82 FR 31109 - Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Advance Notice Concerning the Adoption of a New Stock Options and Futures Settlement Agreement Between The Options Clearing Corporation and the National Securities Clearing Corporation

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 127 (July 5, 2017)

Page Range		31109-31117
FR Document		2017-14016
Federal Register, Volume 82 Issue 127 (Wednesday, July 5, 2017)
[Federal Register Volume 82, Number 127 (Wednesday, July 5, 2017)]
[Notices]
[Pages 31109-31117]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-14016]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81040; File No. SR-OCC-2017-804]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Advance Notice Concerning the Adoption of a New 
Stock Options and Futures Settlement Agreement Between The Options 
Clearing Corporation and the National Securities Clearing Corporation

June 28, 2017.
    Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, entitled Payment, Clearing 
and Settlement Supervision Act of 2010 (``Clearing Supervision Act'' or 
``Payment, Clearing and Settlement Supervision Act'') \1\ and Rule 19b-
4(n)(1)(i) of the Securities Exchange Act of 1934 (``Act''),\2\ notice 
is hereby given that on June 1, 2017, The Options Clearing Corporation 
(``OCC'') filed with the Securities and Exchange Commission 
(``Commission'') an advance notice as described in Items I, II and III 
below, which Items have been prepared by OCC. The Commission is 
publishing this notice to solicit comments on the advance notice from 
interested persons.
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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 filed in connection with proposed changes 
relating to a new Stock Options and Futures Settlement Agreement (``New 
Accord'') between OCC and the National Securities Clearing Corporation 
(``NSCC,'' collectively NSCC and OCC may be referred to herein as the 
``clearing agencies'') and amendments to OCC's By-Laws and Rules to 
accommodate the proposed provisions of the New Accord.
    The proposed changes to OCC's By-Laws and Rules and the proposed 
New Accord were submitted as Exhibits 5A-

[[Page 31110]]

5C of the filing, respectively.\3\ The proposed changes are described 
in detail in Item 10 below. All terms with initial capitalization not 
defined herein have the same meaning as set forth in OCC's By-Laws and 
Rules.\4\
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    \3\ OCC has filed a proposed rule change with the Commission in 
connection with the New Accord. See SR-OCC-2017-013. NSCC also has 
filed proposed rule change and advance notice filings with the 
Commission in connection with the New Accord. See NSCC filings SR-
NSCC-2017-007 and SR-NSCC-2017-803, respectively.
    \4\ OCC's By-Laws and Rules can be found on OCC's public Web 
site: http://optionsclearing.com/about/publications/bylaws.jsp. 
Other terms not defined herein or in the OCC By-Laws and Rules can 
be found in the Rules & Procedures of NSCC (``NSCC Rules''), 
available at http://www.dtcc.com/~/media/Files/Downloads/legal/
rules/nscc_rules.pdf, as the context implies.
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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 proposed rule change and none have been received. OCC 
will notify the Commission of any written comments received by OCC.

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

Description of the Proposed Change
Background
    OCC issues and clears U.S.-listed options and futures on a number 
of underlying financial assets including common stocks, currencies and 
stock indices. OCC's Rules, however, provide that delivery of, and 
payment for, securities underlying certain physically settled stock 
options and single stock futures cleared by OCC are effected through 
the facilities of a correspondent clearing corporation (i.e., NSCC) and 
are not settled through the facilities OCC. OCC and NSCC are parties to 
a Third Amended and Restated Options Exercise Settlement Agreement, 
dated February 16, 1995, as amended (``Existing Accord''),\5\ which 
governs the delivery and receipt of stock in the settlement of put and 
call options issued by OCC (``Stock Options'') that are eligible for 
settlement through NSCC's Continuous Net Settlement (``CNS'') 
Accounting Operation and are designated to settle on the third business 
day following the date the related exercise or assignment was accepted 
by NSCC (``Options E&A''). All OCC Clearing Members that intend to 
engage in Stock Options transactions are required to also be Members of 
NSCC or to have appointed or nominated an NSCC Member to act on its 
behalf.\6\
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    \5\ The Existing Accord and the proposed changes thereunder were 
previously approved by the Commission. See Securities Exchange Act 
Release No. 37731 (September 26, 1996), 61 FR 51731 (October 3, 
1996) (SR-OCC-96-04 and SR-NSCC-96-11) (Order Approving Proposed 
Rule Change Related to an Amended and Restated Options Exercise 
Settlement Agreement Between the Options Clearing Corporation and 
the National Securities Clearing Corporation); Securities Exchange 
Act Release No. 43837 (January 12, 2001), 66 FR 6726 (January 22, 
2001) (SR-OCC-00-12) (Order Granting Accelerated Approval of a 
Proposed Rule Change Relating to the Creation of a Program to 
Relieve Strains on Clearing Members' Liquidity in Connection With 
Exercise Settlements); and Securities Exchange Act Release No. 58988 
(November 20, 2008), 73 FR 72098 (November 26, 2008) (SR-OCC-2008-18 
and SR-NSCC-2008-09) (Notice of Filing and Order Granting 
Accelerated Approval of Proposed Rule Changes Relating to Amendment 
No. 2 to the Third Amended and Restated Options Exercise Settlement 
Agreement).
    \6\ A firm that is both an OCC Clearing Member and an NSCC 
Member, or is an OCC Clearing Member that has designated an NSCC 
Member to act on its behalf is referred to herein as a ``Common 
Member.''
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    OCC proposes to adopt a New Accord with NSCC, which would provide 
for the settlement of certain Stock Options and delivery obligations 
arising from certain matured physically-settled stock futures contracts 
cleared by OCC (``Stock Futures''). Specifically, the New Accord would, 
among other things: (1) Expand the category of securities that are 
eligible for settlement and guaranty under the agreement to certain 
securities (including stocks, exchange-traded funds and exchange-traded 
notes) that (i) are required to be delivered in the exercise and 
assignment of Stock Options and are eligible to be settled through 
NSCC's Balance Order Accounting Operation (in addition to its CNS 
Accounting Operation) or (ii) are delivery obligations arising from 
Stock Futures that have reached maturity and are eligible to be settled 
through NSCC's CNS Accounting Operation or Balance Order Accounting 
Operation; (2) modify the time of the transfer of responsibilities from 
OCC to NSCC and, specifically, when OCC's guarantee obligations under 
OCC's By-Laws and Rules with respect to such transactions (``OCC's 
Guaranty'') end and NSCC's obligations under Addendum K of the NSCC 
Rules with respect to such transactions (``NSCC's Guaranty'') begin 
(such transfer being the ``Guaranty Substitution''); and (3) put 
additional arrangements into place concerning the procedures, 
information sharing, and overall governance processes under the 
agreement. Furthermore, OCC proposes to make certain clarifying and 
conforming changes to the OCC By-Laws and Rules as necessary to 
implement the New Accord.
    The primary purpose of the proposed changes is to (1) provide 
consistent treatment across all expiries for products with ``regular 
way'' \7\ settlement cycle specifications; (2) reduce the operational 
complexities of the Existing Accord by eliminating the cross-guaranty 
between OCC and NSCC and the bifurcated risk management of exercised 
and assigned transactions between the two clearing agencies by 
delineating a single point in time at which OCC's Guaranty ceases and 
NSCC's Guaranty begins; (3) further solidify the roles and 
responsibilities of OCC and NSCC in the event of a default of a Common 
Member at either or both clearing agencies; and (4) improve procedures, 
information sharing, and overall governance under the agreement.
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    \7\ Under the New Accord, ``regular way settlement'' shall have 
a meaning agreed to by the clearing agencies. Generally, regular way 
settlement is understood to be the financial services industry's 
standard settlement cycle. Currently, regular way settlement of 
Stock Options or Stock Futures transactions are those transactions 
designated to settle on the third business day following the date 
the related exercise, assignment or delivery obligation was accepted 
by NSCC. NSCC has proposed to change the NSCC Rules with respect to 
the meaning of regular way settlement in order to be consistent with 
the anticipated industry-wide move to a shorter standard settlement 
cycle of two business days after trade date. See Securities Exchange 
Act Release No. 79734 (January 4, 2017), 82 FR 3030 (January 10, 
2017) (SR-NSCC-2016-007). See also Securities Exchange Act Release 
No. 78962 (September 28, 2016), 81 FR 69240 (October 5, 2016) (S7-
22-16) (Amendment to Securities Transaction Settlement Cycle).
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    The New Accord would become effective, and wholly replace the 
Existing Accord, at a date specified in a service level agreement to be 
entered into between NSCC and OCC.\8\
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    \8\ Such effective date would be a date following approval of 
all required regulatory submissions to be filed by OCC and NSCC with 
the appropriate regulatory authorities, including this advance 
notice filing. See supra note 3.
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The Existing Accord
Key Terms of the Existing Accord
    Under the Existing Accord, the settlement of Options E&A generally 
proceeds according to the following

