Notice2025-09061
Self-Regulatory Organizations; The Options Clearing Corporation; Notice of No Objection To Advance Notice Concerning The Options Clearing Corporation's Proposed Amendments to Certain Key Terms of a Master Repurchase Agreement for a Committed Liquidity Facility With a Bank Counterparty as Part of the Options Clearing Corporation's Overall Liquidity Plan
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 21, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 97 (Wednesday, May 21, 2025)</title>
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[Federal Register Volume 90, Number 97 (Wednesday, May 21, 2025)]
[Notices]
[Pages 21800-21804]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-09061]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103047; File No. SR-OCC-2025-801]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of No Objection To Advance Notice Concerning The Options
Clearing Corporation's Proposed Amendments to Certain Key Terms of a
Master Repurchase Agreement for a Committed Liquidity Facility With a
Bank Counterparty as Part of the Options Clearing Corporation's Overall
Liquidity Plan
May 15, 2025.
I. Introduction
On February 14, 2025, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'')
advance notice SR-OCC-2025-801 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'') \3\ to propose
amendments to certain key terms of a master repurchase agreement for a
committed liquidity facility with a bank counterparty as part
[[Page 21801]]
of OCC's overall liquidity plan (hereinafter, the ``Advance
Notice'').\4\ On February 26, 2025, the Notice of Filing of the Advance
Notice was published in the Federal Register to solicit public
comment.\5\ On March 14, 2025, the Commission requested additional
information for consideration of the Advance Notice from OCC, pursuant
to section 806(e)(1)(D) of the Clearing Supervision Act,\6\ which
tolled the Commission's period of review of the Advance Notice until 60
days from the date the information requested by the Commission was
received by the Commission.\7\ On March 19, 2025, the Commission
received OCC's response to the Commission's request for additional
information.\8\ The Commission has not received public comment
regarding the changes proposed in the Advance Notice. The Commission is
hereby providing notice of no objection to the Advance Notice.
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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.
\4\ See Notice of Filing infra note 5, 90 FR 10734.
\5\ Securities Exchange Act Release No. 102462 (Feb. 20, 2025),
90 FR 10734 (Feb. 26, 2025) (File No. SR-OCC-2025-801) (``Notice of
Filing'').
\6\ 12 U.S.C. 5465(e)(1)(D).
\7\ See 12 U.S.C. 5465(e)(1)(E)(ii); Memorandum from the Office
of Clearance and Settlement Supervision, Division of Trading and
Markets, titled ``Commission's Request for Additional Information,''
available at <a href="https://www.sec.gov/comments/sr-occ-2025-801/srocc2025801-581155-1670662.pdf">https://www.sec.gov/comments/sr-occ-2025-801/srocc2025801-581155-1670662.pdf</a>.
\8\ See 12 U.S.C. 5465(e)(1)(E)(ii) and (G)(ii); Memorandum from
the Office of Clearance and Settlement Supervision, Division of
Trading and Markets, titled ``Response to the Commission's Request
for Additional Information,'' available at <a href="https://www.sec.gov/comments/sr-occ-2025-801/srocc2025801-586055-1693302.pdf">https://www.sec.gov/comments/sr-occ-2025-801/srocc2025801-586055-1693302.pdf</a>.
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II. Background
OCC is a central counterparty (``CCP''), which means that as part
of its function as a clearing agency, it interposes itself as the buyer
to every seller and the seller to every buyer for financial
transactions. It is the sole clearing agency for standardized equity
options listed on national securities exchanges registered with the
Commission. In OCC's role as a registered clearing agency, and as a
derivatives clearing organization (``DCO'') registered with the
Commodity Futures Trading Commission (``CFTC''), it guarantees all
contracts it clears. As the CCP for the listed options markets and for
certain futures in the United States, OCC is exposed to the risk that
one or more of its Clearing Members \9\ may fail to make a payment or
to deliver securities.
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\9\ Capitalized terms used but not defined herein have the
meanings specified in OCC's Rules and By-Laws, available at <a href="https://www.theocc.com/about/publications/bylaws.jsp">https://www.theocc.com/about/publications/bylaws.jsp</a>.
