
[Federal Register Volume 81, Number 195 (Friday, October 7, 2016)]
[Notices]
[Pages 69885-69887]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24282]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79028; File No. SR-OCC-2016-012]


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

October 3, 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 September 30, 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 by OCC. OCC filed the proposal pursuant to 
Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder 
\4\ so that the proposal was effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change by OCC would revise OCC's Schedule of Fees 
effective December 1, 2016, to implement an increase in clearing fees 
in accordance with OCC's Fee Policy.\5\

[[Page 69886]]

The proposed changes to the Schedule of Fees can be found in Exhibit 5 
to the proposed rule change. All capitalized terms not defined herein 
have the same meaning as set forth in the OCC By-Laws and Rules.\6\
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    \5\ OCC's Fee Policy was adopted as part of 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 Exchange Act Release No. 74387 (February 26, 2015), 80 
FR 12215 (March 6, 2015) (SR-OCC-2014-813). BATS Global Markets, 
Inc., BOX Options Exchange LLC, KCG Holdings, Inc., Miami 
International Securities Exchange, LLC, and Susquehanna 
International Group, LLP (collectively ``Petitioners'') each filed 
petitions for review of the Approval Order, challenging the action 
taken by delegated authority. The filing of the petitions 
automatically stayed the Approval Order. OCC filed a Motion to Lift 
the Stay on April 2, 2015, and the Petitioners responded. The 
Commission subsequently determined that the automatic stay of 
delegated action should be discontinued, and the Commission granted 
OCC's Motion to Lift Stay of the staff's action in approving by 
delegated authority File No. SR-OCC-2015-02. On February 11, 2016, 
the Commission issued an order setting aside the approval order 
issued under delegated authority and approved the proposed rule 
change to implement the Capital Plan. See Securities Exchange Act 
Release No. 77112 (February 11, 2016) 81 FR 8294 (February 18, 2016) 
(SR-OCC-2015-02).
    \6\ OCC's By-Laws and Rules can be found on OCC's public Web 
site: http://optionsclearing.com/about/publications/bylaws.jsp.
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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 revise OCC's 
Schedule of Fees in accordance with its Fee Policy to set OCC's fees at 
a level designed to cover OCC's operating expenses and maintain a 
Business Risk Buffer of 25%.\7\ The revised fee schedule would become 
effective on December 1, 2016.
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    \7\ The Business Risk Buffer is equal to net income before 
refunds, dividends, and taxes divided by total revenue.
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    By way of background, OCC implemented its Capital Plan in 2015,\8\ 
which was put in place in light of proposed regulatory capital 
requirements applicable to systemically important financial market 
utilities, such as OCC. As part of OCC's Capital Plan, OCC adopted a 
Fee Policy whereby OCC would set clearing fees at a level that covers 
OCC's operating expenses plus a Business Risk Buffer of 25%.\9\ The 
purpose of the Business Risk Buffer is to ensure that OCC accumulates 
sufficient capital to cover unexpected fluctuations in operating 
expenses, business capital needs, and regulatory capital requirements.
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    \8\ See supra note 5.
    \9\ OCC's Schedule of Fees must also meet the requirements set 
forth in Article IX, Section 9 of OCC's By-Laws. In general, Article 
IX, Section 9 of OCC's By-Laws requires that OCC's fee structure be 
designed to: (1) Cover OCC's operating expenses plus a business risk 
buffer; (2) maintain reserves deemed reasonably necessary by OCC's 
Board of Directors; and (3) accumulate an additional surplus deemed 
advisable by the Board of Directors to permit OCC to meet its 
obligations to its clearing members and the public. Clauses 2 and 3 
above will only be invoked at the discretion of OCC's Board of 
Directors and in extraordinary circumstances.
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    OCC recently reviewed its current Schedule of Fees \10\ against 
actual and projected revenues and expenses for 2016 in accordance with 
its Fee Policy to determine whether the Schedule of Fees was sufficient 
to cover OCC's anticipated operating expenses and achieve a Business 
Risk Buffer of 25%. In reviewing the Schedule of Fees, OCC analyzed: 
(i) Clearing fee revenues charged on a year-to-date basis, (ii) 
projected volume for the remainder of the year, (iii) the anticipated 
``mix'' of volume among the various fee levels set forth in the 
Schedule of Fees, (iv) operating expenses incurred to date, and (v) 
operating expenses projected for the remainder of the year. Based on 
the foregoing analysis, OCC determined that the current fee schedule is 
set at a level that would be insufficient to ensure that OCC achieves 
its Business Risk Buffer of 25% as required under the Fee Policy. OCC 
arrived at the proposed fee schedule presented herein by determining 
the figures that provide the best opportunity for OCC to achieve 
coverage of its anticipated operating expenses plus a Business Risk 
Buffer of 25%.
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    \10\ OCC previously revised its Schedule of Fees effective March 
1, 2016, to implement a reduction of clearing fees in accordance 
with the Fee Policy. See Securities Exchange Act Release No. 77041 
(February 3, 2016), 81 FR 6917 (February 9, 2016), (SR-OCC-2016-
001). OCC subsequently amended its Schedule of Fees to simplify 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. The revised fee structure, which became effective 
May 2, 2016, was designed to be revenue neutral when compared to the 
previous fee structure. See Securities Exchange Act Release No. 
77336 (March 10, 2016), 81 FR 14153 (March 16, 2016), (SR-OCC-2016-
005).
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    As a result of the aforementioned analysis, OCC proposes to revise 
its Schedule of Fees as set forth below.\11\
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    \11\ These changes are also reflected in Exhibit 5.

