83 FR 11807 - Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change Related to The Options Clearing Corporation's Fee Policy

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 52 (March 16, 2018)

Page Range		11807-11808
FR Document		2018-05331

Federal Register, Volume 83 Issue 52 (Friday, March 16, 2018)

[Federal Register Volume 83, Number 52 (Friday, March 16, 2018)]
[Notices]
[Pages 11807-11808]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2018-05331]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82856; File No. SR-OCC-2018-001]

Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change Related to The Options Clearing
Corporation's Fee Policy

March 12, 2018.
On January 18, 2018, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ proposed rule change SR-
OCC-2018-001. The proposed rule change was published for comment in the
Federal Register on January 30, 2018,\3\ and the Commission did not
receive any comments. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 82576 (January 24,
2018), 83 FR 4324 (January 30, 2018) (SR-OOC-2018-001) (``Notice'').
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I. Description of the Proposed Rule Change

A. Background

As stated in the Notice, OCC filed the proposed Fee Policy to
reduce the permitted implementation time for proposed changes to its
Schedule of Fees.\4\ Under the current Fee Policy, any change to the
Schedule of Fees resulting from a review by OCC's Board of Directors
(``Board'') \5\ will be implemented no sooner than 60 days after filing
the revised Schedule of Fees with the Commission as a proposed rule
change.
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\4\ See Notice at 4324.
\5\ See Notice at 4325 (stating that the authority to review and
approve changes to OCC's fees pursuant to the Capital Plan has been
delegated to the Compensation and Performance Committee of the
Board). See also OCC Compensation and Performance Committee Charter,
available at: http://www.optionsclearing.com/components/docs/about/corporate-information/performance_committee_charter.pdf.
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B. The Proposed Rule Change to OCC's Fee Policy

OCC's By-Laws require OCC to set its fee structure so that it is
sufficient to: (1) Cover OCC's operating expenses plus a Business Risk
Buffer (``Buffer''); \6\ (2) maintain reserves deemed reasonably
necessary by OCC's Board; and (3) accumulate an additional surplus
deemed advisable by the Board to permit OCC to meet its obligations to
its Clearing Members and the public.\7\ As part of the Fee Policy, OCC
sets fees at a level that will cover its estimated operating expenses
plus the additional 25% Buffer, with OCC conducting quarterly reviews
to manage revenues as close to the Buffer as possible. OCC stated that
the Board may rely on recommendations of OCC staff based on analyses of
year-to-date revenue and operating expenses, as well as projected
clearing volume and operating expenses to determine the proper level of
fees to achieve the Buffer.\8\
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\6\ The Buffer is an amount of fee revenue that OCC targets
above its anticipated operating expenses to allow for unexpected
fluctuations in operating expenses, business capital needs, and
regulatory capital requirements.
\7\ See OCC's By-Laws, Art. IX, Sec. 9. In the Notice at 4325,
OCC noted that clauses two and three above would be invoked only at
the discretion of OCC's Board and in extraordinary circumstances.
\8\ See Notice at 4325.
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As stated in the Notice, OCC believes that the current 60-day
implementation period under the Fee Policy: (i) Increases the
difficulty of projecting appropriate fee levels needed to cover its
operating expenses and the Buffer because of the amount of time that
passes between OCC's analysis of the data supporting the fee change and
the subsequent implementation of the fee change; (ii) increases the
risk that by the time the fee change is implemented, the extended delay
in implementation may result in revenues that diverge (either higher or
lower) further from the target Buffer; and (iii) increases the impact
of fee changes on participants due to the delayed implementation
timing.\9\ OCC states that the effects of delayed implementation
described above may result in OCC needing to make more frequent and/or
more dramatic changes to its Schedule of Fees in order to maintain its
target Buffer, resulting in less stability in fees for OCC's
participants.\10\ OCC states that reducing the 60-day implementation
period to thirty days would allow for fee adjustments that are based on
revenue and expense data that is more current, and therefore
projections that are more accurate.\11\ OCC further states that it
believes the proposed Fee Policy would improve its ability to set fees
at the level required by the Fee Policy while still providing adequate
notice to its participants of any proposed fee changes.\12\
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\9\ See id. OCC further stated that, because it generally
implements fee changes on the first of the month, the actual delay
in implementing a proposed fee change may be significantly longer
than 60 days depending on the timing of Board approval of any fee
change and subsequent filing of the associated proposed rule change.
\10\ See id.
\11\ See id.
\12\ See id.
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II. Discussion and Commission Findings

Section 19(b)(2)(C) of the Act \13\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Act and rules and regulations thereunder applicable
to such organization. The Commission finds that the proposed Fee Policy
is consistent with Section 17A(b)(3)(F) of the Act \14\ and Rule 17Ad-
22(e)(21) \15\ thereunder, as described in detail below.
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\13\ 15 U.S.C. 78s(b)(2)(C).
\14\ 15 U.S.C. 78q-1(b)(3)(F).
\15\ 17 CFR 240.17Ad-22(e)(21).
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A. Consistency With Section 17A(b)(3)(F) of the Act

Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions and the protection
of investors and the public interest.\16\ As described above,

[[Page 11808]]

the Fee Policy requires OCC to set fees at a level sufficient to cover
its operating expenses plus a Buffer. Conducting quarterly reviews
allows OCC to monitor the fees collected and make any necessary
adjustments to maintain the Buffer. However, delayed implementation of
fee changes due to the 60-day waiting period and OCC's preference to
introduce such changes at the beginning of the month increase the risk
of an inaccurate fee calculation, which could in turn result in OCC
collecting inadequate resources to cover its operating expenses and
maintain the Buffer.
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\16\ 15 U.S.C. 78q-1(b)(3)(F).
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The Commission believes that setting clearing fees based on more
current information would allow OCC to more accurately set and collect
fees necessary to support its operations, and promote the prompt and
accurate clearance and settlement of securities transactions. The
Commission further believes that accurate fee calculations supports the
protection of investors and the public by protecting participants from
large and unexpected swings in fee levels resulting from fee schedules
based upon stale and outdated information. While the proposed Fee
Policy would shorten the notice period for implementation, the
Commission believes that thirty days still provides sufficient notice
for Clearing Members to make adjustments to their activity as a result
of any impending fee change. Accordingly, the Commission finds that the
proposed Fee Policy promotes the prompt and accurate settlement of
securities transactions and protection of investors and the public
interest, consistent with Section 17A(b)(3)(F) of the Act.\17\
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\17\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Consistency With Rule 17Ad-22(e)(21)

Rule 17Ad-22(e)(21) requires, in part, that a covered clearing
agency establish, implement, maintain, and enforce written policies and
procedures that are reasonably designed to be efficient and effective
in meeting the requirements of its participants and the markets it
serves.\18\
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\18\ 17 CFR 240.17Ad-22(e)(21).
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The Fee Policy requires OCC to set fees at levels designed to cover
its operating expenses and to maintain the Buffer. As discussed above,
the proposed Fee Policy would reduce the implementation period for fee
changes from sixty to thirty days. The Commission believes the proposed
change would enhance the efficiency and effectiveness of OCC's fee
calculations by using more current expense and revenue information,
thereby leading to more accurate fee projections. Improving the
efficiency and effectiveness of OCC's fee calculation process ensures
that OCC is able to cover its operating expenses and maintain the
Buffer, while also reducing the possibility of large and unexpected
swings in fees that could result from using stale and outdated
information. Accordingly, the Commission finds that the proposed Fee
Policy would enhance OCC's efficiency and effectiveness in setting
accurate fees necessary to cover its operating expenses and the Buffer,
thereby enhancing its efficiency and effectiveness to meet the
requirements of its participants and the markets it serves, consistent
with Rule 17Ad-22(e)(21).\19\
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\19\ Id.
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IV. Conclusion

On the basis of the foregoing, the Commission finds that the
proposed Fee Policy is consistent with the requirements of the Act, and
in particular, with the requirements of Section 17A of the Act \20\ and
Rule 17Ad-22(e)(21) \21\ thereunder.
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\20\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\21\ 17 CFR 240.17Ad-22(e)(21).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\22\ that the proposed rule change (SR-OCC-2018-001) be, and it
hereby is, approved.
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\22\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated Authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-05331 Filed 3-15-18; 8:45 am]
BILLING CODE 8011-01-P

