82 FR 23121 - Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Concerning the Options Clearing Corporation's Management Structure

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 96 (May 19, 2017)

[Federal Register Volume 82, Number 96 (Friday, May 19, 2017)]
[Notices]
[Pages 23121-23123]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-10127]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80672; File No. SR-OCC-2017-012]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Concerning the Options Clearing Corporation's Management Structure

May 15, 2017.
    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 May 5, 2017, 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; Items I and II 
have been prepared primarily by OCC. OCC filed the proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ 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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    \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

    This proposed rule change by OCC concerns the amendment of OCC's 
By-Laws to provide that the Board of Directors (``Board'') may, in its 
discretion, designate the Chief Operating Officer (``COO'') to act as 
President of OCC.

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. All terms with initial capitalization that are not 
otherwise defined herein have the same meaning as set forth in the OCC 
By-Laws and Rules.\5\
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    \5\ 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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(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    On April 26, 2017, the Commission approved a proposed rule change 
by OCC that, among other things, amended OCC's By-Laws and Rules to: 
(1) Remove all references to OCC's President to reflect the fact that 
the President would no longer be a recognized officer within OCC's 
management and (2) reallocate the authority and responsibilities 
previously granted to the President between the COO and a newly 
appointed Chief Administrative Officer (``CAO'').\6\ OCC is now 
proposing to amend Article IV, Section 1 of the By-Laws to provide that 
the Board may, in its discretion, designate that the COO also serve as 
President of OCC. The purpose of the proposed rule change is to provide 
further clarity and transparency around OCC's management structure and 
the roles and titles of its senior management.
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    \6\ See Securities Exchange Act Release No. 80531 (April 26, 
2017), 82 FR 20502 (May 2, 2017) (SR-OCC-2017-002).
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    Prior to the approval of SR-OCC-2017-002,\7\ OCC's By-Laws 
stipulated that its President would also serve as COO, with the 
authority and responsibilities of the COO and President primarily being 
addressed throughout the By-Laws and Rules in terms of this officer's 
capacity as President. As a result of SR-OCC-2017-002,\8\ OCC's By-Laws 
and Rules were amended to eliminate all references to the President; 
however, the position of COO was retained, and OCC's senior management 
was reorganized within an Office of the Executive Chairman comprised of 
the Executive Chairman and Chief Executive Officer, the COO and the 
CAO. Pursuant to Article IV, Section 8 of the By-Laws, the COO and CAO 
are responsible for the aspects of OCC's business that do not report 
directly to the Executive Chairman, with such responsibilities being 
determined by the Board to promote the efficient and effective 
management and operation of OCC. The By-Laws and Rules also address 
various other authorities and responsibilities of the COO and CAO.\9\
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    \7\ Id.
    \8\ Id.
    \9\ For example, OCC's Rules provide the Executive Chairman, COO 
and CAO with the authority to, among other things, impose certain 
restrictions on a Clearing Member's transactions, positions and 
activities based on the financial or operational condition of the 
Clearing Member (Rule 305); extend settlement times in emergency 
conditions; (Rule 505); waive the required margin deposit of a 
Clearing Member in the interest of maintaining fair and orderly 
markets (Rule 609A); and make a determination as to whether the 
immediate liquidation of some or all of a suspended Clearing 
Member's margin deposits and/or contributions to the Clearing Fund 
would not be in the best interests of the OCC, other Clearing 
Members, or the general public (Rule 1104).
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    The proposed rule change would provide that the Board may, in its 
discretion, designate that the COO also serve as President. The two 
roles would not, however, be tied together by operation of the By-Laws 
as it was prior to the approval of SR-OCC-2017-002 and would instead 
provide the Board with the discretionary authority to make this 
determination as it deems appropriate. The proposed rule change is not 
intended to modify OCC's current management structure or the allocation 
of duties and responsibilities currently associated with the roles of 
COO or CAO as set forth in By-Laws and Rules. If the Board determines 
to designate that the COO also serve as President, the authority and 
responsibilities of the COO and President would continue to be governed 
by the allocation of authority and responsibilities of the COO as 
currently set forth in OCC's By-Laws and Rules. The proposed rule 
change would take a similar approach to the previous construction of 
OCC's By-Laws and Rules regarding the role of COO and President; 
however, the proposed approach would now describe the authority and 
responsibilities of the President and COO throughout the By-Laws and 
Rules in terms of this officer's capacity as COO (as opposed to 
President).
    OCC notes that, under Article IV, Section 1 of the By-Laws, the 
Board may, but need not, elect such other officers (i.e., officers in 
addition to the Executive Chairman, Member Vice Chairman, COO, CAO, 
Secretary, and Treasurer) as it may from time to time

