[Federal Register Volume 78, Number 162 (Wednesday, August 21, 2013)]
[Notices]
[Pages 51786-51788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-20335]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70207; File No. SR-OCC-2013-12]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change To Revise Its By-Laws and
Rules To Make Structural Changes to OCC's Membership/Risk Committee
Regarding Public Directors and the Process for Designating Membership/
Risk Committee Members
August 15, 2013.
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 2, 2013, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') 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 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. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
OCC proposes to revise its By-Laws and Rules to make structural
changes to OCC's Membership/Risk Committee (``MRC'') regarding Public
Directors and the process for designating MRC members.
II. Clearing Agency'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) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
(1) Purpose
The purpose of this proposed rule change is to revise OCC's By-Laws
and Rules to make structural changes to OCC's MRC regarding Public
Directors \3\ and the process for designating MRC members. The proposed
rule change would require that at least one Public Director must serve
on the MRC, that the MRC Chairman be a Public Director, and that all
MRC members would be designated on an annual basis.
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\3\ In relevant part, Article III, Section 6A of OCC's By-Laws
defines a Public Director as a person who is ``not affiliated with
any national securities exchange or national securities association
or with any broker or dealer in securities[.]''
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Currently, Article III, Section 9 of OCC's By-Laws specifies that
at the first meeting of the Board of Directors that follows each annual
meeting the Board must designate the Chairman of the Board, the Vice
Chairman of the Board, and at least three other Member Directors to
serve on the MRC. The By-Laws would be modified to provide that at
least one Public Director must serve on the MRC and that the MRC
Chairman must be a Public Director. These modifications would
correspond to OCC's existing practice of having at least one Public
Director serve on the MRC, and OCC believes that including this
requirement in the By-Laws would help ensure that the MRC will continue
[[Page 51787]]
to operate in a manner that is appropriately free from outside
influence and that therefore helps protect the interests of investors
and the public.
The proposed rule change would also eliminate the requirement from
the By-Laws that MRC members must be designated at the first meeting of
OCC's Board of Directors that follows each annual meeting. Instead, the
only timing requirement in the By-Laws would be for MRC members to be
designated annually. OCC believes this change to the By-Laws would
provide OCC's Board with appropriate flexibility to decide when it is
best for new MRC member designations to be made.
As amended, Article III, Section 9 of OCC's By-Laws would provide
that the Public Director(s) would be nominated to serve on the MRC by
the Chairman of the Board and that any nomination would be subject to
approval by the Board of Directors. Article III, Section 9 would also
provide that the Chairman of the MRC would be required to be a Public
Director. If more than one Public Director is nominated to serve on the
MRC, the Chairman of the Board would nominate one of the Public
Directors to serve as the MRC Chairman. Any such nomination by the
Chairman of the Board would be subject to Board approval. OCC also
proposes to make technical corrections in Article III, Section 9 to
eliminate specific references to Article V of the By-Laws and Chapter
VI of the Rules in order to avoid any erroneous inference that those
are the only provisions of the By-Laws and Rules that set forth powers
and duties of the MRC, which are in fact contained in many other
provisions of the By-Laws and Rules as well.\4\
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\4\ For example, see Article I, Section G (6) of the By-Laws and
Rules 214(b), 305(c), and 309(e).
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(2) Statutory Basis
OCC believes that the proposed rule change is consistent with
Section 17A(b)(3)(F) \5\ of the Act \6\ and the rules and regulations
thereunder, including Rule 17Ad-22(d)(8),\7\ because these requirements
with respect to Public Directors in OCC's By-Laws would protect
investors and the public interest by promoting the continued operation
of the MRC in a manner that is appropriately free from outside
influence. By including in the By-Laws the existing practice of having
at least one Public Director serve on the MRC and by further requiring
that the MRC Chairman be a Public Director, the proposed modifications
would help ensure that OCC's governance arrangements are clear and
transparent, fulfill the public interests requirements in Section 17A,
support the objectives of owners and participants, and promote the
effectiveness of OCC's risk management procedures.\8\ OCC further
believes that the proposed change to the By-Laws to require a Public
Director to serve as the MRC Chairman is consistent with explanatory
note 3.2.14 to Principle 2 of the Principles for Financial Market
Infrastructures that recommends that a risk committee be chaired by a
sufficiently knowledgeable independent board member.
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\5\ 15 U.S.C. 78q-1(b)(3)(F).
\6\ 15 U.S.C. 78a et. seq.
\7\ 17 CFR 240.17Ad-22(d)(8).
\8\ Id.
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(B) Clearing Agency's Statement on Burden on Competition
OCC does not believe that the proposed rule change would impose a
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.\9\ With respect to any burden
on competition among clearing agencies, OCC is the only clearing agency
that performs central counterparty services for the options markets.
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\9\ 15 U.S.C. 78q-1(b)(3)(I).
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Changes to the rules of a clearing agency may have an impact on the
participants in a clearing agency and the markets that the clearing
agency serves. This proposed rule change primarily affects OCC in that
it would require at least one Public Director to serve on the MRC, the
MRC Chairman to be a Public Director, and all MRC members to be
designated on an annual basis. OCC does not believe that these changes
with respect to governance would treat any clearing member or group of
clearing members disparately or otherwise disparately affect access to
or use of any of OCC's facilities or disadvantage or favor any user in
relationship to any other such user. In fact, OCC believes that the
proposed requirement that at least one member be a Public Director and
that the MRC Chairman be a Public Director would promote competition by
lessening the influence that any particular clearing member may have on
the MRC.
For the foregoing reasons, OCC believes that the proposed rule
change is in the public interest, that it would be consistent with the
requirements of the Act applicable to clearing agencies, and would not
impose any burden on competition that is unnecessary or inappropriate
in furtherance of the purposes of the Act because the changes would
help ensure that the MRC continues to operate in a manner that is
appropriately free from outside influence and therefore help promote
the purposes of the Act and Rule 17Ad-22(d)(8) \10\ thereunder as
described above.
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\10\ 17 CFR 240.17Ad-22(d)(8).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
Written comments on the proposed rule change were not and are not
intended to be solicited with respect to the proposed rule change and
none have been received.
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 such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. 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 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-2013-12 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.
All submissions should refer to File Number SR-OCC-2013-12. 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
[[Page 51788]]
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 Room, 100 F Street NE., Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of OCC and on OCC's Web site:
http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_13_12.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-2013-12
and should be submitted on or before September 11, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-20335 Filed 8-20-13; 8:45 am]
BILLING CODE 8011-01-P