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OCC addresses such risk exposure, in part, by maintaining an
overall liquidity plan that provides access to a diverse set of funding
sources, including a minimum amount of cash in OCC's Clearing Fund,\10\
syndicated bank credit facility \11\ and a program for accessing
additional committed sources of liquidity that do not increase the
concentration of OCC's counterparty exposure (``Non-Bank Liquidity
Facility'').\12\ The credit facility and Non-Bank Liquidity Facility
provide OCC with cash in exchange for collateral (e.g., U.S. Government
securities deposited by Clearing Members in satisfaction of their
Clearing Fund requirements) and comprise part of the liquid resources
OCC maintains to effect same-day settlement of its payment obligations.
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\10\ See OCC Rule 1002 (requiring each Clearing Member deposit a
minimum amount of cash in the Clearing Fund).
\11\ See, e.g., Exchange Act Release No. 88971 (May 28, 2020),
85 FR 34257 (June 3, 2020) (File No. SR-OCC-2020-804).
\12\ See, e.g., Exchange Act Release No. 89039 (June 10, 2020),
85 FR 36444 (June 16, 2020) (File No. SR-OCC-2020-803).
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In addition to these resources, OCC is permitted to establish a
Master Repurchase Agreement (the ``MRA'') with a bank counterparty on
an ongoing basis with a commitment amount of up to $1 billion (the
``Bank Repo Facility'').\13\ Under the Bank Repo Facility, the
designated bank counterparty (the ``buyer'') would purchase U.S.
Government securities from OCC in exchange for payment to OCC in
immediately available funds (the ``Purchase Price''). The buyer, in
exchange, must agree to later transfer the purchased securities back to
OCC on a specified ``Repurchase Date'' or on OCC's demand against the
transfer of funds from OCC to the buyer. The transfer of funds from OCC
to the buyer would equal the outstanding Purchase Price and the accrued
and unpaid price differential agreed to by the parties.
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\13\ See Exchange Act Release No. 88317 (Mar. 4, 2020), 85 FR
13681 (Mar. 9, 2020) (File No. SR-OCC-2020-801) and Exchange Act
Release No. 95669 (Sept. 2, 2022), 87 FR 55064 (Sept. 8, 2022) (File
No. SR-OCC-2022-802).
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The Bank Repo Facility, as filed with the Commission in 2022,
includes the condition that the buyer not pledge, charge, encumber,
hypothecate, transfer, dispose of, or otherwise grant any third party
any interest in (i.e., ``rehypothecate'') any eligible securities.\14\
OCC states that the prohibition on rehypothecation was intended to
prevent the bank from granting third parties an interest in purchased
securities in order to reduce the risk that the third party could
interfere with the buyer's transfer of the purchased securities to OCC
on the Repurchase Date.\15\ However, OCC also states that the
prohibition on rehypothecation is not a standard feature for bilateral
repo transactions like the one contemplated by the Bank Repo Facility,
and its inclusion in the MRA has made the transaction less commercially
appealing to the bank counterparty than OCC initially anticipated.\16\
Specifically, the bank counterparty will not execute an MRA for a $1
billion commitment without a limited right of rehypothecation.\17\ As a
result, OCC has not implemented the $1 billion Bank Repo Facility and
believes it will be able to do so with the amendment of the MRA to
permit a limited right of rehypothecation.\18\
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\14\ See Exchange Act Release No. 95669, supra note 10, 87 FR at
55064-66.
\15\ See Notice of Filing, 90 FR at 10735.
\16\ See id.
\17\ See Notice of Filing, 90 FR 10737 (stating that the current
prohibition on rehypothecation has prevented execution of the
facility on commercially acceptable terms).
\18\ See id.
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As proposed, the Bank Repo Facility would continue to provide OCC
with access to up to $1 billion in liquidity \19\ and provides an
alternative to OCC's other liquidity sources described above (i.e.,
required Clearing Fund cash, bank credit facility, Non-Bank Liquidity
Facility). Accordingly, to make the MRA more commercially appealing to
its bank counterparty, OCC proposes modifying the MRA to provide for a
right to rehypothecate the purchased securities.\20\
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\19\ See Notice of Filing, 90 FR 10735.
\20\ OCC proposes to modify the Bank Repo Facility to provide
for a limited right to rehypothecate non-customer collateral. See
Notice of Filing, 90 FR 10735.
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The current prohibition against rehypothecation was intended to
prevent the bank from granting third parties an interest in purchased
securities and thereby reduce the risk that the bank counterparty would
not be able to retrieve the securities from the third-party and, as a
result, would fail to return the purchased securities to OCC either on
the Repurchase Date or otherwise upon OCC's request.\21\ OCC now
proposes to provide for rehypothecation subject to certain limitations.
