81 FR 66318 - Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Advance Notice of and No Objection to the Options Clearing Corporation's Proposal To Enter Into a New Credit Facility Agreement

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 187 (September 27, 2016)

Page Range		66318-66320
FR Document		2016-23223
Federal Register, Volume 81 Issue 187 (Tuesday, September 27, 2016)
[Federal Register Volume 81, Number 187 (Tuesday, September 27, 2016)]
[Notices]
[Pages 66318-66320]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-23223]



[[Page 66318]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78893; File No. SR-OCC-2016-803]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Advance Notice of and No Objection to the Options 
Clearing Corporation's Proposal To Enter Into a New Credit Facility 
Agreement

September 21, 2016.
    Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act entitled the Payment, 
Clearing, and Settlement Supervision Act of 2010 (``Payment, Clearing 
and Settlement Supervision Act'') \1\ and Rule 19b-4(n)(1)(i) \2\ under 
the Securities Exchange Act of 1934 (``Act''), notice is hereby given 
that, on August 29, 2016, The Options Clearing Corporation (``OCC'') 
filed an advance notice (SR-OCC-2016-803) with the Securities and 
Exchange Commission (``Commission''). The advance notice is described 
in Items I and II below, which Items have been prepared by OCC. The 
Commission is publishing this notice to solicit comments on the advance 
notice from interested persons, and to provide notice that the 
Commission does not object to the changes set forth in the advance 
notice and authorizes OCC to implement those changes earlier than 60 
days after the filing of the advance notice.
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
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I. Clearing Agency's Statement of the Terms of Substance of the Advance 
Notice

    This advance notice is being filed in connection with a proposed 
change in the form of the replacement of a revolving credit facility 
that OCC maintains for a 364-day term for the purpose of meeting 
obligations arising out of the default or suspension of a clearing 
member, in anticipation of a potential default by a clearing member, or 
the failure of a bank or securities or commodities clearing 
organization to perform its obligations due to its bankruptcy, 
insolvency, receivership or suspension of operations.

II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Advance Notice

    In its filing with the Commission, OCC included statements 
concerning the purpose of and basis for the advance notice and 
discussed any comments it received on the advance notice. 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 and B below, 
of the most significant aspects of these statements.

A. Clearing Agency's Statement on Comments on the Advance Notice 
Received From Members, Participants or Others

    Written comments were not and are not intended to be solicited with 
respect to the advance notice and none have been received.

