Sunshine Act Meetings, 19063-19064 [2021-07573]
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Federal Register / Vol. 86, No. 68 / Monday, April 12, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
the Commission believes that the
changes proposed in the Advance
Notice are consistent with promoting
robust risk management, promoting
safety and soundness, reducing systemic
risks, and supporting the stability of the
broader financial system.30
The Commission continues to regard
skin-in-the-game as a potential tool to
align the various incentives of a covered
clearing agency’s stakeholders,
including management and clearing
members.31 OCC’s current rules provide
for the application of excess capital as
skin-in-the-game. The Commission
believes that OCC’s proposal to set aside
capital to maintain a minimum amount
of skin-in-the-game strengthens OCC’s
existing skin-in-the-game rules. OCC’s
current rules align senior management’s
personal economic incentives with
OCC’s overall risk management
incentives,32 but do not guaranty that an
amount of OCC capital would be set
aside to ensure a pre-determined
minimum level of skin-in-the-game. The
Commission believes that holding a
Minimum Corporate Contribution, in
addition to the EDCP unvested balance,
to ensure such a minimum level of skinin-the-game would help to align OCC’s
economic incentives as a corporation
with risk management more broadly,
thereby promoting robust risk
management at OCC.
Holding a defined Minimum
Corporate Contribution, as opposed to
an undefined amount of excess capital,
may help to incentivize OCC further to
maintain the appropriate amount of
resources to manage a Clearing Member
default, consistent with the promotion
Notice. One commenter raised issues related solely
to the consistency of the proposal with the
requirements of Section 17A of the Exchange Act.
See letter from Richard J. McDonald, Susquehanna
International Group (‘‘SIG’’), dated March 30, 2021,
to Vanessa Countryman, Secretary, Commission
(‘‘SIG Letter’’), available at https://www.sec.gov/
comments/sr-occ-2021-003/srocc2021003.htm.
Specifically, SIG expressed concern regarding (i)
the extent to which OCC fees, dues, and other
charges would be used to finance the equity
windfall of OCC shareholders and their commercial
interests and (ii) the effect of the proposal on the
protection of investors and the public interest. The
Commission’s evaluation of the Advance Notice is
conducted under the Clearing Supervision Act and,
as noted above, generally considers whether the
proposal will mitigate systemic risk and promote
financial stability. The Commission notes that SIG
has not explained or demonstrated how the
retention of capital, derived from clearing fees, for
use as skin-in-the-game would cause the proposal
to be inconsistent with the Clearing Supervision
Act. The SIG Letter is directed at the Proposed Rule
Change and will be addressed in that context.
30 12 U.S.C. 5464(b).
31 Covered Clearing Agency Standards, 81 FR at
70805–06.
32 See Securities Exchange Act Release No. 87257
(Oct. 8, 2019), 84 FR 55194, 55199 (Oct. 15, 2019)
(File No. SR–OCC–2019–805).
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of safety and soundness at OCC.
Further, the Commission believes that,
to the extent the proposed changes are
consistent with promoting OCC’s safety
and soundness, they are also consistent
with supporting the stability of the
broader financial system. OCC has been
designated as a SIFMU, in part, because
its failure or disruption could increase
the risk of significant liquidity or credit
problems spreading among financial
institutions or markets.33 The
Commission believes that the proposed
changes would help support the
maintenance of OCC as a going concern
following a Clearing Member default,
which in turn would help support the
stability of the financial system by
reducing the risk of significant liquidity
or credit problems spreading among
market participants that rely on OCC’s
central role in the options market.
Finally, the Commission believes that
the proposed changes to increase OCC’s
pre-determined default management
resources are consistent with the
reduction of systemic risk because such
increase enhances the ability of OCC to
absorb and contain the spread of any
losses that might arise from a member
default.