Specifically, that the rehypothecation is (1) within a tri-party repo
program of a third-party custodian where the buyer would hold the
eligible securities in a custodial account \22\ and
[[Page 21802]]
(2) only to a third-party cash investor (e.g., a large institutional
money market fund) that is legally restricted from further pledging,
charging, encumbering, hypothecating, transferring, disposing of, or
otherwise granting any interest in the purchased securities.\23\ OCC
states that these limitations serve two purposes: (1) ensuring that the
rehypothecated securities remain in a segregated account held at the
buyer's custodial bank on behalf of the third-party cash investors
(thereby reducing the risk that the bank counterparty will not be able
to deliver the purchased securities back to OCC on the Repurchase Date
or sooner upon OCC's demand); and (2) creating requisite commercial
incentives for the bank counterparty to execute the modified MRA.\24\
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\21\ OCC generally would make such a request in the event that
OCC needed to substitute the purchased securities as a result of a
Clearing Member's request to substitute collateral.
\22\ See Notice of Filing, 90 FR 10735, n. 17 (``Tri-party repos
use a custodian bank that provides collateral valuation, margining,
and management services to the counterparties to the agreement.'').
\23\ See Notice of Filing, 90 FR 10734 and 10735.
\24\ See id.
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Further, OCC believes it can mitigate the risks attendant to the
Bank Repo Facility without prohibiting rehypothecation.\25\ The
prohibition on rehypothecation facilitated collateral substitution by
ensuring that a third-party could not interfere with OCC's ability to
honor a Clearing Member's substitution request.\26\ OCC's rules,
however, allow OCC to reject substitution requests for securities
contributed to the Clearing Fund that OCC has taken possession of to
borrow funds from a liquidity facility.\27\ OCC states that it may
facilitate substitutions following such a draw as a convenience and
accommodation to Clearing Members, but it is not required to do so.\28\
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\25\ See Notice of Filing, 90 FR 10736.
\26\ See id.
\27\ See OCC Rule 1006(f)(4).
\28\ See Notice of Filing, 90 FR 10736.
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III. Discussion and Notice of No Objection
Although the Clearing Supervision Act does not specify a standard
of review for an advance notice, the stated purpose of the Clearing
Supervision Act is instructive: 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 (``SIFMUs'') and strengthening the
liquidity of SIFMUs.\29\
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\29\ See 12 U.S.C. 5461(b).
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Section 805(a)(2) of the Clearing Supervision Act authorizes the
Commission to prescribe regulations containing risk management
standards for the payment, clearing and settlement activities of
designated clearing entities, including OCC, engaged in designated
activities for which the Commission is the supervisory agency.\30\
Section 805(b) of the Clearing Supervision Act provides the following
objectives and principles for the Commission's risk management
standards prescribed under section 805(a): \31\
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\30\ 12 U.S.C. 5464(a)(2).
\31\ 12 U.S.C. 5464(b).
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<bullet> To promote robust risk management;
<bullet> To promote safety and soundness;
<bullet> To reduce systemic risks; and
<bullet> To support the stability of the broader financial system.
Section 805(c) provides that the Commission's risk management
standards may address such areas as risk management and default
policies and procedures, among other areas.\32\
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\32\ 12 U.S.C. 5464(c).
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The Commission has adopted risk management standards under section
805(a)(2) of the Clearing Supervision Act and section 17A of the
Exchange Act (the ``Clearing Agency Rules'').\33\ The Clearing Agency
Rules require, among other things, each covered clearing agency
(``CCA'') to establish, implement, maintain, and enforce written
policies and procedures that are reasonably designed to meet certain
minimum requirements for its operations and risk management practices
on an ongoing basis.\34\ As such, it is appropriate for the Commission
to review advance notices against the Clearing Agency Rules and the
objectives and principles of these risk management standards as
described in section 805(b) of the Clearing Supervision Act. As
discussed below, the changes proposed in the Advance Notice are
consistent with the objectives and principles described in section
805(b) of the Clearing Supervision Act,\35\ and in the Clearing Agency
Rules, in particular Rule 17ad-22(e)(7).\36\
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\33\ 17 CFR 240.17ad-22. See Exchange Act Release No. 68080
(Oct. 22, 2012), 77 FR 66220 (Nov. 2, 2012) (S7-08-11). See also
Covered Clearing Agency Standards, 81 FR 70786. OCC is a ``covered
clearing agency'' as defined in Rule 17ad-22(a).
