[Federal Register Volume 87, Number 142 (Tuesday, July 26, 2022)]
[Notices]
[Pages 44477-44481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15920]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95327; File No. SR-OCC-2022-803]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Advance Notice Related to an Expansion of The 
Options Clearing Corporation's Non-Bank Liquidity Facility Program as 
Part of Its Overall Liquidity Plan

July 20, 2022.
    Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, entitled Payment, Clearing 
and Settlement Supervision Act of 2010 (``Clearing Supervision Act'') 
\1\ and Rule 19b-4(n)(1)(i) \2\ under the Securities Exchange Act of 
1934 (``Exchange Act'' or ``Act''),\3\ notice is hereby given that on 
July 7, 2022, The Options Clearing Corporation (``OCC'') filed with the 
Securities and Exchange Commission (``Commission'') an advance notice 
as described in Items I, II and III below, which Items have been 
prepared primarily by OCC. The Commission is publishing this notice to 
solicit comments on the advance notice from interested persons.
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    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ 15 U.S.C. 78a et seq.
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I. Clearing Agency's Statement of the Terms of Substance of the Advance 
Notice

    This advance notice is submitted in connection with a proposed 
change to its operations to expand capacity under OCC's program for 
accessing additional committed sources of liquidity that do not 
increase the concentration of OCC's counterparty exposure (``Non-Bank 
Liquidity Facility'') as part of OCC's overall liquidity plan. The 
proposed changes do not require any changes to the text of OCC's By-
Laws or Rules. All terms with initial capitalization that are not 
otherwise defined herein have the same meaning as set forth in the OCC 
By-Laws and Rules.\4\
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    \4\ OCC's By-Laws and Rules can be found on OCC's public 
website: https://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Advance Notice

    In its filing with the Commission, OCC included statements 
concerning the purpose of and basis for the advance notice and 
discussed any comments it received on the advance notice. 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) and (B) 
below, of the most significant aspects of these statements.

(A) Clearing Agency's Statement on Comments on the Advance Notice 
Received From Members, Participants or Others

    Written comments were not and are not intended to be solicited with 
respect to the advance notice and none have been received. OCC will 
notify the Commission of any written comments received by OCC.

(B) Advance Notices Filed Pursuant to Section 806(e) of the Payment, 
Clearing, and Settlement Supervision Act

Description of Change
    As the sole clearing agency for standardized U.S. securities 
options listed on national securities exchanges registered with the 
Commission (``listed options''), OCC is obligated to make certain 
payments. In the event of a Clearing Member default, OCC would be 
obligated to make payments, on time, related to that member's clear 
transactions. To meet such payment obligations, OCC maintains access to 
cash from a variety of sources, including, a requirement for members to 
pledge cash collateral to OCC and various agreements with banks and 
other counterparties (``liquidity facilities'') to provide OCC with 
cash in exchange for collateral, such as U.S. Government securities. 
OCC routinely considers potential market stress scenarios that could 
affect such payment obligations. Based on such considerations, OCC now 
believes that it should seek to expand its liquidity facility to 
increase OCC's access to cash to manage a member default.
    OCC is proposing to expand the size of its liquidity facilities by 
increasing the size of one of its liquidity facilities. Specifically, 
this advance notice concerns a change to OCC's operations to expand 
capacity under OCC's Non-Bank Liquidity Facility as part of OCC's 
overall liquidity plan, which includes OCC's arrangements to access 
cash in exchange for Government securities deposited by Clearing 
Members in respect of their Clearing Fund

[[Page 44478]]

requirements to meet OCC's settlement obligations. OCC is not, as part 
of this advance notice, proposing to require its members or other 
market participants provide additional or different collateral to OCC. 
Rather, the purpose of the proposal is to provide OCC with another 
vehicle for accessing cash to meet its payment obligations, including 
in the event that one of its members fails to meet its payment 
obligations to OCC.\5\
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    \5\ OCC may use the Clearing Fund to address liquidity 
shortfalls arising from the failure of any bank, securities or 
commodities clearing organization, or investment counterparty to 
perform any obligation to OCC when due. See OCC Rule 1006(f)(1)(C); 
Exchange Act Release No. 94304 (Feb. 24, 2022), 87 FR 11776 (Mar. 2, 
2022) (SR-OCC-2021-014).
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Background