[[Page 31111]]

sequence of events. NSCC maintains and delivers to OCC a list (``CNS 
Eligibility Master File'') that enumerates all CNS Securities, which 
are defined in NSCC's Rule 1 and generally include securities that have 
been designated by NSCC as eligible for processing through NSCC's CNS 
Accounting Operation and eligible for book entry delivery at NSCC's 
affiliate, The Depository Trust Company (for purposes of this advance 
notice filing, such securities are referred to as ``CNS Eligible 
Securities'').\9\ OCC, in turn, uses this file to make a final 
determination of which securities NSCC would not accept and therefore 
would need to be settled on a broker-to-broker basis. OCC then sends to 
NSCC a transactions file,\10\ listing the specific securities that are 
to be delivered and received in settlement of an Options E&A that have 
not previously been reported to NSCC and for which settlement is to be 
made through NSCC (``OCC Transactions File'').\11\ With respect to each 
Options E&A, the OCC Transactions File includes the CUSIP number of the 
security to be delivered, the identities of the delivering and 
receiving Common Members, the quantity to be delivered, the total value 
of the quantity to be delivered based on the exercise price of the 
option for which such security is the underlying security, and the 
exercise settlement date. After receiving the OCC Transactions File, 
NSCC then has until 11:00 a.m. Central Time on the following business 
day to reject any transaction listed in the OCC Transactions File. NSCC 
can reject a transaction if the security to be delivered has not been 
listed as a CNS Eligible Security in the CNS Eligible Master File or if 
information provided in the OCC Transactions File is incomplete. 
Otherwise, if NSCC does not so notify OCC of its rejection of an 
Options E&A by the time required under the Existing Accord, NSCC will 
become unconditionally obligated to effect settlement of the Options 
E&A.
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    \9\ See supra note 4.
    \10\ Delivery of the OCC Transactions File with respect to an 
Options E&A typically happens on the date of the option's exercise 
or expiration, though this is not expressly stated in the Existing 
Accord. In theory, however, an Options E&A could, due to an error or 
delay, be reported later than the date of the option's exercise or 
expiration.
    \11\ This process would be substantially the same under the New 
Accord with the exception that the CNS Eligibility Master File and 
OCC Transactions File would be renamed and would be expanded in 
scope to include additional securities that would be eligible for 
guaranty and settlement under the New Accord, as discussed in 
further detail below.
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    Under the Existing Accord, even after NSCC's trade guarantee has 
come into effect,\12\ OCC is not released from its guarantee with 
respect to the Options E&A until certain deadlines \13\ have passed on 
the first business day following the scheduled settlement date without 
NSCC notifying OCC that the relevant Common Member has failed to meet 
an obligation to NSCC or NSCC has ceased to act for such Common Member 
pursuant to the NSCC Rules.\14\ As a result, there is a period of time 
when NSCC's trade guarantee overlaps with OCC's guarantee and where 
both clearing agencies are holding margin against the same Options E&A 
position.
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    \12\ Pursuant to Addendum K of the NSCC Rules, NSCC guarantees 
the completion of CNS transactions and balance order transactions 
that have reached the point at which, for bi-lateral submissions by 
Members, such trades have been validated and compared by NSCC, and 
for locked-in submission, such trades have been validated by NSCC, 
as described in the NSCC Rules. Transactions that are covered by the 
Existing Accord, and that would be covered by the New Accord, are 
expressly excluded from the timeframes described in Addendum K. See 
supra note 4.
    \13\ The deadline is 6:00 a.m. Central Time for NSCC notifying 
OCC of a Common Member failure and, if NSCC does not immediately 
cease to act for such defaulting Common Member, 4:00 p.m. Central 
Time for notifying OCC that it has ceased to act.
    \14\ See NSCC Rule 46 (Rule 46 (Restrictions on Access to 
Services)). See supra note 4.
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    In the event that NSCC or OCC ceases to act on behalf of or 
suspends a Common Member, that Common Member becomes a ``defaulting 
member.'' Once a Common Member becomes a defaulting member, the 
Existing Accord provides that NSCC will make a payment to OCC equal to 
the lesser of OCC's loss or the positive mark-to-market amount relating 
to the defaulting member's Options E&A and that OCC will make a payment 
to NSCC equal to the lesser of NSCC's loss or the negative mark-to-
market amount relating to the defaulting member's Options E&A to 
compensate for potential losses incurred in connection with the 
default. A clearing agency must request the transfer of any such 
payments by the close of business on the tenth business day following 
the day of default and, after a request is made, the other clearing 
agency is required to make payment within five business days of the 
request.

The New Accord

Overview

    As noted above, NSCC proposes to adopt a New Accord with OCC, which 
would provide for the settlement of certain Stock Options and Stock 
Futures transactions. The New Accord is primarily designed to, among 
other things, expand the category of securities that are eligible for 
settlement and guaranty under the agreement; simplify the time of the 
transfer of responsibilities from OCC to NSCC (specifically, the 
transfer of guarantee obligations); and put additional arrangements 
into place concerning the procedures, information sharing, and overall 
governance processes under the agreement. The material provisions of 
the New Accord are described in detail below.

