Notice2024-31094
Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Update The Options Clearing Corporation's By-Laws
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Published
December 30, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 249 (Monday, December 30, 2024)</title>
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[Federal Register Volume 89, Number 249 (Monday, December 30, 2024)]
[Notices]
[Pages 106660-106663]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-31094]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102018; File No. SR-OCC-2024-018]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Update The Options Clearing Corporation's By-Laws
December 20, 2024.
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 December 19, 2024, 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)
\3\ of the Act and Rule 19b-4(f)(6) \4\ thereunder. 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).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change would amend the definition of ``Fund
Share'' in Article I of OCC's By-Laws (including the Interpretation and
Policy), consistent with the staff advisory (``Advisory'') recently
issued by the Commodity Futures Trading Commission (``CFTC'') regarding
the clearing of options on spot commodity exchange traded funds
(``ETFs'') \5\ (hereinafter ``Proposed Rule Change'').
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\5\ See CFTC Staff Advisory Relating to the Clearing of Options
on Spot Commodity Exchange Traded Funds (ETFs), Letter No. 24-16
(Nov. 15, 2024), available at <a href="https://www.cftc.gov/csl/24-16/download">https://www.cftc.gov/csl/24-16/download</a>.
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The proposed changes to OCC's By-Laws are included [sic] in Exhibit
5 of
[[Page 106661]]
File No. SR-OCC-2024-018. Material proposed to be added to OCC's By-
Laws 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.\6\
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\6\ 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 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
OCC clears and settles options on ETFs. Such ETFs are classified
under the definition of ``Fund Share'' in OCC's By-Laws. An
Interpretation and Policy to the fund share definition lists by name
certain precious metals commodity-based ETFs for which OCC can provide
clearance and settlement services on related options and security
futures contracts. This practice began in 2008 because of the uncertain
jurisdictional status of options or security futures on precious metals
commodity-based ETFs.\7\ As exchanges have launched more of these
products since 2008, OCC has, for each product, (i) sought CFTC
exemptive relief pursuant to Section 4(c) of the Commodity Exchange Act
(``CEA'') \8\ from regulations that would be inconsistent with the
trading and clearing of these products if the underlying were
considered a commodity that is not a security \9\ and then (ii) filed a
proposed rule change with the Commission to incorporate the name of the
product for which relief was granted into the Interpretation and Policy
of the fund share definition.\10\
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\7\ In seeking comment to an OCC request to clear and settle
options on streetTRACKS[supreg] Gold Trust Shares, the CFTC
indicated that, ``novel derivative products that implicate areas of
overlapping regulatory concern should be permitted to trade in
either or both a CFTC- or SEC- regulated environment [. . .]'' The
CFTC further noted that in considering the exemption, ``the CFTC
need not--and does not--find that [these options] are (or are not)
subject to the CEA'' and that the options were ```novel instruments'
and the `determination as to [their] jurisdiction is not
straightforward.' Given their potential usefulness to the market,
however, the [CFTC] believes that this may be an appropriate case
for issuing an exemption without making a finding as to the nature
of these particular instruments.'' See Proposal to Exempt the
Trading and Clearing of Certain Products Related to
streetTRACKS[supreg] Gold Trust Shares, 73 FR 21917, at 21918 (Apr.
23, 2008).
\8\ 7 U.S.C. 7a-1.
\9\ See infra note 15.
\10\ See e.g., Securities Exchange Act Release Nos. 57466 (Mar.
11, 2008), 73 FR 14297 (Mar. 17, 2008) and 57695 (Apr. 21, 2008), 73
FR 22452 (Apr. 25, 2008) (SR-OCC-2008-07) (SPDR Gold Trust f/k/a
streetTRACKS[supreg] Gold Shares); 59054 (Dec. 4, 2008), 73 FR 75159
(Dec. 10, 2008) (SR-OCC-2008-13 and SR-OCC-2008-14) (iShares COMEX
Gold Trust Shares and iShares Silver Trust Shares); 61254 (Dec. 29,
2009), 75 FR 1093 (Jan. 8, 2010) (SR-OCC-2009-20) (ETFS Physical
Swiss Gold Shares and ETFS Physical Silver Shares).
