Self-Regulatory Organizations; the Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Options Clearing Corporation Concerning the Adoption of a New Clearing Agreement That Would Permit OCC To Provide Clearing and Settlement Services to MIAX Subject to All Requisite Regulatory Approvals Being Received, 26377-26380 [2025-11299]

Download as PDF Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices 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–CboeBZX–2025–036. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–CboeBZX–2025–036 and should be submitted on or before July 11, 2025. Rebuttal comments should be submitted by July 25, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2025–11289 Filed 6–18–25; 8:45 am] ddrumheller on DSK120RN23PROD with NOTICES1 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–103271; File No. SR–OCC– 2025–008] Self-Regulatory Organizations; the Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Options Clearing Corporation Concerning the Adoption of a New Clearing Agreement That Would Permit OCC To Provide Clearing and Settlement Services to MIAX Subject to All Requisite Regulatory Approvals Being Received June 16, 2025. 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 June 4, 2025, The Options Clearing Corporation (‘‘OCC’’ or ‘‘Corporation’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared primarily by OCC. OCC filed the proposed rule change pursuant to Section 19(b)(3)(A) 3 of the Act and paragraph (f)(4) or Rule 19b–4 4 thereunder, such that the proposed rule change was immediately 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 This proposed rule change would update an agreement for Clearing and Settlement Services (‘‘Clearing Agreement’’) between OCC and MIAX Futures Exchange, LLC (‘‘MIAX’’) in connection with MIAX’s status as a designated contract market (‘‘DCM’’) regulated by the Commodity Futures Trading Commission (‘‘CFTC’’). There are no proposed changes to OCC’s ByLaws or Rules. OCC filed as Exhibit 5 to File No. SR– OCC–2025–008 the text of the proposed Clearing Agreement. All terms with initial capitalization that are not otherwise defined herein have the same meaning as set forth in the OCC ByLaws and Rules.5 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f). 5 OCC’s By-Laws and Rules can be found on OCC’s public website: https://www.theocc.com/ Company-Information/Documents-and-Archives/ By-Laws-and-Rules. 26377 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 This proposed rule is to adopt a new Clearing Agreement that would permit OCC to provide clearing and settlement services to MIAX subject to all requisite regulatory approvals being received. OCC proposes to provide clearance and settlement services for commodity futures (‘‘Futures’’) including commodity futures of an underlying interest that are a broad-based security index (‘‘Broad-Based Index Futures’’), together with options on Futures (‘‘Futures Options’’), collectively referred to within the Clearing Agreement as (‘‘Cleared Contracts’’), to MIAX pursuant to the terms set forth in the Clearing Agreement. MIAX already has a DCM designation from the CFTC.6 The terms of the proposed Clearing Agreement are based on the terms of the Agreement for Clearing and Settlement Services executed with Small Exchange, Inc. (‘‘Small Agreement’’), which was approved by the Commission.7 The Clearing Agreement is similar to the Small Agreement with several differences discussed in more detail below. Clearing Agreement Proposal OCC proposes to provide the clearance and settlement services as described in the Clearing Agreement that includes new provisions designed to protect OCC and the holders of outstanding contracts listed on MIAX. These provisions would enable OCC to effectively manage the risks borne from a clearing relationship with a DCM such as the one OCC proposes to establish with MIAX. More specifically, the following provisions would be added: 2 17 13 17 CFR 200.30–3(a)(57). VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 6 See https://www.cftc.gov/sites/default/files/ stellent/groups/public/@otherif/documents/ifdocs/ mgexsubpartcelection.pdf. 7 See Securities Exchange Act Release No. 87774 (December 17, 2019), 84 FR 70602 (December 23, 2019) (SR–OCC–2019–011). E:\FR\FM\20JNN1.SGM 20JNN1 ddrumheller on DSK120RN23PROD with NOTICES1 26378 Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices • A new recital paragraph within the preamble, which acknowledges a separate ‘‘Data Agreement’’ related to the use and distribution of data and other information that would be entered into concurrently with the Clearing Agreement. This recital reflects the parties’ intent that the provision of clearing services would be subject to the terms of both agreements in addition to OCC’s By-Laws and Rules and any applicable regulatory requirements. Accordingly, both Section 6, ‘‘Clearance of Transaction in Cleared Contracts,’’ and Section 7, ‘‘Acceptance and Rejection of Transactions in Cleared Contracts’’, would also be revised to include statements to that effect. • Section 16 ‘‘Information Technology and Security,’’ would require OCC and MIAX to share their respective contact information, and setup mutual notification requirements for cybersecurity incidents to assist with the resolution of information technology and security matters. This section would also mandate that MIAX maintain a comprehensive cybersecurity program as well as a written business continuity and disaster recovery program and meet certain connectivity requirements set by OCC, which may include connectivity through point to point and redundant connections. This term would align with standard practices and guidelines generally accepted in the industry to detail each party’s obligations as a separate section within the Clearing Agreement. • Section 17 ‘‘Access to Books and Records of the Corporation,’’ would provide MIAX with a limited right subject to certain security and confidentiality requirements to review OCC’s books and records, as related to the provision of services envisioned by the Clearing Agreement. The substance of this term was moved from Schedule B to memorialize MIAX’s right as a separate term within the Clearing Agreement, which aligns with current best practices. • Section 18 ‘‘Confidentiality,’’ would introduce provisions that establish certain obligations between both OCC and MIAX in relation to certain information sharing and intellectual property rights, designed to align the Clearing Agreement in line with current best practices. More specifically, Section 18(a), would provide for the definition of ‘‘Confidential Information’’ that would include the type and scope of information considered material to each of the parties and over which the rights and obligations described in the remaining paragraphs of Section 18 would apply. VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 • Section 28 ‘‘Marks,’’ would provide that both MIAX and OCC would grant each other non-exclusive, royalty free license to use their name, tradename, logos and trademarks in connection with OCC’s clearance services and MIAX’s listing activities to align the Clearing Agreement in line with current best practices in relation to intellectual property rights. In addition to the above, the Clearing Agreement would include several other differences from the Small Agreement. Within Section 3 ‘‘Selection of Underlying Interests; Classes and Series of Cleared Contracts,’’ the changes would enhance the management of new product risks, introduce defined terms, and make conforming or clarifying changes that include: • Paragraph 3(a)(i) with respect to Underlying Interests for Commodity Futures would be revised to reflect that in addition to existing conditions, OCC’s prior written approval would be required for any underlying interest or Cleared Contract that would materially impact OCC’s established risk profile or that would introduce new or unique financial risk, risk model or third-party risks (each a ‘‘New Products Risk’’).8 This Paragraph would also define the ‘‘types’’ of underlying interests as those interests in respect of Futures including broad-based security indices. • Paragraph 3(a)(ii) with respect to Underlying Interests for Futures Options would be revised to reflect that in addition to existing conditions, OCC’s prior written approval would be required for any Futures Options or underlying Futures contracts that present New Product Risk, and would also require that the underlying Futures contract be open for trading for a reasonable period of time specified by OCC prior to the date and time that the underlying Futures Options is opened for trading. • Paragraph 3(a)(iii) would be added that specifies any extra steps that OCC would carry out under circumstances when OCC may refuse to clear and settle Cleared Contracts that present New Product Risk to OCC, including notifications to MIAX, undertaking commercially reasonable efforts, including in consultation with MIAX, to address the New Product Risk, and notification to MIAX when the issues have been satisfactorily addressed so that OC may approve the new Cleared Contract. • Paragraph 3(a)(iv) would be added to detail any extra steps MIAX would 8 The term ‘‘New Product Risk’’ refers to the risk that arises from products that introduce novel or unique financial, risk model, or third-party risks. PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 carry out under circumstances when OCC may request additional supporting documentation. This Paragraph would also provide OCC with the discretion to defer the trading of new Cleared Contracts and specify the circumstances under which it may not be able to clear such contracts. • Paragraph 3(b) ‘‘Nomenclature,’’ would be removed and the remaining paragraphs renumbered. Renumbered Paragraph 3(b) ‘‘Procedures for Selection of Underlying Interests,’’ would be modified to clarify that any new product proposal by MIAX would also be subject to the requirement of Paragraph 3(a). Within Section 5 ‘‘Comparison of Transactions in Cleared Contracts; Settlement Prices,’’ changes would include the following: • Paragraph 5(b) would be revised to include reference to the Data Agreement between OCC and MIAX, and an explicit statement on MIAX’s obligation to cooperate at the request of OCC on determining settlement prices. • Paragraph 5(d) would be added to specify certain information sharing obligations between OCC and MIAX further detailed in Schedule B of the Clearing Agreement. The parties would also revise Section 10 of the Clearing Agreement in relation to margin obligations of Clearing Members for Cleared trades in the same account, to include an additional step for risk management review before the provision of any reductions in margin. This additional step provides OCC with another layer of risk management review of the exposure presented by a Clearing Member before the application of any reductions in margin obligation, thus enhancing OCC’s ability to manage its risk and margin resources appropriately. In addition, Section 12 would be renamed to ‘‘Reporting Obligations by Market,’’ and substantially revised and expanded to organize and memorialize MIAX’s reporting obligations within the Clearing Agreement to include: • Paragraph 12(a) would be added to provide for ongoing information sharing by MIAX to OCC, including providing annual and quarterly financials, and the reporting of any losses. The paragraph would also establish the right for OCC to examine MIAX’s books and records and request other information when needed. • Paragraph 12(b) would be added to specify additional reporting obligations of certain material events by MIAX, such as changes in good standing in the jurisdiction of incorporation, any