[Federal Register Volume 77, Number 181 (Tuesday, September 18, 2012)]
[Notices]
[Pages 57602-57611]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22908]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67835; File No. SR-OCC-2012-14]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change Relating to the Clearance and
Settlement of Over-the-Counter Options
September 12, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that
on August 30, 2012, The Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared primarily by OCC. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change would allow OCC to provide central
clearing of index options on the S&P 500 that are negotiated
bilaterally in the over-the-counter market and submitted to OCC for
clearance.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, OCC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. OCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of these
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of this proposed rule change is to allow OCC to provide
central clearing of OTC index options on the S&P 500 Index. The
proposed rule change replaces a previously proposed rule change which
was withdrawn by OCC.\3\ OCC will clear the proposed OTC options in a
manner that is highly similar to the manner in which it clears listed
options, with only such modifications as are appropriate to reflect the
unique characteristics of OTC options.
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\3\ Securities Exchange Act Release No. 34-66090 (January 3,
2012), 77 FR 1107 (January 9, 2012) (SR-OCC-2011-19).
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OTC Options
OCC has entered into a license agreement with Standard & Poor's
Financial Services LLC (``S&P'') that allows OCC to clear OTC options
on three equity indices published by the S&P: the S&P 500 Index, the
S&P MidCap 400 Index and the S&P Small Cap 600 Index. The initial OTC
options to be cleared by OCC will consist of options on the S&P 500
Index. OCC may clear OTC options on other indices and on individual
equity securities in the future, subject to Commission approval
[[Page 57603]]
of one or more additional rule filings. The current rule filing defines
``OTC option'' and ``OTC index option'' generically in order to
simplify future amendments to provide for additional underlying
interests. OTC options will have predominantly common terms and
characteristics, but also include unique terms negotiated by the
parties. Transactions in OTC options will not be executed through the
facilities of any exchange, but will instead be entered into
bilaterally and submitted to OCC for clearance through one or more
providers of trade affirmation services.\4\
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\4\ The initial provider of the trade affirmation services in
connection with the OTC options will be MarkitSERV.
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OTC options will be similar to exchange-traded standardized equity
index options called ``FLEX Options'' that are currently traded on
certain options exchanges.\5\ FLEX Options are exchange-traded put and
call options that allow for customization of certain terms. For
example, FLEX index Options traded on the Chicago Board Options
Exchange have six customizable terms: (1) Underlying index, (2) put or
call, (3) expiration date, (4) exercise price, (5) American or European
exercise style, and (6) method of calculating settlement value. OCC is
the issuer and guarantor of FLEX Options and clears FLEX Options traded
on multiple exchanges.
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\5\ Note that FINRA Rule 2360(a)(16) refers to FLEX Options as
``FLEX Equity Options,'' which it defines as ``any options contract
issued, or subject to issuance by, The Options Clearing Corporation
whereby the parties to the transaction have the ability to negotiate
the terms of the contract consistent with the rules of the exchange
on which the options contract is traded.'' OCC does not believe this
definition would capture OTC options as they are not traded on any
exchange. Nevertheless, as discussed below, OCC is working with
FINRA to amend certain of FINRA's rules to clarify the proper
application of such rules to OTC options.
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Similar to FLEX Options, OTC options will allow for customization
of a limited number of variable terms with a specified range of values
that may be assigned to each as agreed between the buyer and seller.
Parties submitting transactions in OTC options for clearing by OCC will
be able to customize six discrete terms: (1) Underlying index;\6\ (2)
put or call; (3) exercise price; (4) expiration date; (5) American or
European exercise style; and (6) method of calculating exercise
settlement value on the expiration date.\7\ The variable terms and
permitted values will be specified in the proposed Section 6 of Article
XVII of the By-Laws. With respect to future OTC options accepted for
clearing, OCC intends that such future OTC options will conform to the
general variable terms and limits on the variable terms set forth in
proposed Section 6 of the By-Laws, and will either amend the
Interpretations and Policies thereunder to specify additional
requirements for specific OTC options or publish such requirements on
OCC's Web site.
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\6\ Initially, however, the S&P 500 Index will be the only
permitted underlying index.
\7\ The expiration date of an OTC option must fall on a business
day. The method of determining the exercise settlement value of an
OTC option on its expiration date may be either the opening
settlement value or the closing settlement value of the underlying
index (calculated by S&P using the opening or closing price, as
applicable, in the primary market of each component security of the
underlying index on the specified expiration date), in each case as
reported to OCC by CBOE.
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Clearing of OTC Options
OCC proposes to clear OTC options subject to the same basic rules
and procedures used for the clearance of listed index options. The
proposed rules require that the counterparties to the OTC options must
be eligible contract participants (``ECPs''), as defined in Section
3a(65) of the Securities Exchange Act of 1934,\8\ as amended (the
``Exchange Act'') and Section 1a(18) of the Commodity Exchange Act,\9\
as amended (the ``CEA''). Because an OTC option will be a ``security''
as defined in the Exchange Act, the proposed rules also require that
the transactions be cleared through a clearing member of OCC that is
registered with the Commission as a broker-dealer or one of the small
number of clearing members that are ``non-U.S. securities firms'' as
defined in OCC's By-Laws. OCC is not proposing to require clearing
members to meet any different financial standards for clearing OTC
options. However, clearing members must be specifically approved by OCC
to clear OTC options pursuant to new Interpretation and Policy .11 to
Section 1 of Article V in order to assure the operational readiness of
such clearing members to clear OTC options. Clearing members seeking to
clear OTC options will be required to submit a business expansion
request and complete an operational review. The operational review
consists of an initial meeting with the clearing member's staff to
evaluate the staff's experience, confirm the staff's familiarity with
current OCC systems and procedures, complete an operational
questionnaire, perform a high level review of the clearing member's
systems and processing capabilities, and review other pertinent
operational information. Successful testing of messaging capability
between the clearing member, MarkitSERV and OCC is also necessary.
These procedures will determine whether the firm is operationally ready
to clear OTC Index Options.
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\8\ 15 U.S.C. 78c(a)(65).
\9\ 7 U.S.C. 1a(18).
