80 FR 42139 - Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of Proposed Rule Change Concerning the Implementation of New Risk Models in Order To Support the Clearance and Settlement of Asian-Style Flexibly Structured Options and Flexibly Structured Cliquet Options
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 136 (July 16, 2015)
Federal Register Volume 80, Issue 136 (July 16, 2015)
| Page Range | 42139-42141 | |
| FR Document | 2015-17400 |
[Federal Register Volume 80, Number 136 (Thursday, July 16, 2015)] [Notices] [Pages 42139-42141] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-17400] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75427; File No. SR-OCC-2015-010] Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of Proposed Rule Change Concerning the Implementation of New Risk Models in Order To Support the Clearance and Settlement of Asian-Style Flexibly Structured Options and Flexibly Structured Cliquet Options July 10, 2015. I. Introduction On May 1, 2015, The Options Clearing Corporation (``OCC'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change SR-OCC-2015-010 pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The proposed rule change was published for comment in the Federal Register on May 22, 2015.\3\ The Commission received no comment letters regarding the proposed change. For the reasons discussed below, the Commission is granting approval of the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ Securities Exchange Act Release No. 34-74966 (May 14, 2015), 80 FR 29784 (May 22, 2015) (SR-OCC-2015-010). The proposed rule change was published in the Federal Register on May 22, 2015, but was deemed published on May 1, 2015, pursuant section 19b(2)(E) of the Act. --------------------------------------------------------------------------- II. Description OCC is proposing to implement new risk models to support the clearance and settlement of Asian-style and Cliquet flexibly structured options \4\ (``Asian Options'' and ``Cliquet Options,'' respectively). OCC already clears other flexibly structured options (``Current Index Flex Options'') \5\ on various securities indices \6\ and risk manages clearing member positions (i.e., computes margin requirements) through its STANS methodology.\7\ --------------------------------------------------------------------------- \4\ Flexibly structured options permit the buyer and seller to negotiate and customize certain variable terms pursuant to exchange rules. See OCC By-Laws Article 1, section 1(F)(5). For example, parties may select from a variety of underlying indices, pick a strike price and expiration date as well as pick the exercise-style of the option--i.e., American or European exercise. Options with an American style exercise may be exercised at any time prior to, and including, expiration. Options with a European style exercise may only be exercised at expiration. \5\ The exercise settlement amount for Current Index Flex Options is determined based entirely on the strike price of a given option and the current underlying interest value on the day of exercise, in the case of American style Current Index Flex Options, or final day of trading, in the case of European style Current Index Flex Options. \6\ OCC clears Current Index Flex Options on the S&P 500 Index, S&P 100 Index, Nasdaq 100 Index and Russell 2000 Index, among other underlying indexes. \7\ See http://www.theocc.com/risk-management/margins/ for a description of OCC's margin methodology. See also OCC Rule 601. --------------------------------------------------------------------------- Asian Options use an ``Asian-style'' methodology for determining the exercise settlement amount of an option, which is the difference between the aggregate exercise price and the aggregate current underlying interest value, which is based on the average of twelve monthly price ``observations.'' OCC states that traders of Asian Options will select an observation date as well as an expiration date.\8\ --------------------------------------------------------------------------- \8\ OCC provides that, since Expiration dates must be within 50 to 53 calendar weeks from the date of listing, all Asian Options that it will clear will have a term of approximately one year. OCC explains that if the expiration date precedes the observation date in the final month, then the final ``observation'' will be the current underlying interest value on expiration date and not the observation date, and if one of the observation dates falls on a weekend or holiday, the value used will be from the previous business day. --------------------------------------------------------------------------- Cliquet Options use a cliquet \9\ method for determining the exercise settlement amount of the option, which is the greater of: (i) Zero (i.e., the underlying index had negative returns during the option's tenor); and, (ii) the difference between the aggregate exercise price and the aggregate current underlying interest value, which is based on the sum of the Capped Returns of the underlying index on 12 predetermined ``observation dates'' \10\ (each an ``Observation Date,'' and the computed value an ``Observation'').