Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change Concerning the Commingling of Certain Non-Customer Margin Assets With Clearing Fund Contributions in the Options Clearing Corporation's Account at the Federal Reserve Bank of Chicago, 64603-64605 [2020-22475]
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2020–84 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.
khammond on DSKJM1Z7X2PROD with NOTICES
All submissions should refer to File
Number SR–NYSEArca–2020–84. 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
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Persons submitting comments are
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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–NYSEArca–2020–84 and
should be submitted on or before
November 3, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–22630 Filed 10–9–20; 8:45 am]
BILLING CODE 8011–01–P
25 17
CFR 200.30–3(a)(12).
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18:52 Oct 09, 2020
Jkt 253001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90100; File No. SR–OCC–
2020–010]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Approving Proposed Rule Change
Concerning the Commingling of
Certain Non-Customer Margin Assets
With Clearing Fund Contributions in
the Options Clearing Corporation’s
Account at the Federal Reserve Bank
of Chicago
October 6, 2020.
I. Introduction
On August 7, 2020, the Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2020–
010 (‘‘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
provide OCC with express authority to
hold cash Clearing Fund contributions
and certain non-customer cash margin
assets in its account at the Federal
Reserve Bank of Chicago at the same
time.3 The Proposed Rule Change was
published for public comment in the
Federal Register on August 24, 2020.4
The Commission has received no
comments regarding the Proposed Rule
Change. This order approves the
Proposed Rule Change.
II. Background
Since March 15, 2016, OCC has
maintained an account at the Federal
Reserve Bank of Chicago to hold cash
deposits from its Clearing Members to
satisfy margin and Clearing Fund
requirements.5 OCC’s current rules
restrict the manner in which OCC may
hold Clearing Fund contributions and
margin assets.6 As a result, OCC holds
cash Clearing Fund contributions in its
Federal Reserve Bank Account, but
separately holds Clearing Members’
cash margin assets in accounts with
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Notice of Filing infra note 4, 85 FR at 52176.
4 Securities Exchange Act Release No. 89590
(Aug. 18, 2020), 85 FR 52176 (Aug. 24, 2020) (File
No. SR–OCC–2020–010) (‘‘Notice of Filing’’).
5 See Federal Reserve Bank of Chicago
authorization to provide accounts and services to
Options Clearing Corporation and Chicago
Mercantile Exchange, Inc., in accordance with the
Dodd-Frank Act and Regulation HH, approved
March 15, 2016 (https://www.federalreserve.gov/
releases/h2/20160319/h2.pdf).
6 See OCC Rules at https://www.theocc.com/
getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/
occ_rules.pdf.
2 17
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64603
commercial banks. To authorize OCC to
comingle certain cash margin and cash
Clearing Fund contributions, OCC
proposes to amend its Rules 604 and
1002 as described below.
Current rules. OCC Rule 604(d)
requires that certain cash margin assets
of Clearing Members (‘‘Specified Cash
Margin Assets’’) must be deposited to
the credit of OCC in an account or
accounts,7 designated as Clearing
Member margin accounts, with such
banks, trust companies or other
depositories as the Board of Directors
may select. Rule 604(d) further prohibits
OCC from commingling Specified Cash
Margin Assets with OCC’s funds of OCC
or using such assets as working capital.
OCC Rule 1002(c) requires, among
other things, that cash Clearing Fund
contributions not otherwise invested
shall be deposited by OCC in accounts
with approved custodians, which
include the Federal Reserve Bank of
Chicago. Rule 1002(c) permits the
comingling of Clearing Fund
contributions from different Clearing
Members.8 OCC currently holds cash
Clearing Fund contributions in its
Federal Reserve Bank Account.
Proposed Rule Change to OCC. OCC
proposes to add language to Rule 604 to
allow OCC to deposit Specified Cash
Margin Assets in a Federal Reserve Bank
Account not designated as a Clearing
Member margin account. The proposed
change would apply only to noncustomer margin assets.9 OCC proposes
further to add language to its Rules 604
and 1002 to allow OCC to commingle
such assets and cash Clearing Fund
contributions deposited in a Federal
Reserve Bank Account.
