchange Act Release No. 87207 (Oct. 3, 2019), 84
FR 54239 (Oct. 9, 2019) (SR-OCC-2019-008) (``Notice of Filing'').
---------------------------------------------------------------------------
II. Background
OCC proposes to establish the OCC Regulatory Committee
(``Committee'') and adopt the OCC Regulatory Committee Charter
(``Committee Charter''). The Committee would be composed solely of
members of OCC's Board of Directors (``Board''). To facilitate the
establishment of the Committee, OCC also proposes to amend Article III,
Section 4 of the OCC By-Laws (``By-Laws'') and the OCC Board of
Directors Charter and Corporate Governance Principles (``Board
Charter'').
Specifically, OCC proposes to amend the Board Charter and Article
III, Section 4 of OCC's By-Laws to list the Committee alongside the
other OCC Board committees. OCC also proposes to amend its By-Laws
consistent with the Committee Charter regarding the delegation of
authority from the Board to the Committee as well as the composition of
the Committee. The Committee Charter would further define the scope of
the Committee's authority. For example, the Committee Charter would
authorize the Committee to access OCC's books, records, facilities and
personnel and to hire specialists or rely upon other outside advisors.
Consistent with the charters of OCC's other Board-level
committees,\5\ the Committee Charter would define the purpose and
functions of the Committee and would set out requirements related to
the composition and meetings of the Committee, which would, in part,
relate to the governance arrangements supporting OCC's compliance with
its regulatory obligations. For example, in defining the Committee's
purpose, the Committee Charter would state that the Board established
the Committee to assist in overseeing OCC's efforts to demonstrate
compliance with its regulatory obligations. The functions and
responsibilities with which the Committee would be charged under the
Committee Charter would include (1) overseeing OCC management's action
plans to achieve compliance with any proposed new regulation; (2)
meeting with regulators to discuss OCC's efforts to enhance its
regulatory compliance posture; (3) reviewing annual regulatory
compliance reports provided by OCC management; and (4) reviewing
documents related to examinations conducted by OCC's regulators (e.g.,
examination report letters provided by regulators, responses to such
letters from OCC). Regarding the composition and meetings of the
Committee, the Committee would be composed of all OCC Public Directors,
and the Committee would be obligated to meet at least quarterly and to
maintain minutes of all Committee meetings.\6\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release 84473 (Oct. 23, 2019),
83 FR 54385 (Oct. 29, 2018) (SR-OCC-2018-012).
\6\ The Committee Charter would permit the Committee's Chair to
determine whether to record minutes of any executive session called
by the Committee.
---------------------------------------------------------------------------
The proposed Committee Charter would also clearly describe direct
lines of responsibility between the Committee and, as appropriate,
either the Board or members of OCC's management team. For example, the
Committee Charter would require that the Committee make such reports to
the Board as deemed necessary or advisable. The Committee Charter would
also require that OCC's Chief Compliance Officer (``CCO''), or one of
his or her deputies if the CCO is unavailable, attend meetings of the
Committee. Additionally, the Committee Charter would require the
Committee to review its charter at least once every twelve months and
submit the Committee Charter to the Board for approval.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Exchange Act directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to such organization.\7\ After carefully
considering the Proposed Rule Change, the Commission finds that the
proposal is consistent with the requirements of the Exchange Act and
the rules and regulations thereunder applicable to OCC. More
specifically, the Commission finds that the proposal is consistent
[[Page 65203]]
with Section 17A(b)(3)(F) of the Exchange Act \8\ and Rule 17Ad-
22(e)(2) thereunder.\9\
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78s(b)(2)(C).
\8\ 15 U.S.C. 78q-1(b)(3)(F).
\9\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------
A. Consistency With Section 17A(b)(3)(F) of the Exchange Act
Section 17A(b)(3)(F) of the Exchange Act requires, among other
things, that the rules of a clearing agency be designed to, in general,
protect investors and the public interest.\10\ Based on its review of
the record, the Commission believes that the proposed changes are
designed to, in general, protect investors and the public interest for
the reasons set forth below.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The Committee, as described in the Proposed Rule Change, would be
established to assist the Board in overseeing OCC's efforts to
demonstrate compliance with its regulatory obligations. The Committee's
responsibilities would include meeting with regulators as well as
reviewing compliance reports and materials related to examinations
conducted by OCC's regulators. Moreover, the Committee Charter and By-
Laws would require that the Committee be composed of OCC's Public
Directors. The Commission believes that establishing a Board-level
committee for the purpose of overseeing OCC's efforts to demonstrate
compliance with its regulatory obligations would help ensure that such
efforts are being reviewed and overseen at appropriately senior levels
within the organization, which in turn should enhance OCC's efforts to
demonstrate compliance with its regulatory obligations.
Further, the proposed Committee Charter would clearly define the
authority and function of the Committee. For example, the Committee
Charter would provide the Committee with authority to (1) act on the
behalf of the Board; (2) access OCC's books, records, facilitates and
personnel; and (3) hire specialists or rely upon outside advisors. The
authority described in the proposed Committee Charter would be
consistent with the authority granted to OCC's other Board-level
committees.\11\ The Committee Charter would also clearly describe the
Committee's obligations regarding meeting frequency, minutes, and
reporting. Further, the Committee would be obligated to review the
Committee Charter at least once every twelve months. Formally defining
the Committee's characteristics in this manner--consistent with the
characteristics of OCC's other Board-level committees--should help
ensure that the Committee is imbued with and sustains a level of
attention and stature consistent with that of OCC's other Board-level
committees, which in turn should enhance the Committee's ability to
achieve its stated mission of supporting OCC's efforts to demonstrate
compliance with its regulatory obligations.
