81 FR 6915 - Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving the Adoption of a Charter of a New Committee of The Options Clearing Corporation's Board of Directors, the Technology Committee

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 26 (February 9, 2016)

Page Range		6915-6916
FR Document		2016-02437
Federal Register, Volume 81 Issue 26 (Tuesday, February 9, 2016)
[Federal Register Volume 81, Number 26 (Tuesday, February 9, 2016)]
[Notices]
[Pages 6915-6916]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-02437]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77042; File No. SR-OCC-2015-018]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving the Adoption of a Charter of a New Committee of The 
Options Clearing Corporation's Board of Directors, the Technology 
Committee

February 3, 2016.
    On December 8, 2015, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change SR-OCC-2015-018 pursuant to Section 19(b)(1) of 
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder.\2\ On December 24, 2015, the proposed rule change was 
published for comment in the Federal Register.\3\ The Commission did 
not receive any comments on the proposed rule change. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 76686 (December 18, 
2015), 80 FR 80422 (December 24, 2015) (SR-OCC-2015-018).
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I. Description

    OCC is adopting a Charter for a new committee of OCC's Board of 
Directors (``Board''), the Technology Committee (``TC''). Additionally, 
OCC is adding a description of the TC into Article III, Section 9 of 
OCC's By-Laws. The Board formed the TC in order to enhance the Board's 
understanding and oversight of key technology, information security, 
and cyber-security risk issues at OCC. Consistent with OCC's other 
Board-level committee charters, the TC Charter sets forth: (i) The 
purpose, functions, and responsibilities of the TC; and (ii) the 
composition and organization of the TC.
    As set forth in the TC Charter, the TC will be responsible for: (i) 
Overseeing major information technology (``IT'') related strategies, 
projects, and technology architecture decisions; (ii) monitoring 
whether OCC's IT programs effectively support OCC's business objectives 
and strategies; (iii) monitoring OCC's IT risk management efforts as 
well as the security of OCC's information systems and physical security 
of information system assets; and (iv) conferring with OCC's senior IT 
management team and informing the Board on IT-related matters.
    Further, and with respect to the TC Charter's role in the oversight 
of OCC's IT strategy and projects, the TC Charter provides that the TC 
will be specifically tasked with: (i) Evaluating OCC's IT strategy, 
including the financial, tactical, and strategic benefits of IT 
projects and technology architecture initiatives; (ii) critically 
reviewing IT projects and technology architecture decisions, including 
review of the process related to approval of capital expenditures as 
they relate to IT projects; and (iii) making recommendations to the 
Board with respect to IT-related projects and investments that require 
Board approval. In addition, the TC Charter will require that the TC: 
(i) Monitor the quality and effectiveness of OCC's IT and physical 
security, including periodically reviewing and appraising OCC's 
disaster recovery capabilities and crisis management plans; (ii) in 
coordination and cooperation with the Audit Committee of the Board, 
monitor the quality and effectiveness of OCC's IT systems and processes 
that relate to or affect OCC's internal controls and assess OCC's 
management of IT-related compliance risks; (iii) report to the Board 
and the Audit Committee about IT risks and controls; and (iv) serve in 
an advisory role with respect to IT decisions at OCC. In connection 
with carrying out its responsibilities, the TC will also, in general, 
inform and make recommendations to the Board and other Board-level 
committees with respect to IT-related matters.
    The TC Charter will provide that the TC be comprised of three or 
more directors, and meet at least four times per year.\4\ The TC will 
function in a manner similar to the other Board-level committees in 
that it will have the ability to hire specialists and meet in executive 
session as well as be required to report to the Board on an annual 
basis. The TC will also have to annually confirm to the Board that its 
responsibilities, as set forth in the TC Charter, have been carried out 
and evaluate its and its members' performance on a regular basis.
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    \4\ Members of the TC will not need to be technology experts.
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II. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \5\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that the rule change, as proposed, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization.
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    \5\ 15 U.S.C. 78s(b)(2)(C).
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    The Commission finds that the proposed rule change is consistent 
with Section 17A(b)(3)(F) of the Act. This section requires, among 
other things, that the rules of a clearing agency promote the prompt 
and accurate clearance and settlement of securities transactions.\6\ 
The rule change should enhance the effectiveness of the Board's 
oversight on OCC's business and operational processes. Specifically, it 
should enhance technology-related processes (such as disaster recovery 
and crisis management plans), as well as IT systems that relate to 
internal controls and compliance risks, through a dedicated Board-level 
committee's oversight of such processes. Accordingly, the proposed rule 
change will increase the likelihood that OCC's technology processes 
work as expected, including those processes tied to the clearance and 
settlement of securities transactions.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    Additionally, the Commission finds that the proposed rule change is 
consistent with Rule 17Ad-22(d)(8). This rule requires a clearing 
agency's the written policies and procedures to: (i) Have governance 
arrangements that are clear and transparent to fulfill the public 
interest requirements in Section 17A of the Act; (ii) support the 
objectives of OCC's owners and participants; and (iii) promote the 
effectiveness of OCC's risk management procedures.\7\ First, the TC 
Charter delineates a clear and transparent governance arrangement 
designed to increase the likelihood that OCC's technology processes 
work as expected (including those processes tied to the clearance and 
settlement of securities transactions). By increasing the likelihood 
that OCC's technology processes work as expected, the TC Charter also 
supports the objective of OCC's owners and participants to promote the 
prompt and accurate clearance and settlement of securities