delisting of Cleared Contracts, any E:\FR\FM\20JNN1.SGM 20JNN1 ddrumheller on DSK120RN23PROD with NOTICES1 Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices material changes to risk controls, or any regulatory or other material changes. In addition, Section 13 ‘‘Fees,’’ of the Clearing Agreement, would be reorganized to clarify that fee structures for the services OCC performs would be established by OCC’s By-Laws and Rules, as well as filings with the SEC or CFTC, and obligate MIAX to pay fees consistent with such established provisions. In addition, Section 15 ‘‘Indemnification,’’ would be reorganized by renumbering Paragraph 15(c) to 15(b)(iii). Paragraph 15(b)(iii) would then be revised to expand the intellectual property indemnity to include allegations in circumstances when MIAX would have no right to use, reference, or distribute the underlying interest. The remaining paragraphs 15(d) to 15(e) would then be renumbered chronologically in alphabetical order as 15(c) to 15(d). Other changes to the Clearing Agreement include the renumbering of Section 16 ‘‘Notices,’’ to Section 29 and Section 17 ‘‘Miscellaneous,’’ to Section 27. Section 29 would remain substantially unchanged, while Section 27 would be substantially reorganized and enhanced to add new standard terms and provisions used in other OCC agreements to conform with best practices.9 The added provisions would in general clarify how the Clearing Agreement should be interpreted such as, for example, paragraph (a) that specifies that the Clearing Agreement should be construed in accordance with the governing laws of Illinois, or paragraphs (c) that describes the rights and obligations of the parties as related to the assignment of the Clearing Agreement, or paragraph (e) that makes it clear that the headings contained within the Clearing Agreement are for the purposes of reference only and are not meant to affect the meaning of the sections, among others. As described above, due to the addition of new sections and other modifications Sections 18 to 25 would be renumbered as Sections 19 to 26 respectively. The Clearing Agreement would then be further amended and include such changes as: • Section 19, titled ‘‘Breach of Agreement—Termination,’’ would be retitled as ‘‘Suspension; Breach of Agreement; Termination.’’ In addition, Paragraph 19(a) ‘‘Suspension,’’ would be added to protect OCC and provides it with the right to suspend any of its obligations to MIAX in order to comply with any waiver or suspension of OCC’s 9 OCC is committed to updating the interpretative provisions of its agreements generally to bring them in line with current best market practices. VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 By-Laws, Rules policies and procedures, or any other rules issued by OCC, or in case of a material breach of the Clearing Agreement by MIAX, or under circumstance where OCC believes that provision of services would result in a violation of the Commodity Exchange Act. The remaining paragraphs in this section would be renumbered chronologically in alphabetical order. • Section 20, ‘‘Survival of Obligations,’’ would introduce a change that preserves the parties’ mutual obligations of confidentiality upon the termination of the Clearing Agreement. • Section 21, ‘‘Dispute Resolution,’’ would be modified to replace all references to ‘‘Chief Executive Officer’’ with ‘‘senior management’’ to provide both parties’ with the ability to leverage other senior management personnel under such circumstances to quickly resolve disputes. • Section 23, ‘‘System Redundancy, Disaster Recovery,’’ would add a new term to the Clearing Agreement that memorializes OCC’s existing obligation to maintain a written business continuity and disaster recovery program with annual testing for recovery point objectives and real-time objectives. • Section 26, ‘‘Nonexclusive Agreement,’’ would be revised to clearly assert that OCC services would be provided on a non-exclusive basis and that the Clearing Agreement would not prevent OCC from providing its services to any other parties both during and after termination. With respect to Schedule B of the Clearing Agreement, certain terms of the schedule would be modified to include the following changes: • Paragraph (1)(A) related to the sharing of ‘‘Information provided each trading day,’’ from OCC to MIAX, would be revised to include a limitation on the use of the Data Distribution Service (‘‘DDS’’) for Authorized Purposes only and a prohibition on the redistribution of DDS data to any third party, absent OCC’s prior written consent. • Paragraph (1)(B) related to the sharing of ‘‘Information provided on an occurrence basis,’’ from OCC to MIAX, would be revised to simplify OCC’s notification obligations to MIAX to only include the default of any Clearing Member, or the suspension, termination, ceasing to act for, or liquidation of any Clearing Member by OCC if also a member of MIAX. • Paragraph (2)(A) related to the sharing of ‘‘Information regarding Clearing Members,’’ from MIAX to OCC, would be revised to remove the obligation to determine whether to report a Clearing Member that is not in PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 26379 compliance with OCC’s financial responsibility standards, since that obligation would naturally rest with OCC. In addition to the foregoing, various other minor and administrative changes have been made throughout the document including, but not limited to, updated references to the names of the parties, clean-up of outdated terms and typographical errors, and other clarifying or conforming revisions. (2) Statutory Basis OCC believes the proposed rule change is consistent with Section 17A of the Exchange Act 10 and Rule 17Ad– 22(e)(20) 11 thereunder. Section 17A(b)(3)(F) of the Act 12 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, 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, and, in