
[Federal Register Volume 79, Number 46 (Monday, March 10, 2014)]
[Notices]
[Pages 13366-13368]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05055]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71646; File No. SR-OCC-2014-03]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change to Comply With Recently 
Adopted Commodity Futures Trading Commission Requirements for 
Derivatives Clearing Organizations That Accept Deposits of Futures 
Customer Funds

March 4, 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 February 19, 2014, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change described in Items I and II below, which Items 
have been prepared primarily by OCC. OCC filed the proposed rule change 
pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(4)(ii) 
\4\ thereunder, so that the proposal was effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4)(ii).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    This proposed rule change by OCC would amend OCC's By-Laws and 
Rules to allow OCC to comply with recently adopted Commodity Futures 
Trading Commission (``CFTC'') requirements for derivatives clearing 
organizations (``DCOs''), such as OCC, that accept deposits of futures 
customer funds from futures commission merchants (``FCMs'').

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
    OCC is proposing to modify its rules to allow it to comply with new 
CFTC requirements imposed on depositories that accept deposits of 
futures customer funds from FCMs. Recent amendments to CFTC Regulation 
Sec.  1.20 \5\ require that FCMs only deposit futures customer funds 
with depositories that agree to grant the CFTC's Division of Swap 
Dealer and Intermediary Oversight (``DSIO'') and the CFTC's Division of 
Clearing and Risk, as well as representatives of the FCM's designated 
self-regulatory organization, certain access and examination rights 
(``CFTC Access and Examination Rights'').\6\ OCC, as a CFTC-registered 
DCO, functions as a depository with respect to any futures customer 
funds deposited by clearing members that are FCMs. Consequently, for 
these FCM clearing members to continue to use OCC as their DCO, OCC 
must agree to comply with the CFTC Access and Examination Rights. 
Pursuant to CFTC Regulation Sec.  1.20(d)(1),\7\ OCC and the clearing 
member may make this agreement either by providing a written 
acknowledgment

[[Page 13367]]