Key Elements of the New Accord

Expanded Scope of Eligible Securities
    Pursuant to the proposed New Accord, on each day that both OCC and 
NSCC are open for accepting trades for clearing (``Activity Date''), 
NSCC would deliver to OCC an ``Eligibility Master File,'' which would 
identify the securities, including stocks, exchange-traded funds and 
exchange-traded notes, that are (1) eligible to settle through NSCC's 
CNS Accounting Operation (as is currently the case under the Existing 
Accord) or NSCC's Balance Order Accounting Operation (which is a 
feature of the New Accord) and (2) to be delivered in settlement of (i) 
exercises and assignments of Stock Options (as is currently the case 
under the Existing Accord) or (ii) delivery obligations arising from 
maturing physically settled Stock Futures (which is a feature of the 
New Accord) (all such securities collectively being ``Eligible 
Securities''). OCC, in turn, would deliver to NSCC its file of E&A/
Delivery Transactions \15\ that list the Eligible Securities to be 
delivered, or received, and for which settlement is proposed to be made 
through NSCC on that Activity Date. Guaranty Substitution (discussed 
further below) would not occur with respect to an E&A/Delivery 
Transaction that is not submitted in the proper format or that involves 
a security that is not identified as an Eligible Security on the then-
current Eligibility Master File. This process is similar to the current 
process under the Existing Accord with the exception of the expanded 
scope of Eligible Securities (and additional fields necessary to 
accommodate such securities) that would be listed on the

[[Page 31112]]

Eligibility Master File and the E&A/Delivery Transactions file.
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    \15\ ``E&A/Delivery Transactions'' are transactions involving 
the settlement of Stock Options and Stock Futures under the New 
Accord. The delivery of E&A/Delivery Transactions to NSCC would 
replace the delivery of the ``OCC Transactions File'' from the 
Existing Accord. The actual information delivered by OCC to NSCC 
would be the same as is currently provided on the OCC Transactions 
File, but certain additional terms would be included to accommodate 
the inclusion of Stock Futures, along with information regarding the 
date that the instruction to NSCC was originally created and the 
E&A/Delivery Transaction's designated settlement date.
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    Like the Existing Accord, the proposed New Accord would continue to 
facilitate the processes by which Common Members deliver and receive 
stock in the settlement of Stock Options that are eligible to settle 
through NSCC's CNS Accounting Operation and are designated to settle 
regular way. The New Accord would also expand the category of 
securities eligible for settlement under the agreement. In particular, 
the New Accord would facilitate the processes by which Common Members 
deliver and receive stock in settlement of Stock Futures that are 
eligible to settle through NSCC's CNS Accounting Operation and are 
designated to settle regular way. It would also provide for the 
settlement of both Stock Options and Stock Futures that are eligible to 
settle through NSCC's Balance Order Accounting Operation on a regular 
way basis. The primary purpose of expanding the category of securities 
that are eligible for settlement and guaranty under the agreement is to 
provide consistent treatment across all expiries for products with 
regular way settlement cycle specifications and simplify the settlement 
process for these additional securities transactions.
    The New Accord would not apply to Stock Options or Stock Futures 
that are designated to settle on a shorter timeframe than the regular 
way settlement timeframe. These Stock Options would continue to be 
processed and settled as they would be today, outside of the New 
Accord. The New Accord also would not apply to any Stock Options or 
Stock Futures that are neither CNS Securities nor Balance Order 
Securities.\16\ Transactions in these securities are, and would 
continue to be, processed on a trade-for-trade basis away from NSCC's 
facilities. Such transactions may utilize other NSCC services for which 
they are eligible, but would not be subject to the New Accord.\17\
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    \16\ Balance Order Securities are defined in NSCC Rule 1, and 
are generally securities, other than foreign securities, that are 
eligible to be cleared at NSCC but are not eligible for processing 
through the CNS Accounting Operation. See supra note 4.
    \17\ OCC will continue to guarantee settlement until settlement 
actually occurs with respect to these Stock Options and Stock 
Futures.
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Proposed Changes Related to Guaranty Substitution
    The New Accord would adopt a fundamentally different approach to 
the delineation of the rights and responsibilities of OCC and NSCC with 
respect to E&A/Delivery Transactions. The purpose of the proposed 
changes related to the Guaranty Substitution, defined below, is to 
reduce the operational complexities of the Existing Accord by 
eliminating the cross-guaranty between OCC and NSCC and the bifurcated 
risk management of exercised and assigned transactions between the two 
clearing agencies and delineating a single point in time at which OCC's 
Guaranty ceases and NSCC's Guaranty begins. Moreover, the proposed 
changes would solidify the roles and responsibilities of OCC and NSCC 
in the event of a default of a Common Member at either or both clearing 
agencies.
    As described above, the Existing Accord provides that NSCC will 
make a payment to OCC following the default of a Common Member in an 
amount equal to the lesser of OCC's loss or the positive mark-to-market 
amount relating to the Common Member's Options E&A, and provides that 
OCC will make a payment to NSCC following the default of a Common 
Member equal to the lesser of NSCC's loss or the negative mark-to-
market amount relating to the Common Member's Options E&A to compensate 
for potential losses incurred in connection with the Common Member's 
default. The proposed New Accord, in contrast, would focus on the 
transfer of responsibilities from OCC to NSCC and, specifically, the 
point at which OCC's Guaranty ends and NSCC's Guaranty begins (i.e., 
the Guaranty Substitution) with respect to E&A/Delivery Transactions. 
By focusing on the timing of the Guaranty Substitution, rather than 
payment from one clearing agency to the other, the New Accord would 
simplify the agreement and the procedures for situations involving the 
default of a Common Member. The New Accord additionally would minimize 
``double-margining'' situations when a Common Member may simultaneously 
owe margin to both NSCC and OCC with respect to the same E&A/Delivery 
Transaction.
    After NSCC has received an E&A/Delivery Transaction, the Guaranty 
Substitution would normally occur when NSCC has received all Required 
Deposits to its Clearing Fund, calculated taking into account such E&A/
Delivery Transaction, of Common Members (``Guaranty Substitution 
Time'').\18\ At the Guaranty Substitution Time, NSCC's Guaranty takes 
effect, and OCC does not retain any settlement obligations with respect 
to such E&A/Delivery Transactions. The Guaranty Substitution would not 
occur, however, with respect to any E&A/Delivery Transaction if NSCC 
has rejected such E&A/Delivery Transaction due to an improper 
submission, as described above, or if, during the time after NSCC's 
receipt of the E&A/Delivery Transaction but prior to the Guaranty 
Substitution Time, a Common Member involved in the E&A/Delivery 
Transaction has defaulted on its obligations to NSCC by failing to meet 
its Clearing Fund obligations, or NSCC has otherwise ceased to act for 
such Common Member pursuant to the NSCC Rules (in either case, such 
Common Member becomes a ``Defaulting NSCC Member'').
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    \18\ Procedure XV of the NSCC Rules provides that all Clearing 
Fund requirements and other deposits must be made within one hour of 
demand, unless NSCC determines otherwise. See supra note 4.
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    NSCC would be required to promptly notify OCC if a Common Member 
becomes a Defaulting NSCC Member, as described above. Upon receiving 
such a notice, OCC would not submit to NSCC any further E&A/Delivery 
Transactions involving the Defaulting NSCC Member for settlement, 
unless authorized representatives of both OCC and NSCC otherwise 
consent. OCC would, however, deliver to NSCC a list of all E&A/Delivery 
Transactions that have already been submitted to NSCC and that involve 
the Defaulting NSCC Member (``Defaulted NSCC Member Transactions''). 
The Guaranty Substitution ordinarily would not occur with respect to 
any Defaulted NSCC Member Transactions, unless both clearing agencies 
agree otherwise. As such, NSCC would have no obligation to guaranty 
such Defaulted NSCC Member Transactions, and OCC would continue to be 
responsible for effecting the settlement of such Defaulted NSCC Member 
Transactions pursuant to OCC's By-Laws and Rules. Once NSCC has 
confirmed the list of Defaulted NSCC Member Transactions, Guaranty 
Substitution would occur for all E&A/Delivery Transactions for that 
Activity Date that are not included on such list. NSCC would be 
required to promptly notify OCC upon the occurrence of the Guaranty 
Substitution Time on each Activity Date.
    If OCC suspends a Common Member after NSCC has received the E&A/
Delivery Transactions but before the Guaranty Substitution has 
occurred, and that Common Member has not become a Defaulting NSCC 
Member, the Guaranty Substitution would proceed at the Guaranty 
Substitution Time. In such a scenario, OCC would continue to be 
responsible for guaranteeing the settlement of the E&A/Delivery 
Transactions in question until the Guaranty Substitution Time, at which 
time the responsibility would transfer to NSCC. If, however, the 
suspended Common Member also becomes a

