[Federal Register Volume 79, Number 10 (Wednesday, January 15, 2014)]
[Notices]
[Pages 2739-2741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-00578]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71268; File No. SR-OCC-2013-23]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change, as Modified by Amendment No.
1, To Provide OCC With Authority in Emergency Circumstances To Extend,
Waive, or Suspend the Operation of Its By-Laws, Rules, Policies and
Procedures, or Any Other Rules Issued by OCC
January 9, 2014.
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 December 27, 2013, 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 by OCC. OCC filed Amendment No. 1 to the
proposed rule change on January 8, 2014.\3\ 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.
\3\ In Amendment No. 1, OCC: (i) Clarified its ability to extend
the time fixed in certain Rules for the doing of any act or acts in
emergency situations; (ii) removed the concept of a force majeure
situation from the proposed rule change; and (iii) made other
technical changes.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The purpose of the proposed rule change is to provide OCC with
authority in emergency circumstances, subject to certain conditions, to
waive or suspend the operation of its By-Laws, Rules, policies and
procedures, or any other rules issued by OCC or to extend any time
fixed thereby for the doing of any act or acts.
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
(i) Purpose of the Proposed Rule Change
The purpose of the proposed rule change is to amend OCC's By-Laws
to provide OCC with authority in emergency circumstances, subject to
certain conditions, to waive or suspend the operation of its By-Laws,
Rules, policies and procedures, or any other rules issued by OCC
(collectively, the ``Rules'') or to extend any time fixed thereby for
the doing of any act or acts. The proposed rule change is patterned on,
although not identical to, the existing rule of a registered clearing
agency that was previously approved by the Commission.\4\ OCC is filing
this Amendment No. 1 to: (1) Clarify OCC's ability to extend the time
fixed in certain Rules for the doing of any act or acts in emergency
situations, (2) remove the concept of a force majeure situation from
the proposed rule change and (3) make other non-material, technical,
changes.
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\4\ In connection with an order approving the ability of the
Mortgage-Backed Securities Division of Fixed Income Clearing
Corporation (``FICC MBSD'') to perform guaranteed settlement and
central counterparty services, the Commission approved FICC MBSD
Rule 33, which provides authority to waive and suspend rules, or
extend the time for doing any act or acts thereunder, in emergency
circumstances subject to certain conditions. Securities Exchange Act
Release No. 34-66550 (March 9, 2012), 77 FR 15155, 15160 (March 14,
2012) (SR-FICC-2008-01). FICC's Government Securities Division (FICC
GSD Rule 42) and other registered clearing agencies, National
Securities Clearing Corporation (NSCC Rule 22) and The Depository
Trust Company (DTC Rule 18), maintain similar rules.
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From time-to-time, OCC has faced situations in which its ability to
help facilitate the national system for the prompt and accurate
clearance and settlement of securities transactions has involved a need
to temporarily waive or suspend certain of its Rules, or extend the
time for doing any act or acts thereunder. In one instance, a temporary
waiver was necessary so that OCC could facilitate the transfer,
assignment, and assumption of the securities correspondent clearing
business from one of its clearing members to another. Through the
issuance of a No-Action Letter, the staff of the Commission's Division
of Trading and Markets facilitated OCC's ability to temporarily waive
certain of its Rules, which was appropriate to accommodate underlying
transactions involved with restructuring a clearing member's
business.\5\
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\5\ The Options Clearing Corporation, SEC No-Action Letter,
(June 4, 2012).
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OCC's ability to more immediately and effectively address emergency
situations would be enhanced by the proposed rule change, which would
allow OCC to waive or suspend its Rules or to extend the time fixed
thereby for the doing of any act or acts to address emergency
circumstances. The proposed rule change would also bring OCC's Rules in
line with the existing capabilities of other registered clearing
agencies to waive or suspend their rules, or extend the time fixed
thereby for performing any act or acts, in like circumstances.
Under the proposed rule change, OCC's Board of Directors, Chairman,
Management Vice Chairman or President would be authorized to waive or
suspend the Rules or extend any time fixed thereby for the doing of any
act or acts, if, in his, her, or their judgment, an emergency exists
and extension, waiver or suspension is necessary or advisable for the
protection of OCC or would otherwise be in the public interest in order
for OCC to continue to facilitate the prompt and accurate clearance and
settlement of confirmed trades or other transactions and to provide its
services in a safe and sound manner. If a determination were to be made
other than by the Board of Directors, notice to the Board of Directors
would be required as soon as practicable.