[[Page 6916]]

transactions. Finally, the TC Charter promotes the effectiveness of 
OCC's risk management procedures by establishing a Board-level 
committee focused on reducing IT-related risk at OCC.
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    \7\ 17 CFR 240.17Ad-22(d)(8).
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III. 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 \8\ and the 
rules and regulations thereunder.
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    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-OCC-2015-018) be, and it 
hereby is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
Robert W. Errett,
Deputy Secretary.
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    \10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-02437 Filed 2-8-16; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 81, No. 26 / Tuesday, February 9, 2016 / Notices 6915

Commission does not edit personal As set forth in the TC Charter, the TC responsibilities, as set forth in the TC
identifying information from will be responsible for: (i) Overseeing Charter, have been carried out and
submissions. You should submit only major information technology (‘‘IT’’) evaluate its and its members’
information that you wish to make related strategies, projects, and performance on a regular basis.
available publicly. All submissions technology architecture decisions; (ii)
II. Discussion and Commission
should refer to File Number SR–DTC– monitoring whether OCC’s IT programs
Findings
2016–002 and should be submitted on effectively support OCC’s business
or before March 1, 2016. objectives and strategies; (iii) Section 19(b)(2)(C) of the Act 5 directs
monitoring OCC’s IT risk management the Commission to approve a proposed
For the Commission, by the Division of
efforts as well as the security of OCC’s rule change of a self-regulatory
Trading and Markets, pursuant to delegated
authority.23 information systems and physical organization if it finds that the rule
security of information system assets; change, as proposed, is consistent with
Robert W. Errett,
and (iv) conferring with OCC’s senior IT the requirements of the Act and the
Deputy Secretary.
management team and informing the rules and regulations thereunder
[FR Doc. 2016–02438 Filed 2–8–16; 8:45 am] applicable to such organization.
Board on IT-related matters.
BILLING CODE 8011–01–P Further, and with respect to the TC The Commission finds that the
Charter’s role in the oversight of OCC’s proposed rule change is consistent with
IT strategy and projects, the TC Charter Section 17A(b)(3)(F) of the Act. This
SECURITIES AND EXCHANGE provides that the TC will be specifically section requires, among other things,
COMMISSION tasked with: (i) Evaluating OCC’s IT that the rules of a clearing agency
[Release No. 34–77042; File No. SR–OCC– strategy, including the financial, promote the prompt and accurate
2015–018] tactical, and strategic benefits of IT clearance and settlement of securities
projects and technology architecture transactions.6 The rule change should
Self-Regulatory Organizations; The initiatives; (ii) critically reviewing IT enhance the effectiveness of the Board’s
Options Clearing Corporation; Order projects and technology architecture oversight on OCC’s business and
Approving the Adoption of a Charter of decisions, including review of the operational processes. Specifically, it
a New Committee of The Options process related to approval of capital should enhance technology-related
Clearing Corporation’s Board of expenditures as they relate to IT processes (such as disaster recovery and
Directors, the Technology Committee projects; and (iii) making crisis management plans), as well as IT
recommendations to the Board with systems that relate to internal controls
February 3, 2016.
respect to IT-related projects and and compliance risks, through a
On December 8, 2015, The Options dedicated Board-level committee’s