B. Advance Notice Filed Pursuant to Section 806(e) of the Payment, 
Clearing, and Settlement Supervision Act

    This advance notice is being filed in connection with a proposed 
change in the form of the replacement of a revolving credit facility 
that OCC maintains for a 364-day term for the purpose of meeting 
obligations arising out of the default or suspension of a clearing 
member, in anticipation of a potential default by a clearing member, or 
the failure of a bank or securities or commodities clearing 
organization to perform its obligations due to its bankruptcy, 
insolvency, receivership or suspension of operations. OCC's existing 
credit facility (``Existing Facility'') was implemented on October 5, 
2015 through the execution of a Credit Agreement among OCC, Bank of 
America, N.A. (``BofA''), as administrative agent, and the lenders that 
are parties to the agreement from time to time. The Existing Facility 
provides short-term secured borrowings in an aggregate principal amount 
of $2 billion but may be increased to $3 billion if OCC so requests and 
sufficient commitments from lenders are received and accepted. To 
obtain a loan under the Existing Facility, OCC must pledge as 
collateral U.S. dollars or certain securities issued or guaranteed by 
the U.S. Government or the Government of Canada. Certain mandatory 
prepayments or deposits of additional collateral are required depending 
on changes in the collateral's market value. In connection with OCC's 
past implementation of the Existing Facility, OCC filed an advance 
notice with the Commission on September 9, 2015 [sic], and the 
Commission published a Notice of No-Objection on October 1, 2015.\3\
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    \3\ See Securities Exchange Act Release No. 76062 (October 1, 
2015), 80 FR 64028 (October 22, 2015) (SR-OCC-2015-803).
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    The Existing Facility is set to expire on October 3, 2016, and OCC 
is therefore currently negotiating the terms of a new credit facility 
(``New Facility'') on substantially similar terms as the Existing 
Facility.
    The terms and conditions applicable to the New Facility are set 
forth in the Summary of Terms and Conditions, which is not a public 
document.\4\ OCC has separately submitted a request for confidential 
treatment to the Commission regarding the Summary of Terms and 
Conditions, which is included in this filing as Exhibit 3. The 
conditions regarding the availability of the New Facility, which OCC 
anticipates will be satisfied on or before October 3, 2016, include the 
execution and delivery of (i) a credit agreement between OCC and the 
administrative agent, collateral agent and various lenders under the 
New Facility, (ii) a pledge agreement between OCC and the 
administrative agent or collateral agent, and (iii) such other 
documents as may be required by the parties. The definitive 
documentation concerning the New Facility is expected to be consistent 
with the Summary of Terms and Conditions and substantially similar to 
that concerning the Existing Facility, although it may include certain 
changes as may be necessary regarding administrative and operational 
terms being finalized between the parties. Language will be added to 
the credit agreement in order to permit European Economic Area 
(``EEA'')-based lenders under the New Facility to comply with new 
``bail-in'' requirements under European law. Specifically, OCC would 
agree in the credit agreement that, liabilities of lenders that are 
classified as ``EEA Financial Institutions'' under the relevant law are 
subject to potential write-down or conversion into equity by EEA 
regulators.\5\
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    \4\ The Summary of Terms and Conditions for the New Facility 
clarifies certain terms regarding mandatory prepayments or deposits 
of additional collateral, which, as described above, are also 
features of the Existing Facility.
    \5\ EU Directive 2014/59, often referred to as the Bank 
Resolution and Recovery Directive, contains wide-ranging recovery 
and resolution powers for EEA regulators to facilitate the rescue of 
a failing EEA financial institution. These powers include the 
ability for an EEA regulator to write-down and/or convert into 
equity a failing institution's liabilities. Article 55 of the 
Directive requires EEA financial institutions to include in certain 
documents, such as credit agreements, governed by the law of a non-
EEA country an acknowledgment that obligations of the EEA financial 
institutions are subject to the exercise of write-down and 
conversion powers.
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    The New Facility involves a variety of customary fees payable by 
OCC, including: (1) An arrangement fee payable to the joint lead 
arrangers; (2) administrative and collateral agent fees payable to the 
administrative agent and collateral agent if the New Facility closes; 
(3) upfront commitment fees payable to the lenders based on the

[[Page 66319]]

amount of their commitments; and (4) an ongoing quarterly commitment 
fee based on the unused amount of the New Facility.
Anticipated Effect on and Management of Risk
    Completing timely settlement is a key aspect of OCC's role as a 
clearing agency performing central counterparty services. Overall, the 
New Facility would continue to promote the reduction of risks to OCC, 
its clearing members and the options market in general because it would 
allow OCC to obtain short-term funds to address liquidity demands 
arising out of the default or suspension of a clearing member, in 
anticipation of a potential default or suspension of clearing members 
or the insolvency of a bank or another securities or commodities 
clearing organization. The existence of the New Facility would 
therefore help OCC minimize losses in the event of such a default, 
suspension or insolvency, by allowing it to obtain funds on extremely 
short notice to ensure clearance and settlement of transactions in 
options and other contracts without interruption. OCC believes that the 
reduced settlement risk presented by OCC resulting from the New 
Facility would correspondingly reduce systemic risk and promote the 
safety and soundness of the clearing system. By drawing on the New 
Facility, OCC would also be able to avoid liquidating margin or 
clearing fund assets in what would likely be volatile market 
conditions, which would preserve funds available to cover any losses 
resulting from the failure of a clearing member, bank or other clearing 
organization. Because the New Facility generally preserves the same 
terms and conditions as the Existing Facility, OCC believes that the 
change would not otherwise affect or alter the management of risk at 
OCC. Moreover, and [sic] while the credit agreement for the New 
Facility would contain the ``bail-in'' acknowledgment discussed above, 
OCC has existing processes in place to monitor the financial health of 
lenders under the Existing and New Facilities, including European-based 
lenders under the New Facility. In the event that a lender were 
experiencing [sic] financial difficulties that triggered a bail-in 
risk, OCC could exercise its right to seek a replacement lender.
Consistency With the Payment, Clearing and Settlement Supervision Act
    OCC believes that the New Facility is consistent with Section 
805(b)(1) of the Payment Clearing and Settlement Supervision Act \6\ 
because it promotes robust risk management by OCC of settlement and 
liquidity risk. The New Facility would promote robust risk management 
of these risks by providing OCC with timely access to a stable and 
reliable liquidity funding source to help it complete timely clearing 
and settlement.
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    \6\ 12 U.S.C. 5464(b)(1).
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Accelerated Commission Action Requested
    Pursuant to Section 806(e)(1)(I) of the Payment, Clearing and 
Settlement Supervision Act,\7\ OCC requests that the Commission notify 
OCC that it has no objection to the New Facility not later than 
Wednesday, September 28, 2016, which is three business days prior to 
the October 3, 2016 expiration date of the Existing Facility. OCC 
requests Commission action three business days in advance of the 
effective date in order to ensure that there is no period of time that 
OCC operates without this essential liquidity resource, given its 
importance to OCC's borrowing capacity in connection with its 
management of liquidity and settlement risk and timely completion of 
clearance and settlement.
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    \7\ 12 U.S.C. 5465(e)(1)(I).
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III. Date of Effectiveness of the Advance Notice and Timing for 
Commission Action