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Exercise of an OTC option will be settled by payment of cash by the
assigned writer and to the exercising holder through OCC's cash
settlement system on the business day following exercise in exactly the
same manner as is the case with exercise settlement of listed index
options. As in the case of listed index options, the exercise-
settlement amount will be equal to the difference between the current
value of the underlying interest and the exercise price of the OTC
option, times the multiplier that determines the size of the OTC
option. In the case of OTC index options on the S&P 500, the multiplier
will be fixed at 1. The multipliers for additional OTC index options
that OCC may in the future clear may be fixed at such value as OCC
determines and provides for in its By-Laws and Rules.
OCC will calculate clearing margin for the OTC options using its
STANS margin system on the same basis as for listed index options and
will otherwise apply the same risk management practices to both OTC
options and listed index options, including new risk modeling
enhancements for longer-tenor options discussed below under ``Risk
Management Enhancement for Longer-Tenor Options.'' Because OCC
currently clears listed options on all three of the underlying indexes
on which OCC is currently licensed to clear OTC options, and because
the customizable terms of these OTC options are relatively limited and
the range of values that customizable terms may be given is limited,
OCC does not believe that valuation and risk management for these OTC
options present challenges that are different from those faced in the
listed options market. Nevertheless, as discussed further below, OCC is
proposing special OTC Options Auctions to be used in the unlikely event
that OCC would be unable to close out positions in OTC options of a
failed clearing member through other means.
OTC options may be carried in a clearing member's firm account, in
market-maker accounts or in its securities customers' account, as
applicable. Although customer positions in OTC options will be carried
in the securities customers' account (an omnibus account), OCC will use
a ``customer ID'' to identify positions of individual customers based
on information provided by clearing
[[Page 57604]]
members.\10\ However, positions are not presently intended to be
carried in individual customer sub-accounts, and positions in OTC
options will be margined at OCC in the omnibus customers' account on
the same basis as listed options. If a clearing member takes the other
side of a transaction with its customer in an OTC option, the
transaction will result in the creation of a long or short position (as
applicable) in the clearing member's customers' account and the
opposite short or long position in the clearing member's firm account.
The positions could also be includable in the internal cross-margining
account, subject to any necessary regulatory approvals.
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\10\ Such customer IDs are necessary in order to allow OCC to
comply with certain terms of OCC's license agreement with S&P. As
described further below, customer IDs will be used for other
purposes as well.
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The trade data for an OTC option trade will be entered into the
system of MarkitSERV or another trade confirmation/affirmation vendor
approved by OCC for this purpose (the ``OTC Trade Source'').\11\ While
MarkitSERV will be the only OTC Trade Source at launch, OCC will permit
additional OTC Trade Sources in the future in response to sufficient
market demand from OCC's clearing members and subject to the ability of
any such OTC Trade Source to meet OCC's requirements for operational
readiness and interoperability with OCC's systems, as well as
requirements with respect to relevant business experience and
reputation, adequate personnel and expertise, financial qualification
and such other factors as OCC deems relevant. OCC will receive
confirmed trades from the OTC Trade Source. It will be permissible for
parties to submit trades for clearance that were entered into
bilaterally at any time in the past, provided that the eligibility for
clearance will be determined as of the date the trade is submitted to
OCC for clearance.\12\ The OTC Trade Source will process the trade and
submit it as a confirmed trade to OCC for clearing. If the trade meets
OCC's validation requirements, OCC will so notify the OTC Trade Source,
which will notify the submitting parties. Customers of clearing members
may have direct access to the OTC Trade Source for purposes of entering
or affirming trade data and receiving communications regarding the
status of transactions, in which case mechanisms will be put in place
for a clearing member to authorize a customer to enter a trade for the
clearing member's customers' account or for the clearing member to
affirm a trade once entered.
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\11\ MarkitSERV, LLC is owned by Markit Group Limited, Markit
Group Holdings Limited and The Depository Trust & Clearing
Corporation. MarkitSERV Limited is a wholly-owned U.K. subsidiary of
MarkitSERV, LLC. MarkitSERV, LLC and MarkitSERV Limited
(collectively, ``MarkitSERV'') provide derivatives transaction
processing, electronic confirmation, portfolio reconciliation
services, and other related services for firms that conduct business
in the over-the-counter derivatives markets through a variety of
electronic systems, including the MarkitWire system. MarkitWire,
owned by MarkitSERV Limited, is an OTC derivatives electronic
confirmation/affirmation service offered by MarkitSERV as part of
its post-trade processing suite of products. The role of MarkitSERV
and MarkitWire in OCC's clearing of OTC options is described in
further detail below.
\12\ OCC's license agreement with S&P imposes certain
requirements relating to minimum time remaining to expiration of an
OTC option.
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In order for a clearing member to be approved for clearing OTC
options, the clearing member must enter into a standard agreement with
MarkitSERV (or another OTC Trade Source with which the clearing member
intends to enter trade data, if and when OCC enters into arrangements
with other OTC Trade Sources). At launch, OTC options will not be
subject to the same clearing member trade assignment rules and
procedures through which exchange-traded options can be cleared by a
clearing member other than the executing clearing member. This
functionality may be added at a later date. OCC and MarkitSERV will
adopt procedures to permit a customer that has an account with Clearing
Member A (``CM A'') to enter into an OTC option transaction with
Clearing Member B (``CM B'') and have the position included in its
account at CM A and cleared in CM A's customers' account at OCC.
OTC options will be fungible with each other to the extent that
there are OTC options in the system with identical terms. However, OCC
will not treat OTC options as fungible with index options listed on any
exchange, even if an OTC option has terms identical to the terms of the
exchange-listed option.
