83 FR 38750 - Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Partial Amendments No. 1, 2, and 3 to Advance Notice Concerning Updates to and Formalization of OCC's Recovery and Orderly Wind-Down Plan

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 152 (August 7, 2018)

Page Range		38750-38752
FR Document		2018-16823
Federal Register, Volume 83 Issue 152 (Tuesday, August 7, 2018)
[Federal Register Volume 83, Number 152 (Tuesday, August 7, 2018)]
[Notices]
[Pages 38750-38752]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-16823]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83762; File No. SR-OCC-2017-810]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Partial Amendments No. 1, 2, and 3 to Advance 
Notice Concerning Updates to and Formalization of OCC's Recovery and 
Orderly Wind-Down Plan

August 1, 2018.

I. Introduction

    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'') 
\1\ and Rule 19b-4(n)(1)(i) \2\ under the Securities Exchange Act of 
1934 (``Act''),\3\ The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') an advance 
notice pursuant to which OCC would formalize and update its Recovery 
and Orderly Wind-Down Plan (``RWD Plan'' or ``Plan''), consistent with 
the applicable requirement in Rule 17Ad-22(e)(3)(ii) \4\ (``Advance 
Notice''). The Advance Notice was published for public comment in the 
Federal Register on January 23, 2018.\5\ On January 23, 2018, the 
Commission requested OCC provide it with additional information 
regarding the Advance Notice.\6\ OCC responded to this request for 
information, and the information was received on July 13, 2018.\7\ On 
July 11 and 12, 2018, OCC filed Partial Amendment No. 1 and Partial 
Amendment No. 2 to the Initial Filing. On July 12, 2018, OCC also filed 
a partial amendment (``Partial Amendment No. 3'') to the Initial 
Filing. This Partial Amendment No. 3 is intended to supersede and 
replace Amendments No. 1 and 2 in their entirety.\8\ Therefore, the 
Initial Filing together with Partial Amendment No. 3 reflects the 
changes being proposed.
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ 15 U.S.C. 78a et seq.
    \4\ 17 CFR 240.17Ad-22(e)(3)(ii).
    \5\ See Securities Exchange Act Release No. 82514 (January 17, 
2018), 83 FR 3224 (January 23, 2018) (SR-OCC-2017-810) (hereinafter 
referred to as the ``Initial Filing''). Initial Filing, 83 FR 3224.
    \6\ See Memorandum from Office of Clearance and Settlement, 
Division of Trading and Markets, dated January 23, 2018, available 
at https://www.sec.gov/comments/sr-occ-2017-810/occ2017810-2948228-161854.pdf.
    \7\ See Memorandum from Office of Clearance and Settlement, 
Division of Trading and Markets, dated July 17, 2018, available at 
https://www.sec.gov/comments/sr-occ-2017-810/occ2017810-4062513-169149.pdf.
    \8\ This Partial Amendment No. 3 is substantially the same as 
Partial Amendments No. 1 and 2 but would correct certain technical 
errors in the previous amendments (e.g., update a cross-reference to 
OCC filing SR-OCC-2017-809, as now amended by Amendment No. 2, and 
correct a pagination error in Exhibits 4 and 5). Substantive changes 
to the Initial Filing, as reflected in Partial Amendment No. 3, are 
described in Item II below.
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    The Advance Notice, as amended by Partial Amendment No. 3 is 
described in Item II below, which Item has been prepared by OCC. The 
Commission is publishing this notice to solicit comments on the Advance 
Notice, as amended by Partial Amendments No. 1, 2 and 3, from 
interested persons.

II. Clearing Agency's Statement of the Terms of Substance of Partial 
Amendment No. 3 to the Advance Notice

    This Partial Amendment No. 3 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; \9\ 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 
advance notice filing SR-OCC-2017-809 concerning enhanced and new tools 
for recovery scenarios.\10\
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    \9\ The amendment to the list of Critical Support Functions 
would be made to the confidential and redacted portions of the RWD 
Plan.
    \10\ See Amendment No. 2 to SR-OCC-2017-809. 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 16-17 and 55 of the Initial Filing 
(new text is underlined and proposed deletions are marked in 
strikethrough text).

[[Page 38751]]

[GRAPHIC] [TIFF OMITTED] TN07AU18.002

    OCC also proposes to amend the following text on pages 22-23 and 
61-62 of the Initial Filing (including associated footnotes).
[GRAPHIC] [TIFF OMITTED] TN07AU18.003

    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

[[Page 38752]]

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 71 of the Initial Filing.
[GRAPHIC] [TIFF OMITTED] TN07AU18.024

    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 OCC advance notice filing SR-OCC-2017-809 
concerning enhanced and new tools for recovery scenarios.\11\ 
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, OCC would use its partial 
tear-up process as a means of loss allocation.
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    \11\ See Amendment No. 2 to SR-OCC-2017-809.
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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. 3 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 Amendments No. 1, 2 and 3 would not change the purpose 
of or basis for the proposed changes. All other representations in the 
Initial Filing remain as stated therein and no other changes are being 
made.