    OCC's current liquidity plan provides it with access to a diverse 
set of funding sources, including banks (i.e., OCC's syndicated credit 
facility),\6\ the Non-Bank Liquidity Facility program,\7\ and Clearing 
Members' Cash Clearing Fund Requirement.\8\ The Non-Bank Liquidity 
Facility program reduces the concentration of OCC's counterparty 
exposure with respect to its overall liquidity plan by diversifying its 
base of liquidity providers among banks and non-bank, non-Clearing 
Member institutional investors, such as pension funds or insurance 
companies.
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    \6\ See Exchange Act Release No. 88971 (May 28, 2020), 85 FR 
34257 (June 3, 2020) (SR-OCC-2020-804).
    \7\ See Exchange Act Release No. 89039 (June 10, 2020), 85 FR 
36444 (June 16, 2020) (SR-OCC-2020-803) (``Notice of No Objection to 
2020 Advance Notice''); Exchange Act Release No. 76821 (Jan. 4, 
2016), 81 FR 3208 (Jan. 20, 2016) (SR-OCC-2015-805) (``Notice of No 
Objection to 2015 Advance Notice''); Exchange Act Release No. 73979 
(Jan. 2, 2015), 80 FR 1062 (Jan. 8, 2015) (SR-OCC-2014-809) 
(``Notice of No Objection to 2014 Advance Notice'').
    \8\ See OCC Rule 1002.
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    The currently approved Non-Bank Liquidity Facility program is 
comprised of two parts: a Master Repurchase Agreement (``MRA'') and 
confirmations with one or more institutional investors, which contain 
certain individualized terms and conditions of transactions executed 
between OCC, the institutional investors and their agents. The MRA is 
structured like a typical repurchase arrangement in which the buyer 
(i.e., the institutional investor) would purchase from OCC, from time 
to time, Government securities (``Eligible Securities'').\9\ OCC, as 
the seller, would transfer Eligible Securities to the buyer in exchange 
for a payment by the buyer to OCC in immediately available funds 
(``Purchase Price''). The buyer would simultaneously agree to transfer 
the purchased securities back to OCC at a specified later date 
(``Repurchase Date'') or on OCC's demand against the transfer of funds 
by OCC to the buyer in an amount equal to the outstanding Purchase 
Price plus the accrued and unpaid price differential (together, 
``Repurchase Price''), which is the interest component of the 
Repurchase Price.
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    \9\ OCC would use U.S. government securities that are included 
in Clearing Fund contributions by Clearing Members and margin 
deposits of any Clearing Member that has been suspended by OCC for 
the repurchase arrangements. OCC Rule 1006(f) and OCC Rule 1104(b) 
authorize OCC to obtain funds from third parties through securities 
repurchases using these sources. The officers who may exercise this 
authority include the Executive Chairman, Chief Executive Officer, 
and Chief Operating Officer.
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    The confirmations establish tailored provisions of repurchase 
transactions permitted under the Non-Bank Liquidity Facility that are 
designed to reduce concentration risk and to promote certainty of 
funding and operational effectiveness based on the specific needs of a 
party. For example, OCC would only enter into confirmations with an 
institutional investor that is not a Clearing Member or affiliated 
bank, such as pension funds or insurance companies, in order to allow 
OCC to access stable and reliable sources of funding without increasing 
the concentration of its exposure to counterparties that are affiliated 
banks, broker/dealers, or futures commission merchants. In addition, 
any such institutional investor is obligated to enter repurchase 
transactions even if OCC experiences a material adverse change,\10\ 
funds must be made available to OCC within 60 minutes of OCC's 
delivering eligible securities, and the institutional investor is not 
permitted to rehypothecate purchased securities.\11\ Additionally, the 
confirmations set forth the term and maximum dollar amounts of the 