Clearing members that carry customer positions in cleared OTC
options will be subject to all OCC rules governing OCC-cleared options
generally, as well as all applicable rules of the Commission and of any
self-regulatory organization, including the Financial Industry
Regulatory Authority (``FINRA''), of which they are a member. Section 8
of Article III of OCC's By-Laws provides that, subject to the By-Laws
and Rules, ``the Board of Directors may suspend Clearing Members and
may prescribe and impose penalties for the violation of the By-Laws or
the Rules of the Corporation, and it may, by Rule or otherwise,
establish all disciplinary procedures applicable to Clearing Members
and their partners, officers, directors and employees.'' As a condition
to admission, Section 3(c) of Article V of the By-Laws provides that a
clearing member must agree, among other things, to ``pay such fines as
may be imposed on it in accordance with the By-Laws and Rules.'' Rule
305 permits OCC to impose restrictions on the clearing activities of a
clearing member if it finds that the financial or operational condition
of the clearing member makes it necessary or advisable to do so for the
protection of OCC, other clearing members, or the general public. Rule
1201(a) provides that OCC ``may censure, suspend, expel or limit the
activities, functions or operations of any Clearing Member for any
violation of the By-Laws and Rules or its agreements with the
Corporation.'' In addition to, or in lieu of, such actions, OCC is
permitted under the same paragraph to impose fines. Rule 1202(b)
establishes procedures for taking any such disciplinary actions. The
foregoing provisions are sufficient to permit OCC to fine or otherwise
discipline a clearing member that fails to abide by OCC's By-Laws and
Rules applicable to OTC options, or to prohibit such clearing member
from continuing to clear such options.
Regulatory Status of the OTC Options
An OTC option will be a ``security'' as defined in both the
Securities Act of 1933, as amended (the ``Securities Act'') and, as
noted above, the Exchange Act. OCC will be the ``issuer'' of the OTC
options. The OTC options will be neither ``swaps'' nor ``security-based
swaps'' for purposes of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank'').\13\
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\13\ Section 1a(47)(A)(i) of CEA, 7 U.S.C. 1a(47)(A)(i), as
added by Section 721(a)(21) of Dodd-Frank, defines ``swaps'' broadly
to include options on indices. However, Section 1a(47)(B)(iii) of
the CEA, 7 U.S.C. 1a(47)(B)(iii), excludes from the ``swap''
definition any option on any index of securities that is subject to
the Securities Act and the Exchange Act. A contract that is excluded
from the definition of a ``swap'' under Section 1a(47)(B) of the
CEA, 7 U.S.C. 1a(47)(B) (other than Section 1a(47)(B)(x), 7 U.S.C
1a(47)(B)(x)) is not a ``security-based swap'' for purposes of
Section 3a(68) of the Exchange Act, 15 U.S.C. 78c(a)(68).
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Most of OCC's clearing members are members of FINRA and subject to
FINRA's rules, which have different provisions for ``listed'' and ``OTC
options'' and contain various definitions distinguishing between the
two. In some cases, OTC options would fall into
[[Page 57605]]
neither category under FINRA's definitions and in other cases, they
would fall within what OCC perceives to be the wrong category. FINRA
and OCC are working together to implement appropriate amendments to
FINRA rules to clarify the proper application of such rules to cleared
OTC options.
MarkitSERV Trade Submission Mechanics
MarkitSERV provides an interface to OCC that allows OCC to receive
messages containing details of transactions in OTC options submitted
for clearing by clearing members with access to MarketWire and also
allows OCC to transmit messages to MarkitWire participants identifying
the status of submitted transactions. MarkitWire applications use
product-specific templates to simplify deal entry and negotiations. The
templates specify the data required for a given product and also the
business validation rules for each field. MarkitSERV has included OCC's
validation requirements for OTC options in its trade templates.
The trade data for each OTC option transaction must be entered into
MarkitWire. MarkitSERV will use a ``confirmation/affirmation''
procedure in which one party to the trade enters the trade data to the
MarkitWire platform, which issues a confirmation to the counterparty to
be affirmed, rejected or requested to be revised. If the trade details
are confirmed, the trade will then be submitted to OCC for clearance
and MarkitSERV will affirm such submission to both parties. OCC then
validates the trade information for compliance with applicable
requirements, such as the identification of an account of an eligible
clearing member in which each side of the trade will be cleared, that
the variable terms are within permissible ranges, and that minimum size
requirements under OCC's license agreement with S&P are met. This
validation will be completed by OCC immediately upon submission. OCC's
clearing system will automatically accept the trade if it passes the
validation process and will otherwise reject it.\14\ A trade that is
rejected by OCC may be corrected and submitted as a new transaction.
Clearing members and customers with access to MarkitSERV will be able
to determine whether a trade has been accepted or rejected both through
MarkitSERV and, in the case of clearing members, through their
interface with OCC's clearing system.
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\14\ Once accepted, a trade is guaranteed by OCC. Note, however,
that OTC options for which the premium payment date communicated by
MarkitSERV to OCC is prior to the business day on which the OTC
option is submitted to OCC for clearing (referred to as a
``Backloaded OTC Option'') will not be accepted and guaranteed until
the selling clearing member has met its initial morning cash
settlement obligations to OCC on the following business day.
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MarkitSERV's Regulatory Status \15\
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\15\ MarkitSERV offers different services in different markets,
and this discussion is addressed only to the ``confirmation/
affirmation'' procedure to be used in submitting trades to OCC.
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MarkitSERV is not registered as a clearing agency under the
Exchange Act, and the Commission staff has asked OCC to consider
whether MarkitSERV would be required to so register in order to provide
the proposed services to the OTC options market. OCC believes that no
such registration is necessary based upon relevant interpretive
guidance issued by the Commission.
Section 3(a)(23)(A) of the Exchange Act \16\ defines a ``clearing
agency'' broadly. The definition includes, in relevant part, ``any
person who * * * provides facilities for comparison of data respecting
the terms of settlement of securities transactions[.]'' In 1998, the
Commission issued a release entitled ``Confirmation and Affirmation of
Securities Trades; Matching'' (the ``Matching Release'').\17\ In the
Matching Release, the Commission published ``its interpretation that a
`matching' service that compares securities trade information from a
broker-dealer and the broker-dealer's customer is a clearing agency
function.'' The Matching Release distinguishes between such a matching
service and a ``confirmation/affirmation service'' where the ``vendor
intermediary will only transmit information between the parties to a
trade, and the parties will confirm and affirm the accuracy of the
information.'' The Commission noted that ``matching'' constitutes the
``comparison of data respecting the terms of settlement of securities
transactions'' and that such services therefore trigger status as a
clearing agency, while confirmation/affirmation services would not, by
themselves, constitute such a data comparison. The Commission concluded
in the Matching Release that ``an intermediary that captures trade
information from a buyer and a seller of securities and performs an
independent reconciliation or matching of that information is providing
facilities for the comparison of data within the scope of Exchange Act
Section 3(a)(23).'' The Commission stated that ``matching'' is ``so
closely tied to the clearance and settlement process that it is
different not only in degree but also different in kind from the * * *
confirmation and affirmation process.'' The Matching Release goes on to
state: ``a vendor that provides confirmation/affirmation services only
will exchange messages between a broker-dealer and its institutional
customer. The broker-dealer and its institutional customer will compare
the trade information contained in those messages, and the institution
itself will issue the affirmed confirmation.'' This is precisely what
occurs when a counterparty to a trade affirms the trade data through
MarkitSERV and requests submission to OCC for clearance. MarkitSERV
transmits messages only; it does not ``compare'' or ``match'' trade
data submitted by two parties.