\11\ --------------------------------------------------------------------------- \9\ Cliquet style settlement provides for payout based on the (positive) sum of ``capped'' returns of an index on pre-determined dates over a specified period of time. \10\ OCC states that the parties to a Cliquet Option will designate a set of Observation Dates for each contract as well as an expiration date. According to OCC, Observation Dates will generally be a given date each month for the twelve months preceding the expiration date, with the last Observation Date being the expiration date. If the Observation Date chosen by the parties to a Cliquet Option precedes the expiration date then OCC states that there will be two Observation Dates in the final month (i.e., the expiration date will always be an Observation Date) and ten other Observation Dates; one date in each of the ten months preceding the expiration month that will coincide with the Observation Date that was chosen by the parties to a Cliquet Option (not the expiration date). OCC explains that expiration dates must be within 50 to 53 calendar weeks from the date of listing, and that if one of the Observation Dates falls on a weekend or holiday, the previous business day will be deemed to be the Observation Date. \11\ OCC explains that, on each Observation Date, the exchange on which the Cliquet Options is listed will determine the actual return of the underlying index from observation period-to- observation period, which will be compared to the observation cap, an amount designated the parties to the Cliquet Option. OCC further states that the Capped Return for a given Observation Date will be the lesser of the actual observation period-to-observation period return or the observation cap. For example, if the actual return of the underlying index was 1.75% and the designated capped return for a Cliquet Option was 2%, the 1.75% value will be included (and not the 2%) as the value for the Observation Date. Using this same example, if the actual return of the underlying index was 3.30%, the 2% value will be included (and not the 3.30%) as the value for the Observation Date. --------------------------------------------------------------------------- [[Page 42140]] OCC states that both Asian Options and Cliquet Options will be only available in European style exercises, and will be subject to OCC's expiration exercise procedures set forth in OCC Rule 805, as supplemented by OCC Rule 1804. In addition, OCC represents that it will initially clear Asian Options and Cliquet Options on the S&P 500 Index, Nasdaq 100 Index, Russell 2000 Index and Dow Jones Industrial Average Index and it may clear Asian Options and Cliquet Options on other indices in the future. New Risk Models As noted above, OCC will risk manage clearing member positions in Asian Options and Cliquet Options through its STANS methodology. Due to certain features of Asian Options and Cliquet Options described below, OCC proposed adding new pricing models into its STANS methodology so that OCC may compute appropriate margin requirements for clearing members holding positions in Asian Options and Cliquet Options.\12\ --------------------------------------------------------------------------- \12\ OCC explains that it currently computes the price of Current Index Flex Options on indices through standard pricing models (i.e., the Black-Scholes pricing model) that consider: (i) The value of the option's underlying index, (ii) the implied volatility of an option's underlying index, (iii) time until expiration, (iv) risk-free interest rate, and (v) the strike price of the option. --------------------------------------------------------------------------- Asian Options Asian Options differ from the Current Index Flex Options currently cleared by OCC due to the option's exercise settlement amount being a function of the arithmetic average of the underlying index on certain observation dates, rather than the value of the underlying index of a given option on the exercise date or expiration date. Based on this phenomenon, OCC proposed to add a new pricing model for Asian Options that will be a shifted lognormal model \13\ to accommodate the fact that Asian Options will have an arithmetic average value of the underlying index within the final exercise settlement amount calculation. OCC states that the shifted lognormal model will account for the fact that the current underlying interest value on the expiration date of an Asian