general, to protect investors and the public interest. The proposed rule change is designed to promote the prompt and accurate clearance and settlement of derivatives contracts traded on MIAX by providing that such Cleared Contracts will be cleared through OCC’s existing clearance and settlement processes for cleared contracts, which have functioned efficiently for many years with regard to other markets for which OCC provides clearance and settlement services. Similarly, OCC believes that the proposed rule change is designed to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency by bringing Cleared Contracts traded on MIAX and funds associated with those contracts within the scope of OCC’s existing custody and control arrangements, which have effectively served OCC’s Clearing Members and their customers for many years. Finally, OCC believes the proposed rule change is designed to protect investors and the public interest. By providing that Cleared Contracts traded on MIAX and cleared by OCC are risk managed under OCC’s risk management framework, which is designed to offer protection to customers and other market participants in the event of a Clearing Member default, OCC believes the proposed rule change contributes to the protection of investors and the public interest. For these reasons, the proposed changes to OCC’s rules are reasonably designed to 10 15 U.S.C. 78q–1. CFR 240.17Ad–22(e)(20). 12 15 U.S.C. 78q–1(b)(3)(F). 11 17 E:\FR\FM\20JNN1.SGM 20JNN1 26380 Federal Register / Vol. 90, No. 117 / Friday, June 20, 2025 / Notices promote the prompt and accurate clearance and settlement of securities transactions, 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, and, in general, to protect investors and the public interest in accordance with Section 17A(b)(3)(F) of the Act.13 Rule 17Ad–22(e)(20) 14 requires that a covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to identify, monitor, and manage risks related to any link the covered clearing agency establishes with one or more other clearing agencies, financial market utilities, or trading markets.15 OCC believes that the proposed rule change is consistent with Rule 17Ad– 22(e)(20) 16 because the proposed Clearing Agreement is designed to help OCC identify, monitor, and manage the risks associated with providing clearance and settlement services for MIAX, which is a trading market registered as a DCO with the CFTC. The Clearing Agreement would set certain rights and obligations on MIAX, and for example would require MIAX, to report financial information to OCC, which would enable OCC to monitor for changes in MIAX’s financial condition. It also would require MIAX to maintain sufficient financial resources or arrangements with another DCM to mitigate the impact to the marketplace should MIAX become unavailable as a trading venue for its Cleared Contracts. ddrumheller on DSK120RN23PROD with NOTICES1 (B) Clearing Agency’s Statement on Burden on Competition Section 17A(b)(3)(I) of the Act 17 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 impose any burden on competition. The purpose of the proposed rule change is to adopt a Clearing Agreement between OCC and MIAX. The adoption of such an agreement would not affect Clearing Members’ access to OCC’s services, nor would it disadvantage or favor any particular user with respect to another user. As such, OCC believes that the proposed rule change would not impose any burden on competition. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 18 and paragraph (f) of Rule 19b–4 19 thereunder. 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. The proposal shall not take effect until all regulatory actions required with respect to the proposal are completed.20 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 U.S.C. 78q–1(b)(3)(I). VerDate Sep<11>2014 20:05 Jun 18, 2025 Jkt 265001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2025–11299 Filed 6–18–25; 8:45 am] Paper Comments [Release No. 34–103263; File No. SR–ISE– 2025–17] • 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–2025–008. 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 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 20 Notwithstanding its immediate effectiveness, implementation of this rule change will be delayed until this change is deemed certified under CFTC Regulation 40.6. 16 Id. 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 a.m. and 3 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/CompanyInformation/Documents-and-Archives/ By-Laws-and-Rules. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–OCC–2025–008 and should be submitted on or before July 11, 2025. • 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–2025–008 on the subject line. 19 17 CFR 240.17Ad–22(e)(20). 15 Id. 17 15 Written comments were not and are not intended to be solicited with respect to the proposed rule change, and none have been received. 18 15 13 Id. 14 17 (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Fees for Nasdaq 100 Index Options in Options 7, Section 5.A June 16, 2025. 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 June 2, 2025, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and 21 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\20JNN1.SGM 20JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 90, Number 117 (Friday, June 20, 2025)]
[Notices]
[Pages 26377-26380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-11299]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-103271; File No. SR-OCC-2025-008]


Self-Regulatory Organizations; the Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change by 
the Options Clearing Corporation Concerning the Adoption of a New 
Clearing Agreement That Would Permit OCC To Provide Clearing and 
Settlement Services to MIAX Subject to All Requisite Regulatory 
Approvals Being Received

June 16, 2025.
