81 FR 69100 - Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Amendments to and the Restatement of OCC's Certificate of Incorporation

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 193 (October 5, 2016)

[Federal Register Volume 81, Number 193 (Wednesday, October 5, 2016)]
[Notices]
[Pages 69100-69102]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-24005]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78983; File No. SR-OCC-2016-010]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Related to Amendments to and the Restatement of OCC's Certificate of 
Incorporation

September 29, 2016.
    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 September 27, 2016, 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 primarily by OCC. OCC filed the proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) \3\ of the Act and Rule 
19b-4(f)(6) \4\ thereunder so that the proposal was 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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    \42\ 17 CFR 200.30-3(a)(12).
    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change by OCC concerns the amendment and 
restatement of OCC's Certificate of Incorporation to provide more 
clarity, transparency, and consistency regarding OCC's Management 
Director,\5\ Exchange Director, Public Director, and Member Director 
requirements across OCC's governing documents. The proposed amendments 
and restatement would be filed with the Secretary of the State of 
Delaware in the form of an Amended and Restated Certificate of 
Incorporation, which is included in Exhibit 5 to the proposed rule 
change.\6\ All capitalized terms not defined herein have the same 
meaning as set forth in the OCC By-Laws and Rules.\7\
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    \5\ On July 15, 2016, OCC filed a proposed rule change with the 
Commission concerning modifications and enhancements to OCC's 
governance arrangements. See Securities Exchange Act Release No. 
78438 (July 28, 2016), 81 FR 51220 (August 3, 2016) (SR-OCC-2016-
002). As part of the proposed rule change, OCC proposed amendments 
to its Certificate of Incorporation to remove an explicit 
requirement that OCC's Board of Directors (``Board'') have two 
Management Directors and instead provide that the number of 
Management Directors shall be such number as shall be fixed by or 
pursuant to the By-Laws (which the Board has authorized to be 
amended to state that the Board shall have one (1) Management 
Director). The Commission approved the proposed rule change on 
September 16, 2016. See Securities Exchange Act Release No. 78862 
(September 16, 2016), 81 FR 65415 (September 22, 2016) (SR-OCC-2016-
002).
    \6\ Pending all necessary regulatory filings and approvals for 
the proposed rule change, OCC will file the proposed amendments 
described herein along with the amendments to OCC's Certificate of 
Incorporation contained in SR-OCC-2016-002 in the form of an Amended 
and Restated Certificate of Incorporation. The Amended and Restated 
Certificate of Incorporation must also be filed with the Secretary 
of the State of Delaware before becoming effective.
    \7\ OCC's By-Laws and Rules can be found on OCC's public Web 
site: http://optionsclearing.com/about/publications/bylaws.jsp.
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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
    The purpose of this proposed rule change is to amend and restate 
OCC's Certificate of Incorporation to provide more clarity, 
transparency, and consistency regarding OCC's Management Director,\8\ 
Exchange Director, Public Director, and Member Director requirements, 
which are being filed in the form of an Amended and Restated 
Certificate of Incorporation.\9\ The proposed amendments to the 
Certificate of Incorporation are described in more detail below.
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    \8\ See supra note 5.
    \9\ Under Section 245 of the General Corporation Law of the 
State of Delaware, a corporation may integrate into a single 
instrument all of the provisions of its certificate of incorporation 
which are then in effect and operative and may at the same time also 
further amend its certificate of incorporation by adopting a 
restated certificate of incorporation. See 8 Del. C. 1953, Sec.  
245. The proposed Amended and Restated Certificate of Incorporation 
would supersede OCC's current Restated Certificate of Incorporation 
(which was filed with the Secretary of the State of Delaware on 
November 3, 1987) and the subsequent amendments thereto.
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    OCC proposes clarifying amendments to Article V of the Certificate 
of Incorporation to state that an individual who serves as an Exchange 
Director for more than one Equity Exchange pursuant to the By-Laws 
shall be entitled to such number of votes on each proposition submitted 
to the Board for a vote thereon or for written consent thereto as shall 
correspond to the number of Equity Exchanges represented by him or her. 
Article III, Section 6 of the By-Laws currently provides that an 
individual may be nominated by, elected by, and serve as an Exchange 
Director for more than one Equity Exchange and that each such 
individual shall be counted, for all purposes under the By-Laws 
(including, without limitation, for the purpose of determining whether 
a quorum is present or whether a resolution has been passed by the 
requisite number of directors), as a separate Exchange Director for 
each Equity Exchange that elected him or her. OCC believes it is 
appropriate under Delaware General Corporation Law to include these 
voting rights in its Certificate of Incorporation (in addition to the 
By-Laws) in order to clarify and reinforce the voting powers of its 
Exchange Directors.
    OCC also proposes amendments to Article V of its Certificate of 
Incorporation to conform the language regarding Public Directors to 
existing language in the Certificate of Incorporation used for Member 
Directors. Specifically, the Certificate of Incorporation would be 
amended to state that the number of Public Directors shall be such 
number as shall be fixed by or pursuant to the By-Laws, divided into 
three classes, as provided therein. OCC believes that it is appropriate 
from a corporate governance perspective to specifically state in the 
Certificate of Incorporation that OCC's Public Directors are divided 
into three classes. OCC also proposes that the requirements for Public 
Director terms be clarified to state that each class of Public 
Directors shall be elected for a term which expires at the third annual 
meeting of stockholders following their election and upon the election 
and qualification of their successors, subject to their earlier death, 
disqualification, resignation, or removal. The proposed amendments 
would more closely align the language for Public Director requirements 
with that currently used to