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\11\ See Securities Exchange Act Release 84473 (Oct. 23, 2019),
83 FR 54385 (Oct. 29, 2018) (SR-OCC-2018-012).
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The Commission believes generally that a clearing agency's
compliance the applicable securities laws protects investors and the
public interest. As discussed above, the Commission believes that the
Proposed Rule Change is designed to ensure that the Committee's work
will be reviewed, supervised, and supported at the Board level, which
in turn should enhance the Committee's ability to achieve its stated
goal of supporting OCC's efforts to demonstrate compliance with its
regulatory obligations. The Commission believes, therefore, that OCC's
proposal to establish a Board-level Regulatory Committee is consistent
with, in general, protecting investors and the public interest
consistent with the requirements of Section 17A(b)(3)(F) of the
Exchange Act.\12\
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\12\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(2) Under the Exchange Act
Rule 17Ad-22(e)(2) under the Exchange Act requires that a covered
clearing agency establish, implement, maintain, and enforce written
policies and procedures reasonably designed to provide for governance
arrangements that address certain criteria.\13\ Rules 17Ad-22(e)(2)(i)
and (v) under the Exchange Act require that such governance
arrangements are clear and transparent and specify clear and direct
lines of responsibility.\14\ Further, the Commission has expressed the
belief that policies and procedures specifying clear and direct lines
of responsibility should generally entail documenting the
responsibilities of the board of directors and senior management.\15\
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\13\ 17 CFR 240.17Ad-22(e)(2).
\14\ 17 CFR 240.17Ad-22(e)(2)(i) and 17 CFR 240.17Ad-
22(e)(2)(v).
\15\ See Securities Exchange Act Release No. 78961 (Sep. 28,
2016), 81 FR 70786, 70804 (Oct. 13, 2016) (S7-03-14) (``Covered
Clearing Agency Standards'').
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As described above, OCC proposes amend its By-Laws and Board
Charter to list the Committee among OCC's other Board-level committees
and to specify the required composition of the Committee. Additionally,
the Committee Charter would clearly define the authority and function
of the Committee. For example, the Committee Charter would provide the
Committee with authority to (1) act on the behalf of the Board; (2)
access OCC's books, records, facilitates and personnel; and (3) hire
specialists or rely upon outside advisors. The Committee Charter would
also obligate OCC's CCO, or one of his or her deputies if the CCO is
unavailable, to attend meetings of the Committee. Moreover, the
Committee Charter would obligate the Committee to review its charter at
least once every twelve months and submit the Committee Charter to the
Board for approval. The Commission believes, therefore, that the
changes to OCC's By-Laws and Board Charter as well as the
organizational aspects of the proposed Committee Charter are consistent
with Exchange Act Rule 17Ad-22(e)(2)(i) and (v).\16\
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\16\ 17 CFR 240.17Ad-22(e)(2)(i) and 17 CFR 240.17Ad-
22(e)(2)(v).
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Rule 17Ad-22(e)(2)(iii) under the Exchange Act requires, in part,
that the governance arrangements required by Rule 17Ad-22(e)(2) support
the public interest requirements in Section 17A of the Exchange Act
applicable to clearing agencies.\17\
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\17\ 17 CFR 240.17Ad-22(e)(2)(iii).
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As described above, certain aspects of the Committee Charter relate
to the governance of OCC's compliance with its regulatory obligations.
For example, the Committee Charter would state that the Committee was
established to assist the Board in overseeing OCC's efforts to
demonstrate compliance with its regulatory obligations. The Committee's
functions and responsibilities, as specified in the Committee Charter,
would include meeting with regulators to discuss OCC's efforts to
enhance it compliance posture and reviewing reports related to OCC's
compliance posture (e.g., annual regulatory compliance reports provided
by OCC management, final exam report letters from OCC's regulators, and
OCC's response to regulatory examination letters). As discussed above,
the Commission believes OCC's proposal to establish a Board-level
Regulatory Committee is consistent with, in general, protecting
investors and the public interest consistent with the requirements of
Section 17A(b)(3)(F) of the Exchange Act.\18\ The Commission believes,
therefore, that the establishment of the Committee through a detailed
charter document is consistent with Exchange Act Rule 17Ad-
22(e)(2)(iii).\19\
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\18\ 15 U.S.C. 78q-1(b)(3)(F).
\19\ 17 CFR 240.17Ad-22(e)(2)(iii).
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[[Page 65204]]
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
Proposed Rule Change is consistent with the requirements of the
Exchange Act, and in particular, the requirements of Section 17A of the
Exchange Act \20\ and the rules and regulations thereunder.
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\20\ In approving this Proposed Rule Change, the Commission has
considered the proposed rules' impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\21\ that the Proposed Rule Change (SR-OCC-2019-008) be,
and hereby is, approved.
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\21\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-25587 Filed 11-25-19; 8:45 am]
BILLING CODE 8011-01-P
