Notice2025-23077
Self-Regulatory Organizations; the Options Clearing Corporation; Notice of Filing of Partial Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Partial Amendment No. 1, by the Options Clearing Corporation Concerning Adjustments to Cleared Contracts
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
December 17, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 240 (Wednesday, December 17, 2025)</title>
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[Federal Register Volume 90, Number 240 (Wednesday, December 17, 2025)]
[Notices]
[Pages 58664-58669]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-23077]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104389; File No. SR-OCC-2025-017]
Self-Regulatory Organizations; the Options Clearing Corporation;
Notice of Filing of Partial Amendment No. 1 and Order Granting
Accelerated Approval of Proposed Rule Change, as Modified by Partial
Amendment No. 1, by the Options Clearing Corporation Concerning
Adjustments to Cleared Contracts
December 12, 2025.
I. Introduction
On September 26, 2025, the Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2025-017, pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule
19b-4 \2\ thereunder, to revise and reorganize its rules pertaining to
options contract adjustments.\3\ The proposed rule change was published
for public comment in the Federal Register on October 1, 2025.\4\ On
November 3, 2025, pursuant to Section 19(b)(2) of the Exchange Act,\5\
the Commission designated a longer period within which to approve,
disapprove, or institute proceedings to determine whether to approve or
disapprove the proposed rule change, until December 30, 2025.\6\ On
December 5, 2025, OCC partially amended SR-OCC-2025-017 to (1) correct
proposed rule text describing the current composition and governance of
OCC's Securities Committee, as approved by the Commission in a prior
proposed rule change; \7\ and (2) conform cross references found
elsewhere in OCC's rules to the restatement of the contract adjustment
rules proposed in the Notice of Filing (``Partial Amendment No.
1'').\8\ The Commission has received no comments regarding the proposed
rule change. The Commission is publishing this notice to solicit
comments on Partial Amendment No. 1 from interested persons, and, for
the reasons discussed below, is approving the proposed rule change as
modified by Partial Amendment No. 1 (hereinafter defined as the
``Proposed Rule Change'').
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Notice of Filing infra note 4, at 90 FR 47470.
\4\ See Exchange Act Release No. 104104 (Sept. 26, 2025), 90 FR
47470 (Oct. 1, 2025) (File No. SR-OCC-2025-017) (``Notice of
Filing'').
\5\ 15 U.S.C. 78s(b)(2).
\6\ See Exchange Act Release No. 104173 (Nov. 3, 2025), 90 FR
51424 (Nov. 17, 2025) (File No. SR-OCC-2025-017).
\7\ See Exchange Act Release No. 93102 (Sept. 22, 2021), 86 FR
53718 (Sept. 28, 2021) (SR-OCC-2021-007).
\8\ Partial Amendment No. 1 consists of (1) updated rule text to
clarify that the Notice of Filing did not intend to implement a
change to the governance arrangement or composition of the
Securities Committee, as described in current By-Laws; and (2)
Exhibit 5, showing updated interpretive guidance to accurately
reflect cross-references. Partial Amendment No. 1 does not change
the purpose of or basis for SR-OCC-2025-017.
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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 certain financial
transactions. As the CCP for the listed options markets in the United
States,\9\ as well as for certain futures and stock loans, OCC has
certain processing obligations during the life of the products it
clears. For example, it may be necessary for OCC to adjust the terms of
a contract it has cleared. A contract adjustment refers to the
modification of terms of an overlying derivative, like the options that
are cleared and settled by OCC, in response to certain corporate
actions that affect an underlying security--such as declaration of
dividends or distributions, stock splits, rights offerings,
reorganizations, or the merger or liquidation of an issuer.\10\ OCC
states that it makes adjustments to maintain the economic value of
existing positions by mirroring what occurs to the underlying security
using determinative factors on a case-by-case basis.\11\ Currently, OCC
has broad authority to effect contract adjustments and, typically,
makes a determination based on (a) fairness to holders and writers (or
purchasers and sellers) of the affected contracts; (b) the maintenance
of a fair and orderly market in the affected contracts; (c) consistency
of interpretation and practice; (d) efficiency of exercise settlement
procedures; and (e) the coordination with other clearing agencies of
the clearance and settlement of transactions in the underlying
interest.\12\
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\9\ OCC describes itself as ``the sole clearing agency for
standardized equity options listed on a national securities exchange
registered with the Commission (`listed options').'' See Exchange
Act Release No. 96533 (Dec. 19, 2022), 87 FR 79015 (Dec. 23, 2022)
(File No. SR-OCC-2022-012).