Option is based on an arithmetic average of prices, and not the value of the underlying index on the option's expiration date, which introduces non-normality into the probability distribution of contract payoffs. --------------------------------------------------------------------------- \13\ See Andreasen, J., ``The pricing of discretely sampled Asian and lookback options: a change of numeraire approach,'' Journal of Computational Finance, September 2000. See also Brigo, D., Mercurio, F., Rapidsarda, F., Scotti, R., ``Approximated moment- matching dynamics for basket-options simulation,'' EFMA Lugano meetings, November 2001. See also Haug, E.G. and Margrabe, W., ``Asian Pyramid Power,'' Wilmott Magazine, March 2003. --------------------------------------------------------------------------- With respect to the Asian Option shifted lognormal pricing model, OCC proposed to utilize a modified Black-Scholes pricing model with a shift parameter that employs the first three statistical ``moments.'' In accordance with such model, OCC states that the first moment is the expected value of an Asian Option's value based on the option's implied volatility, the second moment accounts for the statistical volatility of the option's value, and the third moment accounts for the statistical skewness of the option's value. OCC represents that the moments are intended to account for variability in the arithmetic average value of an Asian Option's underlying index. OCC states that the shifted lognormal distribution (i.e., the lognormal probability distribution derived using the first through third moments above) is then priced through the standard Black-Scholes equation.\14\ OCC further states that the shift parameters are then adjusted out of the Black-Scholes price in order to derive a price for a given Asian Option that is appropriate to be utilized within the STANS methodology for the purposes of computing clearing member margin on Asian Options. --------------------------------------------------------------------------- \14\ In connection with using the standard Black-Sholes equation, OCC will also compute each of the three moments using a random shifted lognormal variable. --------------------------------------------------------------------------- Cliquet Options Similar to Asian Options, the price of a given Cliquet Options is based on monthly Observations of an underlying index. OCC states that while a shifted lognormal model is an appropriate pricing model for Asian Options, the capped return feature of Cliquet Options makes the numerical solution to the Black-Scholes Partial Differential Equation \15\ the appropriate pricing model for Cliquet Options.\16\ OCC therefore proposed to add a Cliquet Option pricing model to its STANS methodology that will compute the numerical solution to the Black- Scholes Partial Differential Equation. OCC represents that such a solution will provide OCC with the price of a given Cliquet Option that will be utilized within the STANS methodology for the purposes of computing clearing member margin requirements. --------------------------------------------------------------------------- \15\ OCC represents that the differential equation model incorporates boundary conditions, which are necessary in order to solve differential equations, to ensure that the value of a given Cliquet Option is consistent throughout the equation. \16\ See Andreasen, J., ``The pricing of discretely sampled Asian and lookback options: a change of numeraire approach.'' Journal of Computational Finance (2000). See also Bernard, C., & Li, W. V., ``Pricing and Hedging of Cliquet Options and Locally Capped Contracts.'' SIAM Journal on Financial Mathematics, 353-371 (2013). See also Hagan, P. S., Kumar, D., & Lesniewski, A. S., ``Managing Smile Risk.'' Wilmott Magazine, 84-108 (2002). See also Hull, John C., ``Options Futures and other Derivatives.'' McGraw Hill (2000). See also Kjaer, M., ``Fast pricing of cliquet options with global floor.'' Journal of Derivatives, 14(2), 47-60 (2006). --------------------------------------------------------------------------- With respect to the pricing of a given Cliquet Option, and based on the capped return feature of Cliquet Options, OCC states that it will identify the known implied volatility skew of standard options with the same underlying interest, a similar tenor and a similar amount of forward moneyness \17\ of the given Cliquet Option. OCC represents that its calculation of forward moneyness will include an adjustment to account for any known Observations of the underlying interest for a given Cliquet Option. OCC further states that the known implied volatility skew will subsequently be utilized within the Black-Scholes Partial Differential Equation so that OCC will be able to derive the price of a given Cliquet Option, which will