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
7 OCC Rule 604(d) expressly excludes from these
Specified Cash Margin Assets those funds that are:
(i) Deposited in respect of a segregated futures
account (which must be held in accordance with
the provisions of Section 4d of the Commodity
Exchange Act and regulations thereunder); (ii)
invested by OCC pursuant to Rule 604(a); or (iii)
credited by OCC to a liquidating settlement account
pursuant to Chapter XI of OCC’s Rules.
8 See OCC Rule 1002(c) available at https://
www.theocc.com/getmedia/9d3854cd-b782-450fbcf7-33169b0576ce/occ_rules.pdf.
9 See Notice of Filing, 85 FR at 52177 (stating that
OCC proposes to add Interpretation and Policy .18
to Rule 604 to provide that, notwithstanding
anything else in Rule 604, Specified Cash Margin
Assets held by OCC as non-customer margin assets
and deposited to the credit of OCC in its Federal
Reserve Bank Account may be deposited in
accounts that are not designated as Clearing
Member margin accounts and may be commingled
with cash Clearing Fund contributions.)
E:\FR\FM\13OCN1.SGM
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
such proposed rule change is consistent
with the requirements of the Exchange
Act and the rules and regulations
thereunder applicable to such
organization.10 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
with Section 17A(b)(3)(F) of the
Exchange Act,11 Rule 17Ad–22(e)(7)(iii)
and Rule 17Ad–22(e)(16) thereunder.12
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 assure the safeguarding of
securities and funds which are in the
custody or control of the clearing agency
or for which it is responsible.13 Based
on its review of the record, and for the
reasons described below, the
Commission believes that allowing OCC
to deposit non-customer margin in its
Federal Reserve Bank Account
commingled with cash Clearing Fund
contributions as described above is
consistent with the safeguarding of
securities and funds for which it has
custody or control over.
The Proposed Rule Change would
allow OCC to deposit non-customer
cash margin at a Federal Reserve Bank
Account. The Commission continues to
believe that access to a Federal Reserve
Account is a valuable tool,14 and that
the use of such a tool would reduce
custody risk in a clearing agency.15
Further, the Proposed Rule Change
would not limit OCC’s access to
commercial banks, and would,
therefore, provide OCC with an
additional custodian at which to deposit
non-customer cash margin. The
Commission believes, therefore, that
adopting rules allowing OCC to deposit
non-customer cash margin in a Federal
Reserve Bank Account is consistent
with the requirements of Section
17A(b)(3)(F) of the Exchange Act.16
khammond on DSKJM1Z7X2PROD with NOTICES
10 15
U.S.C. 78s(b)(2)(C).
11 15 U.S.C. 78q–1(b)(3)(F).
12 17 CFR 240.17Ad–22(e)(7)(iii) and 17 CFR
240.17Ad–22(e)(16).
13 15 U.S.C. 78q–1(b)(3)(F).
14 See Securities Exchange Act Release 71699, 79
FR 29508, 29533 (May 22, 2014) (File No. S7–03–
14).
15 See Securities Exchange Act Release 68080, 77
FR 66220, 66268 (Nov. 2, 2012) (File No. S7–08–
11).
16 15 U.S.C. 78q–1(b)(3)(F).