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 website 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, including whether the advance 
notice is consistent with the Clearing Supervision 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-2017-810 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-2017-810. 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 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 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-2017-810 and 
should be submitted on or before August 22, 2018.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2018-16823 Filed 8-6-18; 8:45 am]
BILLING CODE 8011-01-P
38750 Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Notices

Nasdaq Market changes a rule that the 19b–4(n)(1)(i) 2 under the Securities together with Partial Amendment No. 3
Exchanges have incorporated by Exchange Act of 1934 (‘‘Act’’),3 The reflects the changes being proposed.
reference. Options Clearing Corporation (‘‘OCC’’) The Advance Notice, as amended by
Accordingly, it is ordered, pursuant to filed with the Securities and Exchange Partial Amendment No. 3 is described
Section 36 of the Exchange Act,17 that Commission (‘‘Commission’’) an in Item II below, which Item has been
the Exchanges are exempt from the rule advance notice pursuant to which OCC prepared by OCC. The Commission is
filing requirements of Section 19(b) of would formalize and update its publishing this notice to solicit
the Exchange Act solely with respect to Recovery and Orderly Wind-Down Plan comments on the Advance Notice, as
changes to the rules identified in its (‘‘RWD Plan’’ or ‘‘Plan’’), consistent amended by Partial Amendments No. 1,
request that incorporate by reference with the applicable requirement in Rule
certain Nasdaq Market rules that are the 2 and 3, from interested persons.
17Ad–22(e)(3)(ii) 4 (‘‘Advance Notice’’).
result of changes to such Nasdaq Market The Advance Notice was published for II. Clearing Agency’s Statement of the
rules, provided that the Exchanges public comment in the Federal Register Terms of Substance of Partial
promptly provide written notice to their on January 23, 2018.5 On January 23, Amendment No. 3 to the Advance
members whenever the Nasdaq Market 2018, the Commission requested OCC Notice
proposes to change a rule that the provide it with additional information
Exchanges have incorporated by regarding the Advance Notice.6 OCC This Partial Amendment No. 3 would
reference. responded to this request for make the following three amendments
For the Commission, by the Division of information, and the information was to the Initial Filing: (1) Removal of
Trading and Markets, pursuant to delegated received on July 13, 2018.7 On July 11 sections of the RWD Plan concerning
authority.18 and 12, 2018, OCC filed Partial OCC’s proposed authority to require
Brent J. Fields, Amendment No. 1 and Partial cash settlement of certain physically
Secretary. Amendment No. 2 to the Initial Filing. delivered options and single stock
[FR Doc. 2018–16799 Filed 8–6–18; 8:45 am] On July 12, 2018, OCC also filed a futures; (2) updating the list of OCC’s
BILLING CODE 8011–01–P partial amendment (‘‘Partial Critical Support Functions; 9 and (3)
Amendment No. 3’’) to the Initial Filing. making three changes to Chapter 5 of
This Partial Amendment No. 3 is the RWD Plan in order to conform to a
SECURITIES AND EXCHANGE intended to supersede and replace change contemporaneously proposed in
COMMISSION Amendments No. 1 and 2 in their Amendment No. 2 to OCC advance
entirety.8 Therefore, the Initial Filing notice filing SR–OCC–2017–809
[Release No. 34–83762; File No. SR–OCC–
2017–810] concerning enhanced and new tools for
2 17 CFR 240.19b–4(n)(1)(i). recovery scenarios.10
3 15 U.S.C. 78a et seq.
Self-Regulatory Organizations; The With regard to the removal of sections
4 17 CFR 240.17Ad–22(e)(3)(ii).
Options Clearing Corporation; Notice 5 See Securities Exchange Act Release No. 82514
of the RWD Plan concerning OCC’s
of Filing of Partial Amendments No. 1, (January 17, 2018), 83 FR 3224 (January 23, 2018) proposed authority to require cash
2, and 3 to Advance Notice Concerning (SR–OCC–2017–810) (hereinafter referred to as the settlement of certain physically
Updates to and Formalization of OCC’s ‘‘Initial Filing’’). Initial Filing, 83 FR 3224. delivered options and single stock
Recovery and Orderly Wind-Down Plan 6 See Memorandum from Office of Clearance and
futures, OCC proposes to amend the
Settlement, Division of Trading and Markets, dated
August 1, 2018. January 23, 2018, available at https://www.sec.gov/ following text on pages 16–17 and 55 of
comments/sr-occ-2017-810/occ2017810-2948228- the Initial Filing (new text is underlined
I. Introduction 161854.pdf. and proposed deletions are marked in
7 See Memorandum from Office of Clearance and
Pursuant to Section 806(e)(1) of Title strikethrough text).
Settlement, Division of Trading and Markets, dated
VIII of the Dodd-Frank Wall Street July 17, 2018, available at https://www.sec.gov/
Reform and Consumer Protection Act, comments/sr-occ-2017-810/occ2017810-4062513- Initial Filing, as reflected in Partial Amendment No.
3, are described in Item II below.
entitled Payment, Clearing, and 169149.pdf.
9 The amendment to the list of Critical Support
8 This Partial Amendment No. 3 is substantially
Settlement Supervision Act of 2010 Functions would be made to the confidential and
the same as Partial Amendments No. 1 and 2 but
(‘‘Clearing Supervision Act’’) 1 and Rule would correct certain technical errors in the redacted portions of the RWD Plan.
10 See Amendment No. 2 to SR–OCC–2017–809.
previous amendments (e.g., update a cross-reference
17 15 U.S.C. 78mm. to OCC filing SR–OCC–2017–809, as now amended The three amendments to Chapter 5 also would be
18 17 CFR 200.30–3(a)(76). by Amendment No. 2, and correct a pagination error made to the confidential and redacted portions of
1 12 U.S.C. 5465(e)(1). in Exhibits 4 and 5). Substantive changes to the the RWD Plan.
daltland on DSKBBV9HB2PROD with NOTICES

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Document Created: 2018-11-06 10:38:20
Document Modified: 2018-11-06 10:38:20
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 38750