\34\ 17 CFR 240.17ad-22.
\35\ 12 U.S.C. 5464(b).
\36\ 17 CFR 240.17ad-22(e)(7).
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A. Consistency With Section 805(b) of the Clearing Supervision Act
The proposal contained in the Advance Notice is consistent with the
stated objectives and principles of section 805(b) of the Clearing
Supervision Act. Specifically, as discussed below, the changes proposed
in the Advance Notice are consistent with promoting robust risk
management, promoting safety and soundness, reducing systemic risks,
and supporting the stability of the broader financial system.\37\
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\37\ 12 U.S.C. 5464(b).
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The proposed change to the Bank Repo Facility is consistent with
the promotion of robust risk management, in particular the management
of liquidity risk presented to OCC. As a CCP and SIFMU,\38\ OCC must
have adequate resources to satisfy its counterparty settlement
obligations, including in the event of a Clearing Member default.\39\
As described above, and as the Commission has previously
acknowledged,\40\ the Bank Repo Facility provides an additional source
of liquidity to OCC's overall liquidity plan and increases the amount
of OCC's qualifying liquid resources. This would promote the reduction
of risks to OCC, its Clearing Members, and the options market in
general, because it would allow OCC to increase the amount and
availability of short-term funds to address liquidity demands arising
out of the default or suspension of a Clearing Member, or in
anticipation of a potential default or suspension of a Clearing Member.
Adding another committed source of liquidity resources also would help
OCC manage the allocation between its sources of liquidity by giving
OCC more flexibility to adjust the mix of liquidity resources based on
market conditions, availability, and shifting liquidity needs.
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\38\ See Financial Stability Oversight Council (``FSOC'') 2012
Annual Report, Appendix A, available at <a href="https://home.treasury.gov/system/files/261/2012-Annual-Report.pdf">https://home.treasury.gov/system/files/261/2012-Annual-Report.pdf</a> (last visited Feb. 26,
2025).
\39\ See Exchange Act Release No. 73979 (Jan. 2, 2015), 80 FR
1062, 1065 (Jan. 8, 2015) (File No. SR-OCC-2014-809).
\40\ See Exchange Act Release No. 95669 (Sept. 2, 2022), 87 FR
55064, 55066 (Sept. 8, 2022) (File No. SR-OCC-2022-802).
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The Bank Repo Facility cannot, however, provide a committed source
of liquidity resources if OCC cannot implement the facility. As stated
above, OCC believes it will be able to implement the Bank Repo Facility
if it amends the MRA to permit a limited right of rehypothecation. As a
result, OCC now proposes to modify the MRA to allow a bank counterparty
a limited right of rehypothecation. Because this is the only change to
the Bank Repo Facility that OCC is proposing, our analysis of whether
the Advance Notice is consistent with the stated objectives and
principles of section 805(b) of the Clearing Supervision Act is focused
on the specific risks to OCC posed by the provision of such a limited
right of rehypothecation and whether such risks are appropriately
mitigated.
[[Page 21803]]
The initial risk is that the bank counterparty fails to return the
purchased securities. The terms of the revised MRA would limit the
right to rehypothecate to the bank counterparty, which would bar a
third-party investor from further rehypothecating the securities and
thereby expanding the set of counterparties involved. Additionally, the
terms would require that rehypothecation take place in a tri-party
arrangement, such that the securities could not be held directly by the
third-party investor, but rather would be held in a custodial account
at a trusted bank, limiting the risk that might otherwise arise out of
giving the securities directly to the third-party investor. Such an
arrangement would also allow OCC's bank counterparty to provide OCC
visibility to the collateral and transparency to the allocation of that
collateral in a tri-party deal.
In the event that the foregoing is not sufficient to ensure that
the bank counterparty returns the purchased securities, both the terms
of the revised MRA and OCC's existing rules would provide protections
for OCC and specific tools to allow OCC to manage such an event. The
primary risks to OCC presented by such an event would be credit losses
incurred by OCC or payment obligations that OCC would be required to
meet arising out of the bank counterparty's failure to return the
securities to OCC. With regard to potential credit losses, OCC's
existing Rules permit it to charge such losses to the Clearing Fund in
the same manner as it may charge other losses arising out of Clearing
Member default.\41\ With regard to its payment obligations, the express
terms of the revised MRA would permit OCC to retain the funds borrowed
from its bank counterparty if the counterparty fails to return the
purchased securities, which funds OCC could use to meet its payment
obligations.\42\ Additionally, OCC's existing Rules allow it to use
Clearing Fund collateral to meet its settlement obligations as part of
OCC's regular default management process.\43\ Thus, for example, OCC
could use the borrowed funds received from the repurchase agreement, or
if the borrowed funds were insufficient to meet OCC's full payment
obligations additional Clearing Fund collateral, to meet the remainder
of its settlement obligations as part of OCC's standard default
management process.