transaction permitted under the MRA.
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    \10\ When included in a contract, a ``material adverse change'' 
is typically defined as a change that would have a materially 
adverse effect on the business or financial condition of a company.
    \11\ See Notice of No Objection to 2014 Advance Notice, 80 FR at 
1064.
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    In 2020, OCC set the aggregate amount it may seek through the Non-
Bank Liquidity Facility program to an amount up to $1 billion.\12\ OCC 
has since secured from multiple pension funds commitments in an 
aggregate amount of $1 billion. Since setting and securing commitments 
up to that aggregate commitment limit, OCC has experienced an increase 
in its stressed liquidity demands. Under OCC's Liquidity Risk 
Management Framework (``LRMF''), OCC performs daily liquidity stress 
testing to assess its Base Liquidity Resources \13\ and Available 
Liquidity Resources \14\ against OCC's liquidity risk tolerance 
(``Adequacy Scenarios''). Based in part on the results of this stress 
testing, OCC's Rules provide authority for OCC to periodically adjust 
Clearing Member's Cash Clearing Fund Requirement to ensure that OCC 
maintains sufficient liquidity resources to cover its liquidity risk 
exposures at all times. In response to increased stressed liquidity 
demands in 2021, OCC exercised authority under OCC Rule 1002(a) to 
increase the Cash Clearing Fund Requirement from $3.5 billion to $4 
billion in July 2021, and from $4 billion to $5 billion in October 
2021. This advance notice concerns a change to OCC's Non-Bank Liquidity 
Facility program to give OCC greater capacity to source liquidity from 
its non-bank liquidity providers as needed. OCC provided a summary of 
OCC management's recommendation to expand OCC's external liquidity 
sources as well as a discussion of the analysis underlying that 
recommendation as presented to the Board in confidential Exhibit 3 to 
File No. SR-OCC-2022-803.
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    \12\ See Notice of No Objection to 2020 Advance Notice, 85 FR at 
36446. $1 billion is the same as the aggregate value established at 
the inception of the Non-Bank Liquidity Facility program. See Notice 
of No Objection to 2014 Advance Notice, 80 FR at 1064 & n.11. In 
2015, OCC filed an advance notice that set an aggregate value of at 
least $1 billion and up to $1.5 billion. See Notice of No Objection 
to 2015 Advance Notice, 81 FR at 3208.
    \13\ The LRMF defines ``Base Liquidity Resources'' to mean the 
amount of committed liquidity resources maintained at all times by 
OCC to meet its Cover 1 liquidity resource requirements under the 
applicable regulations. Base Liquidity Resources are comprised of 
qualifying liquid resources in the form of Clearing Fund cash 
deposited in respect of the Cash Clearing Fund Requirement and 
assets that are readily available and convertible into cash (i.e., 
Government securities) through prearranged funding arrangements, 
such as the Non-Bank Liquidity Facility.
    \14\ The LRMF defines ``Available Liquidity Resources'' to 
include Base Liquidity Resources plus allowable Clearing Fund cash 
deposited in excess of the Cash Clearing Fund Requirement. Any 
Clearing Member request to substitute Government securities for cash 
deposits in excess of such Clearing Member's propitiate share of the 
Clearing Fund Cash Requirement is subject to a two-day notice 
period. See OCC Rule 1002(a)(iv).
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Proposed Change
    In order to give OCC greater capacity to source liquidity from 
external liquidity providers as needed, OCC would modify the Non-Bank 
Liquidity Facility program to remove the aggregate commitment limit 
identified in prior advance notices concerning the program. Instead, 
OCC's Board of Directors by resolution would set the level of aggregate 
commitments under the program from time to time to ensure that OCC 
maintains sufficient liquidity