    The proposed change may be implemented if the Commission does not 
object to the proposed change within 60 days of the later of (i) the 
date that the proposed change was filed with the Commission or (ii) the 
date that any additional information requested by the Commission is 
received. OCC shall not implement the proposed change if the Commission 
has any objection to the proposed change.
    The Commission may extend the period for review by an additional 60 
days if the proposed change raises novel or complex issues, subject to 
the Commission providing the OCC with prompt written notice of the 
extension. A proposed change may be implemented in less than 60 days 
from the date the advance notice is filed, or the date further 
information requested by the Commission is received, if the Commission 
notifies OCC in writing that it does not object to the proposed change 
and authorizes OCC to implement the proposed change on an earlier date, 
subject to any conditions imposed by the Commission.
    OCC shall post notice on its Web site of proposed changes that are 
implemented.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-OCC-2016-803 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-2016-803. 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 advance notice that are filed 
with the Commission, and all written communications relating to the 
advance notice 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 Room, 100 F Street NE., Washington, 
DC 20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of OCC and on OCC's Web site 
(http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_16_803.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-2016-803 and should be submitted on or before October 18, 2016.

V. Commission's Findings and Notice of No Objection

    Although the Payment, Clearing and Settlement Supervision Act does 
not specify a standard of review for an advance notice, its stated 
purpose is

[[Page 66320]]