----------------------------------------------------------------------------------------------------------------
                     Current fee schedule                                     Proposed fee schedule
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                                                                 Trades with contracts
      Trades with contracts of:              Proposed fee                 of:                  Proposed fee
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1-1370...............................  $0.041.................  1-1100.................  $0.050/contract.
>1370................................  $55/trade..............  >1100..................  $55/trade.
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    In accordance with its Fee Policy, OCC will continue to monitor 
cleared contract volume and operating expenses in order to determine if 
further revisions to OCC's Schedule of Fees are required so that monies 
received from clearing fees cover OCC's operating expenses plus a 
Business Risk Buffer of 25%.\12\
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    \12\ Any subsequent changes to OCC's Schedule of Fees would be 
the subject of a subsequent proposed rule change filed with the 
Commission.
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(2) Statutory Basis
    Section 17A(b)(3)(D) of the Securities Exchange Act of 1934, as 
amended (``Act''), requires that the rules of a clearing agency provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its participants.\13\ The proposed fee schedule was set 
in accordance with the criteria set forth in OCC's Capital Plan, which 
was approved by the Commission \14\ and requires that OCC's fees be set 
at a level designed to cover OCC's operating expenses and maintain a 
Business Risk Buffer of 25%. OCC believes the proposed fee change is 
reasonable because the fee increase would be set at a level intended 
only to facilitate the maintenance of OCC's Business Risk Buffer of 
25%, which is designed to ensure that OCC accumulates sufficient 
capital to cover unexpected fluctuations in operating expenses, 
business capital needs, and regulatory capital requirements. Moreover, 
OCC believes that the proposed fee change would result in an equitable 
allocation of fees among its participants because it would be equally 
applicable to all market participants. As

[[Page 69887]]

a result, OCC believes that the proposed fee schedule provides for the 
equitable allocation of reasonable fees in accordance with Section 
17A(b)(3)(D) of the Act.\15\ The proposed rule change is not 
inconsistent with the existing rules of OCC, including any other rules 
proposed to be amended.
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    \13\ 17 U.S.C. 78q-1(b)(3)(D).
    \14\ See supra note 5.
    \15\ 17 U.S.C. 78q-1(b)(3)(D).
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(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act \16\ requires that the rules of a 
clearing agency not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. OCC does not 
believe that the proposed rule change would have any impact or impose a 
burden on competition. 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 the proposed clearing fees apply equally to all users of OCC. 
Accordingly, OCC does not believe that the proposed rule change would 
have any impact or impose a burden on competition.
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    \16\ 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

    Pursuant to Section 19(b)(3)(A)(ii) \17\ of the Act, and Rule 19b-
4(f)(2) thereunder,\18\ the proposed rule change is filed for immediate 
effectiveness as it constitutes a change in fees charged to OCC 
clearing members. 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.\19\
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    \17\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \18\ 17 CFR 240.19b-4(f)(2).
    \19\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC Regulation Sec.  40.6.
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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-2016-012 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2016-012. 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 the filing also will be available 
for inspection and copying at the principal office of OCC and on OCC's 
Web site (http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_16_012.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-2016-012 and should be submitted on or before October 28, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24282 Filed 10-6-16; 8:45 am]
 BILLING CODE 8011-01-P