[[Page 69101]]

describe Member Directors and is consistent with the current 
requirements for Public Directors in Article III, Section 6A of OCC's 
By-Laws. As a result, OCC believes the proposed amendments would 
provide more clarity and consistency in the description of OCC's 
Director requirements in the Certificate of Incorporation.
    In addition, OCC proposes to amend Article V of the Certificate of 
Incorporation to eliminate an explicit statement that there be ``not 
less than nine'' Member Directors in order to provide more clarity and 
consistency in the description of OCC's Director requirements across 
OCC's governing documents. The proposed amendment is intended only to 
be a technical drafting change to the Certificate of Incorporation and 
would not substantively change OCC's current requirements regarding the 
number of Member Directors required to serve on OCC's Board. While the 
Certificate of Incorporation currently states that there be ``not less 
than nine'' Member Directors, the actual number of Member Directors 
serving on OCC's Board is fixed by Article III, Section 1 of the By-
Laws (which is currently fixed at nine Member Directors). OCC believes 
it is appropriate from a corporate governance perspective that the 
number of various categories of Directors be fixed within one governing 
document of OCC. Currently, the Certificate of Incorporation only 
contains references to specific numbers for Management Directors and 
Member Directors; however, as discussed above, the Commission recently 
approved a proposed rule change by OCC to amend the Certificate of 
Incorporation to remove specific requirements regarding the number of 
Management Directors, with such number being fixed by the By-Laws.\10\ 
OCC notes that it is not proposing any changes to the By-Laws in 
connection with its Member Director requirements. The number of Member 
Directors would continue to be fixed at nine pursuant to Article III, 
Section 1 of the By-Laws.\11\
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    \10\ See supra note 5.
    \11\ Furthermore, under Article XI of OCC's By-Laws, any change 
in the number of Member Directors required under Article III would 
require an amendment approved by two-thirds of the Directors then in 
office as well as the approval of the holders of all of the 
outstanding Common Stock of OCC entitled to vote thereon.
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    Finally, OCC proposes that these amendments and restatement be 
filed in the form of an Amended and Restated Certificate of 
Incorporation, as reflected in Exhibit 5 to this proposed rule change. 
OCC's Certificate of Incorporation has not been restated since November 
3, 1987. Since the 1987 restatement, the Certificate of Incorporation 
has been amended six times.\12\ Given the scope and number of 
amendments to the Certificate of Incorporation since the last 
restatement, OCC believes it would be appropriate to integrate into a 
single instrument all of the provisions of OCC's Certificate of 
Incorporation that are currently in effect (pending regulatory approval 
of the proposed amendments described herein) in order to provide more 
clarity and transparency regarding OCC's governance arrangements. OCC 
notes that, in addition to the changes described above, the proposed 
amendments also include technical, non-substantive drafting changes to 
correct typographical errors in Articles IV and V of the Certificate of 
Incorporation.
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    \12\ The latest restatement of OCC's Certificate of 
Incorporation was dated November 3, 1987, and was subsequently 
amended on June 1, 1992, August 12, 1997, October 28, 1999, March 
16, 2012, December 30, 2013, and March 6, 2015.
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(2) Statutory Basis
    Section 17A(b)(3)(F) of the Act \13\ requires that the rules of a 
clearing agency be designed, in general, to protect investors and the 
public interest. OCC believes that the proposed rule change is 
consistent with Section 17A(b)(3)(F) of the Act \14\ and the rules 
thereunder applicable to OCC because the proposed rule change would 
provide more clarity and transparency regarding OCC's governance 
arrangements to Clearing Members, other users of OCC, and the general 
public. Specifically, the proposed rule change would enhance the 
clarity, consistency, and transparency of OCC's governance arrangements 
by: (i) Clarifying and reinforcing the voting powers of OCC's Exchange 
Directors in OCC's Certificate of Incorporation; (ii) providing more 
clarity and certainty regarding the number of Directors in each 
specific category of Directors required to serve on OCC's Board by 
consolidating those requirements into OCC's By-Laws; and (iii) 
specifying in the Certificate of Incorporation that OCC's Public 
Directors are divided into three classes and describing the length of 
the terms of OCC's Public Directors in a manner that more closely 
aligns with the language currently used to describe such requirements 
for Member Directors. Moreover, the proposed rule change would 
integrate into a single instrument all of the provisions of OCC's 
Certificate of Incorporation that are currently in effect as well as 
changes proposed herein. OCC believes that the proposed changes would 
provide more clarity and consistency in the descriptions of OCC's 
Director requirements and would enhance the readability of one of OCC's 
primary governing documents, its Certificate of Incorporation, for 
Clearing Members, other users of OCC, and the general public. As a 
result, OCC believes that the proposed rule change is designed, in 
general, to protect investors and the public interest in accordance 
with Section 17A(b)(3)(F) of the Act \15\ and is reasonably designed to 
ensure that OCC has clear and transparent governance arrangements 
consistent with Rule 17Ad-22(d)(8) \16\ thereunder. The proposed rule 
change is not inconsistent with the existing rules of OCC, including 
any other rules proposed to be amended.
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    \13\ 15 U.S.C. 78q-1(b)(3)(F).
    \14\ Id.
    \15\ Id.
    \16\ 17 CFR 240.17Ad-22(d)(8).
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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. As discussed in 
more detail above, OCC believes that the proposed rule change would 
provide more clarity and transparency to users (and potential users) of 
OCC regarding OCC's Management Director, Exchange Director, Public 
Director, and Member Director requirements and does not alter the 
substantive requirements of OCC's governing documents. As such, OCC 
believes that the proposed changes would not have any impact or impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act.
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    \17\ 15 U.S.C. 78q-1(b)(3)(I).
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(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