The proposed By-Law provision states that OCC would be required to
notify the SEC and CFTC within two hours of any such emergency
extension, waiver or suspension and that as soon as practicable, but
not later than three calendar days after the date of the determination
to effect the extension, waiver or suspension, OCC would provide the
SEC and CFTC with a report of the material aspects of the extension,
waiver or suspension and the reasons that it was deemed necessary or
advisable. Any such emergency action would be permitted to continue at
OCC's discretion for up to thirty calendar days, provided that the SEC
or CFTC, as applicable, does not notify OCC it objects in writing. OCC
would file a corresponding proposed rule
[[Page 2740]]
change with the SEC and/or CFTC, as applicable, during the thirty day
period if it wishes to continue the extension, waiver, or suspension
beyond the thirty day period. In that case, the extension, waiver or
suspension would continue while the proposed rule change is under
review by each agency, but if either the SEC and/or the CFTC staff, as
applicable, notifies OCC in writing that it objects to the proposed
rule change the operation of the extension, waiver or suspension would
be discontinued.
(ii) Statutory Basis for the Proposed Rule Change
OCC believes the proposed rule change is consistent with Section
17A(b)(3)(F) of the Act \6\ and the rules and regulations thereunder
because by enhancing OCC's ability to more immediately and effectively
address emergency situations through waiver or suspension of its Rules,
or extension of any time periods fixed thereby, in a manner consistent
with the capabilities of other registered clearing agencies that
perform comparable services it would help ensure that OCC's rules are
designed to promote the prompt and accurate clearance and settlement of
securities transactions and foster cooperation and coordination with
persons engaged in the clearance and settlement of securities
transactions. In addition, OCC believes that the proposed rule change
is consistent with Rule 17Ad-22(d)(1) \7\ because including these
emergency capabilities in OCC's By-Laws would help ensure that OCC
maintains a well-founded, transparent, and enforceable legal framework.
The proposed rule change is not inconsistent with the existing rules of
OCC, including any other rules proposed to be amended.
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
\7\ 17 CFR 240.17Ad-22(d)(1).
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(B) Clearing Agency's Statement on Burden on Competition
OCC does not believe that the proposed rule change would impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.\8\ With respect to any burden
on competition among clearing agencies, OCC is the only registered
clearing agency that performs central counterparty services for the
equity options markets.
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\8\ 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 clearing
members with respect to their obligation to abide by all provisions of
OCC's By-Laws and Rules and all procedures adopted pursuant thereto \9\
in that OCC would have authority in an emergency to waive or suspend
such provisions, or extend any time fixed thereby for the doing of any
act or acts, if it is necessary or advisable for the protection of OCC
or would otherwise be in the public interest in order for OCC to
continue to facilitate the prompt and accurate clearance and settlement
of confirmed trades or other transactions and to provide its services
in a safe and sound manner. OCC believes that the proposed authority
would not unfairly inhibit access to OCC's services or disadvantage or
favor any particular user in relationship to another user because the
authority would apply equally to all of OCC's Rules and clearing
members. While any actual emergency extension, waiver or suspension
could ultimately result in certain advantages or disadvantages for a
particular subset of clearing members, OCC's authority in this regard
could only be exercised where OCC believes it is necessary or advisable
for the protection of OCC or is otherwise in the public interest in
order for OCC to facilitate prompt and accurate clearance and
settlement or for the safety and soundness of its clearing functions.
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\9\ OCC By-Laws Article V, Section 3.
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Predicating OCC's emergency authority on these conditions directly
serves the purposes of the Act relevant to OCC because it would help
ensure that any emergency action taken by OCC would be consistent with
Congress' finding in Section 17A of the Act that promoting prompt and
accurate clearance and settlement of securities transactions, including
the transfer of record ownership and the safeguarding of securities and
funds related thereto, is necessary for the protection of investors and
persons facilitating transactions by and acting on behalf of
investors.\10\ In this way, OCC's proposed framework for any such
emergency action would be designed to promote the national system for
clearance and settlement and serve the larger interest of all clearing
members in OCC's continuing ability to operate in a safe and sound
manner. With respect to any burden on competition that might result
from a particular extension, waiver or suspension in an emergency
circumstance, the proposed framework would also facilitate ongoing
regulatory oversight of any emergency action by limiting the initial
effectiveness to thirty days and requiring OCC to provide prompt notice
to regulators of material aspects of the emergency action together with
the reasons therefor. In addition, the SEC and/or CFTC staff, as
applicable, would have the ability to immediately discontinue the
effectiveness of any emergency action through delivery of a written
objection to OCC.
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\10\ 15 U.S.C. 78q-1(a)(1)(A).
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For the foregoing reasons, OCC believes that the proposed rule
change is in the public interest, would be consistent with the
requirements of the Act applicable to clearing agencies, and would not
impose a burden on competition that is unnecessary or inappropriate in
furtherance of the purposes of the Act.
(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 the 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-2013-23 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.
[[Page 2741]]
All submissions should refer to File Number SR-OCC-2013-23. 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 of submission. 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 20549-1090, 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 Web site at http://www.optionsclearing.com/components/docs/legal/rules_and_bylaws/sr_occ_13_23.pdf and at
http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_13_23_a1.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-2013-23 and
should be submitted on or before February 5, 2014.
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. 2014-00578 Filed 1-14-14; 8:45 am]
BILLING CODE 8011-01-P