letter to the clearing member with respect to each segregated futures 
account and segregated futures professional account containing futures 
customer funds or by adopting rules that provide for the segregation of 
futures customer funds in accordance with the Commodity Exchange Act 
and all relevant CFTC regulations and orders promulgated thereunder.
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    \5\ 17 CFR 1.20.
    \6\ CFTC Regulation Sec.  1.20(d)(3) (17 CFR 1.20(d)(3)) also 
provides that FCMs may only deposit futures customer funds with 
depositories that agree to provide the director of the DSIO with 
``direct, read-only electronic access to transaction and account 
balance information'' for the futures customer accounts. Based on 
discussions with staff from the CFTC's Division of Clearing and Risk 
on December 16, 2013 and subsequently confirmed via email, it is 
OCC's understanding that, as a DCO that serves as a depository with 
respect to deposits of futures customer funds by its clearing 
members that are FCMs, it will not be required to provide this 
direct electronic access, because the CFTC did not intend for the 
requirement set forth in Sec.  1.20(d)(3) to apply to a DCO that has 
submitted to the CFTC rules that provide for the segregation of 
customer funds in accordance with all relevant provisions of the 
Commodity Exchange Act and the rules and orders promulgated 
thereunder. Consequently, OCC is not including this direct 
electronic access requirement among the other CFTC Access and 
Examination Rights addressed in this Rule Change.
    \7\ 17 CFR 1.20(d)(1).
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    In Sections 3(f) and 3(j) of Article VI of OCC's By-Laws, OCC 
already states that it agrees to comply with applicable regulations of 
the CFTC pertaining to the holding of segregated funds by clearing 
organizations of contract markets with respect to its segregated 
futures accounts and segregated futures professional accounts. OCC 
proposes to amend the language in both provisions to incorporate OCC's 
agreement to comply with the Commodity Exchange Act itself and all 
applicable CFTC orders, and to more precisely conform to the exact 
language requirements of CFTC Regulation Sec.  1.20(d)(1). In order to 
provide certainty to its clearing members that are FCMs, OCC is 
proposing to add Interpretation and Policy .10 to Section 3 of Article 
VI of OCC's By-Laws,\8\ so that OCC also explicitly agrees to comply 
with the CFTC Access and Examination Rights set forth in newly adopted 
CFTC Regulation Sec.  1.20(d)(5) and (6) with respect to all segregated 
futures accounts and segregated futures professional accounts.\9\ 
Additionally, Interpretation and Policy .10 will provide that all 
clearing members that open segregated futures accounts or segregated 
futures professional accounts have authorized and directed OCC's 
compliance with the CFTC Access and Examination Rights without further 
notice or consent. To this same end, OCC also proposes to amend 
Interpretation and Policy .11 to OCC Rule 604 to clarify that any cash 
deposited as margin in a segregated futures professional account will 
be handled in the same manner as OCC currently handles cash deposited 
as margin in a segregated futures account--i.e., if such funds are 
invested, they will be invested in accordance with CFTC Regulations 
Sec. Sec.  1.25, 1.26 and 1.27 and any other CFTC rules pertaining to a 
DCO's investment of futures customer funds. Not previously mentioning 
``segregated futures professional accounts'' alongside ``segregated 
futures accounts'' in this Interpretation and Policy was an 
unintentional oversight, and OCC proposes to make this change in the 
interest of completeness--it does not reflect a change in policy 
regarding its handling of futures customer funds deposited in 
segregated futures professional accounts.
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    \8\ OCC intends to publish an Information Memo to inform its 
clearing members of the filing of this rule change.
    \9\ 17 CFR 1.20(d)(5)-(6).
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2. Statutory Basis
    OCC believes the proposed rule change is consistent with Section 
17A(b)(3)(F) of the Act,\10\ and the rules and regulations thereunder, 
including Rule 17Ad-22(d)(3),\11\ because it is intended to protect 
investors and the public interest by ensuring OCC holds futures 
customer funds in a manner that minimizes the risk of loss and delay in 
access to such funds. As described above, the proposed rule change is 
designed to address OCC's handling of futures customer funds related to 
its performance of clearing services for products that are subject to 
the jurisdiction of the CFTC. The proposed change will ensure that OCC 
holds futures customers funds in accordance with new requirements 
promulgated by the CFTC designed to protect futures customers and 
provide for safer futures markets. The proposed change will not 
adversely affect OCC's obligations with respect to the prompt and 
accurate clearance and settlement of securities transactions. The 
proposed rule change is not inconsistent with any rules of OCC, 
including any other rules proposed to be amended.
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    \10\ 15 U.S.C. 78q-1(b)(3)(F).
    \11\ 17 CFR 240.17Ad-22(d)(3).
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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 Act \12\ because it relates solely to OCC's 
activities relating to the clearing of commodity futures products 
subject to the exclusive jurisdiction of the CFTC and therefore would 
not have any impact or impose any burden on competition in securities 
markets or any other market governed by the Act.
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    \12\ 15 U.S.C. 78q-1(b)(3)(I).
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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

    Because the proposed rule change primarily affects the clearing 
operations of OCC with respect to products that are not securities and 
does not significantly affect any securities clearing operations of OCC 
or any rights or obligations of OCC with respect to securities clearing 
or persons using such securities-clearing service, the foregoing rule 
change has become effective pursuant to Section 19(b)(3)(A) \13\ of the 
Act and Rule 19b-4(f)(4)(ii) thereunder.\14\ At any time within 60 days 
of the filing of such rule change, the Commission summarily may 
temporarily suspend such rule change if it appears to the Commission 
that such action is necessary or appropriate in the public interest, 
for the protection of investors, or otherwise in furtherance of the 
purposes of the Act.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(4)(ii). OCC has indicated that it will 
delay the implementation of the rule change until it is deemed 
certified under CFTC Regulation Sec.  40.6.
    \15\ 15 U.S.C. 78s(b)(3)(C).
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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 rule-comments@sec.gov. Please include 
File Number SR-OCC-2014-03 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-2014-03. 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

[[Page 13368]]

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 filing also will be available 
for inspection and copying at the principal office of OCC and on OCC's 
Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_14_03.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-2014-03 and should be submitted on or before March 
31, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05055 Filed 3-7-14; 8:45 am]
BILLING CODE 8011-01-P