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18:52 Oct 09, 2020
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B. Consistency With Rule 17Ad–
22(e)(7)(iii) Under the Exchange Act
Rule 17Ad–22(e)(7)(iii) under the
Exchange Act requires that a covered
clearing agency establish, implement,
maintain, and enforce written policies
and procedures reasonably designed to
effectively measure, monitor, and
manage the liquidity risk that arises in
or is borne by the covered clearing
agency, including measuring,
monitoring, and managing its settlement
and funding flows on an ongoing and
timely basis, and its use of intraday
liquidity by, inter alia, using access to
accounts and services at a Federal
Reserve Bank, or other relevant central
bank, when available and where
determined to be practical by the board
of directors to enhance its management
of liquidity risk.17 In recognizing that
there may be a number of ways to
address compliance with Rule 17Ad–
22(e)(7), the Commission has stated that
a covered clearing agency generally
should consider, when establishing and
maintaining policies and procedures
that address liquidity risk, including if
the covered clearing agency has access
to central bank accounts, payment
services, or securities services, whether
it uses these services, where practical, to
enhance its management of liquidity
risk.18
OCC may use cash margin deposits,
including non-customer cash margin
deposits, to manage liquidity risk. OCC
recently adopted a the Liquidity Risk
Management Framework document
(‘‘LRMF’’) that sets forth a
comprehensive overview of OCC’s
liquidity risk management practices and
governs OCC’s policies and procedures
as they relate to liquidity risk
management.19 The LRMF describes the
primary liquidity risks OCC faces when
managing a Clearing Member default,
and describes the maintenance of
liquidity resources designed to address
a variety of stress scenarios through the
sizing of such resources.20 The LRMF
defines such liquidity resources to
include cash margin deposits where
such deposits are required under OCC’s
Contingency Funding Plan.21 The
Proposed Rule Change would permit,
but not require, OCC to use its access to
a central bank account as a depository
for non-customer cash margin. The
Commission believes, therefore, that
17 17
CFR 240.17Ad–22(e)(7)(iii).
Securities Exchange Act Release 78961, 81
FR 70786, 70823–24 (Oct. 13, 2016) (File No. S7–
03–14).
19 See Securities Exchange Act Release 89014
(Jun. 4, 2020), 85 FR 35446 (Jun. 10, 2020) (File No.
SR–OCC–2020–003) (‘‘LRMF Approval Order’’).
20 See LRMF Approval Order, 85 FR at 35447.
21 See id.
18 See
PO 00000
Frm 00164
Fmt 4703
Sfmt 4703
allowing OCC to deposit non-customer
cash margin in a Federal Reserve Bank
Account is consistent with the
requirements of Rule 17Ad–22(e)(7)(iii)
under the Exchange Act.
C. Consistency With Rule 17Ad–
22(e)(16) Under the Exchange Act
Rule 17Ad–22(e)(16) requires a
clearing agency to establish, implement,
maintain, and enforce written policies
and procedures reasonably designed to
safeguard its own and its Clearing
Members’ assets, minimize the risk of
loss and delay in access to these assets,
and invest such assets in instruments
with minimal credit, market, and
liquidity risks.22 The Proposed Rule
Change would expand OCC’s ability to
use its Federal Reserve Bank Account by
allowing it to deposit non-customer
cash margin provided by Clearing
Members in the same account used to
custody cash Clearing Fund
contributions. As stated above, the
Commission believes that access to a
Federal Reserve Account is a valuable
tool,23 and that the use of such a tool
would reduce custody risk in a clearing
agency.24 OCC deposits cash Clearing
Fund contributions in its Federal
Reserve Bank Account, but is precluded
from depositing margin in the same
account under its current rules. The
Commission believes, therefore, that
expanding the Clearing Member funds
that OCC may custody in its Federal
Reserve Bank Account to include noncustomer cash margin is consistent with
the requirements of Rule 17Ad–
22(e)(16) under the Exchange Act.
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 25 and
the rules and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,26
that the Proposed Rule Change (SR–
OCC–2020–010) be, and hereby is,
approved.
22 17
CFR 240.17Ad–22(e)(16).
Securities Exchange Act Release 71699, 79
FR 29508, 29533 (May 22, 2014) (File No. S7–03–
14).
24 See Securities Exchange Act Release 68080, 77
FR 66220, 66268 (Nov. 2, 2012) (File No. S7–08–
11).
25 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).
26 15 U.S.C. 78s(b)(2).
27 17 CFR 200.30–3(a)(12).
23 See
E:\FR\FM\13OCN1.SGM
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–22475 Filed 10–9–20; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #16643 and #16644;
Louisiana Disaster Number LA–00104]
Presidential Declaration Amendment of
a Major Disaster for Public Assistance
Only for the State of Louisiana
U.S. Small Business
Administration.
