
[Federal Register Volume 81, Number 51 (Wednesday, March 16, 2016)]
[Notices]
[Pages 14153-14154]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-05850]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77336; File No. SR-OCC-2016-005]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Simplify the Options Clearing Corporation's Schedule of Fees

March 10, 2016.
    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 May 2, 2016, The Options Clearing Corporation (``OCC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared primarily by OCC. OCC filed the proposed rule change 
pursuant to Section 19(b)(3)(A)(ii) \3\ of the Act and Rule 19b-4(f)(2) 
\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 persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The purpose of this proposed rule change by (``OCC'') is to amend 
OCC's Schedule of Fees in order to simplify OCC's fee structure.

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
    The purpose of this proposed rule change is to amend OCC's Schedule 
of Fees in order to simplify OCC's fee structure. The proposed changes 
to OCC's Schedule of Fees would be effective as of May 2, 2016.
    OCC is proposing to simply [sic] its fee structure through: (i) The 
adoption of a flat clearing fee per contract with a fixed dollar cap 
and (ii) the elimination of the ``scratch'' fee.\5\
---------------------------------------------------------------------------

    \5\ The ``scratch'' fee is charged, per side, when a market 
maker buys and sells the same symbol, series and strike on the same 
day.
---------------------------------------------------------------------------

Flat Fee Schedule
    Currently, OCC utilizes a tiered pricing model whereby the clearing 
fee per contract is reduced as the number of contracts in a given trade 
increases (subject to a $46 cap for trades equal to or greater than 
2,001 contracts). OCC recently compared its clearing fee structure to 
those of its peer institutions (i.e., other clearinghouses) and found 
that OCC's current fee structure is more complex than those of its 
peers. OCC's Capital Plan,\6\ and specifically the Fee Policy (which 
governs the process by which OCC determines its fee structure and was 
filed as part of the Capital Plan), requires OCC to set clearing fees 
to cover OCC's operating expenses plus a Business Risk Buffer \7\ of 
25%. OCC believes that it can adopt a clearing fee structure that is 
less complex while continuing to meet the requirements of the Capital 
Plan. Therefore, OCC is proposing to adopt a flat, per contract, 
clearing fee subjected to a fixed dollar cap. OCC believes all users of 
its services and the public would benefit by the simplicity and 
transparency that a flat fee structure with a fixed dollar cap would 
provide. Additionally, OCC believes that a flat fee with a fixed dollar 
cap would allow users of OCC's services to execute trades without 
regard to the size of such trades, which would, in turn, promote more 
open and equal access to clearance and settlement services provided by 
OCC.
---------------------------------------------------------------------------

    \6\ In 2015, the Commission approved (``Approval Order'') OCC's 
plan for raising additional capital (``Capital Plan''), which was 
put in place in light of proposed regulatory capital requirements 
applicable to systemically important financial market utilities, 
such as OCC. See Securities Exchange Act Release No. 74452 (March 6, 
2015) 80 FR 13058 (March 12, 2015) (SR-OCC-2015-02). OCC also filed 
proposals in the Capital Plan filing as an advance notice under 
Section 806(e)(1) of the Payment, Clearing, and Settlement 
Supervision Act of 2010. 12 U.S.C. 5465(e)(1). On February 26, 2015, 
the Commission issued a notice of no objection to the advance notice 
filing. See Securities Exchange Act Release No. 74387 (February 26, 
2015), 80 FR 12215 (March 6, 2015) (SR-OCC-2014-813). Following 
petitions for review of the approval order of the proposed rule 
change filed by BATS Global Markets, Inc., BOX Options Exchange LLC, 
KCG Holdings, Inc., Miami International Securities Exchange, LLC, 
and Susquehanna International Group, LLP, the Commission set aside 
the approval order of the proposed rule change, reviewed the record 
de novo, and issued another approval of the Capital Plan on February 
11, 2016. See Securities Exchange Act Release No. 77112 (February 
11, 2016), 81 FR 8294 (February 18, 2016) (SR-OCC-2015-02).
    \7\ Business Risk Buffer is equal to net income before refunds, 
dividends and taxes/total revenue. In accordance with its Fee 
Policy, OCC monitors cleared contract volume and operating expenses 
to determine if revisions to OCC's Schedule of Fees are required so 
that monies received from clearing fees cover OCC's operating 
expenses [sic] this Business Risk Buffer. Any subsequent changes to 
OCC's Schedule of Fees would be the subject of a subsequent proposed 
rule change filed with the Commission.
---------------------------------------------------------------------------