[[Page 31113]]

Defaulting NSCC Member after NSCC has received the E&A/Delivery 
Transactions but before the Guaranty Substitution has occurred, 
Guaranty Substitution would not occur, and OCC would continue to be 
responsible for effecting the settlement of such Defaulted NSCC Member 
Transactions pursuant to OCC's By-Laws and Rules (unless both clearing 
agencies agree otherwise).
    Finally, the New Accord also would provide for the consistent 
treatment of all exercise and assignment activity under the agreement. 
Under the Existing Accord, ``standard'' \19\ option contracts become 
guaranteed by NSCC when the Common Member meets its morning Clearing 
Fund Required Deposit at NSCC while ``non-standard'' exercise and 
assignment activity becomes guaranteed by NSCC at midnight of the day 
after trade date (T+1). Under the New Accord, all exercise and 
assignment activity for Eligible Securities would be guaranteed by NSCC 
as of the Guaranty Substitution Time, under the circumstances described 
above, further simplifying the framework for the settlement of such 
contracts.
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    \19\ Option contracts with ``standard'' expirations expire on 
the third Friday of the specified expiration month, while ``non-
standard'' contracts expire on other days of the expiration month.
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Other Terms of the New Accord
    The New Accord also would include a number of other provisions 
intended to either generally maintain certain terms of the Existing 
Accord or improve the procedures, information sharing, and overall 
governance process under the new agreement. Many of these terms are 
additions to or improvements upon the terms of the Existing Accord.
    Under the proposed New Accord, OCC and NSCC would agree to address 
the specifics regarding the time, form and manner of various required 
notifications and actions in a separate service level agreement which 
the parties would be able to revisit as their operational needs evolve. 
The service level agreement would also specify an effective date for 
the New Accord, which, as mentioned above, would occur on a date 
following approval and effectiveness of all required regulatory 
submissions to be filed by OCC and NSCC with the appropriate regulatory 
authorities. Similar to the Existing Accord, the proposed New Accord 
would remain in effect (a) until it is terminated by the mutual written 
agreement of OCC and NSCC, (b) until it is unilaterally terminated by 
either clearing agency upon one year's written notice (as opposed to 
six months under the Existing Accord), or (c) until it is terminated by 
either NSCC or OCC upon the bankruptcy or insolvency of the other, 
provided that the election to terminate is communicated to the other 
party within three business days by written notice.
    Under the proposed New Accord, NSCC would agree to notify OCC if 
NSCC ceases to act for a Common Member pursuant to the NSCC Rules no 
later than the earlier of NSCC's provision of notice of such action to 
the governmental authorities or notice to other NSCC Members. 
Furthermore, if an NSCC Member for which NSCC has not yet ceased to act 
fails to satisfy its Clearing Fund obligations to NSCC, NSCC would be 
required to notify OCC promptly after discovery of the failure. 
Likewise, OCC would be required to notify NSCC of the suspension of a 
Common Member no later than the earlier of OCC's provision of notice to 
the governmental authorities or other OCC Clearing Members.
    Under the Existing Accord, NSCC and OCC agree to share certain 
reports and information regarding settlement activity and obligations 
under the agreement. The New Accord would enhance this information 
sharing between the clearing agencies. Specifically, NSCC and OCC would 
agree to share certain information, including general risk management 
due diligence regarding Common Members, lists of Common Members, and 
information regarding the amounts of Common Members' margin and 
settlement obligations at OCC or Clearing Fund Required Deposits at 
NSCC. NSCC and OCC would also be required to provide the other clearing 
agency with any other information that the other reasonably requests in 
connection with the performance of its obligations under the New 
Accord. All such information would be required to be kept confidential, 
using the same care and discretion that each clearing agency uses for 
the safekeeping of its own members' confidential information. NSCC and 
OCC would each be required to act in good faith to resolve and notify 
the other of any errors, discrepancies or delays in the information it 
provides.
    The New Accord also would include new terms to provide that, to the 
extent one party is unable to perform any obligation as a result of the 
failure of the other party to perform its responsibilities on a timely 
basis, the time for the non-failing party's performance would be 
extended, its performance would be reduced to the extent of any such 
impairment, and it would not be liable for any failure to perform its 
obligations. Further, NSCC and OCC would agree that neither party would 
be liable to the other party in connection with its performance of its 
obligations under the proposed New Accord to the extent it has acted, 
or omitted or ceased to act, with the permission or at the direction of 
a governmental authority. Moreover, the proposed New Accord would 
provide that in no case would either clearing agency be liable to the 
other for punitive, incidental or consequential damages. The purpose of 
these new provisions is to provide clear and specific terms regarding 
each clearing agency's liability for non-performance under the 
agreement.
    The proposed New Accord would also contain the usual and customary 
representations and warranties for an agreement of this type, including 
representations as to the parties' good standing, corporate power and 
authority and operational capability, that the agreement complies with 
laws and all government documents and does not violate any agreements, 
and that all of the required regulatory notifications and filings would 
be obtained prior to the New Accord's effective date. It would also 
include representations that the proposed New Accord constitutes a 
legal, valid and binding obligation on each of OCC and NSCC and is 
enforceable against each, subject to standard exceptions. Furthermore, 
the proposed New Accord would contain a force majeure provision, under 
which NSCC and OCC would agree to notify the other no later than two 
hours upon learning that a force majeure event has occurred and both 
parties would be required to cooperate in good faith to mitigate the 
effects of any resulting inability to perform or delay in performing.

Proposed Amendments to OCC's By-Laws and Rules

    Given the key differences between the Existing Accord and the New 
Accord, as described above, OCC proposes certain changes to its By-Laws 
and Rules in order to accommodate the terms of the New Accord. The 
primary purpose of the proposed changes is to: (1) Reflect the expanded 
scope of the New Accord, (2) reflect changes related to the new 
Guaranty Substitution mechanics of the New Accord; and (3) make other 
changes necessary to conform to the terms of the New Accord or to 
otherwise provide additional clarity around the settlement and 
margining \20\ treatment

[[Page 31114]]

of: (i) Eligible Securities under the New Accord, (ii) non-regular way 
securities settling through the facilities of NSCC but outside of the 
New Accord, and (iii) those securities settling outside of the New 
Accord and away from NSCC on a broker-to-broker basis. These proposed 
changes are discussed in greater detail below.
---------------------------------------------------------------------------

    \20\ OCC notes that, while it is proposing changes to its Rules 
concerning margin requirements (e.g., which transactions would be 
included as part of OCC's margin calculation at a given point in 
time), OCC is not proposing any changes to its margin model (with 
the exception that OCC would no longer collect and hold margin for 
positions after NSCC's Guaranty has taken effect under the New 
Accord).
---------------------------------------------------------------------------

Changes Related to the Expanded Scope of the New Accord

    First, OCC proposes to amend and replace the defined term ``CNS-
eligible'' \21\ in order to reflect the expanded definition of Eligible 
Securities under the New Accord. The term ``CNS-eligible'' currently 
describes the securities underlying the physically-settled stock 
options that are eligible under the Existing Accord to be settled 
through NSCC's CNS Accounting Operation. Under the New Accord, however, 
the term Eligible Securities is more broadly defined to include 
securities (both Stock Options and Stock Futures) eligible for 
settlement via NSCC's CNS Accounting Operation and NSCC's Balance Order 
Accounting Operation. Accordingly, OCC proposes to use ``CCC,'' for 
``correspondent clearing corporation'' \22\ to describe the Eligible 
Securities. Thus, the term ``CCC-eligible'' would replace ``CNS-
eligible'' throughout OCC's By-Laws and Rules.
---------------------------------------------------------------------------