    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 June 4, 2025, The Options Clearing Corporation 
(``OCC'' or ``Corporation'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III below, which Items have been prepared 
primarily by OCC. OCC filed the proposed rule change pursuant to 
Section 19(b)(3)(A) \3\ of the Act and paragraph (f)(4) or Rule 19b-4 
\4\ thereunder, such that the proposed rule change was immediately 
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).
    \4\ 17 CFR 240.19b-4(f).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    This proposed rule change would update an agreement for Clearing 
and Settlement Services (``Clearing Agreement'') between OCC and MIAX 
Futures Exchange, LLC (``MIAX'') in connection with MIAX's status as a 
designated contract market (``DCM'') regulated by the Commodity Futures 
Trading Commission (``CFTC''). There are no proposed changes to OCC's 
By-Laws or Rules.
    OCC filed as Exhibit 5 to File No. SR-OCC-2025-008 the text of the 
proposed Clearing Agreement. All terms with initial capitalization that 
are not otherwise 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://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules.
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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
    This proposed rule is to adopt a new Clearing Agreement that would 
permit OCC to provide clearing and settlement services to MIAX subject 
to all requisite regulatory approvals being received. OCC proposes to 
provide clearance and settlement services for commodity futures 
(``Futures'') including commodity futures of an underlying interest 
that are a broad-based security index (``Broad-Based Index Futures''), 
together with options on Futures (``Futures Options''), collectively 
referred to within the Clearing Agreement as (``Cleared Contracts''), 
to MIAX pursuant to the terms set forth in the Clearing Agreement. MIAX 
already has a DCM designation from the CFTC.\6\ The terms of the 
proposed Clearing Agreement are based on the terms of the Agreement for 
Clearing and Settlement Services executed with Small Exchange, Inc. 
(``Small Agreement''), which was approved by the Commission.\7\ The 
Clearing Agreement is similar to the Small Agreement with several 
differences discussed in more detail below.
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    \6\ See https://www.cftc.gov/sites/default/files/stellent/groups/public/@otherif/documents/ifdocs/mgexsubpartcelection.pdf.
    \7\ See Securities Exchange Act Release No. 87774 (December 17, 
2019), 84 FR 70602 (December 23, 2019) (SR-OCC-2019-011).
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Clearing Agreement Proposal
    OCC proposes to provide the clearance and settlement services as 
described in the Clearing Agreement that includes new provisions 
designed to protect OCC and the holders of outstanding contracts listed 
on MIAX. These provisions would enable OCC to effectively manage the 
risks borne from a clearing relationship with a DCM such as the one OCC 
proposes to establish with MIAX. More specifically, the following 
provisions would be added:

[[Page 26378]]

     A new recital paragraph within the preamble, which 
acknowledges a separate ``Data Agreement'' related to the use and 
distribution of data and other information that would be entered into 
concurrently with the Clearing Agreement. This recital reflects the 
parties' intent that the provision of clearing services would be 
subject to the terms of both agreements in addition to OCC's By-Laws 
and Rules and any applicable regulatory requirements. Accordingly, both 
Section 6, ``Clearance of Transaction in Cleared Contracts,'' and 
Section 7, ``Acceptance and Rejection of Transactions in Cleared 
Contracts'', would also be revised to include statements to that 
effect.
     Section 16 ``Information Technology and Security,'' would 
require OCC and MIAX to share their respective contact information, and 
setup mutual notification requirements for cybersecurity incidents to 
assist with the resolution of information technology and security 
matters. This section would also mandate that MIAX maintain a 
comprehensive cybersecurity program as well as a written business 
continuity and disaster recovery program and meet certain connectivity 
requirements set by OCC, which may include connectivity through point 
to point and redundant connections. This term would align with standard 
practices and guidelines generally accepted in the industry to detail 
each party's obligations as a separate section within the Clearing 
Agreement.