ACTION: Amendment 1.
AGENCY:
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #16601 and #16602;
Iowa Disaster Number IA–00092]
Presidential Declaration Amendment of
a Major Disaster for the State of Iowa
U.S. Small Business
Administration.
AGENCY:
ACTION:
Amendment 2.
This is an amendment of the
Presidential declaration of a major
disaster for the State of Iowa (FEMA–
4557–DR), dated 08/20/2020.
Incident: Severe Storms.
Incident Period: 08/10/2020.
SUMMARY:
Issued on 10/05/2020.
Physical Loan Application Deadline
Date: 10/19/2020.
Economic Injury (EIDL) Loan
Application Deadline Date: 05/20/2021.
DATES:
Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
ADDRESSES:
A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
FOR FURTHER INFORMATION CONTACT:
The notice
of the President’s major disaster
declaration for the State of IOWA, dated
08/20/2020, is hereby amended to
include the following areas as adversely
affected by the disaster:
khammond on DSKJM1Z7X2PROD with NOTICES
SUPPLEMENTARY INFORMATION:
This is an amendment of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Louisiana (FEMA–4559–
DR), dated 09/05/2020.
Incident: Hurricane Laura.
Incident Period: 08/22/2020 through
08/27/2020.
DATES: Issued on 10/05/2020.
Physical Loan Application Deadline
Date: 11/04/2020.
Economic Injury (EIDL) Loan
Application Deadline Date: 06/07/2021.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration,Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: The notice
of the President’s major disaster
declaration for Private Non-Profit
organizations in the State of Louisiana,
dated 09/05/2020, is hereby amended to
include the following areas as adversely
affected by the disaster.
Primary Parishes:
Grant, Jackson, Lincoln, Ouachita,
Rapides, Winn.
All other information in the original
declaration remains unchanged.
SUMMARY:
(Catalog of Federal Domestic Assistance
Number 59008)
Cynthia Pitts,
Acting Associate Administrator for Disaster
Assistance.
Primary Counties (Physical Damage and
Economic Injury Loans): Clinton
Contiguous Counties (Economic Injury
Loans Only): Iowa: Jackson.
Illinois: Carroll, Whiteside.
[FR Doc. 2020–22570 Filed 10–9–20; 8:45 am]
All other information in the original
declaration remains unchanged.
[Docket No. SSA–2020–0014]
(Catalog of Federal Domestic Assistance
Number 59008)
BILLING CODE 8026–03–P
VerDate Sep<11>2014
21:44 Oct 09, 2020
Jkt 253001
SOCIAL SECURITY ADMINISTRATION
Privacy Act of 1974; Matching Program
AGENCY:
Cynthia Pitts,
Acting Associate Administrator for Disaster
Assistance.
[FR Doc. 2020–22569 Filed 10–9–20; 8:45 am]
BILLING CODE 8026–03–P
Social Security Administration
(SSA).
Notice of a new matching
program.
ACTION:
In accordance with the
provisions of the Privacy Act, as
SUMMARY:
PO 00000
Frm 00165
Fmt 4703
Sfmt 4703
64605
amended, this notice announces a new
matching program with the United
States Department of the Treasury,
Internal Revenue Service (IRS). Under
this matching program, the IRS will
disclose IRS return information to SSA
to administer benefits to qualified aged,
blind and disabled individuals.
DATES: The deadline to submit
comments on the proposed matching
program is 30 days from the date of
publication of this notice in the Federal
Register. The matching program will be
applicable on January 1, 2021, or once
a minimum of 30 days after publication
of this notice has elapsed, whichever is
later. The matching program will be in
effect for a period of 18 months.
ADDRESSES: Interested parties may
comment on this notice by either
telefaxing to (410) 966–0869, writing to
Matthew Ramsey, Executive Director,
Office of Privacy and Disclosure, Office
of the General Counsel, Social Security
Administration, G–401 WHR, 6401
Security Boulevard, Baltimore, MD
21235–6401, or emailing
Matthew.Ramsey@ssa.gov. All
comments received will be available for
public inspection by contacting Mr.