    \21\ See Article I, Section (C)(23) of OCC's By-Laws.
    \22\ Under Article I of OCC's By-Laws, the term ``correspondent 
clearing corporation'' means the National Securities Clearing 
Corporation or any successor thereto which, by agreement with the 
Corporation, provides facilities for settlements in respect of 
exercised option contracts or BOUNDs or in respect of delivery 
obligations arising from physically-settled stock futures.
---------------------------------------------------------------------------

    Next, because the New Accord would include the settlement of Stock 
Futures, OCC proposes to make several changes to its rules regarding 
Stock Futures to accommodate this expansion. More specifically, OCC 
proposes a conforming amendment to Rule 901 Interpretation and Policy 
(.02) to clarify that, under the New Accord, OCC will, subject to its 
discretion, cause the settlement of all matured Stock Futures to be 
made through the facilities of NSCC to the extent that the underlying 
securities are CCC-eligible as the term is currently proposed.
    OCC also proposes clarifying and conforming revisions to newly 
renumbered Rule 901(e) (currently Rule 901(d)) to specify that 
settlements made through the facilities of the correspondent clearing 
corporation are governed by Rule 901 and to clarify that, under the New 
Accord, specifications made in any Delivery Advice may be revoked up 
until the point at which NSCC's Guaranty has taken effect (the 
``obligation time'' as discussed below) and not the opening of business 
on the delivery date.

Changes Related to Guaranty Substitution

    OCC also proposes a series of amendments to its Rules to accurately 
reflect the process under which the Guaranty Substitution occurs under 
the New Accord. First, OCC proposes to amend Rule 901(c) so that the 
term ``obligation time''--the time that the correspondent clearing 
corporation becomes unconditionally obligated, in accordance with its 
rules, to effect settlement in respect thereof or to close out the 
securities contract arising therefrom--is synonymous with the Guaranty 
Substitution Time under the New Accord and (i.e., (i) settlement 
obligations are reported to and are not rejected by NSCC; (ii) NSCC has 
not notified OCC that it has ceased to act for the relevant Clearing 
Member; and (iii) the Clearing Fund requirements of the relevant 
Clearing Member are received by NSCC). Under the New Accord, if a 
default occurs prior to the Guaranty Substitution Time, the Guaranty 
Substitution will not occur for any E&A/Delivery Transactions involving 
the Defaulting NSCC Member, and OCC will continue to guarantee 
settlement for those Defaulted NSCC Member Transactions.
    Next, OCC proposes to amend language in newly renumbered Rule 
901(i) (currently Rule 901(h)) regarding the timing of the end of a 
Clearing Member's obligations to OCC with respect to securities to be 
settled through NSCC. Under the Existing Accord and OCC's existing 
Rules, a Clearing Member's obligations to OCC end only once settlement 
is completed. Under the New Accord, however, a Clearing Member's 
obligations to OCC will end when OCC's obligations with respect to 
guaranteeing settlement of the security would end (i.e., the Guaranty 
Substitution Time or ``obligation time''). OCC therefore proposes to 
amend newly renumbered Rule 901(i) to specify that a Clearing Member's 
obligations to OCC will be deemed completed and performed once the 
``obligation time'' has occurred.
    As discussed above, the New Accord eliminates the provisions of the 
Existing Accord whereby OCC and NSCC guaranteed each other the 
performance of Common Members and made certain payments to the other 
upon the default of a Common Member. As such, OCC proposes to delete 
discussions of such guarantees and payments from newly renumbered Rule 
901(i) and Rule 1107.
    OCC also proposes amendments to Rules 910 and 911, which set forth 
procedures for handling failures to make or take delivery of securities 
in settlement of exercised or assigned Stock Options and matured 
physically-settled Stock Futures, to add language to both rules to 
clarify that the failure procedures set forth therein would not apply 
with respect to any delivery to be made through NSCC pursuant to Rule 
901. Under the New Accord, once the Guaranty Substitution Time with 
respect to a specific E&A/Delivery Transaction occurs, OCC's Guaranty 
ends and NSCC's Guaranty begins, leaving OCC with no involvement with 
or responsibility for the settlement of the securities underlying that 
transaction. Therefore, if there is a failure to make or take delivery 
with respect to that transaction after Guaranty Substitution has 
occurred, the NSCC Rules will govern that failure. With respect to 
deliveries made on a broker-to-broker basis under OCC Rules 903 through 
912 (including those that may utilize NSCC's Obligation Warehouse 
services), and which are not governed by Rule 901, Guaranty 
Substitution does not occur and OCC's failure procedures would apply.

Changes to OCC's Margin Rules

    Under the New Accord, OCC will no longer collect margin on a 
transaction once it is no longer guaranteeing settlement for that 
transaction. As such, OCC proposes to add language to Rule 601(f) to 
clarify that OCC's margin calculations will not include delivery 
obligations arising from any Stock Options or Stock Futures that are 
eligible for settlement through NSCC and for which OCC has no further 
settlement obligations because either (i) Guaranty Substitution has 
occurred for E&A/Delivery Transactions under the New Accord (as 
described in revised Rule 901(c)) or (ii) NSCC has otherwise accepted 
transactions for non-regular way settlement under the NSCC Rules (as 
describe in newly proposed Rule 901(d)).\23\ By not including these 
transactions as part of OCC's margin calculation, OCC is hoping to 
alleviate instances of ``double-margining'' for Common Members that may 
otherwise simultaneously owe margin to NSCC

[[Page 31115]]

and OCC with respect to the same position.
---------------------------------------------------------------------------

    \23\ Related revisions to Rule 901(c) and newly proposed Rule 
901(d) are discussed in more detail below.
---------------------------------------------------------------------------

    OCC also proposes to delete Rule 608A in its entirety. The New 
Accord seeks to eliminate the situation under the Existing Accord where 
Common Members are effectively ``double-margined'' or required to 
simultaneously post margin with OCC and NSCC with respect to the same 
position. As the New Accord eliminates this double-margining scenario, 
Rule 608A, which provides procedures pursuant to which a Clearing 
Member could use the securities deposited as margin with OCC as 
collateral to secure a loan to pay its margin obligations to NSCC, is 
now unnecessary.

