83 FR 37864 - Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Partial Amendments No. 1 and 2 to Proposed Rule Change Concerning Updates to and Formalization of OCC's Recovery and Orderly Wind-Down Plan

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 149 (August 2, 2018)

Page Range		37864-37867
FR Document		2018-16533
Federal Register, Volume 83 Issue 149 (Thursday, August 2, 2018)
[Federal Register Volume 83, Number 149 (Thursday, August 2, 2018)]
[Notices]
[Pages 37864-37867]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-16533]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83732; File No. SR-OCC-2017-021]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Partial Amendments No. 1 and 2 to Proposed Rule 
Change Concerning Updates to and Formalization of OCC's Recovery and 
Orderly Wind-Down Plan

July 27, 2018.
    On December 8, 2017, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') 
proposed rule change SR-OCC-2017-021 (``Proposed Rule Change'') 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ concerning enhanced and new 
tools for recovery scenarios.\3\ The Proposed Rule Change was published 
for comment in the Federal Register on December 26, 2017.\4\ On March 
22, 2018, the Commission instituted proceedings under Section 
19(b)(2)(B)(i) of the Act \5\ to determine whether to approve or 
disapprove the Proposed Rule Change.\6\ On June 20, 2018 the Commission 
designated a longer period for Commission action on proceedings to 
determine whether to approve or disapprove the Proposed Rule Change.\7\ 
On July 11, 2018, OCC filed Partial Amendment No. 1 to the Proposed 
Rule Change. On July 13, 2018, OCC filed Partial Amendment No. 2 to the 
Proposed Rule Change to supersede and replace Partial Amendment No. 1 
in its entirety, due to technical defects in Partial Amendment No. 1. 
Therefore, the Initial Filing, as modified by Amendment No. 2, reflects 
the changes proposed.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On December 8, 2017, OCC also filed a related advance notice 
(SR-OCC-2017-810) with the Commission pursuant to Section 806(e)(1) 
of Title VIII of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, entitled the Payment, Clearing, and Settlement 
Supervision Act of 2010 and Rule 19b-4(n)(1)(i) under the Act 
(``Advance Notice''). 12 U.S.C. 5465(e)(1) and 17 CFR 240.19b-
4(n)(1)(i), respectively. The Advance Notice was published in the 
Federal Register on January 23, 2018. Securities Exchange Act 
Release No. 82513 (Jan. 17, 2018), 83 FR 3224 (Jan. 23, 2018) (SR-
OCC-2017-810).
    \4\ Securities Exchange Act Release No. 82352 (Dec. 19, 2017), 
82 FR 61072 (Dec. 26, 2017) (SR-OCC-2017-021) (``Initial Filing'').
    \5\ 15 U.S.C. 78s(b)(2)(B)(i).
    \6\ See Securities Exchange Act Release No. 82927 (March 22, 
2018), 83 FR 13176 (March 27, 2018) (SR-OCC-2018-021).
    \7\ See Securities Exchange Act Release No. 83485 (Jun. 20, 
2018), 83 FR 29843 (Jun. 26, 2018) (SR-OCC-2017-021).
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    Pursuant to Section 19(b)(1) of the Act \8\ and Rule 19b-4 
thereunder \9\ the Commission is publishing notice of these Partial 
Amendments No. 1 and 2 to the Proposed Rule Change as described in 
Items I and II below, which Items have been prepared by OCC. The 
Commission is publishing this notice to solicit comments on the 
Proposed Rule Change, as modified by Amendments No. 1 and 2, from 
interested persons.
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    \8\ 15 U.S.C. 78s(b)(1).
    \9\ 17 CFR 240.19b-4.
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I. Clearing Agency's Statement of the Terms of Substance of Partial 
Amendments to the Proposed Rule Change