Elimination of Scratch Fee
    Further, and in order to provide additional simplicity, OCC would 
eliminate the ``scratch'' fee. The ``scratch'' fee applies to a limited 
subset of trades cleared by OCC \8\ and OCC believes that the 
operational processing associated with the ``scratch'' fee is 
unnecessarily complex for both OCC and its clearing members. Therefore, 
OCC is proposing to eliminate the ``scratch'' fee so that OCC and its 
members' operations, as they relate to processing of clearing fees, 
would be more streamlined and efficient.
---------------------------------------------------------------------------

    \8\ Approximately 2.6% of trades cleared by OCC are market maker 
scratch trades.
    \9\ These changes are also reflected in Exhibit 5.

          OCC's Revised Schedule of Fees Is Set Forth Below \9\
------------------------------------------------------------------------
         Trades with contracts of:                  Proposed fee
------------------------------------------------------------------------
0-1370....................................  $0.041/contract.
>1370.....................................  $55 per trade.
------------------------------------------------------------------------

The new fee structure is designed to be revenue neutral when compared 
to its existing fee structure.\10\
---------------------------------------------------------------------------

    \10\ In accordance with its Fee Policy, OCC monitors projected 
revenue (based on anticipated cleared contract volume) and operating 
expenses to determine if revisions to OCC's Schedule of Fees are 
required so that monies received from clearing fees cover OCC's 
operating expenses plus the Business Risk Buffer. Assuming the same 
anticipated cleared contract volume, OCC would accumulate the same 
amount of revenue under the proposed fee structure when compared to 
the existing fee structure.
---------------------------------------------------------------------------

    OCC will publish an Information Memo on its public Web site to 
inform clearing members, exchanges and the public of the changes to 
OCC's Schedule of Fees that would become effective May 2, 2016. OCC is 
not aware of any clearing member concerns or issues with the proposed 
changes to OCC's

[[Page 14154]]

Schedule of Fees described in this proposed rule change.
2. Statutory Basis
    OCC believes that the proposed rule change is consistent with 
Section 17A(b)(3)(D) \11\ of the Act, because it provides for the 
equitable allocation of reasonable dues, fees and charges among its 
participants in that all clearing members would be charged the same per 
contract clearing fee per trade (subject to a fixed dollar cap) 
notwithstanding the size of such trade. OCC believes that charging 
clearing members a flat trade fee subject to a fixed dollar cap more 
equitably allocates the cost of providing clearance and settlement 
services for a given trade. The proposed rule change is not 
inconsistent with the existing rules of OCC including any other rules 
proposed to be amended.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------

(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would have any 
impact or impose a burden on competition.\12\ Although this proposed 
rule change affects clearing members, their customers and the markets 
that OCC serves, OCC believes that the proposed rule change would not 
disadvantage or favor any particular user of OCC's services in 
relationship to another user because clearing fees apply equally to all 
users of OCC. Moreover, the proposed changes to the structure of OCC's 
Schedule of Fees are revenue neutral and would not affect one set of 
users of OCC's services in favor of another. For the foregoing reasons, 
OCC does not believe that the proposed rule change would have any 
impact or impose a burden on competition.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------

(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

    The foregoing rule change has become effective upon filing \13\ 
pursuant to Section 19(b)(3)(A)(ii) of the Act \14\ and Rule 19b-
4(f)(2) thereunder \15\ because it constitutes a change in fees imposed 
by OCC on its clearing members and other market participants using 
OCC's services. At any time within 60 days of the filing of the 
proposed 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.
---------------------------------------------------------------------------

    \13\ Notwithstanding the immediate effectiveness of the proposed 
rule change and OCC's anticipated implementation date of May 2, 
2016, implementation of this rule change is also contingent on it 
being deemed certified under CFTC Regulation Sec.  40.6.
    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2016-005 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-OCC-2016-005. 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. 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 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 Room, 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_16_005.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-2016-005 
and should be submitted on or before April 6, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-05850 Filed 3-15-16; 8:45 am]
 BILLING CODE 8011-01-P