Other Clarifying Changes Not Related to the New Accord

    OCC also proposes to amend its Rules to make clarifying changes 
that are not directly required by the New Accord but would provide 
additional clarity in its Rules in light of other changes being made to 
accommodate the New Accord. Specifically, OCC proposes to revise Rule 
901 Interpretation and Policy (.02) to provide that transactions that 
involve the delivery of non-CCC eligible securities made on a broker-
to-broker basis (and away from NSCC) may nevertheless involve the use 
of certain services of NSCC (e.g., NSCC's Obligation Warehouse). For 
such transactions, because they are not covered by the New Accord and 
NSCC at no point guarantees settlement, OCC Rule 901 would not apply 
and delivery is governed by the broker-to-broker settlement procedures 
set forth in OCC Rules 903 through 912, as is the case currently today. 
Additionally, while OCC's existing Rules do not prohibit broker-to-
broker settlements from being facilitated through the services of a 
correspondent clearing corporation, they do not explicitly contemplate 
the possibility. OCC also proposes to make clarifying amendments to 
Rule 904(b) and 910A(a) to more clearly distinguish between settlements 
effected through NSCC's CNS Accounting Operation or Balance Order 
Accounting Operations in accordance with OCC Rule 901 and deliveries 
effected on a broker-to-broker basis utilizing services of NSCC under 
OCC Rules 903 through 912 and to clearly state which OCC Rules apply in 
each context.
    Further, OCC proposes to add a new paragraph (d) to Rule 901 to 
clarify that OCC still intends, at its discretion, to effect settlement 
of Stock Options and Stock Futures that are scheduled to be settled on 
the first business day after exercise or maturity through NSCC pursuant 
to Rule 901 and the relevant provisions of the NSCC Rules, even though 
such contracts are outside the scope of the New Accord. These contracts 
would continue to be settled as they are currently today.
    OCC also proposes clarifying and conforming changes to the 
introductory language of Chapter IX of the Rules. Specifically, OCC 
proposes conforming changes to the Rule to reflect the replacement of 
the defined term ``CNS-eligible'' with ``CCC-eligible'' as described 
above. The proposed changes would also clarify that OCC's broker-to-
broker settlement rules are contained in Rules 903-912, as Rule 902 
concerns Delivery Advices, which also may be applicable to settlements 
made through the correspondent clearing corporation pursuant to Rule 
901. In addition, the proposed changes to the introductory language of 
Chapter IX of the Rules would provide additional clarity around OCC's 
existing authority to alter a previous designation of a settlement 
method at any time prior to the designated delivery date by specifying 
that this authority would apply to both settlements to be made through 
the facilities of the correspondent clearing corporation pursuant to 
Rule 901 or settlements to be made on a broker-to-broker basis pursuant 
to Rules 903 through 912. Finally, OCC proposes a number of conforming 
changes to Rules 901 and 912 to reflect the renumbering of various Rule 
provisions due to the proposed amendments described above.

Expected Effect on and Management of Risk

    OCC believes that the proposed change, which would adopt the New 
Accord and make conforming changes to the OCC By-Laws and Rules to 
accommodate the New Accord, would reduce the overall level of risk to 
OCC, its Clearing Members, and the markets served by OCC.
    In connection with the proposal to enhance the timing of the 
Guaranty Substitution, the New Accord would provide a clearer, simpler 
framework for the settlement of Stock Options and Stock Futures. By 
pinpointing a specific moment in time, the Guaranty Substitution Time, 
at which guarantee obligations transfer from OCC to NSCC with respect 
to each cleared securities transaction, the New Accord would eliminate 
any ambiguity regarding which clearing agency is responsible for 
guaranteeing settlement at any given moment. Establishing a precise 
Guaranty Substitution Time also provides greater certainty that, in the 
event of the default of a Common Member, the default would be handled 
pursuant to the rules and procedures of the clearing agency whose 
guarantee is then in effect and the system for the settlement and 
clearance of Stock Options and Stock Futures would continue with 
minimal interruption. This greater certainty strengthens OCC's and 
NSCC's ability to plan for and manage, and therefore mitigate, the risk 
presented by Common Member defaults to OCC, other Clearing Members and 
the market as a whole.
    The proposal to expand the category of securities eligible for 
settlement and guaranty under the New Accord would provide consistent 
treatment across all expiries for products with regular way settlement 
cycle specifications, and would provide a clearer, simpler framework 
for the settlement of these securities. Finally, the proposal to put 
additional arrangements into place concerning the procedures, 
information sharing, and overall governance processes under the New 
Accord, would assist the clearing agencies to more effectively 
identify, monitor, and manage risks that may be presented by certain 
Common Members, and would create new efficiencies in their general 
surveillance efforts with respect to these firms.

Consistency With the Clearing Supervision Act

    The stated purpose of the Clearing Supervision Act 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 and strengthening the 
liquidity of systemically important financial market utilities.\24\ 
Section 805(a)(2) of the Clearing Supervision Act \25\ also authorizes 
the Commission to prescribe risk management standards for the payment, 
clearing and settlement activities of designated clearing entities, 
like OCC, for which the Commission is the supervisory agency. Section 
805(b) of the Clearing Supervision Act \26\ states that the objectives 
and principles for risk management standards prescribed under Section 
805(a) shall be to:
---------------------------------------------------------------------------

    \24\ 12 U.S.C. 5461(b).
    \25\ 12 U.S.C. 5464(a)(2).
    \26\ 12 U.S.C. 5464(b).
---------------------------------------------------------------------------

     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 Clearing Supervision Act and the Act in furtherance of 
these objectives and principles, including

[[Page 31116]]

those standards adopted pursuant to the Commission rules cited 
below.\27\ For the reasons set forth below, OCC believes that the 
proposed change is consistent with the risk management standards 
promulgated under Section 805(a) of the Clearing Supervision Act.\28\
---------------------------------------------------------------------------

    \27\ 17 CFR 240.17Ad-22. See Securities Exchange Act Release 
Nos. 68080 (October 22, 2012), 77 FR 66220 (November 2, 2012) (S7-
08-11) (``Clearing Agency Standards''); 78961 (September 28, 2016), 
81 FR 70786 (October 13, 2016) (S7-03-14) (``Standards for Covered 
Clearing Agencies''). The Standards for Covered Clearing Agencies 
became effective on December 12, 2016. OCC is a ``covered clearing 
agency'' as defined in Rule 17Ad-22(a)(5) and therefore is subject 
to section (e) of Rule 17Ad-22.
    \28\ 12 U.S.C. 5464(a).
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(1) requires that a covered clearing agency 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to provide for a well-founded, clear, 
transparent, and enforceable legal basis for each aspect of its 
activities in all relevant jurisdictions.\29\ The New Accord would 
constitute a legal, valid and binding obligation on each of OCC and 
NSCC, which is enforceable against each clearing agency. In connection 
with the proposal to enhance the timing of the Guaranty Substitution, 
the New Accord would establish clear, transparent, and enforceable 
terms for the settlement of OCC's cleared Stock Options and Stock 
Futures through the facilities of NSCC and would simplify the 
settlement process for those Stock Options currently settled under the 
Existing Accord. By clarifying the timing and mechanisms by which OCC's 
Guaranty ends and NSCC's Guaranty begins by focusing on the timing of 
the Guaranty Substitution, the new Accord, specifically the proposal to 
enhance the timing of the Guaranty Substitution, would provide a clear, 
transparent and enforceable legal basis for OCC's and NSCC's 
obligations during the event of a Common Member default. As a result, 
OCC believes that the proposal is consistent with the requirements of 
Rule 17Ad-22(e)(1).\30\
---------------------------------------------------------------------------

    \29\ 17 CFR 240.17Ad-22(e)(1).
    \30\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(20) requires, in part, that a covered clearing 
agency establish, implement, maintain and enforce written policies and 
procedures reasonably designed to identify, monitor, and manage risks 
related to any link the covered clearing agency establishes with one or 
more other clearing agencies or financial market utilities.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 240.17Ad-22(e)(20).
---------------------------------------------------------------------------