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\16\ 15 U.S.C. 78c(a)(23)(A).
\17\ Securities Exchange Act Release No. 34-39829 (April 13,
1998), 63 FR 17943 (April 13, 1998).
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The ``confirmation/affirmation'' functionality (as described above)
to be provided by MarkitSERV (through MarkitWire) with respect to OTC
options is functionally identical to the confirmation/affirmation
service described in the Matching Release and OCC believes such service
would not be a ``matching'' service within the meaning of the release.
OCC believes that MarkitSERV will not be a ``clearing agency'' with
respect to the services to be provided in connection with OTC options.
The confirmation/affirmation service described in the Matching Release
referred ``to the transmission of messages among broker-dealers,
institutional investors, and custodian banks regarding the terms of a
trade executed for the institutional investor.'' MarkitWire's
confirmation/affirmation process will allow for the transmission of
messages among OCC's clearing members (most of which are registered
broker-dealers), their customers (all of whom will be ECPs and will
therefore be large and financially sophisticated market participants)
and OCC, which is itself registered and subject to the Commission's
oversight as a clearing agency.
By contrast, the ``matching'' services contemplated in the Matching
Release would involve ``the process whereby an intermediary compares
the broker dealer's trade data submission * * * with the institution's
allocation instructions * * * to determine whether the two descriptions
of the trade agree.'' MarkitWire performs no such comparison. Under the
confirmation/affirmation procedure, trade data is entered into
MarkitWire by one party and such data is made available to the
counterparty to be affirmed, rejected or requested to be revised.
MarkitWire merely facilitates the transfer of information between the
parties sufficient to allow the comparison to be made. A binding
transaction (i.e., an ``affirmed
[[Page 57606]]
confirmation'' in the language of the Matching Release) is not produced
through any action of MarkitSERV, but is instead created by the
completion, by the counterparty, of an affirmation of the trade data
entered by the first party. MarkitWire provides no ``independent
reconciliation or matching'' of trade data. Rather MarkitWire is
providing essentially a messaging service among OCC and the parties to
trades in OTC Options. The Matching Release is clear as to the
distinction between a matching service and a confirmation/affirmation
service, and OCC believes that there is no ambiguity that the services
to be provided by MarkitWire with respect to OTC options fall into the
latter, rather than the former, category.
Risk Management Enhancements for Longer-Tenor Options
Although OCC's license agreement with S&P allows OCC to clear OTC
options with tenors of up to fifteen years, OCC has elected at this
time to clear only OTC options on the S&P 500 index with tenors of up
to five years. However, OCC currently clears FLEX Options on the S&P
500 with tenors of up to 15 years. While OCC believes that its current
risk management practices are adequate for current clearing activity,
OCC is in the process of implementing risk modeling enhancements with
respect to longer-tenor options, including OTC options. The
enhancements are part of OCC's ongoing efforts to test and improve its
risk management operations with respect to all longer-tenor options
that OCC currently clears. These procedures will be submitted for
review in a separate ``advance notice'' filing and OCC will not
commence clearing of OTC options until such procedures have been
approved and implemented.
The proposed enhancements are as follows:
First, OCC will introduce indicative over-the-counter
quotations into the daily dataset of prices used to risk manage OCC-
cleared products. These quotations will be obtained from a service
provider that will collect OTC dealer polling information on a daily
basis and provide such data to OCC.
Second, OCC will introduce variations in the implied
volatilities used in the modeling of all cleared options whose residual
tenors are at least three years. To date, OCC's margin methodology has
assumed that implied volatilities of option contracts are static over
the two-day risk horizon. While OCC's backtesting has identified few
exceedances related to implied volatility shocks, such shocks could
occur and taking them into account in OCC's margin model will allow
more robust risk management. OCC proposes to achieve this result by
incorporating into the risk factors included in OCC's models time
series of proportional changes in implied volatilities for a range of
representative volatilities.
Third, OCC will introduce a valuation adjustment into its
calculation of portfolio net asset value. This adjustment will be based
on the aggregate sensitivity of the longer-tenor options in a portfolio
to the overall level of implied volatilities at three and five years,
and to the implied volatility skew.
A review of individual S&P 500 Index put and call options positions
that are in the money by varying amounts and have expiration dates
between four and nine years out indicates that the inclusion of modeled
implied volatilities tends to result in less margin being held against
short call positions and more being held against short put positions.
These results are consistent with what would be expected given the
strong negative correlation that exists between changes in implied
volatility and market returns. On average, OCC observed a decrease in
the margin requirement of approximately 24% on the nine call options
tested and a 63% increase associated with the nine put options.
Proposed By-Law and Rule Changes
The specific proposed changes to OCC's By-Laws and Rules to provide
for the clearing of OTC options relate primarily to: (i) Specification
of customizable terms; (ii) procedures for submission and acceptance of
trades for clearance; and (iii) specification of criteria for
eligibility of clearing members to clear transactions in OTC options
and limitation of the types of customers for whom clearing members may
effect transactions in OTC options. Otherwise, the currently proposed
OTC options will be cleared and settled under the same provisions
applicable to clearance of listed index options. Many of the proposed
amendments are self-explanatory, and OCC has therefore attempted to
confine the following discussion to a broad overview with specific
explanation only where the reasons for the change may be less obvious.