     Section 17 ``Access to Books and Records of the 
Corporation,'' would provide MIAX with a limited right subject to 
certain security and confidentiality requirements to review OCC's books 
and records, as related to the provision of services envisioned by the 
Clearing Agreement. The substance of this term was moved from Schedule 
B to memorialize MIAX's right as a separate term within the Clearing 
Agreement, which aligns with current best practices.
     Section 18 ``Confidentiality,'' would introduce provisions 
that establish certain obligations between both OCC and MIAX in 
relation to certain information sharing and intellectual property 
rights, designed to align the Clearing Agreement in line with current 
best practices. More specifically, Section 18(a), would provide for the 
definition of ``Confidential Information'' that would include the type 
and scope of information considered material to each of the parties and 
over which the rights and obligations described in the remaining 
paragraphs of Section 18 would apply.
     Section 28 ``Marks,'' would provide that both MIAX and OCC 
would grant each other non-exclusive, royalty free license to use their 
name, tradename, logos and trademarks in connection with OCC's 
clearance services and MIAX's listing activities to align the Clearing 
Agreement in line with current best practices in relation to 
intellectual property rights.
    In addition to the above, the Clearing Agreement would include 
several other differences from the Small Agreement. Within Section 3 
``Selection of Underlying Interests; Classes and Series of Cleared 
Contracts,'' the changes would enhance the management of new product 
risks, introduce defined terms, and make conforming or clarifying 
changes that include:
     Paragraph 3(a)(i) with respect to Underlying Interests for 
Commodity Futures would be revised to reflect that in addition to 
existing conditions, OCC's prior written approval would be required for 
any underlying interest or Cleared Contract that would materially 
impact OCC's established risk profile or that would introduce new or 
unique financial risk, risk model or third-party risks (each a ``New 
Products Risk'').\8\ This Paragraph would also define the ``types'' of 
underlying interests as those interests in respect of Futures including 
broad-based security indices.
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    \8\ The term ``New Product Risk'' refers to the risk that arises 
from products that introduce novel or unique financial, risk model, 
or third-party risks.
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     Paragraph 3(a)(ii) with respect to Underlying Interests 
for Futures Options would be revised to reflect that in addition to 
existing conditions, OCC's prior written approval would be required for 
any Futures Options or underlying Futures contracts that present New 
Product Risk, and would also require that the underlying Futures 
contract be open for trading for a reasonable period of time specified 
by OCC prior to the date and time that the underlying Futures Options 
is opened for trading.
     Paragraph 3(a)(iii) would be added that specifies any 
extra steps that OCC would carry out under circumstances when OCC may 
refuse to clear and settle Cleared Contracts that present New Product 
Risk to OCC, including notifications to MIAX, undertaking commercially 
reasonable efforts, including in consultation with MIAX, to address the 
New Product Risk, and notification to MIAX when the issues have been 
satisfactorily addressed so that OC may approve the new Cleared 
Contract.
     Paragraph 3(a)(iv) would be added to detail any extra 
steps MIAX would carry out under circumstances when OCC may request 
additional supporting documentation. This Paragraph would also provide 
OCC with the discretion to defer the trading of new Cleared Contracts 
and specify the circumstances under which it may not be able to clear 
such contracts.
     Paragraph 3(b) ``Nomenclature,'' would be removed and the 
remaining paragraphs renumbered. Renumbered Paragraph 3(b) ``Procedures 
for Selection of Underlying Interests,'' would be modified to clarify 
that any new product proposal by MIAX would also be subject to the 
requirement of Paragraph 3(a).
    Within Section 5 ``Comparison of Transactions in Cleared Contracts; 
Settlement Prices,'' changes would include the following:
     Paragraph 5(b) would be revised to include reference to 
the Data Agreement between OCC and MIAX, and an explicit statement on 
MIAX's obligation to cooperate at the request of OCC on determining 
settlement prices.
     Paragraph 5(d) would be added to specify certain 
information sharing obligations between OCC and MIAX further detailed 
in Schedule B of the Clearing Agreement.
    The parties would also revise Section 10 of the Clearing Agreement 
in relation to margin obligations of Clearing Members for Cleared 
trades in the same account, to include an additional step for risk 
management review before the provision of any reductions in margin. 
This additional step provides OCC with another layer of risk management 
review of the exposure presented by a Clearing Member before the 
application of any reductions in margin obligation, thus enhancing 
OCC's ability to manage its risk and margin resources appropriately. In 
addition, Section 12 would be renamed to ``Reporting Obligations by 
Market,'' and substantially revised and expanded to organize and 
memorialize MIAX's reporting obligations within the Clearing Agreement 
to include:
     Paragraph 12(a) would be added to provide for ongoing 
information sharing by MIAX to OCC, including providing annual and 
quarterly financials, and the reporting of any losses. The paragraph 
would also establish the right for OCC to examine MIAX's books and 
records and request other information when needed.