    OCC is proposing to adopt the New Accord in order to address the 
risks it has identified related to its existing link with the NSCC 
within the Existing Accord. Specifically, under the terms of the 
Existing Accord, even after NSCC's guarantee has come into effect, OCC 
is not released from its guarantee with respect to the Options E&A 
until certain deadlines have passed on the first business day following 
the scheduled settlement date without NSCC notifying OCC that the 
relevant Common Member has failed to meet an obligation to NSCC and/or 
NSCC has ceased to act for such firm. This current process results in a 
period of time where NSCC's trade guarantee and OCC's guarantee both 
apply to the same positions, and, therefore, both clearing agencies are 
holding margin against the same Options E&A position. As a result, the 
Existing Accord provides for a more complicated framework for the 
settlement of certain Stock Options. These complications could give 
rise to inconsistencies with regard to the development and application 
of interdependent policies and procedures between OCC and NSCC, which 
could lead to unanticipated disruptions in OCC's or NSCC's clearing 
operations.
    In connection with the proposal to enhance the timing of the 
Guaranty Substitution, the New Accord would provide for a clearer, 
simpler framework for the settlement of certain Stock Options and Stock 
Futures by pinpointing a specific moment in time, the Guaranty 
Substitution Time, at which guarantee obligations would transfer from 
OCC to NSCC. The New Accord would eliminate any ambiguity regarding 
which clearing agency is responsible for guaranteeing settlement at any 
given moment. Establishing a precise Guaranty Substitution Time would 
also provide greater certainty that in the event of a Common Member 
default, the default would be handled pursuant to the rules and 
procedures of the clearing agency whose guarantee is then in effect and 
the system for the clearance and settlement of Stock Options and Stock 
Futures would continue with minimal interruption. This greater 
certainty would strengthen OCC's and NSCC's ability to plan for and 
manage, and therefore would mitigate, the risk presented by Common 
Member defaults to OCC and NSCC, other members, and the markets the 
clearing agencies serve. Therefore, through the adoption of the 
proposal to enhance the timing of the Guaranty Substitution, OCC would 
more effectively manage its risks related to the operation of the New 
Accord.
    Moreover, in connection with the proposal to put additional 
arrangements into place concerning the procedures, information sharing, 
and overall governance processes under the New Accord, NSCC and OCC 
would agree to share certain information, including general 
surveillance information regarding their members, so that each clearing 
agency would be able to effectively identify, monitor, and manage risks 
that may be presented by certain Common Members. Accordingly, OCC 
believes the proposed changes are reasonably designed to identify, 
monitor, and manage risks related to the link established between OCC 
and NSCC for the settlement of certain Stock Options and Stock Futures 
in a manner consistent with Rule 17Ad-22(e)(20).\32\
---------------------------------------------------------------------------

    \32\ Id.
---------------------------------------------------------------------------

    Finally, Rule 17Ad-22(e)(21) requires that a covered clearing 
agency establish, implement, maintain and enforce written policies and 
procedures reasonably designed to, among other things, be efficient and 
effective in meeting the requirements of its participants and the 
markets it serves.\33\ As noted above, under the Existing Accord, even 
after NSCC's guarantee has come into effect, OCC is not released from 
its guarantee with respect to the Options E&A until certain deadlines 
have passed on the first business day following the scheduled 
settlement date without NSCC notifying OCC that the relevant Common 
Member has failed to meet an obligation to NSCC and/or NSCC has ceased 
to act for such firm. This results in a period of time where NSCC's 
guarantee overlaps with OCC's guarantee and where both clearing 
agencies are holding margin against the same Options E&A positions. In 
connection with the proposal to enhance the timing of the Guaranty 
Substitution, the New Accord would minimize this ``double margining'' 
issue by introducing a new Guaranty Substitution Time, which would 
normally occur as soon as NSCC has received all Required Deposits to 
the Clearing Fund from Common Members, which have been calculated 
taking into account the relevant E&A/Delivery Transactions, rather than 
require reimbursement payments from one clearing agency to the other. 
As a result, Common Members would no longer be required to post margin 
at both clearing agencies to cover the same E&A/Delivery Transactions. 
OCC believes that, by simplifying the terms of the existing agreement 
in this way, the New Accord is designed to be efficient and effective 
in meeting the requirements of OCC's and NSCC's participants and the 
markets they serve.
---------------------------------------------------------------------------

    \33\ 17 CFR 240.17Ad-22(e)(21).

---------------------------------------------------------------------------

[[Page 31117]]

    Additionally, the proposal to put additional arrangements into 
place concerning the procedures, information sharing, and overall 
governance processes under the New Accord would create new efficiencies 
in the management of this important link between OCC and NSCC. The 
proposal to enhance information sharing between OCC and NSCC would 
allow the clearing agencies to more effectively identify, monitor, and 
manage risks that may be presented by certain Common Members, and would 
create new efficiencies in their general surveillance efforts with 
respect to these firms.
    In these ways, OCC believes the proposed New Accord is consistent 
with the requirements of Rule 17Ad-22(e)(21).\34\
---------------------------------------------------------------------------

    \34\ Id.
---------------------------------------------------------------------------

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 the proposed change was filed with the Commission or (ii) the date 
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 clearing agency 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 the clearing agency in writing that it does not object to the 
proposed change and authorizes the clearing agency 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.
    The proposal shall not take effect until all regulatory actions 
required with respect to the proposal are completed.

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-2017-804 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2017-804. 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 at 
http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_17_804.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-2017-804 and 
should be submitted on or before July 20, 2017.

    By the Commission.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-14016 Filed 7-3-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 127 / Wednesday, July 5, 2017 / Notices 31109

more accurate employee pension employer to indicate whether the and 11b (paper) and Items 10a and 10b
information by asking the employer employee filed for the pension or (Internet). The RRB also proposes to
whether the employee is currently instead elected to defer distribution make other editorial changes. The RRB
eligible for a pension and instructing the from the pension account in Items 11a proposes no changes to Form G–88r.

ESTIMATE OF ANNUAL RESPONDENT BURDEN
Annual Time Burden
Form No. responses (minutes) (hours)

G–88p .......................................................................................................................................... 100 8 13
G–88p (Internet) .......................................................................................................................... 200 6 20
G–88r ........................................................................................................................................... 10 8 1

Total ...................................................................................................................................... 310 ........................ 34

3. Title and purpose of information deceased employee; (2) the amount of widow(er). The Railroad Retirement
collection: Statement Regarding spouse and survivor annuities; and (3) Board (RRB) utilizes Form G–134,
Contributions and Support; OMB 3220– the Tier II restored amount payable to a Statement Regarding Contributions and
0099. widow(er) whose annuity was reduced Support, to secure information needed
Under Section 2 of the Railroad for receipt of an employee annuity, and to adequately determine if the applicant
Retirement Act, dependency on an who was dependent on the railroad meets the one-half support requirement.
employee for one-half support at the employee in the year prior to the One response is completed by each
time of the employee’s death can affect employee’s death. One-half support may respondent. Completion is required to
(1) entitlement to a survivor annuity also negate the public service pension obtain benefits. The RRB proposes no
when the survivor is a parent of the offset in Tier I for a spouse or changes to Form G–134.

