
[Federal Register Volume 80, Number 147 (Friday, July 31, 2015)]
[Notices]
[Pages 45690-45691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18770]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75528; File No. SR-OCC-2015-013]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving a Proposed Rule Change To Codify Procedures for 
Resizing the Options Clearing Corporation's Clearing Fund on a Monthly 
Basis and Increasing Such Clearing Fund Size on an Intra-Month Basis

July 27, 2015.
    On June 19, 2015, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change SR-OCC-2015-013 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 June 26, 2015.\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. 75260 (June 22, 2015), 
80 FR 36867 (June 26, 2015) (SR-OCC-2015-013).
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I. Description

    According to OCC, it is amending Rule 1001(a) to codify the 
Commission's recent approval of and non-objection to procedures for 
resizing the clearing fund on a monthly basis and increasing such 
clearing fund size on an intra-month basis to ensure OCC maintains 
sufficient financial resources consistent with

[[Page 45691]]

regulatory requirements (``Procedures'').\4\
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    \4\ See Securities Exchange Act Release No. 74980 (May 15, 
2015), 80 FR 29364 (May 21, 2015) (SR-OCC-2015-009) and Securities 
Exchange Act Release No. 74981 (May 15, 2015), 80 FR 29367 (May 21, 
2015) (SR-OCC-2015-811). OCC recently amended the Procedures. See 
Securities Exchange Act Release No. 75255 (June 22, 2015), 80 FR 
36869 (June 26, 2015) (SR-OCC-2015-012) (changing the method by 
which certain dashboard reports are distributed).
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    Specifically, OCC recently adopted the Procedures which, according 
to OCC, are designed to clarify for clearing members and market 
participants the manner in which OCC would resize the clearing fund on 
a monthly basis and, if necessary, collect additional financial 
resources through intra-day margin calls and intra-month increases of 
the clearing fund.\5\ According to OCC, under the Procedures, OCC 
continues to size the clearing fund on the first business day of each 
month, with the clearing fund size equal to a base amount and an 
additional prudential margin of safety determined by OCC, currently set 
at $1.8 billion. The base amount is equal to the peak five-day rolling 
average of clearing fund draws \6\ observed over the preceding three 
calendar months. Under the Procedures, OCC must issue an intra-day 
margin call in the event that a projected draw on the clearing fund 
under stress tests conducted by OCC exceeds 75% of the then-current 
size of OCC's clearing fund. In addition, OCC must increase the size of 
the clearing fund intra-month where a projected draw, after taking into 
account intra-day margin collected under the Procedures, exceeds 90% of 
the then-current size of the clearing fund.
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    \5\ Id.
    \6\ According to OCC, clearing fund draws are the amounts that 
OCC would have been required to draw against the clearing fund under 
the daily idiosyncratic default and minor systemic default scenario 
calculations conducted by OCC (i.e., the amount of projected losses 
not covered by margin deposits or deposits in lieu of margin).
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    According to OCC, it is amending Rule 1001(a) to codify, in 
accordance with the Procedures, the process by which such clearing fund 
size: (i) Is determined and set on a monthly basis, and (ii) may be 
increased on an intra-month basis. OCC believes that the proposed rule 
change provides greater transparency to clearing members and other 
market participants, because OCC's practices with regard to the monthly 
sizing of the clearing fund and OCC's ability to increase the clearing 
fund intra-month in accordance with the Procedures would be codified in 
the text of Rule 1001(a).

II. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act \7\ 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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    \7\ 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 \8\ and Rule 17Ad-22(b)(3) of the 
Act.\9\ Rule 17Ad-22(b)(3) of the Act requires OCC to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to maintain sufficient financial resources to 
withstand, at a minimum, a default by the participant family to which 
it has the largest exposure in extreme but plausible market 
conditions.\10\ OCC is amending Rule 1001(a) to reflect the process by 
which OCC determines its clearing fund size on a monthly basis and 
increases its clearing fund size on an intra-month basis. As stated 
above, OCC already adopted Procedures that reflect this change.\11\ By 
amending Rule 1001(a) to codify the Procedures, as described above, and 
thus permitting OCC to take action pursuant to the Procedures, OCC 
should be able to be more responsive to sudden increases in exposure 
and less sensitive to short-run reductions in exposure that could 
inappropriately reduce the overall size of the clearing fund. As a 
result, OCC should be in a better position to maintain sufficient 
financial resources to withstand, at a minimum, a default by the 
participant family to which it has the largest exposure in extreme but 
plausible market conditions.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
    \9\ 17 CFR 240.17Ad-22(b)(3).
    \10\ Id.
    \11\ See supra note 4.
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    For these same reasons, OCC's rule change is consistent with 
Section 17A(b)(3)(F) of the Act,\12\ which requires, in part, that the 
rules of a clearing agency be designed to promote the prompt and 
accurate clearance and settlement of securities transactions and to 
assure the safeguarding of securities and funds which are in the 
custody or control of the clearing agency or for which it is 
responsible. By maintaining financial resources in this manner, OCC is 
less likely to be subject to disruptions in its operations as a result 
of a default of a participant family, thereby facilitating the prompt 
and accurate clearance and settlement of securities transactions and 
assuring the safeguarding of securities and funds which are in the 
custody or control of OCC or for which it is responsible.
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    \12\ 15 U.S.C. 78q-1(b)(3)(F).
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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-2015-013) 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\
Robert W. Errett,
Deputy Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-18770 Filed 7-30-15; 8:45 am]
 BILLING CODE 8011-01-P