     Paragraph 12(b) would be added to specify additional 
reporting obligations of certain material events by MIAX, such as 
changes in good standing in the jurisdiction of incorporation, any 
delisting of Cleared Contracts, any

[[Page 26379]]

material changes to risk controls, or any regulatory or other material 
changes.
    In addition, Section 13 ``Fees,'' of the Clearing Agreement, would 
be reorganized to clarify that fee structures for the services OCC 
performs would be established by OCC's By-Laws and Rules, as well as 
filings with the SEC or CFTC, and obligate MIAX to pay fees consistent 
with such established provisions. In addition, Section 15 
``Indemnification,'' would be reorganized by renumbering Paragraph 
15(c) to 15(b)(iii). Paragraph 15(b)(iii) would then be revised to 
expand the intellectual property indemnity to include allegations in 
circumstances when MIAX would have no right to use, reference, or 
distribute the underlying interest. The remaining paragraphs 15(d) to 
15(e) would then be renumbered chronologically in alphabetical order as 
15(c) to 15(d). Other changes to the Clearing Agreement include the 
renumbering of Section 16 ``Notices,'' to Section 29 and Section 17 
``Miscellaneous,'' to Section 27. Section 29 would remain substantially 
unchanged, while Section 27 would be substantially reorganized and 
enhanced to add new standard terms and provisions used in other OCC 
agreements to conform with best practices.\9\ The added provisions 
would in general clarify how the Clearing Agreement should be 
interpreted such as, for example, paragraph (a) that specifies that the 
Clearing Agreement should be construed in accordance with the governing 
laws of Illinois, or paragraphs (c) that describes the rights and 
obligations of the parties as related to the assignment of the Clearing 
Agreement, or paragraph (e) that makes it clear that the headings 
contained within the Clearing Agreement are for the purposes of 
reference only and are not meant to affect the meaning of the sections, 
among others.
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    \9\ OCC is committed to updating the interpretative provisions 
of its agreements generally to bring them in line with current best 
market practices.
---------------------------------------------------------------------------

    As described above, due to the addition of new sections and other 
modifications Sections 18 to 25 would be renumbered as Sections 19 to 
26 respectively. The Clearing Agreement would then be further amended 
and include such changes as:
     Section 19, titled ``Breach of Agreement--Termination,'' 
would be retitled as ``Suspension; Breach of Agreement; Termination.'' 
In addition, Paragraph 19(a) ``Suspension,'' would be added to protect 
OCC and provides it with the right to suspend any of its obligations to 
MIAX in order to comply with any waiver or suspension of OCC's By-Laws, 
Rules policies and procedures, or any other rules issued by OCC, or in 
case of a material breach of the Clearing Agreement by MIAX, or under 
circumstance where OCC believes that provision of services would result 
in a violation of the Commodity Exchange Act. The remaining paragraphs 
in this section would be renumbered chronologically in alphabetical 
order.
     Section 20, ``Survival of Obligations,'' would introduce a 
change that preserves the parties' mutual obligations of 
confidentiality upon the termination of the Clearing Agreement.
     Section 21, ``Dispute Resolution,'' would be modified to 
replace all references to ``Chief Executive Officer'' with ``senior 
management'' to provide both parties' with the ability to leverage 
other senior management personnel under such circumstances to quickly 
resolve disputes.
     Section 23, ``System Redundancy, Disaster Recovery,'' 
would add a new term to the Clearing Agreement that memorializes OCC's 
existing obligation to maintain a written business continuity and 
disaster recovery program with annual testing for recovery point 
objectives and real-time objectives.
     Section 26, ``Nonexclusive Agreement,'' would be revised 
to clearly assert that OCC services would be provided on a non-
exclusive basis and that the Clearing Agreement would not prevent OCC 
from providing its services to any other parties both during and after 
termination.
    With respect to Schedule B of the Clearing Agreement, certain terms 
of the schedule would be modified to include the following changes:
     Paragraph (1)(A) related to the sharing of ``Information 
provided each trading day,'' from OCC to MIAX, would be revised to 
include a limitation on the use of the Data Distribution Service 
(``DDS'') for Authorized Purposes only and a prohibition on the 
redistribution of DDS data to any third party, absent OCC's prior 
written consent.
     Paragraph (1)(B) related to the sharing of ``Information 
provided on an occurrence basis,'' from OCC to MIAX, would be revised 
to simplify OCC's notification obligations to MIAX to only include the 
default of any Clearing Member, or the suspension, termination, ceasing 
to act for, or liquidation of any Clearing Member by OCC if also a 
member of MIAX.