investments that require Board
Clearing Corporation (‘‘OCC’’) filed with oversight of such processes.
approval. In addition, the TC Charter
the Securities and Exchange Accordingly, the proposed rule change
will require that the TC: (i) Monitor the
Commission (‘‘Commission’’) the will increase the likelihood that OCC’s
quality and effectiveness of OCC’s IT
proposed rule change SR–OCC–2015– technology processes work as expected,
and physical security, including
018 pursuant to Section 19(b)(1) of the including those processes tied to the
periodically reviewing and appraising
Securities Exchange Act of 1934 OCC’s disaster recovery capabilities and clearance and settlement of securities
(‘‘Act’’) 1 and Rule 19b–4 thereunder.2 crisis management plans; (ii) in transactions.
On December 24, 2015, the proposed coordination and cooperation with the Additionally, the Commission finds
rule change was published for comment Audit Committee of the Board, monitor that the proposed rule change is
in the Federal Register.3 The the quality and effectiveness of OCC’s IT consistent with Rule 17Ad–22(d)(8).
Commission did not receive any systems and processes that relate to or This rule requires a clearing agency’s
comments on the proposed rule change. affect OCC’s internal controls and assess the written policies and procedures to:
This order approves the proposed rule OCC’s management of IT-related (i) Have governance arrangements that
change. compliance risks; (iii) report to the are clear and transparent to fulfill the
I. Description Board and the Audit Committee about public interest requirements in Section
IT risks and controls; and (iv) serve in 17A of the Act; (ii) support the
OCC is adopting a Charter for a new
an advisory role with respect to IT objectives of OCC’s owners and
committee of OCC’s Board of Directors
decisions at OCC. In connection with participants; and (iii) promote the
(‘‘Board’’), the Technology Committee
carrying out its responsibilities, the TC effectiveness of OCC’s risk management
(‘‘TC’’). Additionally, OCC is adding a
will also, in general, inform and make procedures.7 First, the TC Charter
description of the TC into Article III,
recommendations to the Board and delineates a clear and transparent
Section 9 of OCC’s By-Laws. The Board
other Board-level committees with governance arrangement designed to
formed the TC in order to enhance the
respect to IT-related matters. increase the likelihood that OCC’s
Board’s understanding and oversight of
The TC Charter will provide that the technology processes work as expected
key technology, information security,
TC be comprised of three or more (including those processes tied to the
and cyber-security risk issues at OCC.
directors, and meet at least four times clearance and settlement of securities
Consistent with OCC’s other Board-level
per year.4 The TC will function in a transactions). By increasing the
committee charters, the TC Charter sets
manner similar to the other Board-level likelihood that OCC’s technology
forth: (i) The purpose, functions, and
committees in that it will have the processes work as expected, the TC
responsibilities of the TC; and (ii) the
mstockstill on DSK4VPTVN1PROD with NOTICES

ability to hire specialists and meet in Charter also supports the objective of
composition and organization of the TC.
executive session as well as be required OCC’s owners and participants to
23 17 CFR 200.30–3(a)(12).
to report to the Board on an annual promote the prompt and accurate
1 15 U.S.C. 78s(b)(1). basis. The TC will also have to annually clearance and settlement of securities
2 17 CFR 240.19b–4. confirm to the Board that its
3 Securities Exchange Act Release No. 76686 5 15 U.S.C. 78s(b)(2)(C).
6 15 U.S.C. 78q–1(b)(3)(F).
(December 18, 2015), 80 FR 80422 (December 24, 4 Members of the TC will not need to be
2015) (SR–OCC–2015–018). technology experts. 7 17 CFR 240.17Ad–22(d)(8).