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\41\ See OCC Rule 1006(a).
\42\ See Exchange Act Release No. 88317 (Mar. 4, 2020), 85 FR
13681, 13862 (Mar. 9, 2020) (File No. SR-OCC-2020-801) (providing
for the use of a ``mini-default'' in lieu of declaring an event of
default at the discretion of the non-defaulting party). For example,
if the buyer fails to transfer purchased securities on the
applicable repurchase date, rather than declaring an event of
default, OCC may (1) if OCC has already paid the repurchase price,
require the buyer to repay the repurchase price, (2) if there is a
margin excess, require the buyer to pay cash or deliver purchased
securities in an amount equal to the margin excess, or (3) declare
that the applicable transaction, and only that transaction, will be
immediately terminated, and apply default remedies under the MRA to
only that transaction. Id. at n. 15.
\43\ See OCC Rule 1006(f)(1)(C).
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Another risk presented by rehypothecation could arise in the event
a Clearing Member whose Clearing Fund collateral is included in the
purchased securities makes a request for collateral substitution.\44\
Such a request could require OCC to demand early repurchase of the
purchased securities by the bank counterparty. If the bank counterparty
has itself rehypothecated the securities, it may not be in a position
to return the collateral to OCC when requested. Again, OCC's existing
Rules provide it with protection and tools to manage this risk.
Specifically, OCC's Rules would allow it to refuse such a substitution
request if the securities at issue have been utilized by OCC as part of
the Bank Repo Facility.\45\
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\44\ See OCC Rule 1002(a)(iv).
\45\ See OCC Rule 1006(f)(4) (allowing OCC to refuse any
Clearing Member substitution request regarding securities
contributed to the Clearing Fund that the Corporation has taken
possession to borrow funds).
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As described above, such rehypothecation would be limited to a tri-
party repo program, where the eligible securities would be held in a
custodial account, and the third-party cash investor would be
restricted from further rehypothecation. As a result, OCC could request
that the bank counterparty provide visibility to the collateral and
transparency to the allocation of that collateral in a tri-party deal.
Such limitation and visibility serve to increase the likelihood that
the bank counterparty would return purchased securities pursuant to the
terms of the MRA. Even if the bank counterparty were not able to return
the purchased securities, the terms of the Bank Repo Facility include
protections designed to ensure that OCC would retain the borrowed
funds.\46\ As described above, OCC's rules provide for OCC's management
of credit losses \47\ or liquidity shortfalls \48\ arising out of the
bank counterparty's failure to return the purchased securities. To the
extent OCC were to suffer a loss due to the bank counterparty's failure
to return the purchased securities, OCC could charge such a loss to the
Clearing Fund.\49\ OCC's rules also provide sufficiently flexibility to
manage a scenario in which a Clearing Member requests a substitution of
its Clearing Fund collateral, but the bank counterparty has not
returned that collateral.\50\
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\46\ See Exchange Act Release No. 88317 (Mar. 4, 2020), 85 FR
13681, 13862 (Mar. 9, 2020) (File No. SR-OCC-2020-801) (providing
for the use of a ``mini-default'' in lieu of declaring an event of
default at the discretion of the non-defaulting party).
\47\ See OCC Rule 1006(a).
\48\ See OCC Rule 1006(f)(1)(C).
\49\ See OCC Rule 1006(a).
\50\ See OCC Rule 1006(f)(4) (allowing OCC to refuse any
Clearing Member substitution request regarding securities
contributed to the Clearing Fund that the Corporation has taken
possession to borrow funds).