[[Page 44479]]

resources to cover its liquidity risk exposures at all times 
considering such factors including, but not limited to: (1) the size 
and make-up of the Clearing Fund; (2) the aggregate amount of OCC's 
other liquidity sources; and (3) changing market and business 
conditions. OCC would establish a target across all external liquidity 
resources of at least $3 billion, which is the current aggregate amount 
of external liquidity. OCC would continue to manage the allocation 
between external liquidity sources to maintain a diverse set of 
liquidity providers, including sources like the Non-Bank Liquidity 
Facility that reduce concentration of OCC's counterparty exposures.
    Considering these factors, the Board of Directors has authorized 
OCC to seek up to an additional $2.5 billion in external liquidity, 
including through the Non-Bank Liquidity Facility program. 
Specifically, the Board considered that:

    (1) OCC's current total Clearing Fund requirement, as of January 
31, 2022, was approximately $15.8 billion, of which Clearing Members 
had deposited approximately $5.5 billion in Government securities.
    (2) OCC's Base Liquidity Resources are currently $8 billion, 
consisting of $5 billion in cash from the Clearing Fund Cash 
Requirement, $2 billion from the syndicated credit facility, and $1 
billion from OCC's current commitments under the Non-Bank Liquidity 
Facility.
    (3) The agent for the liquidity providers under Non-Bank 
Liquidity Facility has indicated that several pension funds and 
other institutional investors have expressed interest in 
establishing or expanding commitments under the facility.\15\
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    \15\ See Confidential Exhibit 3 to SR-OCC-2022-803 (Confidential 
data and analysis that informed the Board's decision).

    OCC expects that it will source up to $500 million of this 
liquidity through an expansion of the syndicated credit facility as 
part of its annual renewal in June.\16\ In addition, OCC concurrently 
has filed an advance notice to source liquidity through a bank 
counterparty by executing another master repurchase agreement for up to 
$1 billion (the ``Bank Repo Facility''), similar to the repurchase 
agreement OCC executed with a bank counterparty in 2020,\17\ this time 
with a bank counterparty to which OCC has more limited counterparty 
credit exposure. Accordingly, OCC expects to source approximately $1 
billion in additional liquidity under the Non-Bank Liquidity Facility. 
As such, the proportion of bank versus non-bank sources of liquidity 
would remain roughly equal to the current proportions, consistent with 
OCC's objective to maintain access to a diverse set of funding sources. 
However, to the extent that commitments under the syndicated credit 
facility or master repurchase agreement with a bank counterparty are 
less than anticipated, the Board has authorized OCC to seek additional 
commitments under the Non-Bank Liquidity Facility program to make up 
any difference. In the unlikely event that OCC is not able to onboard 
any of the additional bank liquidity and sources the full $2.5 billion 
under the Non-Bank Liquidity Facility program, OCC believes that the 
change in proportions between bank and non-bank liquidity would still 
be consistent with OCC's objective to maintain access to a diverse set 
of funding sources. Based on current interest received from potential 
counterparties, OCC believes that the risk that OCC would not be able 
to obtain $2.5 billion in additional external liquidity through one of 
more of these sources of liquidity to be low.
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    \16\ See Exchange Act Release No. 88971, 85 FR at 34259 
(providing conditions for future renewals of the syndicated credit 
facility without an additional advance notice, including an increase 
of up to $500 million in total).
    \17\ See Exchange Act Release No. 88317 (Mar. 4, 2020), 85 FR 
13681 (Mar. 9, 2020) (SR-OCC-2020-801) (concerning the establishment 
of a ``Bank Repo Facility'' with a bank counterparty in an amount of 
$500 million).
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    Removing the present $1 billion dollar cap to the Non-Bank 
Liquidity Facility program will also have the effect of removing one of 
the events in which OCC would file an advance notice for entering into 
