
[Federal Register Volume 79, Number 236 (Tuesday, December 9, 2014)]
[Notices]
[Pages 73128-73129]
From the Federal Register Online via the Government Printing 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

[[Page 73129]]

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