instructive.\8\ The stated purpose is to mitigate systemic risk in the 
financial system and promote financial stability by, among other 
things, promoting uniform risk management standards for systemically 
important financial market utilities (``FMUs'') and strengthening the 
liquidity of systemically important FMUs.\9\ Section 805(a)(2) of the 
Payment, Clearing and Settlement Supervision Act \10\ authorizes the 
Commission to prescribe risk management standards for the payment, 
clearing, and settlement activities of designated clearing entities and 
financial institutions engaged in designated activities for which it is 
the Supervisory Agency or the appropriate financial regulator. Section 
805(b) of the Payment, Clearing and Settlement Supervision Act \11\ 
states that the objectives and principles for the risk management 
standards prescribed under Section 805(a) shall be to:
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    \8\ See 12 U.S.C. 5461(b).
    \9\ Id.
    \10\ 12 U.S.C. 5464(a)(2).
    \11\ 12 U.S.C. 5464(b).
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     Promote robust risk management;
     promote safety and soundness;
     reduce systemic risks; and
     support the stability of the broader financial system.
    The Commission has adopted risk management standards under Section 
805(a)(2) of the Payment, Clearing and Settlement Supervision Act \12\ 
and the Act (``Clearing Agency Standards'').\13\ The Clearing Agency 
Standards require registered clearing agencies to establish, implement, 
maintain, and enforce written policies and procedures that are 
reasonably designed to meet certain minimum requirements for their 
operations and risk management practices on an ongoing basis.\14\ 
Therefore, it is appropriate for the Commission to review advance 
notices against these Clearing Agency Standards and the objectives and 
principles of these risk management standards as described in Section 
805(b) of the Payment, Clearing and Settlement Supervision Act.\15\
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    \12\ 12 U.S.C. 5464(a)(2).
    \13\ See Exchange Act Rule 17Ad-22. 17 CFR 240.17Ad-22. 
Securities Exchange Act Release No. 68080 (October 22, 2012), 77 FR 
66220 (November 2, 2012) (S7-08-11).
    \14\ Id.
    \15\ 12 U.S.C. 5464(b).
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    The Commission believes that the proposal in the advance notice is 
consistent with the Clearing Agency Standards, in particular, Rule 
17Ad-22(d)(11) under the Act and Rule 17Ad-22(b)(3) under the Act.\16\ 
Rule 17Ad-22(d)(11) under the Act \17\ requires that registered 
clearing agencies ``establish, implement, maintain and enforce written 
policies and procedures reasonably designed to, as applicable . . . 
establish default procedures that ensure that the clearing agency can 
take timely action to contain losses and liquidity pressures and to 
continue meeting its obligations in the event of a participant 
default.'' The Commission believes that the proposal is consistent with 
Rule 17Ad-22(d)(11) under the Act \18\ because the New Facility will 
allow OCC to obtain short-term funds to address liquidity demands 
arising out of the default or suspension of a clearing member, in 
anticipation of a potential default or suspension of clearing members 
or the insolvency of a bank or another securities or commodities 
clearing organization. Therefore, the New Facility should help OCC 
minimize losses in the event of such a default, suspension or 
insolvency, by allowing it to obtain funds on extremely short notice to 
ensure clearance and settlement of transactions in options and other 
contracts without interruption.
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    \16\ 17 CFR 240.17Ad-22(d)(11) and 17 CFR 240.17Ad-22(b)(3), 
respectively.
    \17\ 17 CFR 240.17Ad-22(d)(11).
    \18\ Id.
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    Rule 17Ad-22(b)(3) under the Act \19\ requires a central 
counterparty to ``establish, implement, maintain and enforce written 
policies and procedures reasonably designed to . . . [m]aintain 
sufficient financial resources to withstand, at a minimum, a default by 
the participant family to which it has the largest exposure in extreme 
but plausible market conditions . . . .'' The Commission believes that 
the proposal is consistent with Rule 17Ad-22(b)(3) under the Act \20\ 
because OCC's proposal to enter into the New Facility, thereby ensuring 
continued access to a committed bank syndicated credit facility, will 
help OCC maintain sufficient financial resources to withstand, at a 
minimum, a default by an clearing member family to which it has the 
largest exposure.
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    \19\ 17 CFR 240.17Ad-22(b)(3).
    \20\ Id.
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    For these reasons, the Commission believes the proposal contained 
in the advance notice is consistent with the objectives and principles 
described in Section 805(b) of the Payment, Clearing and Settlement 
Supervision Act,\21\ including that it reduces systemic risks and 
promote the safety and soundness of the broader financial system. As 
discussed above, the New Facility will continue to promote the 
reduction of risks to OCC, its clearing members, and the options market 
in general because it will allow OCC to obtain short-term funds to 
address liquidity demands, which should ensure clearance and settlement 
of transactions in options and other contracts without interruption. 
Given that OCC has been designated as a systemically important FMU, its 
ability to access financial resources to address short-term liquidity 
demands contributes to reducing systemic risks and supporting the 
stability of the broader financial system.
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    \21\ 12 U.S.C. 5464(b).
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    For these reasons, stated above, the Commission does not object to 
the advance notice.

VI. Conclusion

    It is therefore noticed, pursuant to Section 806(e)(1)(I) of the 
Payment, Clearing and Settlement Supervision Act,\22\ that the 
Commission does not object to the proposed change, and authorizes OCC 
to implement the change in the advance notice (SR-OCC-2016-803) as of 
the date of this notice.
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    \22\ 12 U.S.C. 5465(e)(1)(I).

    By the Commission.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-23223 Filed 9-26-16; 8:45 am]
 BILLING CODE 8011-01-P
66318 Federal Register / Vol. 81, No. 187 / Tuesday, September 27, 2016 / Notices