    Pursuant to Section 19(b)(3)(A) of the Act,\18\ and Rule 19b-
4(f)(6) \19\ thereunder, the proposed rule change is

[[Page 69102]]

filed for immediate effectiveness because it does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
by its terms would not become operative for 30 days after the date of 
the filing, or such shorter time as the Commission may designate.\20\ 
Additionally, OCC provided the Commission with written notice of its 
intent to file the proposed rule change, along with a brief description 
and text of the proposed rule change, at least five business days prior 
to the date of filing of the proposed rule change or such shorter time 
as designated by the Commission.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ OCC has requested that the Commission waive the 30-day 
operative delay contained in Rule 19b-4(f)(6)(iii) so that the 
proposal may become operative immediately upon filing. As noted 
herein, the proposed rule change is not intended to substantively 
alter OCC's governance arrangements but is designed to provide 
additional clarity regarding OCC's governance arrangements and 
improve the overall readability of OCC's Certificate of 
Incorporation. OCC believes that the prompt implementation of these 
changes would be consistent with the public interest and the 
protection of investors.
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because it will allow OCC to implement the proposed rule change 
immediately. As stated by OCC, OCC believes that the proposed rule 
change is not intended to substantively alter OCC's governance 
arrangements, but is designed to provide more clarity and transparency 
to Clearing Members, other users of OCC, and the general public. 
Therefore, the Commission hereby waives the 30-day operative delay and 
designates the proposed rule change operative upon filing with the 
Commission.\21\
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    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.\22\
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    \22\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified or otherwise appropriately filed as a Weekly Notification 
of Rule Amendments under CFTC Regulation Sec.  40.6.
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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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-OCC-2016-010 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-OCC-2016-010. 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 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 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_16_010.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-2016-010 and 
should be submitted on or before October 26, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated Authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24005 Filed 10-4-16; 8:45 am]
 BILLING CODE 8011-01-P