Notice2021-21625
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
Primary source
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Published
October 5, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 190 (Tuesday, October 5, 2021)</title>
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[Federal Register Volume 86, Number 190 (Tuesday, October 5, 2021)]
[Notices]
[Pages 55039-55041]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21625]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93195; File No. SR-OCC-2021-009]
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
September 29, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on September 28, 2021, The Options Clearing
Corporation (``OCC'') filed with the Securities and Exchange Commission
(``SEC'' or ``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
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
to implement a fee holiday for the period beginning November 1, 2021,
and ending December 31, 2021. OCC's schedule of fees is included as
Exhibit 5 to File No. SR-OCC-2021-009. Material proposed to be added to
OCC's schedule of fees as currently in effect is underlined and
material proposed to be deleted is marked in strikethrough text. All
capitalized terms not defined herein have the same meaning as set forth
in the OCC By-Laws and Rules.\5\
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\5\ OCC's By-Laws and Rules can be found on OCC's public
website: <a href="https://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules">https://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules</a>.
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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
[[Page 55040]]
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 to implement a fee holiday for the period beginning
November 1, 2021, and ending December 31, 2021. OCC's Capital
Management Policy (``Policy'') provides that OCC reviews its fee
schedule on a periodic basis in consideration of factors including, but
not limited to, projected operating expenses, projected volumes,
anticipated cash flows, and capital needs.\6\ Provided that OCC's
shareholders' equity (``Equity''), less the minimum persistent amount
of capital that OCC maintains exclusively to address losses or
liquidity shortfalls arising from member defaults (the ``Minimum
Corporate Contribution''),\7\ exceeds 110% of the Target Capital
Requirement \8\ (``Early Warning'') \9\ plus any amount approved for
capital expenditures, OCC's Board, or a Committee the Board has
delegated, may use tools as it considers appropriate to lower costs for
Clearing Members. Such tools for reducing the cost of clearing include
lowering fees, declaring a fee holiday, or issuing refunds.\10\
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\6\ See Exchange Act Release No. 88029 (Jan. 24, 2020), 85 FR
5500, 5502 (Jan. 30, 2020) (File No. SR-OCC-2019-007) (``Order
Approving Policy''); Exchange Act Release No. 87257 (Oct. 8, 2019),
84 FR 55194, 55196 (Oct. 15, 2019) (File No. SR-OCC-2019-805)
(``Notice of No-Objection to Policy'').
\7\ See Exchange Act Release No. 92038 (May 27, 2021), 86 FR
29861 (Jun. 3, 2021) (File No. SR-OCC-2021-003) (order approving
proposed rule change to establish OCC's persistent minimum skin-in-
the-game); Exchange Act Release No. 91491 (Apr. 7, 2021), 86 FR
19061 (Apr. 12, 2021) (File No. SR-OCC-2021-801) (notice of no
objection to advance notice relating to OCC's establishment of
persistent minimum skin-in-the-game).
\8\ The Target Capital Requirement is the amount of Equity
recommended by Management and approved by the Board to ensure
compliance with regulatory capital requirements and to keep such
additional amount the Board may approve for capital expenditures.
See OCC Rule 101.
\9\ The Early Warning is one of the thresholds under OCC's plan
for replenishing capital in the event OCC's Equity falls close to or
below OCC's regulatory capital requirements, as required by SEC Rule
17Ad-22(e)(15)(iii). See 17 CFR 17Ad-22(e)(15)(iii).
\10\ See Order Approving Policy, 85 FR at 5502; Notice of No-
Objection to Policy, 84 FR at 55196.
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OCC has experienced record volumes in 2021 while maintaining
expenses at or around the budgeted amount. These strong financial
results put OCC in a position to continue to invest resources in OCC's
initiative to update and upgrade its technology infrastructure for
critical clearing and settlement services, risk systems and data
management,\11\ while at the same time lowering the cost of clearing
for the users of the markets OCC serves. Accordingly, effective June 1,
2021, OCC lowered its clearing fee from $0.045 per contract to $0.02
per contract.\12\
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\11\ See OCC Technology Changes + Enhancements Reference Guide,
available at <a href="https://www.theocc.com/Participant-Resources">https://www.theocc.com/Participant-Resources</a> (last
updated July 21, 2021).
\12\ Exchange Act Release No. 91920 (May 18, 2021), 86 FR 27916
(May 24, 2021) (File No. SR-OCC-2021-006).