Article I of the By-Laws contains defined terms used throughout the
By-Laws and Rules. OCC proposes to modify certain existing definitions
and include certain new definitions in order to incorporate OTC options
into existing rules and facilitate the creation of new provisions
unique to OTC options. Throughout the By-Laws and Rules, OCC proposes
to replace the term ``Exchange transaction,'' which is currently
defined in Article I, in relevant part, as ``a transaction on or
through the facilities of an Exchange for the purchase, writing or sale
of a cleared contract'' with the term ``confirmed trade'' so as to make
the relevant portions of the By-Laws and Rules applicable to
transactions in OTC options as well as listed options, without causing
confusion about the role of the OTC Trade Source in OCC's clearing of
OTC options. ``Confirmed trade'' is proposed to be defined in Article I
to include transactions ``effected on or through the facilities of an
exchange'' or ``affirmed through the facilities of an OTC Trade
Source'' in order to include transactions in both listed options and
OTC options. The current definition of ``confirmed trade'' in Rule 101
is proposed to be deleted as unnecessary given the new definition. Much
of the length of this rule filing is attributable to the fact that the
term ``Exchange transaction'' is used so many places in the rules. OCC
has entered into agreements in the past which reference the term
``Exchange transaction'' or ``exchange transaction.'' OCC is also
proposing to add an Interpretation and Policy to the new definition of
``confirmed trade'' in order to avoid any ambiguity concerning how such
terms should be interpreted in any such agreement.
OCC proposes to add a new Interpretation and Policy .11 to Section
1 of Article V of the By-Laws, providing the additional criteria that
must be met by a clearing member in order to clear OTC index options.
Among these new criteria are that clearing members seeking to clear OTC
index options on underlying indices published by Standard & Poor's
Financial Services LLC (``S&P'') must execute and maintain in effect a
short-form license agreement in such form as specified from time to
time by S&P. The current form of S&P short-form index license agreement
is attached hereto as Exhibit 3.
The Interpretations and Policies under Section 1, Article VI allow
clearing members to adjust their positions with OCC for certain
enumerated reasons. OCC proposes to amend the Interpretations and
Policies to clarify that adjustment of positions in OTC options will be
effected through a manual process (as opposed to the electronic process
available to post-trade adjustments in listed options), to the extent
permitted by OCC. For the same reason, OCC is proposing to amend Rule
403 to prohibit clearing member trade assignment (``CMTA'')
transactions in OTC options. Trade
[[Page 57607]]
``give-ups'' that are effected through the CMTA process in the case of
listed options will, in the case of OTC options, be effected through
MarkitSERV before the trades are submitted to OCC for clearing.
Article XVII of the By-Laws governs index options in general and
OCC is proposing amendments to Article XVII in order to set forth the
terms applicable to the initial OTC options proposed to be cleared by
OCC--options on the S&P 500 Index --and to differentiate OTC index
options from other index options cleared by OCC. For example, certain
amendments to the definitions are necessary because OTC options will be
permitted to have a much wider range of expiration dates than exchange-
traded options (other than FLEX Options). Additional definitional
amendments ensure that OTC index options will constitute a separate
class of options from other cash-settled index options even if both
index options have the same terms and cover the same underlying
interest.
Section 3 of Article XVII provides for adjustment of the terms of
outstanding index options as necessary to reflect possible changes in
the underlying index--such as those creating a discontinuity in the
level of the index--that could theoretically make an adjustment
necessary to protect the legitimate expectations of holders and writers
of options on the index. Pursuant to paragraph (g) of Section 3, most
but not all such adjustments would be made, in the case of listed index
options, by an adjustment panel consisting of representatives of the
exchanges on which the options are traded. In the case of OTC options,
any such adjustments will be made by OCC in its sole discretion.
However, in exercising that discretion, OCC may take into consideration
adjustment made by the adjustment panel with respect to exchange-traded
options covering the same underlying index.\18\
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\18\ Because index options, unlike options on individual stocks,
rarely, if ever, require adjustments, allocation of the adjustment
authority may have little practical significance.
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OCC proposes to add a new Section 6 to Article XVII to set forth
certain provisions unique to OTC index options, including the variable
terms allowed for OTC index options and the general limitations on such
variable terms. In general, all OTC index options must conform to the
terms and limitations set forth in Section 6, and additional specific
requirements applicable to specific OTC index options will either be
set forth in the Interpretations and Policies under Section 6 or
published separately on OCC's Web site. Section 6 also makes clear that
although OTC index options are not fungible with exchange-traded index
options, OTC index options of the same series (i.e., options having
identical terms) will be fungible with each other. In addition to the
terms and limitations applicable to OTC index options, Section 6 will
establish that clearing members will be deemed to have made a number of
representations and warranties in connection with their activities in
OTC options each time they affirm a confirmed trade entered into an OTC
Trade Source.
OCC has submitted a rulemaking petition to the Commission \19\
seeking an amendment to Commission Rule 238 \20\ that would exempt the
OTC Options from most provisions of the Securities Act. Unless another
exemption from the registration requirements of the Securities Act is
available, OCC intends to rely upon Rule 506 of Regulation D \21\ under
the Securities Act, which is a safe harbor under the Securities Act
exemption in Section 4(a)(2) \22\ for offerings by an issuer not
involving a public offering. OCC intends to satisfy the conditions of
Rule 506 of Regulation D as in effect at the time OCC relies upon the
safe harbor. Participants in the existing markets for OTC equity
options offered and sold in the United States commonly rely on the
private offering exemption under these provisions and such reliance is
therefore consistent with existing practice. OTC Options will be
available for purchase only by highly sophisticated investors that are
both ``eligible contract participants,'' as defined in Section 3a(65)
of the Exchange Act,\23\ and ``accredited investors,'' as defined in
Rule 501(a) under Regulation D.\24\ Section 6(f) of Article XVII
includes representations of clearing members necessary to ensure that
there is no general solicitation or general advertising in connection
with the offer or sale of the OTC Options until such time as OCC
notifies clearing members that such restriction no longer applies.
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\19\ See SEC File No. 4-644 (Submitted January 13, 2012),
available at http://www.sec.gov/rules/petitions/2012/petn4-644.pdf.
\20\ 17 CFR 230.238.
\21\ 17 CFR 230.506.
\22\ 15 U.S.C. 77d(a)(2).