individual commitments that OCC identified in a prior advance 
notice.\18\ Consistent with the proposal to establish a target for 
external liquidity and drawing from applicable conditions for filing 
advance notices with respect to renewals of OCC's syndicated credit 
facility and proposed Bank Repo Facility, OCC would submit another 
advance notice with respect to the execution of individual commitments 
under the Non-Bank Liquidity Facility only if: (i) OCC should seek to 
execute a commitment at a level that would have the effect of reducing 
external liquidity below the target of $3 billion; (ii) OCC should seek 
to change the terms and conditions of the MRA or commitments thereunder 
in a manner that materially affects the nature or level of risk 
presented by OCC; \19\ or (iii) OCC should seek to execute a commitment 
with a counterparty that has experienced a negative change to its 
credit profile or a material adverse change since OCC last executed a 
commitment with that counterparty. Consistent with another prior 
advance notice, OCC may consider changes to (i) liquidity providers 
provided that any new counterparty is subject to a credit review under 
OCC's Third-Party Risk Management Framework \20\ and (ii) term lengths 
consistent with those approved by OCC's Board considering factors 
including, but not limited to, the initial committed length of the 
term, market conditions, and OCC's liquidity needs.\21\ OCC would not 
consider additional counterparties or different commitment terms within 
these specified parameters as materially altering the terms and 
conditions of MRAs or commitments under the Non-Bank Liquidity Facility 
program.
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    \18\ See Exchange Act Release No. 76821, 81 FR at 3209 
(describing OCC's proposal to submit an advance notice in connection 
with a renewal of commitments under the Non-Bank Liquidity Facility 
if: (i) OCC determined that its liquidity needs merited commitments 
above or below certain levels; (ii) OCC should seek to change the 
terms and conditions of the Non-Bank Liquidity Facility; and (iii) 
the commitment counterparty experienced a negative change to its 
credit profile or a material adverse change since entering the 
commitment or the latest renewal of the commitment). OCC 
subsequently submitted an advance notice pursuant to that commitment 
to support its ability to onboard multiple liquidity providers below 
the identified commitment levels and with different term lengths to 
replace expiring commitments. See Exchange Act Release No. 89039, 85 
FR at 36445-46.
    \19\ For the purposes of clarity, OCC would not consider changes 
to pricing or changes in representations, covenants, and terms of 
events of default, to be changes to a term or condition that would 
require the filing of a subsequent advance notice provided that 
pricing is at the then prevailing market rate and changes to such 
other provisions are immaterial to OCC as the seller and do not 
impair materially OCC's ability to draw against the facility.
    \20\ See Third-Party Risk Management Framework, available at 
Documents & Archives, https://www.theocc.com/Company-Information/Documents-and-Archives. While credit monitoring of insurance 
companies that may become liquidity providers would necessarily be 
different than credit monitoring of existing pension fund 
counterparties, any new liquidity would be subject to the same 
credit review for counterparties of the same type.
    \21\ See Exchange Act Release No. 89039, 85 FR at 36445-46.
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    Provided that none of the conditions under which OCC would file a 
subsequent advance notice are present, OCC would consider a new or 
renewed commitment as being on substantially the same terms and 
conditions as existing commitments under the Non-Bank Liquidity 
Facility program such that executing such commitments would not be 
subject to the requirement to file an advance notice filing pursuant to 
Section 806(e)(1) of the Clearing Supervision Act.\22\ If OCC 
determines to modify the conditions for a new or renewed commitment 
under the Non-Bank Liquidity Facility in a subsequent filing, it would 
include in that filing the proposed conditions to the terms of any 
subsequent commitments or renewals