SECURITIES AND EXCHANGE of these statements may be examined at on substantially similar terms as the
COMMISSION the places specified in Item IV below. Existing Facility.
OCC has prepared summaries, set forth The terms and conditions applicable
[Release No. 34–78893; File No. SR–OCC– to the New Facility are set forth in the
2016–803]
in sections A and B below, of the most
significant aspects of these statements. Summary of Terms and Conditions,
Self-Regulatory Organizations; The which is not a public document.4 OCC
A. Clearing Agency’s Statement on has separately submitted a request for
Options Clearing Corporation; Notice Comments on the Advance Notice
of Filing of Advance Notice of and No confidential treatment to the
Received From Members, Participants or Commission regarding the Summary of
Objection to the Options Clearing Others
Corporation’s Proposal To Enter Into a Terms and Conditions, which is
New Credit Facility Agreement Written comments were not and are included in this filing as Exhibit 3. The
not intended to be solicited with respect conditions regarding the availability of
September 21, 2016. the New Facility, which OCC
to the advance notice and none have
Pursuant to Section 806(e)(1) of Title been received. anticipates will be satisfied on or before
VIII of the Dodd-Frank Wall Street October 3, 2016, include the execution
Reform and Consumer Protection Act B. Advance Notice Filed Pursuant to and delivery of (i) a credit agreement
entitled the Payment, Clearing, and Section 806(e) of the Payment, Clearing, between OCC and the administrative
Settlement Supervision Act of 2010 and Settlement Supervision Act agent, collateral agent and various
(‘‘Payment, Clearing and Settlement lenders under the New Facility, (ii) a
This advance notice is being filed in
Supervision Act’’) 1 and Rule 19b– pledge agreement between OCC and the
connection with a proposed change in
4(n)(1)(i) 2 under the Securities administrative agent or collateral agent,
the form of the replacement of a
Exchange Act of 1934 (‘‘Act’’), notice is and (iii) such other documents as may
revolving credit facility that OCC be required by the parties. The
hereby given that, on August 29, 2016,
maintains for a 364-day term for the definitive documentation concerning
The Options Clearing Corporation
purpose of meeting obligations arising the New Facility is expected to be
(‘‘OCC’’) filed an advance notice (SR–
out of the default or suspension of a consistent with the Summary of Terms
OCC–2016–803) with the Securities and
clearing member, in anticipation of a and Conditions and substantially
Exchange Commission (‘‘Commission’’).
potential default by a clearing member, similar to that concerning the Existing
The advance notice is described in
or the failure of a bank or securities or Facility, although it may include certain
Items I and II below, which Items have
commodities clearing organization to changes as may be necessary regarding
been prepared by OCC. The Commission
perform its obligations due to its administrative and operational terms
is publishing this notice to solicit
bankruptcy, insolvency, receivership or being finalized between the parties.
comments on the advance notice from
suspension of operations. OCC’s Language will be added to the credit
interested persons, and to provide
existing credit facility (‘‘Existing agreement in order to permit European
notice that the Commission does not
Facility’’) was implemented on October Economic Area (‘‘EEA’’)-based lenders
object to the changes set forth in the
5, 2015 through the execution of a under the New Facility to comply with
advance notice and authorizes OCC to
Credit Agreement among OCC, Bank of new ‘‘bail-in’’ requirements under
implement those changes earlier than 60
America, N.A. (‘‘BofA’’), as European law. Specifically, OCC would
days after the filing of the advance
administrative agent, and the lenders agree in the credit agreement that,
notice.
that are parties to the agreement from liabilities of lenders that are classified
I. Clearing Agency’s Statement of the time to time. The Existing Facility as ‘‘EEA Financial Institutions’’ under
Terms of Substance of the Advance provides short-term secured borrowings the relevant law are subject to potential
Notice in an aggregate principal amount of $2 write-down or conversion into equity by
This advance notice is being filed in billion but may be increased to $3 EEA regulators.5
connection with a proposed change in billion if OCC so requests and sufficient The New Facility involves a variety of
the form of the replacement of a commitments from lenders are received customary fees payable by OCC,
revolving credit facility that OCC and accepted. To obtain a loan under including: (1) An arrangement fee
maintains for a 364-day term for the the Existing Facility, OCC must pledge payable to the joint lead arrangers; (2)
purpose of meeting obligations arising as collateral U.S. dollars or certain administrative and collateral agent fees
out of the default or suspension of a securities issued or guaranteed by the payable to the administrative agent and
clearing member, in anticipation of a U.S. Government or the Government of collateral agent if the New Facility
potential default by a clearing member, Canada. Certain mandatory closes; (3) upfront commitment fees
or the failure of a bank or securities or prepayments or deposits of additional payable to the lenders based on the
commodities clearing organization to collateral are required depending on
perform its obligations due to its changes in the collateral’s market value. 4 The Summary of Terms and Conditions for the

bankruptcy, insolvency, receivership or In connection with OCC’s past New Facility clarifies certain terms regarding
implementation of the Existing Facility, mandatory prepayments or deposits of additional
suspension of operations. collateral, which, as described above, are also
OCC filed an advance notice with the features of the Existing Facility.
II. Clearing Agency’s Statement of the Commission on September 9, 2015 [sic], 5 EU Directive 2014/59, often referred to as the
Purpose of, and Statutory Basis for, the and the Commission published a Notice Bank Resolution and Recovery Directive, contains
Advance Notice of No-Objection on October 1, 2015.3
asabaliauskas on DSK3SPTVN1PROD with NOTICES