Accordingly, and for the reasons
stated above, the Commission believes
the changes proposed in the Advance
Notice are consistent with Section
805(b) of the Clearing Supervision
Act.34
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, among other things, are clear and
transparent; clearly prioritize the safety
and efficiency of the covered clearing
agency; and support the public interest
requirements of the Exchange Act.35 In
adopting Rule 17Ad–22(e)(2), the
Commission discussed comments it
received regarding the concept of skinin-the-game as a potential tool to align
the various incentives of a covered
clearing agency’s stakeholders,
including management and clearing
members.36 And, while the Commission
declined to include a specific skin-inthe-game requirement in the rule, it
33 See Financial Stability Oversight Council
(‘‘FSOC’’) 2012 Annual Report, Appendix A,
https://home.treasury.gov/system/files/261/here.pdf
(last visited Mar. 17, 2021).
34 12 U.S.C. 5464(b).
35 17 CFR 240.17Ad–22(e)(2).
36 Covered Clearing Agency Standards, 81 FR at
70805–06.
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19063
stated its belief that ‘‘the proper
alignment of incentives is an important
element of a covered clearing agency’s
risk management practices,’’ and noted
that skin-in-the-game ‘‘may play a role
in those risk management practices in
many instances.’’ 37 OCC’s current rules
require the application management
compensation and excess capital as
skin-in-the-game, which in turn should
help further align the interests of OCC’s
stakeholders, including OCC
management and Clearing Members.38
As described above, OCC’s proposal
would not reduce the resources OCC
would apply to address default losses or
remove the current skin-in-the-game
component of OCC’s rules. Rather, OCC
proposes to set aside a defined amount
of capital for the sole purpose of
absorbing losses and shortfalls arising
out of a Clearing Member default. OCC
has clearly stated the factors that the
Board would consider when
determining the amount of resources to
hold as skin-in-the-game, a portion of
which would comprise the Minimum
Corporate Contribution. OCC also
proposes to establish a clear process for
addressing reductions in the Minimum
Corporate Contribution arising out of a
Clearing Member’s default. Accordingly,
the Commission believes that the
proposed changes to establish a
persistent minimum level of skin-in-thegame are consistent with Rule 17Ad–
22(e)(2) under the Exchange Act.39
IV. Conclusion
It is therefore noticed, pursuant to
Section 806(e)(1)(I) of the Clearing
Supervision Act, that the Commission
does not object to Advance Notice (SR–
OCC–2021–801) and that OCC is
authorized to implement the proposed
change as of the date of this notice or
the date of an order by the Commission
approving proposed rule change SR–
OCC–2021–003, whichever is later.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–07454 Filed 4–9–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
TIME AND DATE:
2:00 p.m. on Thursday,
April 15, 2021.
37 Covered Clearing Agency Standards, 81 FR at
70806.
38 See CMP Approval Order at 5507.
39 17 CFR 240.17Ad–22(e)(2).
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19064
Federal Register / Vol. 86, No. 68 / Monday, April 12, 2021 / Notices
The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
PLACE:
SECURITIES AND EXCHANGE
COMMISSION
This meeting will be closed to
the public.
STATUS:
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations
and enforcement proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: April 8, 2021.
Eduardo A. Aleman,
Deputy Secretary.
khammond on DSKJM1Z7X2PROD with NOTICES
[FR Doc. 2021–07573 Filed 4–8–21; 4:15 pm]
BILLING CODE 8011–01–P
[Release No. 34–91481; File No. SR–Phlx–
2021–19]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Phlx’s Pricing
Schedule at Options 7, Section 8,
‘‘Membership Fees’’
April 6, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 25,
2021, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Phlx’s Pricing Schedule at Options 7,
Section 8, ‘‘Membership Fees.’’
While the changes proposed herein
are effective upon filing, the Exchange
has designated the amendments become
operative on April 1, 2021.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, 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
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange 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. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00129
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Sfmt 4703
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Phlx proposes to amend its pricing
within Options 7, Section 8,
‘‘Membership Fees’’ to (1) waive the
Inactive Nominee Fee for a six month
period; and (2) remove obsolete
language. Each change is described
below.