    This Partial Amendment No. 2 would make the following three 
amendments to the Initial Filing: (1) Removal of sections of the RWD 
Plan concerning OCC's proposed authority to require cash settlement of 
certain physically delivered options and single stock futures; (2) 
updating the list of OCC's Critical Support Functions; \10\ and (3) 
making three changes to Chapter 5 of the RWD Plan in order to conform 
to a change contemporaneously proposed in Amendment No. 2 to OCC 
proposed rule change SR-OCC-2017-020 concerning enhanced and new tools 
for recovery scenarios.\11\
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    \10\ The amendment to the list of Critical Support Functions 
would be made to the confidential and redacted portions of the RWD 
Plan.
    \11\ See Amendment No. 2 to SR-OCC-2017-020. The three 
amendments to Chapter 5 also would be made to the confidential and 
redacted portions of the RWD Plan.
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    With regard to the removal of sections of the RWD Plan concerning 
OCC's proposed authority to require cash settlement of certain 
physically delivered options and single stock futures, OCC proposes to 
amend the following text on pages 16 and 55-56 of the Initial Filing 
(new text is underlined and proposed deletions are marked in 
strikethrough text).

[[Page 37865]]

[GRAPHIC] [TIFF OMITTED] TN02AU18.008

    OCC also proposes to amend the following text on pages 22-23 and 
61-63 of the Initial Filing (including associated footnotes).

[[Page 37866]]

[GRAPHIC] [TIFF OMITTED] TN02AU18.009

    OCC plans to resubmit the proposed cash settlement tool previously 
filed in SR-OCC-2017-018 and SR-OCC-2017-807 on a separate timeline 
from the rest of its enhanced and new tools for recovery scenarios and 
would submit a subsequent filing to the Commission to amend the RWD 
Plan at that time.
    In addition, OCC proposes to make the following amendments on pages 
32 and 72 of the Initial Filing.
[GRAPHIC] [TIFF OMITTED] TN02AU18.010

    With regard to updating the list of OCC's Critical Support 
Functions, the amendment would revise OCC's RWD Plan to consistently 
identify one of OCC's internal functions as a Critical Support 
Function.
    Finally, OCC proposes to make two changes to Chapter 5 of the RWD 
Plan, which would align an exhibit, a related list and a related 
paragraph with the certain changes OCC is contemporaneously proposing 
in Amendment No. 2 to proposed rule change SR-OCC-2017-020 concerning 
enhanced and new tools for recovery scenarios.\12\ Specifically, OCC 
would change the aforementioned exhibit, list and paragraph in Chapter 
5 to recognize that while OCC does not intend, in the first instance 
for its tear-up process to serve as a means of loss allocation, 
circumstances may arise such that, despite best efforts, OCC has 
inadequate remaining financial resources to extinguish torn-up 
positions at their assigned Tear-Up Price without forcing a reduction 
in the amount of unpaid value of such positions (e.g., despite best 
efforts, market movements not accounted for by monitoring, additional 
Clearing Member defaults occur immediately preceding a tear-up). In 
such circumstances, despite best efforts,

[[Page 37867]]

OCC would use its partial tear-up process as a means of loss 
allocation.
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    \12\ See Amendment No. 2 to SR-OCC-2017-020.
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    OCC has included an updated Exhibit 5 containing its RWD Plan as 
well as an Exhibit 4 showing the changes proposed in this Partial 
Amendment No. 2 to the proposed rule text in the Initial Filing, with 
the proposed changes in the Initial Filing marked in underlined and 
strikethrough text. Exhibits 4 and 5 have been redacted and filed 
separately with the Commission and confidential treatment for Exhibits 
4 and 5 is requested pursuant to 17 CFR 240.24b-2.
    The partial amendment would not change the purpose of or basis for 
the proposed rule change. All other representations in the Initial 
Filing remain as stated therein and no other changes are being made.