wide-ranging recovery and resolution powers for
EEA regulators to facilitate the rescue of a failing
In its filing with the Commission, The Existing Facility is set to expire EEA financial institution. These powers include the
OCC included statements concerning on October 3, 2016, and OCC is ability for an EEA regulator to write-down and/or
the purpose of and basis for the advance therefore currently negotiating the terms convert into equity a failing institution’s liabilities.
notice and discussed any comments it of a new credit facility (‘‘New Facility’’) Article 55 of the Directive requires EEA financial
institutions to include in certain documents, such
received on the advance notice. The text as credit agreements, governed by the law of a non-
3 See Securities Exchange Act Release No. 76062 EEA country an acknowledgment that obligations of
1 12 U.S.C. 5465(e)(1). (October 1, 2015), 80 FR 64028 (October 22, 2015) the EEA financial institutions are subject to the
2 17 CFR 240.19b–4(n)(1)(i). (SR–OCC–2015–803). exercise of write-down and conversion powers.

VerDate Sep<11>2014 17:08 Sep 26, 2016 Jkt 238001 PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 E:\FR\FM\27SEN1.SGM 27SEN1
Federal Register / Vol. 81, No. 187 / Tuesday, September 27, 2016 / Notices 66319

amount of their commitments; and (4) Supervision Act 6 because it promotes IV. Solicitation of Comments
an ongoing quarterly commitment fee robust risk management by OCC of Interested persons are invited to
based on the unused amount of the New settlement and liquidity risk. The New submit written data, views and
Facility. Facility would promote robust risk arguments concerning the foregoing.
management of these risks by providing Comments may be submitted by any of
Anticipated Effect on and Management
OCC with timely access to a stable and the following methods:
of Risk
reliable liquidity funding source to help
Completing timely settlement is a key it complete timely clearing and Electronic Comments
aspect of OCC’s role as a clearing agency settlement. • Use the Commission’s Internet
performing central counterparty comment form (http://www.sec.gov/
Accelerated Commission Action
services. Overall, the New Facility rules/sro.shtml); or
Requested
would continue to promote the • Send an email to rule-comments@
reduction of risks to OCC, its clearing Pursuant to Section 806(e)(1)(I) of the sec.gov. Please include File Number SR–
members and the options market in Payment, Clearing and Settlement OCC–2016–803 on the subject line.
general because it would allow OCC to Supervision Act,7 OCC requests that the
obtain short-term funds to address Commission notify OCC that it has no Paper Comments
liquidity demands arising out of the objection to the New Facility not later • Send paper comments in triplicate
default or suspension of a clearing than Wednesday, September 28, 2016, to Secretary, Securities and Exchange
member, in anticipation of a potential which is three business days prior to the Commission, 100 F Street NE.,
default or suspension of clearing October 3, 2016 expiration date of the Washington, DC 20549–1090.
members or the insolvency of a bank or Existing Facility. OCC requests All submissions should refer to File
another securities or commodities Commission action three business days Number SR–OCC–2016–803. This file
clearing organization. The existence of in advance of the effective date in order number should be included on the
the New Facility would therefore help to ensure that there is no period of time subject line if email is used. To help the
OCC minimize losses in the event of that OCC operates without this essential Commission process and review your
such a default, suspension or liquidity resource, given its importance comments more efficiently, please use
insolvency, by allowing it to obtain to OCC’s borrowing capacity in only one method. The Commission will
funds on extremely short notice to connection with its management of post all comments on the Commission’s
ensure clearance and settlement of liquidity and settlement risk and timely Internet Web site (http://www.sec.gov/
transactions in options and other completion of clearance and settlement. rules/sro.shtml). Copies of the
contracts without interruption. OCC submission, all subsequent
III. Date of Effectiveness of the Advance
believes that the reduced settlement risk amendments, all written statements
Notice and Timing for Commission
presented by OCC resulting from the with respect to the advance notice that
Action
New Facility would correspondingly are filed with the Commission, and all
reduce systemic risk and promote the The proposed change may be written communications relating to the
safety and soundness of the clearing implemented if the Commission does advance notice between the
system. By drawing on the New Facility, not object to the proposed change Commission and any person, other than
OCC would also be able to avoid within 60 days of the later of (i) the date those that may be withheld from the
liquidating margin or clearing fund that the proposed change was filed with public in accordance with the
assets in what would likely be volatile the Commission or (ii) the date that any provisions of 5 U.S.C. 552, will be
market conditions, which would additional information requested by the available for Web site viewing and
preserve funds available to cover any Commission is received. OCC shall not printing in the Commission’s Public
losses resulting from the failure of a implement the proposed change if the Reference Room, 100 F Street NE.,
clearing member, bank or other clearing Commission has any objection to the Washington, DC 20549 on official
organization. Because the New Facility proposed change. business days between the hours of
generally preserves the same terms and The Commission may extend the 10:00 a.m. and 3:00 p.m. Copies of the
conditions as the Existing Facility, OCC period for review by an additional 60 filing also will be available for
believes that the change would not days if the proposed change raises novel inspection and copying at the principal
otherwise affect or alter the management or complex issues, subject to the office of OCC and on OCC’s Web site
of risk at OCC. Moreover, and [sic] Commission providing the OCC with (http://www.theocc.com/components/
while the credit agreement for the New prompt written notice of the extension. docs/legal/rules_and_bylaws/sr_occ_16_
Facility would contain the ‘‘bail-in’’ A proposed change may be 803.pdf). All comments received will be
acknowledgment discussed above, OCC implemented in less than 60 days from posted without change; the Commission
has existing processes in place to the date the advance notice is filed, or does not edit personal identifying
monitor the financial health of lenders the date further information requested information from submissions. You
under the Existing and New Facilities, by the Commission is received, if the should submit only information that
including European-based lenders Commission notifies OCC in writing you wish to make available publicly. All
under the New Facility. In the event that that it does not object to the proposed submissions should refer to File
a lender were experiencing [sic] change and authorizes OCC to Number SR–OCC–2016–803 and should
financial difficulties that triggered a implement the proposed change on an
asabaliauskas on DSK3SPTVN1PROD with NOTICES