\23\ 15 U.S.C. 77c(a)(65).
\24\ 17 CFR 230.501.
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Chapter IV of the Rules sets forth the requirements for reporting
of confirmed trades to OCC, and Rule 401 thereunder governs reporting
of transactions in listed options by participant Exchanges. OCC is
proposing to add new Rule 404 to govern the details of reporting of
confirmed trades in OTC options by an OTC Trade Source.
As discussed above, positions in OTC options will generally be
margined in the same manner as positions in listed options using STANS
and pursuant to Chapter VI of the Rules. However, OCC proposes to amend
Rule 611 to establish different procedures for the segregation of long
positions in OTC options for margining purposes. Long positions in
listed options are held in a clearing member's customers' account or
firm non-lien account and by default are deemed to be ``segregated,''
meaning that they are not subject to OCC's lien and are given no
collateral value when determining the margin requirement in the
account. Such positions may be unsegregated only when a clearing member
instructs OCC to unsegregate a long position and represents to OCC that
the long position is part of a spread transaction carried for a single
customer whose margin requirement on the corresponding short position
has been reduced in recognition of the spread. OCC will then
unsegregate the long position and so reduce OCC's margin requirement.
However, in case of long positions in OTC options that are carried in a
clearing member's customers' account and for which OCC has received a
customer ID, OCC proposes that it will automatically unsegregate such
long positions if OCC identifies a qualifying short position in OTC
options carried under the same customer ID. Clearing members will not
be required to give an affirmative instruction to OCC to unsegregate a
long position in OTC options or make a separate representation
regarding the spread transaction. Instead, by carrying a qualifying
spread position in a customer account, clearing members are deemed to
have represented to OCC that the customer's margin has been reduced in
recognition of the spread. Based on discussion with the clearing
members, it is OCC's understanding that, in practice, broker-dealers
reduce customers' margin requirements to reflect spread positions.
Therefore, OCC believes that automatic recognition of such spreads by
OCC together with the deemed representation will greatly increase
operational efficiency while providing equal assurance that long
positions in OTC options will be unsegregated only if an identified
customer will receive the benefit of the reduced margin required for
spread transactions.
Rule 1001 sets forth the amount of the contribution that each
clearing member is required to make to the clearing fund. OCC proposes
to amend Rule 1001(c) so that, for purposes of calculating the daily
average number of cleared
[[Page 57608]]
contracts held by a clearing member in open positions with OCC during a
calendar month (which number is used in turn to determine the clearing
member's contribution to the clearing fund), open positions in OTC
options will be adjusted as needed to account for any differences
between the multiplier or unit of trading with respect to OTC options
relative to non-OTC options covering the same underlying index or
interest so that OTC options and non-OTC options are given comparable
weight in the computation.\25\
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\25\ For example, the index multiplier applicable to OTC index
options on the S&P 500 Index will be fixed at 1. In comparison, the
index multiplier applicable to listed index options is 100.
---------------------------------------------------------------------------
In general, the rules in Chapter XI governing the suspension of a
clearing member will apply equally to clearing members that transact in
OTC options. Rule 1104 provides broad authority for OCC to liquidate a
suspended clearing member's margin and clearing fund deposits ``in the
most orderly manner practicable.'' Rule 1106 provides similarly worded
authority to close out open positions in options and certain other
cleared contacts carried by a suspended clearing member. In 2011, the
Commission approved an OCC rule change providing OCC the express
authority to use a private auction as one of the means by which OCC may
close out open positions and liquidate margin and clearing fund
deposits of a suspended clearing member.\26\ OCC anticipates it will
use this auction process for OTC options as well. As an additional tool
to ensure its ability to close out positions in OTC options promptly,
OCC is proposing to amend Rule 1106 to provide for an alternative
auction procedure specifically applicable only to OTC index options and
related positions hedging, or hedged by, OTC index options (an ``OTC
Options Auction''). An OTC Options Auction would be used only in
unusual circumstances where OCC determines it is not feasible to close
out open positions in OTC index options through the other means
provided for in OCC's Rules and By-Laws.\27\ The amendments to Rule
1106 summarize the OTC Options Auction procedures and incorporate by
reference the detailed procedures contained in a document entitled
``OTC Options Auction Procedures,'' which will be posted on the
Corporation's Web site and otherwise made available to clearing members
upon request of OCC. A copy of the OTC Options Auction Procedures is
attached hereto as Exhibit 5.
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\26\ See Securities Exchange Act Release No. 34-65654 (October
28, 2011), 76 FR 68238 (November 3, 2011) (SR-OCC-2011-08). OCC
subsequently filed a rule change to provide for detailed procedures
for the conduct of such an auction. See Securities Exchange Act
Release No. 34-67443 (July 16, 2012), 77 FR 42784 (July 20, 2012)
(SR-OCC-2012-11). The Staff notes that SR-OCC-2012-11 was approved
on August 27, 2012. See Securities Exchange Act Release No. 34-6773
(August 27, 2012), 77 FR 53241 (August 31, 2012).
\27\ OCC anticipates that these procedures would be applicable
to other OTC derivatives that may be cleared by OCC in the future.
However, OCC has limited the currently proposed rule to OTC index
options, and will amend it as and if appropriate to apply to other
over-the-counter products that OCC may propose to clear in the
future.
---------------------------------------------------------------------------
Rule 1106(e)(2)(C) clarifies that, in the event that the
liquidation of a clearing member results in a deficiency that would
otherwise result in a proportionate charge against the clearing fund
contributions of other clearing members, each OTC Index Option Member
(as defined below) that failed to purchase or assume its share of an
auction portfolio will be the first to absorb the deficiency, through a
``Priority Charge'' against such clearing members' clearing fund
contributions. The Priority Charge is a ``first loss'' mechanism, and
is not intended to increase a clearing member's total maximum exposure
to OCC.