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6916 Federal Register / Vol. 81, No. 26 / Tuesday, February 9, 2016 / Notices

transactions. Finally, the TC Charter II. The Exchange’s Description of the Additionally, NYSE Arca clarifies that
promotes the effectiveness of OCC’s risk Proposed Rule Change the Commentary is inapplicable because
management procedures by establishing the Index contains options
A. The Prior Proposal
a Board-level committee focused on components.8
reducing IT-related risk at OCC. The Commission approved the listing The Exchange asserts that the deletion
and trading on the Exchange of shares of its prior representations would not
III. Conclusion (‘‘Shares’’) of the WisdomTree Put Write adversely affect investors or the public
Strategy Fund (‘‘Fund’’) under NYSE interest, because the Index is based on
On the basis of the foregoing, the
Arca Equities Rule 5.2(j)(3), which CBOE-traded puts on the S&P 500,
Commission finds that the proposal is
governs the listing and trading of which are highly liquid.9 The Exchange
consistent with the requirements of the
Investment Company Units.4 The further estimates that, on the launch
Act, and in particular, with the
Exchange filed that proposed rule date, the Fund would hold
requirements of Section 17A of the Act 8
change because the Fund and the Shares approximately $2.5–$5.0 million in cash
and the rules and regulations
did not meet all of the ‘‘generic’’ listing and cash equivalents. The Exchange
thereunder.
requirements of Commentary .01(a)(A) also believes that sufficient protections
It is therefore ordered, pursuant to to NYSE Arca Equities Rule 5.2(j)(3), are in place to protect against market
Section 19(b)(2) of the Act,9 that the applicable to the listing of Investment manipulation of the Fund’s Shares and
proposed rule change (SR–OCC–2015– Company Units based upon an index of SPX Puts because: (i) Trading in the
018) be, and it hereby is, approved. ‘‘US Component Stocks.’’ 5 The Shares and the underlying Fund
For the Commission, by the Division of Exchange represented that the Shares instruments are subject to the federal
Trading and Markets, pursuant to delegated would conform to the initial and securities laws and to the Exchange’s,
authority.10 continued listing criteria under NYSE CBOE’s, and the Financial Industry
Robert W. Errett, Arca Equities Rules 5.2(j)(3) and Regulatory Authority’s rules and
Deputy Secretary.
5.5(g)(2), except that the underlying surveillance programs, which are
index, the CBOE S&P 500 Put Write designed to detect violations; (ii) assets
[FR Doc. 2016–02437 Filed 2–8–16; 8:45 am]
Index (the ‘‘Index’’), would not meet the in the portfolio—which will primarily
BILLING CODE 8011–01–P
requirements of NYSE Arca Equities be short-term U.S. Treasury bills 10 and
Rule 5.2(j)(3), Commentary .01(a)(A)(1)– SPX Puts—will be acquired in
(5). The Exchange, however, also extremely liquid and highly regulated
SECURITIES AND EXCHANGE represented that the Index would (1) markets; and (iii) the exchange-traded
COMMISSION include a minimum of 20 components, fund creation/redemption and arbitrage
and therefore (2) meet the numerical mechanisms are tied to the large pool of
[Release No. 34–77045; File No. SR– requirements of NYSE Arca Equities liquidity of each of the Fund’s
NYSEArca–2015–113] Rule 5.2(j)(3), Commentary .01(a)(A)(4), underlying investments.
which requires a minimum of 13 index The Exchange represents that trading
Self-Regulatory Organizations; NYSE or portfolio components. in the Shares will be subject to the
Arca, Inc.; Order Approving a The Exchange has not listed or existing trading surveillances and that
Proposed Rule Change Relating to the commenced trading in the Shares.6 these procedures are adequate to
Index Underlying the WisdomTree Put properly monitor Exchange trading of
Write Strategy Fund B. The Instant Proposed Rule Change
the Shares in all trading sessions and to
The Exchange submitted this proposal deter and detect violations of Exchange
February 3, 2016.
to correct two representations made in rules and federal securities laws.
I. Introduction support of its prior proposal to list and Furthermore, the Financial Industry
trade the Shares. Specifically, the
On December 2, 2015, NYSE Arca, Exchange seeks to strike its invested in one and three-month Treasury bills. The
Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed representations that the Index will (1) SPX Puts are struck at-the-money and are sold on
with the Securities and Exchange include a minimum of 20 components; a monthly basis, usually the third Friday of the
Commission (‘‘Commission’’), pursuant month (i.e., the ‘‘Roll Date’’), which matches the
and (2) meet the numerical expiration date of the SPX Puts. All SPX Puts are
to Section 19(b)(1) of the Securities requirements of NYSE Arca Equities standardized options traded on the CBOE.
Exchange Act of 1934 (‘‘Act’’) 1 and Rule Rule 5.2(j)(3), Commentary .01(a)(A)(4). 8 NYSE Arca Equities Rule 5.2(j)(3), Commentary