[[Page 44480]]

that could be done without an additional advance notice.
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    \22\ 12 U.S.C. 5465(e)(1).
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Anticipated Effect On and Management of Risk
    Completing timely settlement is a key aspect of OCC's role as the 
clearing agency performing central counterparty services for all listed 
options. Expanding the Non-Bank Liquidity Facility program would 
continue to promote the reduction of risks to OCC, its Clearing Members 
and the options market in general because it would allow OCC to obtain 
short-term funds from the Non-Bank Liquidity Facility to address 
liquidity demands arising out of the default or suspension of a 
Clearing Member, in anticipation of a potential default or suspension 
of Clearing Members, the insolvency of a bank, another securities or 
commodities clearing organization, or a counterparty with which OCC has 
invested Clearing Member funds, or the failure of such a bank clearing 
organization, or investment counterparty to meet an obligation to OCC 
when due.
    The Non-Bank Liquidity Facility helps OCC minimize losses in the 
event of a default, suspension, insolvency, or failure to achieve daily 
settlement, by allowing it to obtain funds from sources not connected 
to OCC's Clearing Members on extremely short notice to ensure clearance 
and settlement of transactions in options and other contracts without 
interruption. OCC believes that the reduced settlement risk presented 
by OCC resulting from the proposed change would correspondingly reduce 
systemic risk and promote the safety and soundness of the clearing 
system. The ability to borrow funds from the Non-Bank Liquidity 
Facility would allow OCC to avoid liquidating margin or clearing fund 
assets in what would likely be volatile market conditions, which would 
preserve funds available to cover any losses resulting from the failure 
of a Clearing Member, bank, other clearing organization, or investment 
counterparty.
    The proposed change to the Non-Bank Liquidity Facility program to 
allow OCC to seek an aggregate commitment amount for up to the amount 
determined by the Board of the Directors from time to time would help 
OCC ensure the continued availability of its liquidity resources by 
providing OCC with the capacity to seek additional funding amounts on 
substantially the same terms, conditions, operations, and mechanics. In 
addition, the proposed change to the program would ensure that the 
approved amount would not be less than the currently approved amount of 
up to $1 billion. Because the proposed change preserves substantially 
the same terms and conditions as the MRA and the existing 
conformations, OCC believes that the proposed change would not 
otherwise affect or alter the management of risk at OCC.
Consistency With the Payment, Clearing and Settlement Supervision Act
    The stated purpose of the Clearing Supervision Act is to mitigate 
systemic risk in the financial system and promote financial stability 
by, among other things, promoting uniform risk management standards for 
systemically important financial market utilities and strengthening the 
liquidity of systemically important financial market utilities.\23\ 
Section 805(a)(2) of the Clearing Supervision Act \24\ also authorizes 
the Commission to prescribe risk management standards for the payment, 
clearing and settlement activities of designated clearing entities, 
like OCC, for which the Commission is the supervisory agency. Section 
805(b) of the Clearing Supervision Act \25\ states that the objectives 
and principles for risk management standards prescribed under Section 
805(a) shall be to:
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    \23\ 12 U.S.C. 5461(b).
    \24\ 12 U.S.C. 5464(a)(2).
    \25\ 12 U.S.C. 5464(b).
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     promote robust risk management;
     promote safety and soundness;
     reduce systemic risks; and
     support the stability of the broader financial system.
    The Commission has adopted risk management standards under Section 
805(a)(2) of the Clearing Supervision Act and the Exchange Act in 
furtherance of these objectives and principles.\26\ Rule 17Ad-22 
requires registered clearing agencies, like OCC, to establish, 
implement, maintain, and enforce written policies and procedures that 
are reasonably designed to meet certain minimum requirements for their 
operations and risk management practices on an ongoing basis.\27\ 
Therefore, the Commission has stated \28\ that it believes it is 
appropriate to review changes proposed in advance notices against Rule 
17Ad-22 and the objectives and principles of these risk management 
standards as described in Section 805(b) of the Clearing Supervision 
Act.\29\
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    \26\ 17 CFR 240.17Ad-22. See Exchange Act Release Nos. 68080 
(October 22, 2012), 77 FR 66220 (November 2, 2012) (S7-08-11) 
(``Clearing Agency Standards''); 78961 (September 28, 2016), 81 FR 
70786 (October 13, 2016) (S7-03-14) (``Standards for Covered 
Clearing Agencies'').
    \27\ 17 CFR 240.17Ad-22.
    \28\ See, e.g., Exchange Act Release No. 86182 (June 24, 2019), 
84 FR 31128, 31129 (June 28, 2019) (SR-OCC-2019-803).
    \29\ 12 U.S.C. 5464(b).
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    OCC believes that the Non-Bank Liquidity Facility program, as 
modified, is consistent with Section 805(b)(1) of the Clearing 
Supervision Act \30\ because the proposed confirmations would provide 
OCC with an additional source of committed liquidity to meet its 
settlement obligations while at the same time being structured to 
mitigate certain operational risks, as described above, that arise in 
connection with this committed liquidity source. In this way, the 
proposed changes are designed to promote robust risk management; 
promote safety and soundness; reduce systemic risks; and support the 
stability of the broader financial system.
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    \30\ 12 U.S.C. 5464(b)(1).
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    OCC believes that the Non-Bank Liquidity Facility program, as 
modified, is also consistent with the requirements of Rule 17Ad-
22(e)(7) under the Exchange Act.\31\ Rule 17Ad-22(e)(7) requires OCC to 
establish, implement, maintain and enforce written policies and 
procedures reasonably designed to effectively measure, monitor, and 
manage liquidity risk that arises in or is borne by OCC, including 
measuring, monitoring, and managing its settlement and funding flows on 
an ongoing and timely basis, and its use of intraday liquidity, as 
specified in the rule.\32\ In particular, Rule 17Ad-22(e)(7)(i) under 
the Exchange Act \33\ directs that OCC meet this obligation by, among 
other things, ``[m]aintaining sufficient liquid resources at the 
minimum in all relevant currencies to effect same-day . . . settlement 
of payment obligations with a high degree of confidence under a wide 
range of foreseeable stress scenarios that includes, but is not limited 
to, the default of the participant family that would generate the 
largest aggregate payment obligation for [OCC] in extreme but plausible 
market conditions.''
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    \31\ 17 CFR 240.17Ad-22(e)(7).
    \32\ Id.
    \33\ 17 CFR 240.17Ad-22(e)(7)(i).
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    As described above, the proposed change would allow OCC to seek a 
readily available liquidity resource that would enable it to, among 
other things, continue to meet its obligations in a timely fashion and 
as an alternative to selling Clearing Member collateral under what may 
be stressed and volatile market conditions. For these reasons, OCC 
believes that the proposal is consistent with Rule 17Ad-
22(e)(7)(i).\34\
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    \34\ Id.
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    Rule 17Ad-22(e)(7)(ii) under the Exchange Act requires OCC to 
establish,