then be utilized within the STANS methodology for purposes of computing clearing member margin requirements on a Cliquet Options. --------------------------------------------------------------------------- \17\ OCC describes forward moneyness as the ratio of the strike to the current value of the implied forward for the index. --------------------------------------------------------------------------- III. Discussion and Commission Findings Section 19(b)(2)(C) of the Act \18\ directs the Commission to approve a proposed rule change of a self-regulatory organization if the Commission finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such self-regulatory organization. Section 17A(b)(3)(F) of the Act \19\ requires, among other things, that the rules of a clearing agency are 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. In addition, [[Page 42141]] Rule 17Ad-22(b)(2) \20\ requires registered clearing agencies, among other things, to establish, implement, maintain, and enforce written policies and procedures reasonably designed to use margin requirements to limit its credit exposures to participants under normal market conditions and use risk-based models and parameters to set margin requirements. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78s(b)(2)(C). \19\ 15 U.S.C. 78q-1(b)(3)(F). \20\ 17 CFR 240.17Ad-22(b)(2). --------------------------------------------------------------------------- The Commission finds that the proposed rule change is consistent with Section 17A of the Act \21\ and the rules thereunder applicable to OCC. The proposal will integrate new pricing models into the STANS methodology to accommodate the manner in which the exercise settlement amount for Asian Options and Cliquet Options is determined. The Commission believes these changes are designed to enable OCC to accurately compute margin requirements for Asian Option and Cliquet Option positions through its STANS methodology, therefore reducing the risk that clearing member margin assets would be insufficient should OCC need to use such assets to close-out the positions of a defaulted clearing member. The Commission therefore believes that the proposed rule change is reasonably designed to limit OCC's credit exposures to participants under normal market conditions and use risk-based models and parameters to set margin requirements, consistent with the requirements of Rule 17Ad-22(b)(2).\22\ Accordingly, the Commission believes that the proposed rule change is designed to assure the safeguarding of securities and funds in OCC's custody or control or for which it is responsible, consistent with section 17A(b)(3)(F) of the Act.\23\ --------------------------------------------------------------------------- \21\ 15 U.S.C. 78q-1. \22\ 17 CFR 240.17Ad-22(b)(2). \23\ 15 U.S.C. 78q-1(b)(3)(F). --------------------------------------------------------------------------- IV. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of section 17A of the Act \24\ and the rules and regulations thereunder. --------------------------------------------------------------------------- \24\ 15 U.S.C. 78q-1. --------------------------------------------------------------------------- It is therefore ordered, pursuant to section 19(b)(2) of the Act,\25\ that the proposed rule change (File No. SR-OCC-2015-010) be, and hereby is, approved.\26\ --------------------------------------------------------------------------- \25\ 15 U.S.C. 78s(b)(2). \26\ In approving the proposed rule change, the Commission considered the proposal's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\27\ Jill M. Peterson, Assistant Secretary. --------------------------------------------------------------------------- \27\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2015-17400 Filed 7-15-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 136 / Thursday, July 16, 2015 / Notices 42139
Paper Comments SECURITIES AND EXCHANGE clearing member positions (i.e.,
COMMISSION computes margin requirements) through
• Send paper comments in triplicate its STANS methodology.7
to Brent J. Fields, Secretary, Securities [Release No. 34–75427; File No. SR–OCC– Asian Options use an ‘‘Asian-style’’
and Exchange Commission, 100 F Street 2015–010]
methodology for determining the
NE., Washington, DC 20549–1090. Self-Regulatory Organizations; The exercise settlement amount of an option,
Options Clearing Corporation; Order which is the difference between the
All submissions should refer to File
Granting Approval of Proposed Rule aggregate exercise price and the
Number SR–NASDAQ–2015–070. This aggregate current underlying interest
file number should be included on the Change Concerning the
Implementation of New Risk Models in value, which is based on the average of
subject line if email is used. To help the twelve monthly price ‘‘observations.’’