[[Page 23122]]

determine are required for the efficient management and operation of 
OCC. While this provision of Article IV, Section 1 of the By-Laws 
currently provides the Board with discretionary authority to elect or 
otherwise designate an officer of OCC to serve as President, OCC 
believes that the proposed rule change would provide additional clarity 
and transparency around the Board's authority to elect a President, 
particularly in light of recent OCC filing SR-OCC-2017-002.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act,\10\ 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 the protection of investors and the public interest 
because it would provide OCC's users and the general public with 
further clarity and transparency around OCC's management structure and 
the roles and titles of its senior management by clarifying in OCC's 
By-Laws that the Board has the discretion to designate that OCC's COO 
also serve as President of the corporation. As a result, OCC believes 
the proposed rule change is consistent with Section 17A(b)(3)(F) of the 
Act.\11\
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    \10\ 15 U.S.C. 78q-1(b)(3)(F).
    \11\ Id.
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    In addition, Rule 17Ad-22(e)(2) \12\ requires covered clearing 
agencies to maintain written policies and procedures reasonably 
designed to, among other things, provide for governance arrangements 
that are clear and transparent, specify clear and direct lines of 
responsibility, and fulfill the public interest requirements in Section 
17A of the Act.\13\ OCC believes that the proposed amendments to its 
By-Laws would provide clear and transparent statements of the Board's 
discretionary authority to designate that the COO also serve as 
President of OCC. Under the proposed rule change, if the Board would 
designate that the COO also serve as President, the authority and 
responsibilities of the COO and President would continue to be governed 
by the clear allocation of authority and responsibilities provided to 
the COO as currently set forth in OCC's By-Laws and Rules. As a result, 
OCC believes the proposed rule change would provide for governance 
arrangements that are clear and transparent, specify clear and direct 
lines of responsibility, and fulfill the public interest requirements 
in Section 17A of the Act \14\ in a manner consistent with Rule 17Ad-
22(e)(2).\15\
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    \12\ 17 CFR 240.17Ad-22(e)(2).
    \13\ 15 U.S.C. 78q-1.
    \14\ 15 U.S.C. 78q-1.
    \15\ 17 CFR 240.17Ad-22(e)(2).
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    The proposed rule change is not inconsistent with the existing 
rules of OCC, including any other rules proposed to be amended.

(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act \16\ 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. OCC does not 
believe the proposed rule change would have any impact or impose any 
burden on competition. 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 
governance and management arrangements. The proposed rule change would 
not affect Clearing Members' access to OCC's services or disadvantage 
or favor any particular user in relationship to another user. As such, 
OCC believes that the proposed changes would not have any impact or 
impose any burden on competition.
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    \16\ 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 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,\17\ and Rule 19b-
4(f)(6) \18\ thereunder, the proposed rule change is filed for 
immediate effectiveness because it does not do the following: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
by its terms become operative for 30 days after the date of the filing, 
or such shorter time as the Commission may designate. 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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. 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. OCC believes 
that a waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest because it will enable 
OCC to implement the proposed rule change in a more timely manner and 
thereby reinforce the Board's authority to elect officers, and more 
specifically, a President, as it deems necessary for the efficient 
management and operation of OCC.
    The Commission agrees that a waiver of the 30-day operative delay 
is appropriate under the particular facts and circumstances concerning 
this proposed rule change, as the proposed rule change does not present 
novel or controversial issues. As OCC stated, Article IV, Section 1 of 
the By-Laws currently provides the Board with discretionary authority 
to elect or otherwise designate an officer of OCC to serve as 
President. OCC stated further that the proposed rule change would 
provide additional clarity and transparency around the Board's 
authority to elect a President, particularly in light of recent OCC 
filing SR-OCC-2017-002. Accordingly, the Commission designates the 
proposed rule change to be operative upon filing.\19\
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    \19\ 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.\20\
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    \20\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC Regulation Sec.  40.6.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and

[[Page 23123]]

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-2017-012 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-2017-012. 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_17_012.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-2017-012 and should 
be submitted on or before June 9, 2017.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-10127 Filed 5-18-17; 8:45 am]
BILLING CODE 8011-01-P