19b–4 thereunder,2 a proposal to change At any given time, the Index consists of .01(a)(A)(5) provides that all securities in the
a representation the Exchange made in applicable index or portfolio shall be US
one component, an ‘‘SPX Put.’’ 7 Component Stocks listed on a national securities
support of a prior proposed rule change. exchange and shall be NMS Stocks as defined in
The proposed rule change was 4 See Securities Exchange Act Release Nos. 74290
Rule 600 under Regulation NMS of the Act. Each
published for comment in the Federal (February 18, 2015), 80 FR 9818 (February 24, 2015) component stock of the S&P 500 Index is a US
Register on December 21, 2015.3 The (SR–NYSEArca–2015–05) (‘‘Prior Notice’’); 74675 Component Stock that is listed on a national
(April 8, 2015), 80 FR 20038 (April 14, 2015) (SR– securities exchange and is an NMS Stock. Options
Commission received no comments on NYSEArca–2015–05) (‘‘Prior Order’’ and, together are excluded from the definition of NMS Stock.
the proposed rule change. This order with the Prior Notice, the ‘‘Prior Release’’). 9 See Notice, supra note 3, at 79372 and 79373 for
approves the proposed rule change. 5 NYSE Arca Equities Rule 5.2(j)(3) provides that
the Exchange’s representation of the average daily
the term ‘‘US Component Stock’’ shall mean an trading volume of at-the-money 30-day SPX Puts,
8 In approving this proposed rule change, the
equity security that is registered under Sections the trading volume of the at-the-money SPX Puts,
12(b) or 12(g) of the Act and an American and the daily high, low and last reported sales
mstockstill on DSK4VPTVN1PROD with NOTICES

Commission has considered the proposed rule’s Depositary Receipt, the underlying equity securities prices on each of the Roll Dates for SPX Puts at-
impact on efficiency, competition, and capital of which is registered under Sections 12(b) or 12(g) the-money.
formation. See 15 U.S.C. 78c(f). of the Act. 10 See Notice, supra note 3, at 79373. The
9 15 U.S.C. 78s(b)(2).
6 See Notice, supra note 3, 80 FR at 79371.
10 17 CFR 200.30–3(a)(12).
Exchange states that the short-term Treasury
7 The Index is maintained by the Chicago Board securities that the Fund will acquire as part of its
1 15 U.S.C. 78s(b)(1).
Options Exchange, Inc. (‘‘CBOE’’) and tracks the strategy are not readily susceptible to market
2 17 CFR 240.19b–4.
value of a passive investment strategy, which manipulation due to the liquidity and extensive
3 See Securities Exchange Act Release No. 76646 consists of overlaying of S&P 500 Index put options oversight associated with the short-term U.S.
(Dec. 15, 2015), 80 FR 79371 (‘‘Notice’’). (‘‘SPX Puts’’) over a money market account, Treasury market.

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Document Created: 2018-02-02 14:30:01
Document Modified: 2018-02-02 14:30:01
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 6915