Options 7, Section 8
First, Phlx proposes to amend Options
7, Section 8, ‘‘Membership Fees,’’ at Part
A, ‘‘Permit and Registration Fees,’’ to
waive the Inactive Nominee 3 Fee which
is a fee of $600 for 6 months.4 Phlx
proposes to waive the Inactive Nominee
Fee from April 1, 2021 through
September 30, 2021. The Exchange
notes that the Clerk Fee 5 of $100 per
month will continue to be assessed.
By way of background, on March 17,
2019 [sic],6 Phlx suspended open outcry
trading as a result of precautions taken
with respect to COVID–19. When the
Trading Floor reopened on June 3,
2020,7 the Exchange permitted each
Trading Floor member organization to
3 The term ‘‘inactive nominee’’ shall mean a
natural person associated with and designated as
such by a member organization and who has been
approved for such status and is registered as such
with the Membership Department. An inactive
nominee shall have no rights or privileges under a
permit unless and until said inactive nominee
becomes admitted as a member of the Exchange
pursuant to the By-Laws and Rules of the Exchange.
An inactive nominee merely stands ready to
exercise rights under a permit upon notice by the
member organization to the Membership
Department on an expedited basis. See Options 8,
Section 2(a)(3). An Inactive Nominee shall be
deemed a Clerk pursuant to Options 8, Section
12(a). An inactive nominee’s status expires after six
months unless it has been reaffirmed in writing by
the member organization or is sooner terminated. A
member organization is assessed the Inactive
Nominee Fee every time the status is reaffirmed. An
inactive nominee is also assessed Application and
Initiation Fees when such person applies to be an
inactive nominee. Such fees are reassessed if there
is a lapse in their inactive nominee status. However,
an inactive nominee is not assessed Application
and Initiation Fees if such inactive nominee applied
for membership without any lapse in that
individual’s association with a particular member
organization. An Inactive Nominee is also assessed
the Clerk Fee.
4 The member organization is assessed $100 per
month for the applicable six month period unless
the member organization provides proper notice of
its intent to terminate an inactive nominee prior to
the first day of the next billing month.
5 The Clerk Fee is imposed on any registered onfloor person employed by or associated with a
member or member organization pursuant to
Options 3, Section 19, including Inactive Nominees
pursuant to Options 8, Section 7. The Clerk Fee is
not imposed on permit holders. See Phlx Rules at
Options 7, Section 8A.
6 See Options Trader Alert #2020—07.
7 See Options Trader Alert #2020—13.
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]]>Agencies
[Federal Register Volume 86, Number 68 (Monday, April 12, 2021)]
[Notices]
[Pages 19063-19064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07573]
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SECURITIES AND EXCHANGE COMMISSION
Sunshine Act Meetings
TIME AND DATE: 2:00 p.m. on Thursday, April 15, 2021.
[[Page 19064]]
PLACE: The meeting will be held via remote means and/or at the
Commission's headquarters, 100 F Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to the public.
MATTERS TO BE CONSIDERED: Commissioners, Counsel to the Commissioners,
the Secretary to the Commission, and recording secretaries will attend
the closed meeting. Certain staff members who have an interest in the
matters also may be present.
In the event that the time, date, or location of this meeting
changes, an announcement of the change, along with the new time, date,
and/or place of the meeting will be posted on the Commission's website
at https://www.sec.gov.
The General Counsel of the Commission, or his designee, has
certified that, in his opinion, one or more of the exemptions set forth
in 5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR
200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and (a)(10),
permit consideration of the scheduled matters at the closed meeting.
The subject matter of the closed meeting will consist of the
following topics:
Institution and settlement of injunctive actions;
Institution and settlement of administrative proceedings;
Resolution of litigation claims; and
Other matters relating to examinations and enforcement proceedings.
At times, changes in Commission priorities require alterations in
the scheduling of meeting agenda items that may consist of
adjudicatory, examination, litigation, or regulatory matters.
CONTACT PERSON FOR MORE INFORMATION: For further information; please
contact Vanessa A. Countryman from the Office of the Secretary at (202)
551-5400.
Dated: April 8, 2021.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2021-07573 Filed 4-8-21; 4:15 pm]
BILLING CODE 8011-01-P