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As of June 30, 2021, OCC maintained Equity of approximately $693
million, or approximately $418 million more than the Early Warning.\13\
Based on projections of contract volume and expenses, OCC believes that
it can implement a two-month fee holiday while maintaining sufficient
revenue to support OCC's operations and capital needs, including 2021
cash needs related to OCC's technology infrastructure
transformation.\14\ Accordingly, OCC proposes to modify its fee
schedule to decrease both its per contract and per trade clearing fees
to $0 for the last two months of 2021.\15\
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\13\ See OCC Schedule of Fees, available at <a href="https://www.theocc.com/Company-Information/Schedule-of-Fees">https://www.theocc.com/Company-Information/Schedule-of-Fees</a> (under OCC
Capital Management Reporting, unaudited as of June 30, 2021).
\14\ OCC has provided confidential data and analysis to the
Commission in Exhibit 3 to File No. SR-OCC-2021-009.
\15\ These changes are also reflected in Exhibit 5 to File No.
SR-OCC-2021-009.
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Fee schedule Proposed fee holiday from November 1, 2021 to
December 31, 2021
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Clearing Fees Clearing Fees
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Trades with contracts of 0-2,750.. $0.02/contract............ Trades with contracts $0/contract.
of 0-2,750.
Trades with contracts of more than $55/trade................. Trades with contracts $0/trade.
2,750. of more than 2,750.
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OCC proposes to make the fee change effective November 1, 2021,
because OCC believes that this date is the first date that the industry
could be prepared to process the new fee without disruption based on
consultations with market participants.\16\ Effective the first trading
day of 2022, clearing fees will revert to the fee schedule in effect
before November 1, 2021 and OCC will remove the fee holiday from its
schedule of fees.
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\16\ OCC notes that a mid-month change to clearing fees could
introduce operational disruption to Clearing Members due to the
impact on their billing processes.
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(2) Statutory Basis
Section 17A(b)(3)(D) of the Act \17\ requires that the rules of a
clearing agency provide for the equitable allocation of reasonable
dues, fees, and other charges among its participants. OCC believes that
the proposed fee holiday is reasonable because it is designed to
decrease the cost of clearing while maintaining sufficient reserves in
the form of liquid net assets to cover OCC's operating expenses and
address potential business or operational losses so that OCC can
continue to meet its obligations as a systemically important financial
market utility to Clearing Members and the general public if such
losses were to materialize (including through a recovery or orderly
wind-down of critical operations and services) and thereby facilitating
compliance with certain requirements of Rule 17Ad-22(e)(15)(ii).\18\
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\17\ 15 U.S.C. 78q-1(b)(3)(D).
\18\ 17 CFR 240.17Ad-22(e)(15)(ii).
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In determining the appropriateness of a fee holiday, the CPC
considered a variety of factors, including the projected revenue loss
that would result from a two-month fee holiday, projected expenses,
projected average daily volume, and a scenario analysis modeling the
sensitivity of operating income, adjusting for different clearing fee
levels.\19\ The CPC also considered OCC's cash needs through 2021 to
support its technology transformation initiative. OCC believes that the
proposed fee holiday is reasonable and consistent with its existing By-
Laws and Rules. OCC also believes that the proposed fee holiday would
result in an equitable allocation of fees among its participants
because it would be equally applicable to all market participants. As a
result, OCC believes that the proposed fee holiday provides for the
equitable
[[Page 55041]]
allocation of reasonable fees in accordance with Section 17A(b)(3)(D)
of the Act.\20\
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\19\ A summary of the analyses is included in confidential
Exhibit 3 to File No. SR-OCC-2021-009.
\20\ 15 U.S.C. 78q-1(b)(3)(D).
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The proposed rule change is not inconsistent with the existing
rules of OCC, including any other rules proposed to be amended.
(B) Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act \21\ 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 fee holiday applies 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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\21\ 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) \22\ of the Act, and Rule 19b-
4(f)(2) thereunder,\23\ the proposed rule change is filed for immediate
effectiveness as it constitutes a change in fees charged to OCC's
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. The proposal shall
not take effect until all regulatory actions required with respect to
the proposal are completed.\24\
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\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 17 CFR 240.19b-4(f)(2).
\24\ Notwithstanding its immediate effectiveness, implementation
of this rule change will be delayed until this change is deemed
certified under CFTC Regulation 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#a5d7d0c9c088c6cac8c8c0cbd1d6e5d6c0c68bc2cad3"><span class="__cf_email__" data-cfemail="0d7f786168206e6260606863797e4d7e686e236a627b">[email protected]</span></a>. Please include
File Number SR-OCC-2021-009 on the subject line.
Paper Comments
<bullet> 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-2021-009. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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 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.
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-2021-009 and should be
submitted on or before October 26, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21625 Filed 10-4-21; 8:45 am]
BILLING CODE 8011-01-P
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