Commission process and review your Order To Support the Clearance and
Settlement of Asian-Style Flexibly OCC states that traders of Asian Options
comments more efficiently, please use will select an observation date as well
only one method. The Commission will Structured Options and Flexibly
Structured Cliquet Options as an expiration date.8
post all comments on the Commission’s Cliquet Options use a cliquet 9
Internet Web site (http://www.sec.gov/ July 10, 2015. method for determining the exercise
rules/sro.shtml). Copies of the settlement amount of the option, which
I. Introduction is the greater of: (i) Zero (i.e., the
submission, all subsequent
amendments, all written statements On May 1, 2015, The Options Clearing underlying index had negative returns
with respect to the proposed rule Corporation (‘‘OCC’’) filed with the during the option’s tenor); and, (ii) the
change that are filed with the Securities and Exchange Commission difference between the aggregate
Commission, and all written (‘‘Commission’’) the proposed rule exercise price and the aggregate current
communications relating to the change SR–OCC–2015–010 pursuant to underlying interest value, which is
proposed rule change between the section 19(b)(1) of the Securities based on the sum of the Capped Returns
Exchange Act of 1934 (‘‘Act’’) 1 and Rule of the underlying index on 12
Commission and any person, other than
19b–4 thereunder.2 The proposed rule predetermined ‘‘observation dates’’ 10
those that may be withheld from the
change was published for comment in (each an ‘‘Observation Date,’’ and the
public in accordance with the
the Federal Register on May 22, 2015.3 computed value an ‘‘Observation’’).11
provisions of 5 U.S.C. 552, will be The Commission received no comment
available for Web site viewing and letters regarding the proposed change. and Russell 2000 Index, among other underlying
printing in the Commission’s Public For the reasons discussed below, the indexes.
Reference Room, 100 F Street NE., Commission is granting approval of the
7 See http://www.theocc.com/risk-management/
Washington, DC 20549, on official margins/ for a description of OCC’s margin
proposed rule change. methodology. See also OCC Rule 601.
business days between the hours of 8 OCC provides that, since Expiration dates must
10:00 a.m. and 3:00 p.m. Copies of the II. Description be within 50 to 53 calendar weeks from the date of
filing also will be available for OCC is proposing to implement new listing, all Asian Options that it will clear will have
risk models to support the clearance and a term of approximately one year. OCC explains
inspection and copying at the principal that if the expiration date precedes the observation
office of the Exchange. All comments settlement of Asian-style and Cliquet date in the final month, then the final ‘‘observation’’
received will be posted without change; flexibly structured options 4 (‘‘Asian will be the current underlying interest value on
Options’’ and ‘‘Cliquet Options,’’ expiration date and not the observation date, and
the Commission does not edit personal if one of the observation dates falls on a weekend
identifying information from respectively). OCC already clears other or holiday, the value used will be from the previous
submissions. You should submit only flexibly structured options (‘‘Current business day.
information that you wish to make Index Flex Options’’) 5 on various 9 Cliquet style settlement provides for payout
available publicly. All submissions securities indices 6 and risk manages based on the (positive) sum of ‘‘capped’’ returns of
an index on pre-determined dates over a specified
should refer to File Number SR– 1 15
period of time.
U.S.C. 78s(b)(1).
NASDAQ–2015–070 and should be 2 17
CFR 240.19b–4.
10 OCC states that the parties to a Cliquet Option
will designate a set of Observation Dates for each
submitted on or before August 6, 2015. 3 Securities Exchange Act Release No. 34–74966
contract as well as an expiration date. According to
(May 14, 2015), 80 FR 29784 (May 22, 2015) (SR– OCC, Observation Dates will generally be a given
For the Commission, by the Division of
OCC–2015–010). The proposed rule change was date each month for the twelve months preceding
Trading and Markets, pursuant to delegated published in the Federal Register on May 22, 2015, the expiration date, with the last Observation Date
authority.16 but was deemed published on May 1, 2015, being the expiration date. If the Observation Date
Jill M. Peterson, pursuant section 19b(2)(E) of the Act. chosen by the parties to a Cliquet Option precedes
4 Flexibly structured options permit the buyer
the expiration date then OCC states that there will
Assistant Secretary. and seller to negotiate and customize certain be two Observation Dates in the final month (i.e.,
[FR Doc. 2015–17396 Filed 7–15–15; 8:45 am] variable terms pursuant to exchange rules. See OCC the expiration date will always be an Observation
By-Laws Article 1, section 1(F)(5). For example, Date) and ten other Observation Dates; one date in
BILLING CODE 8011–01–P
parties may select from a variety of underlying each of the ten months preceding the expiration
indices, pick a strike price and expiration date as month that will coincide with the Observation Date
well as pick the exercise-style of the option—i.e., that was chosen by the parties to a Cliquet Option
American or European exercise. Options with an (not the expiration date). OCC explains that
American style exercise may be exercised at any expiration dates must be within 50 to 53 calendar
time prior to, and including, expiration. Options weeks from the date of listing, and that if one of
with a European style exercise may only be the Observation Dates falls on a weekend or