[[Page 44481]]

implement, maintain and enforce written policies and procedures 
reasonably designed to hold qualifying liquid resources sufficient to 
satisfy payment obligations owed to Clearing Members.\35\ Rule 17Ad-
22(a)(14) of the Exchange Act defines ``qualifying liquid resources'' 
to include, among other things, lines of credit without material 
adverse change provisions, that are readily available and convertible 
into cash.\36\ The MRA under the Non-Bank Liquidity Facility would not 
be subject to any material adverse change provision and would continue 
to be designed to permit OCC to, among other things, help ensure that 
OCC has sufficient, readily-available qualifying liquid resources to 
meet the cash settlement obligations of its largest Clearing Member 
Group. Therefore, OCC believes that the proposal is consistent with 
Rule 17Ad-22(e)(7)(ii).\37\
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    \35\ 17 CFR 240.17Ad-22(e)(7)(ii).
    \36\ 17 CFR 240.17Ad-22(a)(14).
    \37\ 17 CFR 240.17Ad-22(e)(7)(ii).
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    For the foregoing reasons, OCC believes that the proposed changes 
are consistent with Section 805(b)(1) of the Clearing Supervision Act 
\38\ and Rule 17Ad-22(e)(7) \39\ under the Exchange Act.
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    \38\ 12 U.S.C. 5464(b)(1).
    \39\ 17 CFR 240.17Ad-22(e)(7).
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III. Date of Effectiveness of the Advance Notice and Timing for 
Commission Action

    The proposed change may be implemented if the Commission does not 
object to the proposed change within 60 days of the later of (i) the 
date the proposed change was filed with the Commission or (ii) the date 
any additional information requested by the Commission is received. OCC 
shall not implement the proposed change if the Commission has any 
objection to the proposed change.
    The Commission may extend the period for review by an additional 60 
days if the proposed change raises novel or complex issues, subject to 
the Commission providing the clearing agency with prompt written notice 
of the extension. A proposed change may be implemented in less than 60 
days from the date the advance notice is filed, or the date further 
information requested by the Commission is received, if the Commission 
notifies the clearing agency in writing that it does not object to the 
proposed change and authorizes the clearing agency to implement the 
proposed change on an earlier date, subject to any conditions imposed 
by the Commission.
    OCC shall post notice on its website of proposed changes that are 
implemented. The proposal shall not take effect until all regulatory 
actions required with respect to the proposal are completed.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the advance 
notice 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 [email protected]. Please include 
File Number SR-OCC-2022-803 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2022-803. 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 website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the advance notice that are filed with the 
Commission, and all written communications relating to the advance 
notice 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 website 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 website at 
https://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly.
    All submissions should refer to File Number SR-OCC-2022-803 and 
should be submitted on or before August 16, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-15920 Filed 7-25-22; 8:45 am]
BILLING CODE 8011-01-P