II. Date of Effectiveness of Proposed Rule Change and Timing for 
Commission Action

    As the Commission stated in Securities Exchange Act Release No. 
83485, the Commission shall by order approve or disapprove the proposed 
rule change by August 23, 2018.\13\
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    \13\ See Securities Exchange Act Release No. 83485 (June 20, 
2018), 83 FR 29843 (June 26, 2018) (SR-OCC-2017-021).
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commissions internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-OCC-2017-021 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2017-021. 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 website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of OCC and on OCC's website at 
http://www.theocc.com/about/publications/bylaws.jsp.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal or identifying information from comment submissions. You 
should submit only information that you wish to make available 
publicly.
    All submissions should refer to File Number SR-OCC-2017-021 and 
should be submitted on or before August 17, 2018.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-16533 Filed 8-1-18; 8:45 am]
 BILLING CODE 8011-01-P
37864 Federal Register / Vol. 83, No. 149 / Thursday, August 2, 2018 / Notices

provide for a well-founded, clear, SECURITIES AND EXCHANGE Partial Amendment No. 2 to the
transparent, and enforceable legal basis COMMISSION Proposed Rule Change to supersede and
for each aspect of its activities in all replace Partial Amendment No. 1 in its
relevant jurisdictions.130 The [Release No. 34–83732; File No. SR–OCC–
entirety, due to technical defects in
Commission has stated that, in 2017–021]
Partial Amendment No. 1. Therefore,
establishing and maintaining policies Self-Regulatory Organizations; The the Initial Filing, as modified by
and procedures to address legal risk, a Amendment No. 2, reflects the changes
Options Clearing Corporation; Notice
covered clearing agency generally proposed.
of Filing of Partial Amendments No. 1
should consider whether its rules,
and 2 to Proposed Rule Change Pursuant to Section 19(b)(1) of the
policies and procedures, and contracts
Concerning Updates to and Act 8 and Rule 19b–4 thereunder 9 the
are clear, understandable, and
Formalization of OCC’s Recovery and Commission is publishing notice of
consistent with relevant laws and
Orderly Wind-Down Plan these Partial Amendments No. 1 and 2
regulations.131
The Commission believes that the July 27, 2018. to the Proposed Rule Change as
proposed consolidation and On December 8, 2017, The Options described in Items I and II below, which
reorganization of OCC’s Rules described Clearing Corporation (‘‘OCC’’) filed with Items have been prepared by OCC. The
above would improve readability by the Securities and Exchange Commission is publishing this notice to
locating all rules related to the clearing Commission (‘‘Commission’’) proposed solicit comments on the Proposed Rule
fund in one place, thereby enhancing rule change SR–OCC–2017–021 Change, as modified by Amendments
the clarity, transparency, consistency, (‘‘Proposed Rule Change’’) pursuant to No. 1 and 2, from interested persons.
and understandability of OCC’s Rules Section 19(b)(1) of the Securities
related to the clearing fund. Exchange Act of 1934 (‘‘Act’’),1 and I. Clearing Agency’s Statement of the
Additionally, by amending the Rules to Rule 19b–4 thereunder,2 concerning Terms of Substance of Partial
accurately reflect OCC’s current margin enhanced and new tools for recovery Amendments to the Proposed Rule
practices, the Commission believes scenarios.3 The Proposed Rule Change Change
OCC’s Rules will be more transparent was published for comment in the
and understandable. This Partial Amendment No. 2 would
Federal Register on December 26,
Accordingly, the Commission finds make the following three amendments
2017.4 On March 22, 2018, the
that the proposed textual reorganization to the Initial Filing: (1) Removal of