Ramsey at this street address.
FOR FURTHER INFORMATION CONTACT:
Interested parties may submit general
questions about the matching program
to Andrea Huseth, Director, Office of
Privacy and Disclosure, Office of the
General Counsel, Social Security
Administration, G–401 WHR, 6401
Security Boulevard, Baltimore, MD
21235–6401, at Telephone: (410) 966–
5855, or send an email to
Andrea.Huseth@ssa.gov.
SUPPLEMENTARY INFORMATION: None.
Matthew Ramsey,
Executive Director, Office of Privacy and
Disclosure, Office of the General Counsel.
PARTICIPATING AGENCIES:
SSA and IRS.
AUTHORITY FOR CONDUCTING THE MATCHING
PROGRAM
This matching agreement between IRS
and SSA is executed pursuant to the
Privacy Act of 1974, (5 U.S.C. 552a), as
amended by the Computer Matching
and Privacy Protection Act of 1988, and
otherwise; and the Office of
Management and Budget Final
Guidance interpreting those Acts.
Public Law (Pub. L.) 98–369, Deficit
Reduction Act of 1984, requires
agencies administering certain federallyassisted benefit programs to use certain
information to ensure proper
distribution of benefit payments (98
Stat. 494).
E:\FR\FM\13OCN1.SGM
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Agencies
[Federal Register Volume 85, Number 198 (Tuesday, October 13, 2020)]
[Notices]
[Pages 64603-64605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22475]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90100; File No. SR-OCC-2020-010]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change Concerning the Commingling of
Certain Non-Customer Margin Assets With Clearing Fund Contributions in
the Options Clearing Corporation's Account at the Federal Reserve Bank
of Chicago
October 6, 2020.
I. Introduction
On August 7, 2020, the Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2020-010 (``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 provide OCC
with express authority to hold cash Clearing Fund contributions and
certain non-customer cash margin assets in its account at the Federal
Reserve Bank of Chicago at the same time.\3\ The Proposed Rule Change
was published for public comment in the Federal Register on August 24,
2020.\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, 85 FR at 52176.
\4\ Securities Exchange Act Release No. 89590 (Aug. 18, 2020),
85 FR 52176 (Aug. 24, 2020) (File No. SR-OCC-2020-010) (``Notice of
Filing'').
---------------------------------------------------------------------------
II. Background
Since March 15, 2016, OCC has maintained an account at the Federal
Reserve Bank of Chicago to hold cash deposits from its Clearing Members
to satisfy margin and Clearing Fund requirements.\5\ OCC's current
rules restrict the manner in which OCC may hold Clearing Fund
contributions and margin assets.\6\ As a result, OCC holds cash
Clearing Fund contributions in its Federal Reserve Bank Account, but
separately holds Clearing Members' cash margin assets in accounts with
commercial banks. To authorize OCC to comingle certain cash margin and
cash Clearing Fund contributions, OCC proposes to amend its Rules 604
and 1002 as described below.
---------------------------------------------------------------------------
\5\ See Federal Reserve Bank of Chicago authorization to provide
accounts and services to Options Clearing Corporation and Chicago
Mercantile Exchange, Inc., in accordance with the Dodd-Frank Act and
Regulation HH, approved March 15, 2016 (https://www.federalreserve.gov/releases/h2/20160319/h2.pdf).
\6\ See OCC Rules at https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf.
---------------------------------------------------------------------------
Current rules. OCC Rule 604(d) requires that certain cash margin
assets of Clearing Members (``Specified Cash Margin Assets'') must be
deposited to the credit of OCC in an account or accounts,\7\ designated
as Clearing Member margin accounts, with such banks, trust companies or
other depositories as the Board of Directors may select. Rule 604(d)
further prohibits OCC from commingling Specified Cash Margin Assets
with OCC's funds of OCC or using such assets as working capital.