be submitted on or before October 18,
bail-in risk, OCC could exercise its right earlier date, subject to any conditions 2016.
to seek a replacement lender. imposed by the Commission.
OCC shall post notice on its Web site V. Commission’s Findings and Notice of
Consistency With the Payment, Clearing No Objection
and Settlement Supervision Act of proposed changes that are
implemented. Although the Payment, Clearing and
OCC believes that the New Facility is Settlement Supervision Act does not
consistent with Section 805(b)(1) of the 6 12 U.S.C. 5464(b)(1). specify a standard of review for an
Payment Clearing and Settlement 7 12 U.S.C. 5465(e)(1)(I). advance notice, its stated purpose is

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66320 Federal Register / Vol. 81, No. 187 / Tuesday, September 27, 2016 / Notices

instructive.8 The stated purpose is to 22(d)(11) under the Act 17 requires that the options market in general because it
mitigate systemic risk in the financial registered clearing agencies ‘‘establish, will allow OCC to obtain short-term
system and promote financial stability implement, maintain and enforce funds to address liquidity demands,
by, among other things, promoting written policies and procedures which should ensure clearance and
uniform risk management standards for reasonably designed to, as applicable settlement of transactions in options
systemically important financial market . . . establish default procedures that and other contracts without
utilities (‘‘FMUs’’) and strengthening the ensure that the clearing agency can take interruption. Given that OCC has been
liquidity of systemically important timely action to contain losses and designated as a systemically important
FMUs.9 Section 805(a)(2) of the liquidity pressures and to continue FMU, its ability to access financial
Payment, Clearing and Settlement meeting its obligations in the event of a resources to address short-term liquidity
Supervision Act 10 authorizes the participant default.’’ The Commission demands contributes to reducing
Commission to prescribe risk believes that the proposal is consistent systemic risks and supporting the
management standards for the payment, with Rule 17Ad–22(d)(11) under the stability of the broader financial system.
clearing, and settlement activities of Act 18 because the New Facility will For these reasons, stated above, the
designated clearing entities and allow OCC to obtain short-term funds to Commission does not object to the
financial institutions engaged in address liquidity demands arising out of advance notice.
designated activities for which it is the the default or suspension of a clearing
member, in anticipation of a potential VI. Conclusion
Supervisory Agency or the appropriate
financial regulator. Section 805(b) of the default or suspension of clearing It is therefore noticed, pursuant to
Payment, Clearing and Settlement members or the insolvency of a bank or Section 806(e)(1)(I) of the Payment,
Supervision Act 11 states that the another securities or commodities Clearing and Settlement Supervision
objectives and principles for the risk clearing organization. Therefore, the Act,22 that the Commission does not
management standards prescribed under New Facility should help OCC object to the proposed change, and
Section 805(a) shall be to: minimize losses in the event of such a authorizes OCC to implement the
• Promote robust risk management; default, suspension or insolvency, by change in the advance notice (SR–OCC–
• promote safety and soundness; allowing it to obtain funds on extremely 2016–803) as of the date of this notice.
• reduce systemic risks; and short notice to ensure clearance and By the Commission.
• support the stability of the broader settlement of transactions in options Robert W. Errett,
financial system. and other contracts without
Deputy Secretary.
The Commission has adopted risk interruption.
Rule 17Ad–22(b)(3) under the Act 19 [FR Doc. 2016–23223 Filed 9–26–16; 8:45 am]
management standards under Section
805(a)(2) of the Payment, Clearing and requires a central counterparty to BILLING CODE 8011–01–P