exercised at expiration. holiday, the previous business day will be deemed
5 The exercise settlement amount for Current to be the Observation Date.
tkelley on DSK3SPTVN1PROD with NOTICES
Index Flex Options is determined based entirely on 11 OCC explains that, on each Observation Date,
the strike price of a given option and the current the exchange on which the Cliquet Options is listed
underlying interest value on the day of exercise, in will determine the actual return of the underlying
the case of American style Current Index Flex index from observation period-to-observation
Options, or final day of trading, in the case of period, which will be compared to the observation
European style Current Index Flex Options. cap, an amount designated the parties to the Cliquet
6 OCC clears Current Index Flex Options on the Option. OCC further states that the Capped Return
16 17 CFR 200.30–3(a)(12). S&P 500 Index, S&P 100 Index, Nasdaq 100 Index Continued
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![Federal Register / Vol. 80, No. 136 / Thursday, July 16, 2015 / Notices 42141
Rule 17Ad–22(b)(2) 20 requires For the Commission, by the Division of II. Self-Regulatory Organization’s
registered clearing agencies, among Trading and Markets, pursuant to delegated Statement of the Purpose of, and
other things, to establish, implement, authority.27 Statutory Basis for, the Proposed Rule
maintain, and enforce written policies Jill M. Peterson, Change
and procedures reasonably designed to Assistant Secretary. In its filing with the Commission, the
use margin requirements to limit its [FR Doc. 2015–17400 Filed 7–15–15; 8:45 am] Exchange included statements
credit exposures to participants under concerning the purpose of and basis for
BILLING CODE 8011–01–P
normal market conditions and use risk- the proposed rule change and discussed
based models and parameters to set any comments it received on the
margin requirements. SECURITIES AND EXCHANGE proposed rule change. The text of these
The Commission finds that the COMMISSION statements may be examined at the
proposed rule change is consistent with places specified in Item IV below. The
Section 17A of the Act 21 and the rules Exchange has prepared summaries, set
[Release No. 34–75422; File No. SR–BATS–
thereunder applicable to OCC. The forth in sections A, B, and C below, of
2015–52]
proposal will integrate new pricing the most significant parts of such
models into the STANS methodology to Self-Regulatory Organizations; BATS statements.
accommodate the manner in which the Exchange, Inc.; Notice of Filing and
exercise settlement amount for Asian A. Self-Regulatory Organization’s
Immediate Effectiveness of a Proposed Statement of the Purpose of, and
Options and Cliquet Options is
Rule Change Related to Fees for Use Statutory Basis for, the Proposed Rule
determined. The Commission believes
of BATS Exchange, Inc. Change
these changes are designed to enable
OCC to accurately compute margin July 10, 2015. 1. Purpose
requirements for Asian Option and
Pursuant to section 19(b)(1) of the The Exchange proposes to modify the
Cliquet Option positions through its
Securities Exchange Act of 1934 (the ‘‘Options Pricing’’ section of its fee
STANS methodology, therefore
‘‘Act’’),1 and Rule 19b–4 thereunder,2 schedule, effective immediately, in
reducing the risk that clearing member
notice is hereby given that on July 1, order to modify pricing charged by the
margin assets would be insufficient
2015, BATS Exchange, Inc. (the Exchange’s options platform (‘‘BATS
should OCC need to use such assets to
‘‘Exchange’’ or ‘‘BATS’’) filed with the Options’’) including: (i) Amend footnote
close-out the positions of a defaulted
Securities and Exchange Commission 2 to remove Professional 6 orders from
clearing member. The Commission
(‘‘Commission’’) the proposed rule the Professional and Firm Penny Pilot
therefore believes that the proposed rule
change as described in Items I, II and III Add Volume Tiers related to the pricing