11808 Federal Register / Vol. 83, No. 52 / Friday, March 16, 2018 / Notices

the Fee Policy requires OCC to set fees thereby leading to more accurate fee individuals and organizations. The
at a level sufficient to cover its operating projections. Improving the efficiency purpose of this Notice is to allow 30
expenses plus a Buffer. Conducting and effectiveness of OCC’s fee days for public comment.
quarterly reviews allows OCC to calculation process ensures that OCC is DATES: Submit comments directly to the
monitor the fees collected and make any able to cover its operating expenses and Office of Management and Budget
necessary adjustments to maintain the maintain the Buffer, while also reducing (OMB) up to April 16, 2018.
Buffer. However, delayed the possibility of large and unexpected ADDRESSES: Direct comments to the
implementation of fee changes due to swings in fees that could result from Department of State Desk Officer in the
the 60-day waiting period and OCC’s using stale and outdated information. Office of Information and Regulatory
preference to introduce such changes at Accordingly, the Commission finds that Affairs at the Office of Management and
the beginning of the month increase the the proposed Fee Policy would enhance Budget (OMB). You may submit
risk of an inaccurate fee calculation, OCC’s efficiency and effectiveness in comments by the following methods:
which could in turn result in OCC setting accurate fees necessary to cover • Email: oira_submission@
collecting inadequate resources to cover its operating expenses and the Buffer, omb.eop.gov. You must include the DS
its operating expenses and maintain the thereby enhancing its efficiency and form number, information collection
Buffer. effectiveness to meet the requirements title, and the OMB control number in
The Commission believes that setting of its participants and the markets it the subject line of your message.
clearing fees based on more current serves, consistent with Rule 17Ad– • Fax: 202–395–5806. Attention: Desk
information would allow OCC to more 22(e)(21).19 Officer for Department of State.
accurately set and collect fees necessary
IV. Conclusion FOR FURTHER INFORMATION CONTACT:
to support its operations, and promote
Direct requests for additional
the prompt and accurate clearance and On the basis of the foregoing, the information regarding the collection
settlement of securities transactions. Commission finds that the proposed Fee listed in this notice, including requests
The Commission further believes that Policy is consistent with the for copies of the proposed collection
accurate fee calculations supports the requirements of the Act, and in instrument and supporting documents,
protection of investors and the public by particular, with the requirements of to Patrice Johnson at 3507 International
protecting participants from large and Section 17A of the Act 20 and Rule Place NW, Washington DC 20008, who
unexpected swings in fee levels 17Ad–22(e)(21) 21 thereunder. may be reached on 202–895–3504 or at
resulting from fee schedules based upon It is therefore ordered, pursuant to
stale and outdated information. While johnsonpd@state.gov.
Section 19(b)(2) of the Act,22 that the SUPPLEMENTARY INFORMATION:
the proposed Fee Policy would shorten proposed rule change (SR–OCC–2018–
the notice period for implementation, • Title of Information Collection:
001) be, and it hereby is, approved. Foreign Diplomatic Services
the Commission believes that thirty
days still provides sufficient notice for For the Commission, by the Division of Applications (FDSA).
Trading and Markets, pursuant to delegated • OMB Control Number: 1405–0105.
Clearing Members to make adjustments Authority.23 • Type of Request: Revision of a
to their activity as a result of any Currently Approved Collection.
Eduardo A. Aleman,
impending fee change. Accordingly, the • Originating Office: M/OFM.
Assistant Secretary.
Commission finds that the proposed Fee • Form Number: DS–98, DS–99, DS–
Policy promotes the prompt and [FR Doc. 2018–05331 Filed 3–15–18; 8:45 am]
100, DS–101, DS–102, DS–104, DS–
accurate settlement of securities BILLING CODE 8011–01–P
1504, DS–1972D, DS–1972T, DS–2003,
transactions and protection of investors DS–2004, DS–2005, DS–2006, DS–2008,
and the public interest, consistent with DS–4138, DS- 4139, DS–4140, DS–4155,
Section 17A(b)(3)(F) of the Act.17 DEPARTMENT OF STATE DS–4284, DS–4285, DS–4298, DS–4299,
B. Consistency With Rule 17Ad– [Public Notice: 10353] DS–7675.
22(e)(21) • Respondents: Foreign Mission
30-Day Notice of Proposed Information Community.
Rule 17Ad–22(e)(21) requires, in part, Collection: Foreign Diplomatic • Estimated Number of Respondents:
that a covered clearing agency establish, Services Applications (FDSA) 98,770.
implement, maintain, and enforce • Estimated Number of Responses:
written policies and procedures that are ACTION:Notice of request for public 98,770.
reasonably designed to be efficient and comment and submission to OMB of • Average Time per Response: 12
effective in meeting the requirements of proposed collection of information. minutes.
its participants and the markets it • Total Estimated Burden Time:
serves.18 SUMMARY: The Department of State has 20,726 hours annually.
The Fee Policy requires OCC to set submitted the information collection • Frequency: For each specific event;
fees at levels designed to cover its described below to the Office of annually.
operating expenses and to maintain the Management and Budget (OMB) for • Obligation to Respond: Mandatory
Buffer. As discussed above, the approval. In accordance with the and/or Required to Obtain or Retain a
proposed Fee Policy would reduce the Paperwork Reduction Act of 1995 we Benefit.
implementation period for fee changes are requesting comments on this We are soliciting public comments to
from sixty to thirty days. The collection from all interested permit the Department to:
Commission believes the proposed • Evaluate whether the proposed
daltland on DSKBBV9HB2PROD with NOTICES

change would enhance the efficiency 19 Id.
information collection is necessary for
20 In approving this proposed rule change, the
and effectiveness of OCC’s fee the proper functions of the Department.
calculations by using more current
Commission has considered the proposed rule’s • Evaluate the accuracy of our
impact on efficiency, competition, and capital
expense and revenue information, formation. See 15 U.S.C. 78c(f). estimate of the time and cost burden for
21 17 CFR 240.17Ad–22(e)(21). this proposed collection, including the
17 15 U.S.C. 78q–1(b)(3)(F). 22 15 U.S.C. 78s(b)(2). validity of the methodology and
18 17 CFR 240.17Ad–22(e)(21). 23 17 CFR 200.30–3(a)(12). assumptions used.

VerDate Sep<11>2014 21:54 Mar 15, 2018 Jkt 244001 PO 00000 Frm 00140 Fmt 4703 Sfmt 4703 E:\FR\FM\16MRN1.SGM 16MRN1

Document Created: 2018-03-16 01:12:10
Document Modified: 2018-03-16 01:12:10

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		83 FR 11807