Settlement Supervision Act 12 and the ‘‘establish, implement, maintain and
Act (‘‘Clearing Agency Standards’’).13 enforce written policies and procedures
The Clearing Agency Standards require reasonably designed to . . . [m]aintain DEPARTMENT OF STATE
registered clearing agencies to establish, sufficient financial resources to [Public Notice: 9727]
implement, maintain, and enforce withstand, at a minimum, a default by
written policies and procedures that are the participant family to which it has Notice of Receipt of Application for an
reasonably designed to meet certain the largest exposure in extreme but Amended Presidential Permit for the
minimum requirements for their plausible market conditions . . . .’’ The Presidio-Ojinaga International Bridge
operations and risk management Commission believes that the proposal on the U.S.-Mexico Border at Presidio,
practices on an ongoing basis.14 is consistent with Rule 17Ad–22(b)(3) Texas and Ojinaga, Chihuahua, Mexico
Therefore, it is appropriate for the under the Act 20 because OCC’s proposal
to enter into the New Facility, thereby AGENCY: Department of State.
Commission to review advance notices
against these Clearing Agency Standards ensuring continued access to a ACTION: Notice.
and the objectives and principles of committed bank syndicated credit
facility, will help OCC maintain SUMMARY: The Department of State
these risk management standards as (‘‘State Department’’) hereby gives
described in Section 805(b) of the sufficient financial resources to
withstand, at a minimum, a default by notice that, on September 7, 2016, it
Payment, Clearing and Settlement received an application from the Texas
Supervision Act.15 an clearing member family to which it
has the largest exposure. Department of Transportation (TXDOT)
The Commission believes that the for an Amended Presidential Permit to
proposal in the advance notice is For these reasons, the Commission
believes the proposal contained in the construct a second bridge structure for
consistent with the Clearing Agency southbound traffic on the U.S.-Mexico
Standards, in particular, Rule 17Ad– advance notice is consistent with the
objectives and principles described in border at Presidio, Texas and Ojinaga,
22(d)(11) under the Act and Rule 17Ad– Chihuahua, Mexico. The State
22(b)(3) under the Act.16 Rule 17Ad– Section 805(b) of the Payment, Clearing
and Settlement Supervision Act,21 Department issued the original
8 See including that it reduces systemic risks Presidential Permit to Presidio County
12 U.S.C. 5461(b).
9 Id. and promote the safety and soundness on July 2, 1976, and an Amended
10 12 U.S.C. 5464(a)(2). of the broader financial system. As Presidential Permit to TXDOT on May 4,
1982. The application may be found at:
asabaliauskas on DSK3SPTVN1PROD with NOTICES

11 12 U.S.C. 5464(b). discussed above, the New Facility will
12 12 U.S.C. 5464(a)(2).
continue to promote the reduction of http://www.state.gov/documents/
13 See Exchange Act Rule 17Ad–22. 17 CFR
risks to OCC, its clearing members, and organization/261891.pdf.
240.17Ad–22. Securities Exchange Act Release No. The State Department’s review of this
68080 (October 22, 2012), 77 FR 66220 (November
2, 2012) (S7–08–11). 17 17 CFR 240.17Ad–22(d)(11). application is based upon Executive
14 Id. 18 Id. Order 11423 of August 16, 1968, as
15 12 U.S.C. 5464(b). 19 17 CFR 240.17Ad–22(b)(3). amended. As provided in E.O. 11423,
16 17 CFR 240.17Ad–22(d)(11) and 17 CFR 20 Id.

240.17Ad–22(b)(3), respectively. 21 12 U.S.C. 5464(b). 22 12 U.S.C. 5465(e)(1)(I).

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Document Created: 2016-09-27 01:19:30
Document Modified: 2016-09-27 01:19:30
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		81 FR 66318