Under the OTC Options Auction procedures, all clearing members
authorized to clear transactions in OTC index options (``OTC Index
Option Members''), other than the defaulting clearing member, will be
required to participate in the OTC Options Auction by submitting
competitive bids for all or a portion of the defaulting clearing
member's OTC index option portfolio. Each such participant will be
subject to a minimum participation level based on the participant's
proportionate share of the total ``risk margin'' requirement posted by
all OTC Index Options Members in the previous month for all positions
(not limited to OTC option positions) held in accounts eligible to hold
OTC options positions (``OTC Eligible Accounts''), after removing the
defaulting clearing member.\28\ This method of calculating the minimum
participation level in the OTC Options Auction results in all OTC Index
Option Members being required to participate in the OTC Options Auction
based on their clearing activity related to all positions in OTC
Eligible Accounts. Required participation ensures that the OTC Options
Auction will have sufficient participants authorized to clear
transactions in OTC index options and that the most active clearing
members in OTC index options will submit bids for the largest
percentage of the auction portfolio, increasing the likelihood of the
acquisition of OTC options positions by clearing members with
appropriate financial strength, risk management capabilities and
trading expertise. Each participant may submit bids at varying
quantities and varying prices, so long as the participant's bids equal
or exceed its minimum participation level. A participant may use bids
from non-OTC Index Options Members and non-clearing members in order to
meet its minimum participation level, subject to certain Corporation
requirements including that it guarantee the performance of such third
parties. Each bid will indicate what percentage of the auction
portfolio the participant is bidding on and the amount of the bid. Bids
will be stated in terms of a price for the entire auction portfolio,
and may be either positive or negative. (Negative bids imply an auction
portfolio that has a negative net asset value and indicate how much the
Corporation would be required to pay the participant to assume the
relevant percentage of the auction portfolio.) The Corporation will
rank the submitted bids from best to worst and the auction portfolio
will be allocated among the bidding participants accordingly until the
auction portfolio is exhausted. The bid price that is sufficient to
clear the entire auction portfolio will become the single price to be
used for all winning bids, even if a participant's stated bid was
better.
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\28\ This minimum participation level will be multiplied by 1.15
to calculate each participant's minimum bid size, such that the sum
of all participants' bids will equal 115% of the auction portfolio,
in order to increase the likelihood that the entire auction
portfolio will be allocated to participants.
---------------------------------------------------------------------------
In order to provide a strong incentive to ensure competitive
bidding by the OTC Index Option Members required to participate in an
OTC Options Auction, OTC Index Options Members who fail to win their
minimum participation in the auction will be subject to a potential
priority charge against its clearing fund contribution. If the cost of
liquidating a suspended clearing member's positions exhausts the
clearing member's margin and clearing fund contribution and any other
assets of the suspended clearing member available to OCC, then OCC,
pursuant to Section 5 of Article VIII of the By-Laws, would ordinarily
withdraw the amount of the deficiency from the clearing fund and charge
it on a proportionate basis against all other clearing members'
computed contributions as fixed at the time. When an OTC Options
Auction has been held in respect of a suspended OTC Index Options
Member, however, some or all of any such remaining loss would be
assessed first against the clearing fund
[[Page 57609]]
contributions of any OTC Options Auction participant(s) whose bids are
insufficiently competitive to be allocated a portion of the auction
portfolio equal to such participant's minimum required participation.
This priority charge would be made regardless of the reason for the
shortfall--i.e., whether or not the loss resulted from the closing out
of OTC options positions. The priority charge would be calculated based
on an ``assessment ratio,'' which is formulated to provide incentive to
all OTC Options Auction participants to participate to their full
minimum participation level in the auction. The method of calculating
the assessment ratio is such that if the net asset value of the auction
portfolio is zero the assessment ratio will also be zero and no
priority charge will be made. As the absolute net asset value of the
auction portfolio (whether positive or negative) increases, the
assessment ratio also increases, all other factors being equal. If all
OTC Options Auction participants submit bids such that each receives an
allocation of OTC options positions equal to its minimum participation
level, no priority charge will be made regardless of whether or not
there is a liquidation shortfall. If a liquidation shortfall remains
after any priority charges, or if no priority charges were required,
the Corporation will then make a proportionate charge against the
clearing fund contributions of all clearing members, including those
that participated in the OTC Options Auction, in the usual manner
pursuant to Section 5 of Article VIII of OCC's By-Laws.
In order to protect the estate of the suspended clearing member,
OCC reserves some discretion in supervising the auction. In the event
that the bid price that clears the entire auction portfolio is
determined by OCC to be an outlier bid, OCC may choose as the winning
bid a price that clears at least 80% of the auction portfolio. The
remaining auction portfolio will then be re-auctioned as described
above.
OCC anticipates that the likelihood of having to use this
alternative auction is small. Nevertheless, in view of the fact that
positions in OTC index options are expected to be large and that there
may be no active trading market in options with terms precisely
identical to the terms of the OTC index options in question, OCC
believes that this is an appropriate failsafe provision. It should be
noted that the Chicago Mercantile Exchange Inc. (``CME'') has rules
allowing its clearing house and certain CME committees to administer an
auction process to liquidate positions in interest rate swaps (``IRS'')
in the event of a default of a CME clearing member authorized to submit
IRS for clearing (an ``IRS Member'').\29\ Although the financial
safeguards supporting IRS clearing, including its ``guaranty fund,''
and the IRS auction process are different from OCC's clearing fund and
OTC Options Auction in that, among other things, there is a separate
guaranty fund for IRS, the IRS auction shares certain similarities with
the OTC Options Auction. In particular, the IRS auction process
requires mandatory participation of IRS clearing members with open
interest in a position being auctioned and, in order to provide
incentive for IRS Members to submit quality bids in an IRS auction,
provides that in the event there is a loss to CME's clearing house
associated with an IRS Member's default, IRS Members that do not submit
quality bids in an IRS auction are subject to having their IRS guaranty
fund deposit assessed before assessments are made against other IRS
clearing members' guaranty fund deposits. In its original rule filing,
OCC had proposed a different failsafe solution whereby OCC could
terminate open positions of a suspended clearing member by setting a
close-out value that non-defaulting clearing members holding the
opposite side of the suspended clearing member's positions would be
required to accept or pay in settlement of the terminated positions.
However, clearing members objected to that proposed method and have
advocated the auction procedures proposed here in lieu of the early
termination proposal.\30\ Clearing members in an OTC advisory group
were active in designing the OTC Options Auction procedures, including
the priority charges.
