
[Federal Register Volume 78, Number 150 (Monday, August 5, 2013)]
[Notices]
[Pages 47449-47450]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-18761]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70076; File No. SR-OCC-2013-09]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving Proposed Rule Change, as Modified by Amendment No. 1, 
To Separate the Powers and Duties Currently Combined in the Office of 
OCC's Chairman Into Two Offices, Chairman and President, and Create an 
Additional Directorship To Be Occupied by the President

July 30, 2013.

I. Introduction

    On June 4, 2013 The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change SR-OCC-2013-09 pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 
thereunder.\2\ On June 10, 2013, OCC filed Amendment No. 1 to the 
proposed rule change.\3\ The proposed rule change, as modified by 
Amendment No. 1, was published for comment in the Federal Register on 
June 21, 2013.\4\ The Commission received no comment letters. For the 
reasons discussed below, the Commission is granting approval of the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 corrects an administrative oversight related 
to a sentence reference in OCC's Certificate of Incorporation.
    \4\ Release No. 34-69771 (June 17, 2013), 78 FR 37640 (June 21, 
2013).
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II. Description

    The purpose of this rule change is to provide for separation of the 
powers and duties currently combined in the office of OCC's Chairman of 
the Board of Directors into two offices, Chairman \5\ and President, 
and create an additional directorship to be occupied by the President.
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    \5\ Pursuant to Article IV, Section 6, of OCC's By-Laws, the 
Chairman of the Board is also the Executive Chairman.
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Proposal Overview

    In the course of OCC's review of the structure of the Board of 
Directors, OCC determined that dividing the powers and duties of the 
Chairman of the Board into two positions, Chairman and President, would 
enhance oversight of OCC management by making the Chairman independent 
of most management functions. Pursuant to the rule change, the Chairman 
will be responsible for oversight of: (i) The control functions of OCC, 
including enterprise risk management, internal audit and compliance; 
(ii) external affairs; and (iii) presiding at all meetings of OCC's 
Board of Directors and OCC's stockholders. The President will report to 
the Chairman and be responsible for all aspects of OCC's business that 
do not report directly to the Chairman. Under OCC's rule change, OCC's 
President, who will also serve as Chief Executive Officer, will focus 
on the effectiveness of OCC's day-to-day operations, as well as 
strategic initiatives for the future.
    OCC expects that the Chairman's direct oversight of control 
functions will increase independence by limiting management's influence 
over such functions. In addition, OCC notes that the significance of 
these control functions for a clearing agency warrants full-time 
oversight, which can only be provided by an executive of OCC.
    To reflect the above changes in its governance structure, OCC will 
revise Section 7 of Article III of its By-Laws to include OCC's 
President as a Management Director, along with OCC's Chairman.\6\ OCC 
will also revise Article IV of its By-Laws to include references to the 
President in certain provisions governing OCC's officers.\7\ OCC will 
also amend Articles IV and V of its Certificate of Incorporation to 
reflect the existence of an additional Management Director. Finally, 
OCC will also amend Sections 2 and 3 of the Stockholders Agreement to 
provide for the election of the President, in addition to the Chairman, 
as a Management Director.
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    \6\ Sections 1, 7 and 12 of Article III will also be amended to 
reflect the existence of an additional Management Director. 
Furthermore, OCC will amend Section 15 of Article III to grant the 
President the same authority to act in the case of an emergency as 
the Chairman and, consequently, OCC will remove the President as one 
of the ``Designated Officers'' to whom such authority would devolve 
if certain enumerated officers are unavailable.
    \7\ The amended Section 1 of Article IV will include the 
President, along with the Chairman, as an officer required to be 
elected by the Board of Directors. Section 8 of Article IV, as 
amended, will no longer give the Board the option of electing a 
President, but will make such office required. Sections 6 and 8 of 
Article IV will be amended to specify the duties of the Chairman and 
President, respectively. Sections 2, 3, and 13 of Article IV will be 
amended to give the President power, like the Chairman, to appoint 
and remove certain officers and agents to carry out the functions 
assigned to him and may determine the salaries of these appointees 
and agents. Sections 7 and 9 will be amended to add references to 
the President, in addition to the Chairman, when referencing the 
highest-ranking officers of OCC.
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Implementation Timeframe

    OCC will notify members of the date on which it intends to 
implement the rule change through the posting of an information memo on 
the OCC Web site. The change will not take effect until such date OCC 
designates as the date of implementation. OCC expects to implement the 
rule change no later than December 31, 2013.

III. Discussion

    Section 19(b)(2)(C) of the Act \8\ directs the Commission to 
approve a proposed rule change of a self-regulatory organization if it 
finds that such proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization. Section 17A(b)(3)(A) of the Act \9\ 
requires that a clearing agency that is registered with the Commission 
be organized and have the capacity to be able to, among other things, 
facilitate the prompt and accurate clearance and settlement of 
securities transactions.
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    \8\ 15 U.S.C. 78s(b)(2)(C).
    \9\ 15 U.S.C. 78q-1(b)(3)(A).
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    The Commission finds that the rule change is consistent with 
Section 17A(b)(3)(A) of the Act \10\ because by separating the powers 
and duties currently combined in the office of OCC's Chairman into two 
offices, the rule change should enhance oversight of management by 
ensuring that the Chairman is independent of most management functions 
and that the separation of powers and duties over OCC operations is not 
overly concentrated in the hands of a single individual, thereby 
promoting greater accountability of management to the Board of 
Directors. In so doing, OCC's rule change should improve its corporate 
governance structure and provide for an appropriate checks and balance 
between oversight by OCC's Board of Directors and OCC management of 
day-to-day operations, which in turn, should facilitate the prompt and 
accurate clearance and settlement of securities transactions.
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    \10\ Id.

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[[Page 47450]]

IV. 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 \11\ and the 
rules and regulations thereunder.
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    \11\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (File No. SR-OCC-2013-09) be and 
hereby is APPROVED.\13\
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    \12\ 15 U.S.C. 78s(b)(2).
    \13\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-18761 Filed 8-2-13; 8:45 am]
BILLING CODE 8011-01-P