ESTIMATE OF ANNUAL RESPONDENT BURDEN
Annual Time Burden
Form No. responses (minutes) (hours)

G–134

With Assistance .................................................................................................................... 75 147 184
Without assistance ............................................................................................................... 25 180 75

Total ............................................................................................................................... 100 ........................ 259

Additional Information or Comments: SECURITIES AND EXCHANGE Clearing Corporation (‘‘OCC’’) filed with
To request more information or to COMMISSION the Securities and Exchange
obtain a copy of the information Commission (‘‘Commission’’) an
collection justification, forms, and/or [Release No. 34–81040; File No. SR–OCC– advance notice as described in Items I,
2017–804] II and III below, which Items have been
supporting material, contact Dana
Hickman at (312) 751–4981 or Self-Regulatory Organizations; The prepared by OCC. The Commission is
Dana.Hickman@RRB.GOV. Comments Options Clearing Corporation; Notice publishing this notice to solicit
regarding the information collection of Filing of Advance Notice comments on the advance notice from
should be addressed to Brian Foster, Concerning the Adoption of a New interested persons.
Railroad Retirement Board, 844 North Stock Options and Futures Settlement I. Clearing Agency’s Statement of the
Rush Street, Chicago, Illinois 60611– Agreement Between The Options Terms of Substance of the Advance
1275 or emailed to Brian.Foster@rrb.gov. Clearing Corporation and the National Notice
Written comments should be received Securities Clearing Corporation
within 60 days of this notice. This advance notice is filed in
June 28, 2017. connection with proposed changes
Brian D. Foster, Pursuant to Section 806(e)(1) of Title relating to a new Stock Options and
Clearance Officer. VIII of the Dodd-Frank Wall Street Futures Settlement Agreement (‘‘New
[FR Doc. 2017–14067 Filed 7–3–17; 8:45 am] Reform and Consumer Protection Act, Accord’’) between OCC and the National
BILLING CODE 7905–01–P
entitled Payment, Clearing and Securities Clearing Corporation
Settlement Supervision Act of 2010 (‘‘NSCC,’’ collectively NSCC and OCC
(‘‘Clearing Supervision Act’’ or may be referred to herein as the
‘‘Payment, Clearing and Settlement
sradovich on DSK3GMQ082PROD with NOTICES

‘‘clearing agencies’’) and amendments to
Supervision Act’’) 1 and Rule 19b– OCC’s By-Laws and Rules to
4(n)(1)(i) of the Securities Exchange Act accommodate the proposed provisions
of 1934 (‘‘Act’’),2 notice is hereby given
of the New Accord.
that on June 1, 2017, The Options
The proposed changes to OCC’s By-
1 12 U.S.C. 5465(e)(1). Laws and Rules and the proposed New
2 17 CFR 240.19b–4(n)(1)(i). Accord were submitted as Exhibits 5A–

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Federal Register / Vol. 82, No. 127 / Wednesday, July 5, 2017 / Notices 31117

Additionally, the proposal to put Electronic Comments SECURITIES AND EXCHANGE
additional arrangements into place COMMISSION
concerning the procedures, information • Use the Commission’s Internet
sharing, and overall governance comment form (http://www.sec.gov/ Proposed Collection; Comment
processes under the New Accord would rules/sro.shtml); or Request
create new efficiencies in the • Send an email to rule-comments@ Upon Written Request, Copies Available
management of this important link sec.gov. Please include File Number SR– From: Securities and Exchange
between OCC and NSCC. The proposal OCC–2017–804 on the subject line. Commission, Office of FOIA Services,
to enhance information sharing between 100 F Street NE., Washington, DC
OCC and NSCC would allow the Paper Comments
20549–2736
clearing agencies to more effectively
• Send paper comments in triplicate Extension:
identify, monitor, and manage risks that
may be presented by certain Common to Secretary, Securities and Exchange Rule 38a–1; SEC File No. 270–522, OMB
Commission, 100 F Street NE., Control No. 3235–0586
Members, and would create new
efficiencies in their general surveillance Washington, DC 20549. Notice is hereby given that, pursuant
efforts with respect to these firms. All submissions should refer to File to the Paperwork Reduction Act of 1995
In these ways, OCC believes the (44 U.S.C. 3501 et seq.), the Securities
Number SR–OCC–2017–804. This file
proposed New Accord is consistent with and Exchange Commission (the
number should be included on the ‘‘Commission’’) is soliciting comments
the requirements of Rule 17Ad– subject line if email is used. To help the
22(e)(21).34 on the collection of information
Commission process and review your summarized below. The Commission
III. Date of Effectiveness of the Advance comments more efficiently, please use plans to submit this existing collection
Notice and Timing for Commission only one method. The Commission will of information to the Office of
Action post all comments on the Commission’s Management and Budget for extension
The proposed change may be Internet Web site (http://www.sec.gov/ and approval.
implemented if the Commission does rules/sro.shtml). Copies of the Rule 38a–1 (17 CFR 270.38a–1) under
not object to the proposed change submission, all subsequent the Investment Company Act of 1940
within 60 days of the later of (i) the date amendments, all written statements (15 U.S.C. 80a) (‘‘Investment Company
the proposed change was filed with the with respect to the advance notice that Act’’) is intended to protect investors by
Commission or (ii) the date any are filed with the Commission, and all fostering better fund compliance with
additional information requested by the written communications relating to the securities laws. The rule requires every
Commission is received. OCC shall not advance notice between the registered investment company and
implement the proposed change if the Commission and any person, other than business development company
Commission has any objection to the those that may be withheld from the (‘‘fund’’) to: (i) Adopt and implement
proposed change. public in accordance with the written policies and procedures
The Commission may extend the reasonably designed to prevent
provisions of 5 U.S.C. 552, will be
period for review by an additional 60 violations of the federal securities laws
available for Web site viewing and
days if the proposed change raises novel by the fund, including procedures for
printing in the Commission’s Public oversight of compliance by each
or complex issues, subject to the Reference Room, 100 F Street NE.,
Commission providing the clearing investment adviser, principal
Washington, DC 20549 on official underwriter, administrator, and transfer
agency with prompt written notice of
business days between the hours of agent of the fund; (ii) obtain the fund
the extension. A proposed change may
10:00 a.m. and 3:00 p.m. Copies of the board of directors’ approval of those
be implemented in less than 60 days
from the date the advance notice is filing also will be available for policies and procedures; (iii) annually
filed, or the date further information inspection and copying at the principal review the adequacy of those policies
requested by the Commission is office of OCC and on OCC’s Web site at and procedures and the policies and
received, if the Commission notifies the http://www.theocc.com/components/ procedures of each investment adviser,
clearing agency in writing that it does docs/legal/rules_and_bylaws/sr_occ_17_ principal underwriter, administrator,
not object to the proposed change and 804.pdf. and transfer agent of the fund, and the
authorizes the clearing agency to All comments received will be posted effectiveness of their implementation;
implement the proposed change on an (iv) designate a chief compliance officer
without change; the Commission does
earlier date, subject to any conditions to administer the fund’s policies and
not edit personal identifying
imposed by the Commission. procedures and prepare an annual
information from submissions. You report to the board that addresses
OCC shall post notice on its Web site should submit only information that
of proposed changes that are certain specified items relating to the
you wish to make available publicly. policies and procedures; and (v)
implemented.
The proposal shall not take effect All submissions should refer to File maintain for five years the compliance
until all regulatory actions required Number SR–OCC–2017–804 and should policies and procedures and the chief
with respect to the proposal are be submitted on or before July 20, 2017. compliance officer’s annual report to the
completed. By the Commission.
board.
The rule contains certain information
IV. Solicitation of Comments Robert W. Errett, collection requirements that are
sradovich on DSK3GMQ082PROD with NOTICES

Interested persons are invited to Deputy Secretary. designed to ensure that funds establish
submit written data, views and [FR Doc. 2017–14016 Filed 7–3–17; 8:45 am] and maintain comprehensive, written
arguments concerning the foregoing. BILLING CODE 8011–01–P internal compliance programs. The
Comments may be submitted by any of information collections also assist the
the following methods: Commission’s examination staff in
assessing the adequacy of funds’
34 Id. compliance programs.

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Document Created: 2017-07-04 02:00:52
Document Modified: 2017-07-04 02:00:52
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		82 FR 31109