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\29\ See CME Rules 8G14, 8G25 and 8G802.B. See also Commodity
Futures Trading Commission Rule Change Submission No. 12-061RR of
CME, the Board of Trade of the City of Chicago Inc. and the New York
Mercantile Exchange, available at: http://www.cmegroup.com/market-regulation/files/12-061rr.pdf.
\30\ See comment letter from Alessandro Cocco, Managing Director
of J.P. Morgan Clearing Corporation and J.P. Morgan Securities LLC,
to Ms. Elizabeth M. Murphy, Secretary, Securities and Exchange
Commission (January 30, 2012), available at http://www.sec.gov/comments/sr-occ-2011-19/occ201119-2.pdf.
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Impact of Clearing OTC Options on Other OCC-Cleared Products
Cleared OTC options will not be fungible with listed options.
However, an OTC option may have economic characteristics that are
substantially similar or identical to the characteristics of options in
series of listed options that OCC clears. While it is possible that in
any given instance a market participant may elect to enter into an OTC
option in lieu of an economically similar listed product, OCC does not
believe that its clearing of OTC options will adversely affect the
efficiency or liquidity of the listed markets. The OTC options markets
currently exist to accommodate a variety of commercial and other needs
of market participants, including the ability to customize the terms of
transactions. While the availability of an OCC guarantee for OTC
transactions in which the parties would otherwise be exposed to each
others' creditworthiness may cause transactions that currently occur in
the non-cleared OTC markets to migrate to the cleared-OTC markets, OCC
does not believe it will cause significant migration from the listed
markets to the cleared OTC markets. The limitation of the OTC options
markets to ECPs as well as the significant minimum transaction size and
tenor requirements that are applicable to certain transactions in the
currently proposed OTC options under the S&P License Agreement will
limit the use of cleared OTC options and should help to ensure that
there is no substantial migration from the listed markets to the OTC
markets for this product. The existing bilateral OTC options markets
have existed for years alongside the listed options markets, and OCC
believes that dealers in such bilateral options often use the listed
markets to hedge positions taken in such bilateral options and other
OTC derivatives.
Notice of Launch Date
Following approval of this rule change by the Commission, OCC
expects to provide notice to its clearing members of the date on which
it intends to implement this rule change and begin clearing OTC
options.
OCC believes that the proposed changes to OCC's By-Laws are
consistent with the purposes and requirements of Section 17A of the
Exchange Act \31\ because they are designed to permit OCC to clear OTC
options subject to the same basic rules, procedures and risk management
practices that have been used successfully by OCC in clearing
transactions in listed options. OCC believes that clearance and
settlement of OTC options pursuant to this rule filing is fully
consistent with OCC's obligations with respect to the prompt and
accurate clearance and settlement of securities transactions and the
protection of securities investors and the public interest. The
proposed rule
[[Page 57610]]
change is not inconsistent with any existing rule of OCC.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
(B) Self-Regulatory Organization's Statement on Burden on Competition
OCC does not believe that the proposed rule change would impose any
burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Written comments were not and are not intended to be solicited with
respect to the proposed rule change and, except as discussed below,
none have been received. OCC has been actively engaged with a number of
clearing members that have expressed an interest in clearing OTC
Options. The following are the only substantive written comments that
were received, and they have been addressed, in the manner indicated:
OCC received a written comment that the role of the
Default Management Advisory Committee, as described in the OTC Options
Auction procedures attached as Exhibit 5 to this rule filing, should be
clarified. OCC has revised the procedures to clarify that the Default
Management Advisory Committee will be a standing committee and will be
formed from the inception of OCC's clearing of OTC Options. It will not
be an ad hoc committee formed at the time of a default.
OCC received a written comment asking that the Membership/
Risk Committee have a role in setting exercise settlement values with
respect to OTC index options in unusual circumstances pursuant to
Section 4(a)(2) of Article XVII of the ByLaws. OCC has revised the
rules to provide that OCC will consult with that committee when
appropriate in setting exercise settlement values pursuant to Section
4(a)(2).
OCC received a written comment asking for limitations on
the indemnification of OCC by clearing members under Section 6(f) of
Article XVII of the ByLaws. In response to this comment OCC has added
an exclusion from the indemnity for claims, liabilities, or expenses
that result primarily from OCC's gross negligence or willful misconduct
or from OCC conduct that causes the offer or sale of the OTC Options to
become subject to the registration provisions of Section 5 of the
Securities Act.\32\
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\32\ 15 U.S.C. 77e.
---------------------------------------------------------------------------
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
OCC has also filed the proposed rule change as an advance notice
under Section 806(e)(1) of the Payment, Clearing, and Settlement
Supervision Act of 2010 (``Clearing Supervision Act'').\33\ The
proposed changes contained in the advance notice may be implemented
pursuant to Section 806(e)(1)(G) of Clearing Supervision Act \34\ if
the Commission does not object to the proposed changes within 60 days
of the later of (i) the date that the advance notice was filed with the
Commission or (ii) the date that any additional information requested
by the Commission is received. The clearing agency shall not implement
the proposed changes contained in the advance notice if the Commission
objects to the proposed changes.
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\33\ 12 U.S.C. 5465(e)(1).
\34\ 12 U.S.C. 5465(e)(1)(G).
---------------------------------------------------------------------------
The Commission may extend the period for review by an additional 60
days if the proposed changes raise novel or complex issues, subject to
the Commission providing the clearing agency with prompt written notice
of the extension. Proposed changes may be implemented in fewer 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 changes and authorizes the clearing agency to implement the
proposed changes on an earlier date, subject to any conditions imposed
by the Commission.
The proposals contained in the proposed rule change and advance
notice shall not take effect until all regulatory actions required with
respect to the proposals are completed. The clearing agency shall post
notice on its web site of proposed changes that are implemented.
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-2012-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2012-14. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Section, 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 filings will also be
available for inspection and copying at the principal office of OCC and
on OCC's Web site at http://www.optionsclearing.com/components/docs/legal/rules_and_bylaws/sr_occ_12_14.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-2012-14 and should be submitted on
or before October 9, 2012.
[[Page 57611]]
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\35\
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\35\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary .
[FR Doc. 2012-22908 Filed 9-17-12; 8:45 am]
BILLING CODE 8011-01-P