Commission instituted proceedings
and clarifications are consistent with under Section 19(b)(2)(B)(i) of the Act 5 sections of the RWD Plan concerning
Rule 17Ad–22(e)(1).132 to determine whether to approve or OCC’s proposed authority to require
disapprove the Proposed Rule Change.6 cash settlement of certain physically
V. Conclusion
On June 20, 2018 the Commission delivered options and single stock
On the basis of the foregoing, the futures; (2) updating the list of OCC’s
designated a longer period for
Commission finds that the Proposed Critical Support Functions; 10 and (3)
Commission action on proceedings to
Rule Change is consistent with the making three changes to Chapter 5 of
determine whether to approve or
requirements of the Act, and in the RWD Plan in order to conform to a
disapprove the Proposed Rule Change.7
particular, the requirements of Section change contemporaneously proposed in
17A of the Act 133 and the rules and On July 11, 2018, OCC filed Partial
Amendment No. 1 to the Proposed Rule Amendment No. 2 to OCC proposed rule
regulations thereunder.
Change. On July 13, 2018, OCC filed change SR–OCC–2017–020 concerning
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,134 that the enhanced and new tools for recovery
Proposed Rule Change (SR–OCC–2018–
1 15 U.S.C. 78s(b)(1). scenarios.11
2 17 CFR 240.19b–4.
008), as modified by Amendments No. 3 On December 8, 2017, OCC also filed a related With regard to the removal of sections
1 and 2, be, and hereby is, approved. advance notice (SR–OCC–2017–810) with the of the RWD Plan concerning OCC’s
For the Commission, by the Division of Commission pursuant to Section 806(e)(1) of Title proposed authority to require cash
Trading and Markets, pursuant to delegated VIII of the Dodd-Frank Wall Street Reform and settlement of certain physically
Consumer Protection Act, entitled the Payment,
authority.135 delivered options and single stock
Clearing, and Settlement Supervision Act of 2010
Robert W. Errett, and Rule 19b–4(n)(1)(i) under the Act (‘‘Advance futures, OCC proposes to amend the
Deputy Secretary. Notice’’). 12 U.S.C. 5465(e)(1) and 17 CFR 240.19b– following text on pages 16 and 55–56 of
4(n)(1)(i), respectively. The Advance Notice was
[FR Doc. 2018–16529 Filed 8–1–18; 8:45 am] the Initial Filing (new text is underlined
published in the Federal Register on January 23,
BILLING CODE 8011–01–P 2018. Securities Exchange Act Release No. 82513 and proposed deletions are marked in
(Jan. 17, 2018), 83 FR 3224 (Jan. 23, 2018) (SR– strikethrough text).
130 17 CFR 240.17Ad–22(e)(1). OCC–2017–810).
131 Securities 4 Securities Exchange Act Release No. 82352 (Dec.
Exchange Act Release 78961 (Sep. 8 15 U.S.C. 78s(b)(1).
28, 2016), 81 FR 70786, 70802 (Oct. 13, 2016) (S7– 19, 2017), 82 FR 61072 (Dec. 26, 2017) (SR–OCC– 9 17
2017–021) (‘‘Initial Filing’’). CFR 240.19b–4.
03–14) (‘‘Covered Clearing Agency Standards’’).
10 The amendment to the list of Critical Support
132 17 CFR 240.17Ad–22(e)(1). 5 15 U.S.C. 78s(b)(2)(B)(i).

133 In approving this Proposed Rule Change, the 6 See Securities Exchange Act Release No. 82927 Functions would be made to the confidential and
Commission has considered the proposed rules’ (March 22, 2018), 83 FR 13176 (March 27, 2018) redacted portions of the RWD Plan.
impact on efficiency, competition, and capital 11 See Amendment No. 2 to SR–OCC–2017–020.
(SR–OCC–2018–021).
daltland on DSKBBV9HB2PROD with NOTICES

formation. See 15 U.S.C. 78c(f). 7 See Securities Exchange Act Release No. 83485 The three amendments to Chapter 5 also would be
134 15 U.S.C. 78s(b)(2). made to the confidential and redacted portions of
(Jun. 20, 2018), 83 FR 29843 (Jun. 26, 2018) (SR–
135 17 CFR 200.30–3(a)(12). OCC–2017–021). the RWD Plan.

VerDate Sep<11>2014 17:06 Aug 01, 2018 Jkt 244001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 E:\FR\FM\02AUN1.SGM 02AUN1
Document Created: 2018-08-02 01:28:40
Document Modified: 2018-08-02 01:28:40
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 37864