---------------------------------------------------------------------------
\7\ OCC Rule 604(d) expressly excludes from these Specified Cash
Margin Assets those funds that are: (i) Deposited in respect of a
segregated futures account (which must be held in accordance with
the provisions of Section 4d of the Commodity Exchange Act and
regulations thereunder); (ii) invested by OCC pursuant to Rule
604(a); or (iii) credited by OCC to a liquidating settlement account
pursuant to Chapter XI of OCC's Rules.
---------------------------------------------------------------------------
OCC Rule 1002(c) requires, among other things, that cash Clearing
Fund contributions not otherwise invested shall be deposited by OCC in
accounts with approved custodians, which include the Federal Reserve
Bank of Chicago. Rule 1002(c) permits the comingling of Clearing Fund
contributions from different Clearing Members.\8\ OCC currently holds
cash Clearing Fund contributions in its Federal Reserve Bank Account.
---------------------------------------------------------------------------
\8\ See OCC Rule 1002(c) available at https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf.
---------------------------------------------------------------------------
Proposed Rule Change to OCC. OCC proposes to add language to Rule
604 to allow OCC to deposit Specified Cash Margin Assets in a Federal
Reserve Bank Account not designated as a Clearing Member margin
account. The proposed change would apply only to non-customer margin
assets.\9\ OCC proposes further to add language to its Rules 604 and
1002 to allow OCC to commingle such assets and cash Clearing Fund
contributions deposited in a Federal Reserve Bank Account.
---------------------------------------------------------------------------
\9\ See Notice of Filing, 85 FR at 52177 (stating that OCC
proposes to add Interpretation and Policy .18 to Rule 604 to provide
that, notwithstanding anything else in Rule 604, Specified Cash
Margin Assets held by OCC as non-customer margin assets and
deposited to the credit of OCC in its Federal Reserve Bank Account
may be deposited in accounts that are not designated as Clearing
Member margin accounts and may be commingled with cash Clearing Fund
contributions.)
---------------------------------------------------------------------------
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
[[Page 64604]]
such proposed rule change is consistent with the requirements of the
Exchange Act and the rules and regulations thereunder applicable to
such organization.\10\ 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 with Section 17A(b)(3)(F) of the
Exchange Act,\11\ Rule 17Ad-22(e)(7)(iii) and Rule 17Ad-22(e)(16)
thereunder.\12\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(2)(C).
\11\ 15 U.S.C. 78q-1(b)(3)(F).
\12\ 17 CFR 240.17Ad-22(e)(7)(iii) and 17 CFR 240.17Ad-
22(e)(16).
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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 assure the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible.\13\
Based on its review of the record, and for the reasons described below,
the Commission believes that allowing OCC to deposit non-customer
margin in its Federal Reserve Bank Account commingled with cash
Clearing Fund contributions as described above is consistent with the
safeguarding of securities and funds for which it has custody or
control over.
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\13\ 15 U.S.C. 78q-1(b)(3)(F).
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The Proposed Rule Change would allow OCC to deposit non-customer
cash margin at a Federal Reserve Bank Account. The Commission continues
to believe that access to a Federal Reserve Account is a valuable
tool,\14\ and that the use of such a tool would reduce custody risk in
a clearing agency.\15\ Further, the Proposed Rule Change would not
limit OCC's access to commercial banks, and would, therefore, provide
OCC with an additional custodian at which to deposit non-customer cash
margin. The Commission believes, therefore, that adopting rules
allowing OCC to deposit non-customer cash margin in a Federal Reserve
Bank Account is consistent with the requirements of Section
17A(b)(3)(F) of the Exchange Act.\16\
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\14\ See Securities Exchange Act Release 71699, 79 FR 29508,
29533 (May 22, 2014) (File No. S7-03-14).
\15\ See Securities Exchange Act Release 68080, 77 FR 66220,
66268 (Nov. 2, 2012) (File No. S7-08-11).