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On November 15, 2024, the CFTC issued the Advisory relating to the
clearing of options on spot commodity ETFs. The Advisory provided that
it is ``substantially likely'' that these spot commodity ETF shares
would be held to be securities.\11\ The Advisory further concluded that
``these shares listed on SEC registered national securities exchanges
do not implicate the [CFTC's] jurisdiction, and therefore, the clearing
of these options by OCC would be undertaken in its capacity as a
registered clearing agency subject to SEC oversight.'' \12\ OCC
believes the Advisory largely forecloses any potential liability under
the CEA, as amended, including the argument that OCC's clearance and
settlement of options on spot commodity ETFs constitutes a violation of
the CEA.
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\11\ See supra note 5.
\12\ Id.
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In light of the Advisory, OCC will no longer seek product-by-
product exemptive relief from the CFTC to clear spot commodity-based
ETF products. OCC will, therefore, no longer need to specifically
identify commodity-based products in the fund share definition. OCC
proposes to make clarifications to the fund share definition based on
the contents of the Advisory and delete the Interpretation and Policy
to the fund share definition, which is no longer relevant or necessary,
as further described below.
1. Purpose
The purpose of the Proposed Rule Change is to amend the definition
of ``Fund Share'' in Article I of OCC's By-Laws (including the
Interpretation and Policy), consistent with the Advisory recently
issued by the CFTC regarding the clearing of options on spot commodity
ETFs.\13\ Currently, Article I, Section 1, of OCC's By-Laws defines
``Fund Share'' as a publicly traded security (as defined in Section
3(a)(10) of the Act, as amended) that represents an interest in a
trust, investment company, commodity pool, or similar entity holding
and/or trading in one or more investments. Where the investments are
commodities, the amended definition would clarify that such term is
subject to any applicable advisory, exemption or other relief or
guidance issued by the CFTC. This proposed change is intended to
facilitate the clearance of these products in a manner that is
consistent with the Advisory and applicable regulations.
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\13\ Id.
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Additionally, the Interpretation and Policy to the fund share
definition currently identifies on a product-by-product basis specific
precious metals commodity-based ETFs that OCC includes within the
definition of fund share. The Commission previously approved proposed
rule changes by OCC in which OCC added these precious metals commodity-
based ETFs to the Interpretation and Policy.\14\ As discussed above,
the purpose of adding specific ETF names to the Interpretation and
Policy was to clarify the jurisdictional status of options or security
futures on these products, and was done in conjunction with the CFTC's
issuance of a 4(c) order exempting the trading and clearing of the
specific ETF names from CFTC regulations with which trading and
clearing would be inconsistent if the products were commodities that
were not securities.\15\ Because the Advisory finds it ``substantially
likely'' likely that spot commodity ETF shares would be held to be
securities, OCC believes that it no longer needs to seek product-by-
product exemptive relief from the CFTC to clear spot commodity-based
ETF products, including precious metals commodity-based ETFs. OCC will
no longer need to specifically identify commodity-based products in the
fund share definition. OCC thus proposes a clean-up change to delete in
its entirety the Interpretation and Policy to the fund share
definition, which is no longer
[[Page 106662]]
relevant or necessary, to avoid potential confusion.
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\14\ See e.g., Securities Exchange Act Release Nos. 57895 (May
30, 2008), 73 FR 32066 (June 5, 2008) (SR-OCC-2008-07) (SPDR Gold
Trust f/k/a streetTRACKS[supreg] Gold Trust Shares)); and 61591
(Feb. 25, 2010), 75 FR 9981 (Mar. 4, 2010) (SR-OCC-2009-20) (ETFS
Physical Swiss Gold Shares and ETFS Physical Silver Shares).
\15\ See e.g., 73 FR 31979 (Jun. 5, 2008) (SPDR[supreg] Gold
Futures Contracts (f/k/a streetTRACKS[supreg] Gold Trust Shares
security futures)); 73 FR 31981 (Jun. 5, 2008) (SPDR[supreg] Gold
Trust Shares (f/k/a streetTRACKS[supreg] Gold Trust Shares
options)); 73 FR 79830 (Dec. 30, 2008) (iShares[supreg] COMEX Gold
Trust Shares and iShares[supreg] Silver Trust Shares); and 75 FR
37406 (Jun. 29, 2010) (ETFS Physical Swiss Gold Shares and ETFS
Physical Silver Shares).
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In general, OCC believes that the proposed changes would provide
additional certainty to market participants regarding OCC's treatment
of fund shares, including commodity-based ETF products, in accordance
with applicable regulatory requirements and guidance. OCC believes that
this proposed rule change does not make any substantive modifications
to the fund share definition. Instead, the proposed changes update the
definition with current details and remove those details that have
become irrelevant due to the Advisory. Such changes would further
ensure that OCC's By-Laws remain up-to-date, clear, and transparent.