change is reasonably designed to limit
below, which Items have been prepared for Professional and Firm 7 orders that
OCC’s credit exposures to participants
by the Exchange. The Exchange has add liquidity in Penny Pilot Securities; 8
under normal market conditions and
designated the proposed rule change as (ii) further amend footnote 2 to change
use risk-based models and parameters to
one establishing or changing a member the standards for meeting Tiers 1 and 2,
set margin requirements, consistent
due, fee, or other charge imposed by the changing the rebate for Tier 2, and
with the requirements of Rule 17Ad–
Exchange under section 19(b)(3)(A)(ii) adding a new Tier 3; (iii) amend the
22(b)(2).22 Accordingly, the Commission
of the Act 3 and Rule 19b–4(f)(2) standard rebate associated with Fee
believes that the proposed rule change
Code PF for Firm orders that add
is designed to assure the safeguarding of thereunder,4 which renders the
liquidity in Penny Pilot Securities; (iv)
securities and funds in OCC’s custody proposed rule change effective upon
create a new Fee Code NF for Firm
or control or for which it is responsible, filing with the Commission. The
orders that add liquidity in non-Penny
consistent with section 17A(b)(3)(F) of Commission is publishing this notice to
Pilot Securities; (v) create a new
the Act.23 solicit comments on the proposed rule
footnote 8 titled ‘‘Firm Non-Penny Pilot
change from interested persons.
IV. Conclusion Add Volume Tiers;’’ (vi) add a new Tier
I. Self-Regulatory Organization’s 3 to the Market Maker Penny Pilot Add
On the basis of the foregoing, the
Statement of the Terms of Substance of Volume Tiers; (vii) amend the fees that
Commission finds that the proposal is
the Proposed Rule Change the Exchange charges for orders routed
consistent with the requirements of the
by the Exchange for execution at other
Act and in particular with the The Exchange filed a proposal to venues, including those associated with
requirements of section 17A of the amend its fees and rebates applicable to Fee Codes 2C, CC, CF, HF, and OF; and
Act 24 and the rules and regulations Members 5 of the Exchange pursuant to (viii) amend the Options Physical
thereunder. Rule 15.1(a) and (c). Connection Fees for both 1G and 10G
It is therefore ordered, pursuant to physical ports.
section 19(b)(2) of the Act,25 that the The text of the proposed rule change
proposed rule change (File No. SR– is available at the Exchange’s Web site Professional Orders in Penny Pilot
OCC–2015–010) be, and hereby is, at www.batstrading.com, at the Securities
approved.26 principal office of the Exchange, and at
The Exchange proposes to remove
the Commission’s Public Reference
Professional orders from inclusion in
20 17 CFR 240.17Ad–22(b)(2).
Room. the Professional and Firm Penny Pilot
21 15 U.S.C. 78q–1.
tkelley on DSK3SPTVN1PROD with NOTICES
22 17 CFR 240.17Ad–22(b)(2). 27 17
CFR 200.30–3(a)(12). 6 ‘‘Professional’’ applies to any transaction
23 15 U.S.C. 78q–1(b)(3)(F). 1 15
U.S.C. 78s(b)(1). identified by a Member as such pursuant to
24 15 U.S.C. 78q–1. 2 17 CFR 240.19b–4.
Exchange Rule 16.1.
25 15 U.S.C. 78s(b)(2). 3 15 U.S.C. 78s(b)(3)(A)(ii). 7 ‘‘Firm’’ applies to any transaction identified by
26 In approving the proposed rule change, the 4 17 CFR 240.19b–4(f)(2). a Member for clearing in the Firm range at the OCC.
Commission considered the proposal’s impact on 5 A Member is defined as ‘‘any registered broker 8 ‘‘Penny Pilot Securities’’ are those issues quoted
efficiency, competition and capital formation. 15 or dealer that has been admitted to membership in pursuant to Exchange Rule 21.5, Interpretation and
U.S.C. 78c(f). the Exchange.’’ See Exchange Rule 1.5(n). Policy .01.
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Document Created: 2015-12-15 13:13:39
Document Modified: 2015-12-15 13:13:39
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 80 FR 42139 |
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