     Paragraph (2)(A) related to the sharing of ``Information 
regarding Clearing Members,'' from MIAX to OCC, would be revised to 
remove the obligation to determine whether to report a Clearing Member 
that is not in compliance with OCC's financial responsibility 
standards, since that obligation would naturally rest with OCC.
    In addition to the foregoing, various other minor and 
administrative changes have been made throughout the document 
including, but not limited to, updated references to the names of the 
parties, clean-up of outdated terms and typographical errors, and other 
clarifying or conforming revisions.
(2) Statutory Basis
    OCC believes the proposed rule change is consistent with Section 
17A of the Exchange Act \10\ and Rule 17Ad-22(e)(20) \11\ thereunder. 
Section 17A(b)(3)(F) of the Act \12\ 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, 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, and, in 
general, to protect investors and the public interest. The proposed 
rule change is designed to promote the prompt and accurate clearance 
and settlement of derivatives contracts traded on MIAX by providing 
that such Cleared Contracts will be cleared through OCC's existing 
clearance and settlement processes for cleared contracts, which have 
functioned efficiently for many years with regard to other markets for 
which OCC provides clearance and settlement services. Similarly, OCC 
believes that the proposed rule change is designed to assure the 
safeguarding of securities and funds which are in the custody or 
control of the clearing agency by bringing Cleared Contracts traded on 
MIAX and funds associated with those contracts within the scope of 
OCC's existing custody and control arrangements, which have effectively 
served OCC's Clearing Members and their customers for many years. 
Finally, OCC believes the proposed rule change is designed to protect 
investors and the public interest. By providing that Cleared Contracts 
traded on MIAX and cleared by OCC are risk managed under OCC's risk 
management framework, which is designed to offer protection to 
customers and other market participants in the event of a Clearing 
Member default, OCC believes the proposed rule change contributes to 
the protection of investors and the public interest. For these reasons, 
the proposed changes to OCC's rules are reasonably designed to

[[Page 26380]]

promote the prompt and accurate clearance and settlement of securities 
transactions, 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, and, in general, to protect investors and the public 
interest in accordance with Section 17A(b)(3)(F) of the Act.\13\
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    \10\ 15 U.S.C. 78q-1.
    \11\ 17 CFR 240.17Ad-22(e)(20).
    \12\ 15 U.S.C. 78q-1(b)(3)(F).
    \13\ Id.
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    Rule 17Ad-22(e)(20) \14\ requires that a covered clearing agency 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to identify, monitor, and manage risks 
related to any link the covered clearing agency establishes with one or 
more other clearing agencies, financial market utilities, or trading 
markets.\15\ OCC believes that the proposed rule change is consistent 
with Rule 17Ad-22(e)(20) \16\ because the proposed Clearing Agreement 
is designed to help OCC identify, monitor, and manage the risks 
associated with providing clearance and settlement services for MIAX, 
which is a trading market registered as a DCO with the CFTC. The 
Clearing Agreement would set certain rights and obligations on MIAX, 
and for example would require MIAX, to report financial information to 
OCC, which would enable OCC to monitor for changes in MIAX's financial 
condition. It also would require MIAX to maintain sufficient financial 
resources or arrangements with another DCM to mitigate the impact to 
the marketplace should MIAX become unavailable as a trading venue for 
its Cleared Contracts.
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    \14\ 17 CFR 240.17Ad-22(e)(20).
    \15\ Id.
    \16\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act \17\ 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 impose any burden on 
competition. The purpose of the proposed rule change is to adopt a 
Clearing Agreement between OCC and MIAX. The adoption of such an 
agreement would not affect Clearing Members' access to OCC's services, 
nor would it disadvantage or favor any particular user with respect to 
another user. As such, OCC believes that the proposed rule change would 
not impose any burden on competition.
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    \17\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \18\ and paragraph (f) of Rule 19b-4 \19\ 
thereunder. 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
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    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.\20\
---------------------------------------------------------------------------

    \20\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC Regulation 40.6.
---------------------------------------------------------------------------

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-2025-008 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-2025-008. 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 
a.m. and 3 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/Company-Information/Documents-and-Archives/By-Laws-and-Rules. Do not include personal identifiable 
information in submissions; you should submit only information that you 
wish to make available publicly. We may redact in part or withhold 
entirely from publication submitted material that is obscene or subject 
to copyright protection.

All submissions should refer to file number SR-OCC-2025-008 and should 
be submitted on or before July 11, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-11299 Filed 6-18-25; 8:45 am]
BILLING CODE 8011-01-P

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