2. Statutory Basis
OCC believes the Proposed Rule Change is consistent with Section
17A of the Exchange Act \16\ and the rules and regulations thereunder
applicable to OCC. In particular, OCC believes that the Proposed Rule
Change is consistent with Section 17A(b)(3)(F) of the Act \17\ and Rule
17Ad-22(e)(21) \18\ thereunder, for the reasons described below.
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\16\ 15 U.S.C. 78q-1.
\17\ 15 U.S.C. 78q-1(b)(3)(F).
\18\ 17 CFR 240.17ad-22(e)(21).
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Section 17A(b)(3)(F) \19\ of the Act requires, among other things,
that the rules of a clearing agency be designed to remove impediments
to and perfect the mechanism of a national system for the prompt and
accurate clearance and settlement of securities transactions. OCC
believes the proposed changes would facilitate the clearance of spot
commodity-based ETF products in a manner that is consistent with
regulatory requirements and guidance. OCC believes the proposed changes
would provide additional certainty to market participants regarding
OCC's treatment of such products, which would reduce the likelihood
that OCC Clearing Members would have jurisdictional concerns over
trading these products. Reducing jurisdictional concerns that could
impede the trading of new products would remove impediments to and
perfect the mechanism of a national system for the prompt and accurate
clearance and settlement of securities transactions by providing
certainty regarding the treatment of fund shares.
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\19\ 15 U.S.C. 78q-1(b)(3)(F).
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Commission Rule 17Ad-22(e)(21) requires OCC to establish,
implement, maintain, and enforce written policies and procedures
reasonably designed to ``be efficient and effective in meeting the
requirements of its [clearing members] and the markets it serves . . .
.'' \20\ OCC believes the Proposed Rule Change is consistent with this
provision because, as described above, by providing clarity in its By-
Laws, it will (i) reduce the likelihood that OCC Clearing Members would
have jurisdictional concerns over trading these products and (ii)
ensure that OCC's By-Laws remain up-to-date and transparent. The
proposed changes to the fund share definition are intended to
facilitate the clearance of commodity-based ETF products in a manner
that is consistent with the Advisory and applicable regulations and to
provide additional certainty regarding OCC's treatment of such
products. The proposed deletion of the Interpretation and Policy to the
fund share definition would prevent potential confusion, as this
provision is no longer relevant or necessary. Moreover, the Proposed
Rule Change is not inconsistent with the By-Laws and Rules of OCC.
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\20\ 17 CFR 240.17ad-22(e)(21).
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(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 amendments to the fund share definition,
including the Interpretation and Policy, would impose any burden on
competition because they would merely establish clear treatment of fund
shares in a manner that is consistent with regulatory requirements and
guidance. OCC believes that this Proposed Rule Change does not make any
substantive modifications to the fund share definition but, instead,
updates the definition with current details and removes those details
that have become irrelevant due to the Advisory. The proposed changes
would not inhibit access to OCC's services in any way, would apply to
all Clearing Members uniformly and would not disadvantage or favor any
particular user in relationship to another user. 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 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
Because the foregoing proposed rule change does not:
(i) significantly affect the protection of investors or the public
interest;
(ii) impose any significant burden on competition; and
(iii) become operative for 30 days from the date on which it was
filed, or such shorter time as the Commission may designate, it has
become effective pursuant to Section 19(b)(3)(A) of the Act \22\ and
Rule 19b-4(f)(6) \23\ thereunder.
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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 17 CFR 240.19b-4(f)(6).
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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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\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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#81f3f4ede4ace2eeecece4eff5f2c1f2e4e2afe6eef7"><span class="__cf_email__" data-cfemail="5321263f367e303c3e3e363d2720132036307d343c25">[email protected]</span></a>. Please include
file number SR-OCC-2024-018 on the subject line.
Paper Comments
<bullet> 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-2024-018. This file
[[Page 106663]]
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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 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 <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>.
Do not include personal identifiable information in submissions;
you should submit only information that you wish to make available
publicly. We may redact in part or withhold entirely from publication
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-OCC-2024-018 and should
be submitted on or before January 21, 2025.
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,
Deputy Secretary.
[FR Doc. 2024-31094 Filed 12-27-24; 8:45 am]
BILLING CODE 8011-01-P
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