80 FR 62129 - Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Concerning the Requirement for Clearing Members To Participate in Operation Testing

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 199 (October 15, 2015)

[Federal Register Volume 80, Number 199 (Thursday, October 15, 2015)]
[Notices]
[Pages 62129-62130]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-26154]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76108; File No. SR-OCC-2015-015]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Concerning the Requirement for Clearing Members To Participate in 
Operation Testing

October 8, 2015.
    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 October 2, 2015, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared by OCC. 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.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    This proposed rule change by OCC codifies the requirement for 
clearing members to participate in operational testing, including 
testing of OCC's business continuity and disaster recovery plans (``BCP 
Testing'').

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 change would codify OCC's current requirement 
for clearing members to participate in operational testing, including 
testing of OCC's BCP Testing. Article V of OCC's By-Laws sets forth 
OCC's initial membership requirements. Pursuant to Interpretation and 
Policy .02(b) of Article V, Section 1 of OCC's By-Laws, an applicant 
for clearing membership must demonstrate that it is operationally 
capable of: (i) Processing expected volumes and values of transactions 
cleared by the clearing member within required time frames, including 
at peak times and on peak days; (ii) fulfilling collateral, payment, 
and delivery obligations as required by OCC; and (iii) participating in 
applicable default management activities, as may be required by OCC and 
in accordance with applicable laws and regulations.\3\
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    \3\ See OCC's By-Laws, Article V, Section 1, Interpretation and 
Policy .02(b).
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    Once a firm becomes a member of OCC, Chapter II of OCC's Rules sets 
forth additional operational requirements. In particular, OCC Rule 
214(d) requires clearing members to maintain their operational 
capabilities as a continuing obligation of membership.\4\ In accordance 
with such requirements, OCC annually conducts BCP Testing with certain 
clearing members through coordinated testing. Recently, the Commission 
promulgated Regulation System Compliance and Integrity (``Reg. SCI''), 
which would require OCC to establish standards to designate members \5\ 
and require participation by such designated members in scheduled BCP 
Testing with OCC on an annual basis.\6\ OCC is proposing to adopt Rule 
218 so that OCC's Rules clearly articulate OCC's requirement with 
respect to BCP Testing.
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    \4\ See OCC Rule 214(d). OCC Rule 214(d) requires clearing 
members to maintain their ability to, among other things: (i) 
Process expected volumes and values of transactions cleared by the 
clearing member within required time frames, including at peak times 
and on peak days; (ii) fulfill collateral, payment, and delivery 
obligations as required by OCC; and (iii) participate in applicable 
default management activities, as may be required by OCC and in 
accordance with applicable laws and regulations.
    \5\ 17 CFR 242.1004(a). In adopting Reg. SCI, the Commission 
determined not to require covered entities to notify the Commission 
of its designations or the standards that will be used in 
designating its members, recognizing instead that each entity's 
standards, designations, and updates, if applicable, would be part 
of its records and, therefore, available to the Commission and its 
staff upon request. See 79 FR 72350.
    \6\ 17 CFR 242.1004(a) and (b).
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    Proposed Rule 218 would increase transparency regarding and ensure 
OCC's practice with respect to BCP Testing is consistent with Reg. SCI 
by articulating OCC's right to: (i) Designate clearing members required 
to participate in BCP Testing; (ii) determine the scope of such BCP 
Testing; and (iii) require clearing members to comply with the subject 
BCP Testing within specified timeframes. In connection therewith, OCC 
is planning to refine the criteria that it currently uses to designate 
firms for BCP Testing. For example, while OCC will continue to rely on 
volume thresholds to mandate participation in annual BCP Testing, OCC 
will also take into account additional factors when designating firms 
for BCP Testing, including but not limited to: (i) The nature of 
interconnectedness based on a firm's approved business activities; (ii) 
the existence of significant operational issues during the past twelve 
months, and (iii) past performance with respect to BCP Testing. 
Clearing members will be informed of the specific standards that will 
be used by OCC, along with

[[Page 62130]]

any updates or changes to these standards, through established methods 
of communication between OCC and its firms. Likewise, clearing members 
will be notified in advance that they've been designated to participate 
in BCP Testing for the upcoming year, and will be provided details 
concerning the nature of such testing as the particular test plans are 
determined.
    OCC believes the proposed rule would have no impact on OCC clearing 
members relative to what clearing members are currently required to do. 
As described above, OCC already requires certain clearing members to 
participate in BCP Testing on an annual basis. The proposed rule 
codifies OCC's practice and provides further clarity and transparency 
to OCC clearing members to ensure consistency with Reg. SCI.
2. Statutory Basis
    OCC believes that the proposed rule change is consistent with 
applicable provisions of the Securities and Exchange Act (``Act'') and 
regulations promulgated thereunder. OCC believes providing further 
transparency regarding the requirement for clearing members to take 
part in its BCP Testing annually will help avoid ambiguity regarding 
such requirements, and will further ensure that business continuity and 
disaster recovery plans between OCC and its clearing members function 
as intended during an emergency. As such, OCC believes the proposed 
rule change would facilitate the prompt and accurate clearance and 
settlement of securities transactions and protect investors and the 
public interest consistent with Section 17A(b)(3)(F) of the Act,\7\ and 
foster the objectives of the Commission under Reg. SCI by helping to 
ensure resilient and available markets.\8\
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    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ 17 CFR 242.1004(a) and (b).
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    Codifying OCC's current practice of requiring clearing members to 
engage in BCP Testing annually is also consistent with Rule 17Ad-
22(d)(1), requiring that OCC provide for a well-founded, transparent, 
and enforceable legal framework for each aspect of its activities in 
all relevant jurisdictions, as it makes this obligation transparent.\9\ 
Finally, the proposed rule change is not inconsistent with any rules of 
OCC, including those proposed to be amended.
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    \9\ 17 CFR 240.17Ad-22(d)(1).
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(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any 
burden on competition.\10\ OCC believes the proposed rule change would 
not unfairly inhibit access to OCC's services or disadvantage or favor 
any particular user in relationship to another user because the 
proposed rule change would apply to all clearing members.
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    \10\ 15 U.S.C. 78-q1(b)(3)(I).
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    For the foregoing reasons, OCC believes that the proposed rule 
change is in the public interest, would be consistent with the 
requirements of the Act applicable to clearing agencies, and would not 
impose a burden on competition.

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

    Written comments on the proposed rule change 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

    Because the foregoing proposed rule change does not:
    (i) Significantly affect the protection of investors and the public 
interest;
    (ii) Impose an significant burden on competition; and
    (iii) Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 
19b-4(f)(6) thereunder.
    At any time within 60 days of the filing of this rule change, the 
Commission summarily may temporarily suspend the 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.

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 Commissions Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-OCC-2015-015 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-2015-015. 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 Web site (http://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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street 
NE., Washington, DC 20549, on official business days between the hours 
of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of OCC and 
on OCC's Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_15_015.pdf.

    All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly.
    All submissions should refer to File Number SR-OCC-2015-015 and 
should be submitted on or before November 5, 2015.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated Authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26154 Filed 10-14-15; 8:45 am]
 BILLING CODE 8011-01-P