[Federal Register Volume 79, Number 236 (Tuesday, December 9, 2014)]
[Notices]
[Pages 73128-73129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-28766]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73725; File No. SR-OCC-2014-19]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change To Permit the Executive Chairman,
the President or a Delegate of Such Officer To Approve Requests by a
Hedge Clearing Member To Become a Market Loan Clearing Member
December 3, 2014.
On October 24, 2014, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2014-19 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder.\2\ The proposed rule change was published for comment in
the Federal Register on November 3, 2014.\3\ The Commission did not
receive any comments on the proposed rule change. This order approves
the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 73449 (October 28,
2014), 79 FR 65277 (November 3, 2014) (SR-OCC-2014-19).
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I. Description
The purpose of OCC's rule change is permit OCC's Executive
Chairman, the President or their delegate to approve business expansion
requests of Hedge Clearing Members \4\ to become Market Loan Clearing
Members.\5\ Delegates of
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the Executive Chairman and/or the President must be an officer of the
rank of Senior Vice President or higher. Currently, OCC's By-Laws
require that requests of a Hedge Clearing Member to become a Market
Loan Clearing Member be processed through OCC's business expansion
process, which involves review and approval by OCC's Risk Committee
(``Committee''). As described below, this type of business expansion
request is operational and administrative in nature and OCC does not
believe review and approval of this type of business expansion request
requires the Committee to assess the risk of such designation.
Accordingly, OCC is amending its rules to permit the Executive
Chairman, the President, or their delegate to approve business
expansion requests of Hedge Clearing Members to become Market Loan
Clearing Members without further review by the Committee, provided that
any delegate be an officer of the rank of Senior Vice President or
higher.
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\4\ See OCC By-Laws, Article 1.H(1). See also, OCC By-Laws,
Article V, Section 1, Interpretation and Policy .07.
\5\ See OCC By-Laws, Article 1.M(4). See also, OCC By-Laws,
Article V, Section 1, Interpretation and Policy .07A.
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According to OCC, the Committee is responsible for reviewing and
approving clearing member requests to clear a type or a kind of
transaction for which it is not currently approved to clear through OCC
(i.e., a business expansion request).\6\ The Committee has delegated
the Executive Chairman, the Management Vice Chairman, the President, or
their delegate with authority to review and approve business expansion
requests in response to requests by clearing members for expedited
review. Such approval is then subject to the Committee's review and
ratification at its next regularly scheduled meeting. If a clearing
member does not request expedited review of a business expansion
request then such request will be reviewed by the Committee at a
regularly scheduled meeting of the Committee, and not by the Executive
Chairman, the Management Vice Chairman, the President, or their
delegate.
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\6\ See OCC By-Laws, Article V, Section 1, Interpretation and
Policy .03(e).
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In the case of a Hedge Clearing Member requesting a business
expansion in order to be approved as Market Loan Clearing Member, the
clearing member will have already been subject a robust risk review by
the Committee concerning such clearing member's ability to participate
in stock loan activity at OCC. Accordingly, the review of the Market
Loan business expansion request by either the Committee and/or the
Executive Chairman, the Management Vice Chairman, the President, or
their delegate would be primarily operational in nature and involve
ensuring that the clearing member: (1) Is a U.S. Clearing Member, (2)
is a member of a Loan Market,\7\ (3) is a participant of the Depository
Trust Company and has executed certain agreements with the Depository
Trust Company, and (4) executes applicable agreements with OCC.\8\ The
Committee and/or the Executive Chairman, the Management Vice Chairman,
the President, or their delegate would also review the current
financial risk profile of the clearing member in connection with the
business expansion request in order to verify that the clearing member
continues to meet OCC's financial requirements. OCC believes that a
second risk review by the Committee would be duplicative because the
Committee has already analyzed and approved the clearing member's
ability to participate in stock loan activity at OCC. In addition, OCC
does not believe that review and approval of this type of business
expansion request is an appropriate use of the Committee's time given
other, more substantive, issues the Committee must consider. Therefore,
OCC is amending Article V, Section 1, Interpretation and Policy .03 of
its By-Laws to provide the Executive Chairman, the President, or their
delegate with the authority to approve the business expansion requests
of Hedge Clearing Members to become Market Loan Clearing Members
without further review by the Committee, provided that any delegate be
an officer of the rank of Senior Vice President or higher. According to
OCC, it will implement appropriate procedures to ensure that Hedge
Clearing Members meet the requirements to become Market Loan Clearing
Members and participate and the Market Loan Program.
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\7\ See OCC By-Laws, Article 1.L(5).
\8\ See, OCC By-Laws, Article V, Section 1, Interpretation and
Policy .07A.
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II. Discussion and Commission Findings
Section 19(b)(2)(C) of the Act \9\ directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that the proposed rule change is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to such
organization.
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\9\ 15 U.S.C. 78s(b)(2)(C).
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The Commission finds that the proposed rule change is consistent
with Section 17A(b)(3)(F) of the Act,\10\ which requires the rules of a
registered clearing agency to, among other things, remove impediments
to and perfect the mechanism of a national system for the prompt and
accurate clearance and settlement of securities transitions. OCC's rule
is consistent with Section 17A(b)(3)(F) of the Act \11\ because by
providing the Executive Chairman, the President or their delegate,
provided the delegate is a Senior Vice President or higher, the
authority to review and approve the business expansion requests of
Hedge Clearing Members that would like to become Market Loan Clearing
Members without further review by the Committee, the Committee can have
more time to focus on more substantive matters. As discussed above, the
Committee will have already analyzed and approved the clearing member's
ability to meet OCC's financial requirements when it approved the
clearing member as a Hedge Clearing Member. This business expansion
review and approval process can be accomplished by OCC's Executive
Chairman, the President, or their delegate, provided that the delegate
is an officer of the rank of Senior Vice President or higher, because
it is primarily administrative in nature and includes a verification
that the clearing member still meets OCC's financial requirements. By
giving the Committee more time to focus on more substantive matters,
this rule is consistent with removing impediments to and perfect the
mechanism of a national system for the prompt and accurate clearance
and settlement of securities transitions.\12\
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\10\ 15 U.S.C. 78q-1(b)(3)(F).
\11\ Id.
\12\ See id.
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act \13\ and the
rules and regulations thereunder.
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\13\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (SR-OCC-2014-19) be, and it
hereby is, approved.
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\14\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-28766 Filed 12-8-14; 8:45 am]
BILLING CODE 8011-01-P