\16\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(7)(iii) Under the Exchange Act
Rule 17Ad-22(e)(7)(iii) under the Exchange Act requires that a
covered clearing agency establish, implement, maintain, and enforce
written policies and procedures reasonably designed to effectively
measure, monitor, and manage the liquidity risk that arises in or is
borne by the covered clearing agency, including measuring, monitoring,
and managing its settlement and funding flows on an ongoing and timely
basis, and its use of intraday liquidity by, inter alia, using access
to accounts and services at a Federal Reserve Bank, or other relevant
central bank, when available and where determined to be practical by
the board of directors to enhance its management of liquidity risk.\17\
In recognizing that there may be a number of ways to address compliance
with Rule 17Ad-22(e)(7), the Commission has stated that a covered
clearing agency generally should consider, when establishing and
maintaining policies and procedures that address liquidity risk,
including if the covered clearing agency has access to central bank
accounts, payment services, or securities services, whether it uses
these services, where practical, to enhance its management of liquidity
risk.\18\
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\17\ 17 CFR 240.17Ad-22(e)(7)(iii).
\18\ See Securities Exchange Act Release 78961, 81 FR 70786,
70823-24 (Oct. 13, 2016) (File No. S7-03-14).
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OCC may use cash margin deposits, including non-customer cash
margin deposits, to manage liquidity risk. OCC recently adopted a the
Liquidity Risk Management Framework document (``LRMF'') that sets forth
a comprehensive overview of OCC's liquidity risk management practices
and governs OCC's policies and procedures as they relate to liquidity
risk management.\19\ The LRMF describes the primary liquidity risks OCC
faces when managing a Clearing Member default, and describes the
maintenance of liquidity resources designed to address a variety of
stress scenarios through the sizing of such resources.\20\ The LRMF
defines such liquidity resources to include cash margin deposits where
such deposits are required under OCC's Contingency Funding Plan.\21\
The Proposed Rule Change would permit, but not require, OCC to use its
access to a central bank account as a depository for non-customer cash
margin. The Commission believes, therefore, that allowing OCC to
deposit non-customer cash margin in a Federal Reserve Bank Account is
consistent with the requirements of Rule 17Ad-22(e)(7)(iii) under the
Exchange Act.
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\19\ See Securities Exchange Act Release 89014 (Jun. 4, 2020),
85 FR 35446 (Jun. 10, 2020) (File No. SR-OCC-2020-003) (``LRMF
Approval Order'').
\20\ See LRMF Approval Order, 85 FR at 35447.
\21\ See id.
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C. Consistency With Rule 17Ad-22(e)(16) Under the Exchange Act
Rule 17Ad-22(e)(16) requires a clearing agency to establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to safeguard its own and its Clearing Members'
assets, minimize the risk of loss and delay in access to these assets,
and invest such assets in instruments with minimal credit, market, and
liquidity risks.\22\ The Proposed Rule Change would expand OCC's
ability to use its Federal Reserve Bank Account by allowing it to
deposit non-customer cash margin provided by Clearing Members in the
same account used to custody cash Clearing Fund contributions. As
stated above, the Commission believes that access to a Federal Reserve
Account is a valuable tool,\23\ and that the use of such a tool would
reduce custody risk in a clearing agency.\24\ OCC deposits cash
Clearing Fund contributions in its Federal Reserve Bank Account, but is
precluded from depositing margin in the same account under its current
rules. The Commission believes, therefore, that expanding the Clearing
Member funds that OCC may custody in its Federal Reserve Bank Account
to include non-customer cash margin is consistent with the requirements
of Rule 17Ad-22(e)(16) under the Exchange Act.
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\22\ 17 CFR 240.17Ad-22(e)(16).
\23\ See Securities Exchange Act Release 71699, 79 FR 29508,
29533 (May 22, 2014) (File No. S7-03-14).
\24\ See Securities Exchange Act Release 68080, 77 FR 66220,
66268 (Nov. 2, 2012) (File No. S7-08-11).
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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 \25\ and the rules and regulations thereunder.
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\25\ 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,\26\ that the Proposed Rule Change (SR-OCC-2020-010) be,
and hereby is, approved.
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\26\ 15 U.S.C. 78s(b)(2).
\27\ 17 CFR 200.30-3(a)(12).
[[Page 64605]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22475 Filed 10-9-20; 8:45 am]
BILLING CODE 8011-01-P