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The Advance Notice is also consistent with the promotion of safety
and soundness. As described above, the Advance Notice is designed to
facilitate implementation of the Bank Repo Facility by amending the
permissible terms such that they provide sufficient commercial
incentives for the bank counterparty to agree to a $1 billion
commitment repurchase facility. Implementation of the Bank Repo
Facility would provide OCC access to $1 billion in committed liquidity
not otherwise available to it which, in turn, would reduce the
likelihood that OCC would have insufficient financial resources to
address liquidity demands arising out of a Clearing Member default.\51\
Further, to the extent the Advance Notice is consistent with promoting
OCC's safety and soundness, it also is consistent with reducing
systemic risks and supporting the stability of the broader financial
system. OCC has been designated as a SIFMU, in part, because its
failure or disruption could increase the risk of significant liquidity
or credit problems spreading among financial institutions or
markets.\52\ The proposed changes to the MRA would support OCC's
ability to continue providing services to the options markets by
addressing losses and shortfalls arising out of the default of a
Clearing Member. OCC's continued operations would, in turn, help
support the stability of the financial system by reducing the risk of
significant liquidity or credit problems spreading among market
participants that rely on OCC's central role in the options market.
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\51\ See Exchange Act Release No. 95669 (Sept. 2, 2022), 87 FR
55064, 55067 (Sept. 8, 2022) (File No. SR-OCC-2022-802).
\52\ See Financial Stability Oversight Council (``FSOC'') 2012
Annual Report, Appendix A, available at <a href="https://home.treasury.gov/system/files/261/2012-Annual-Report.pdf">https://home.treasury.gov/system/files/261/2012-Annual-Report.pdf</a> (last visited Feb. 26,
2025).
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Accordingly, and for the reasons stated above, the changes proposed
in the Advance Notice are consistent with
[[Page 21804]]
section 805(b) of the Clearing Supervision Act.\53\
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\53\ 12 U.S.C. 5464(b).
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B. Consistency With Section 17ad-22(e)(7) of the Exchange Act
Rule 17ad-22(e)(7)(ii) under the Exchange Act requires that a CCA
establish, implement, maintain, and enforce written policies and
procedures reasonably designed to effectively measure, monitor, and
manage the liquidity risk that arises in or is borne by the CCA,
including measuring, monitoring, and managing its settlement and
funding flows on an ongoing and timely basis, and its use of intraday
liquidity by, at a minimum, holding qualifying liquid resources
sufficient to meet the minimum liquidity resource requirement under
Rule 17ad-22(e)(7)(i) \54\ in each relevant currency for which the CCA
has payment obligations owed to clearing members.\55\ For any CCA,
``qualifying liquid resources'' includes assets that are readily
available and convertible into cash through prearranged funding
arrangements, such as committed arrangements without material adverse
change provisions, including repurchase agreements.\56\
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\54\ Rule 17ad-22(e)(7)(i) 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 by, at a minimum,
maintaining 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 of obligation for the covered clearing
agency in extreme but plausible conditions. 17 CFR 240.17ad-
22(e)(7)(i).
\55\ 17 CFR 240.17ad-22(e)(7)(ii).
\56\ 17 CFR 240.17ad-22(a).
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As described above, implementation of the Bank Repo Facility would
provide OCC with a committed funding arrangement that would give OCC
access to $1 billion of committed liquid resources through an MRA with
a designated bank counterparty, which would meet the definition of
``qualifying liquid resources'' as that term is defined in Rule 17ad-
22(a) under the Exchange Act.\57\ OCC does not currently have access to
the committed $1 billion repurchase agreement permitted under the Bank
Repo Facility because OCC's bank counterparty will not enter into such
an agreement without a limited right of rehypothecation. OCC now
proposes to amend the Bank Repo Facility to allow the provision of a
limited right of rehypothecation to provide the necessary commercial
incentives for its bank counterparty to agree to a $1 billion
commitment. As also discussed above, both the limitations placed on
rehypothecation under the existing and proposed terms of the Bank Repo
Facility as well as OCC's existing rules reasonably mitigate the
potential risks posed by permitting rehypothecation under the MRA.
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\57\ Id.
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Accordingly, the changes proposed in the Advance Notice are
consistent with Rule 17ad-22(e)(7) under the Exchange Act.\58\
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\58\ 17 CFR 240.17ad-22(e)(7).
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IV. Conclusion
It is therefore noticed, pursuant to section 806(e)(1)(I) of the
Clearing Supervision Act, that the Commission does not object to
Advance Notice (SR-OCC-2025-801) and that OCC is authorized to
implement the proposed changes as of the date of this notice.
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-09061 Filed 5-20-25; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on May 21, 2025.
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