\10\ See Notice of Filing, 90 FR at 47471.
\11\ Id. (``The future occurrence of corporate actions is not
always foreseeable at the time parties enter a derivatives trade,
and therefore the occurrence of such a corporate action is not
priced into the economics of the trade. Because derivative contract
positions of trading parties may exist for weeks, months or years
after the position was established, corporate actions may occur
during the life of the contract that affect the economic position of
the parties.'').
\12\ Id. OCC also maintains a Securities Committee, consisting
of one designated representative of each Securities Exchange and
OCC's Chief Executive Officer. This Securities Committee is
authorized to adopt statements of policy or interpretations having
general application to specified types of events or OCC cleared
contracts to help guide adjustment policy for new or unusual
situations, as needed. Id.
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As part of its contract adjustment risk management, OCC proposes to
(1) adopt rules reflecting OCC's current practices in making adjustment
determinations; and (2) relocate, consolidate, and update references to
adjustment-related provisions within its By-Laws and Rules.\13\
Regarding substantive revisions, OCC proposes to codify within its
Rules the current practices related to adjustment determinations (e.g.,
by specifying additional circumstances when OCC will generally not make
an adjustment or specifying additional factors guiding adjustment
determinations).\14\ As to the non-substantive reorganization of
adjustment-related provisions, OCC proposes to (i) relocate OCC's
existing provisions from its By-Laws to the new Chapter XXVIII of the
Rules, which would encompass Rules 2801 through 2805; \15\ (ii)
consolidate provisions regarding OCC's adjustment authority and
practices for actively traded products with similar methods of
adjustments \16\ to eliminate duplicative provisions (e.g.,
consolidating provisions for adjustments to stock futures and stock
options); and (iii) update references to current adjustment By-Laws
sections contained in other adjustment provisions of the By-Laws for
products not actively traded, and with regard to governance provisions
for amendments to Rules and By-Laws. The
[[Page 58665]]
proposed changes are described in more detail below.
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\13\ See Notice of Filing, 90 FR at 47470.
\14\ See Notice of Filing, 90 FR at 47481-84.
\15\ OCC also proposes certain non-substantive clarifying
changes to the relocated language.
\16\ OCC does not propose consolidating By-Law provisions into
the Rules for products that do not currently trade. Specifically,
Article XIV, Sections 3A and 3B (Adjustments for Binary Options),
Article XV, Section 4 (Adjustments for Foreign Currency Options),
Article XVI, Section 3 (Adjustments for Yield-Based Treasury
Options), Article XXIV, Section 4 (Adjustments for BOUNDS), and
Article XXVI (Adjustments for Packaged Spread Options) will remain
in the By-Laws with updates to reflect references to other
adjustment provisions relocated to OCC's Rules.
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A. Codification of Current Practices
OCC represents that the proposed provisions concerning its
adjustment process result from and reflect longstanding practices that
OCC developed under its existing adjustment authority but that have not
been codified as rules.\17\ OCC maintains that this codification is
meant to provide more detail, transparency, and clarity around its
adjustment process.\18\ The provisions codifying OCC's current
adjustment practices would be written into Chapter XXVIII of the Rules
and are discussed at greater length below.
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\17\ See Notice of Filing, 90 FR at 47481. To illustrate such
longstanding practices, OCC points to past guidance that has been
publicly released in the form of Information Memos. See generally
Notice of Filing, 90 FR at 47481-47483.
\18\ Id.
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1. Applicability to Specific Types of Contracts
Rule 2802(a)(1) would add a list of the types of cleared
instruments for which OCC's Securities Committee may adopt statements
of policy or interpretations regarding adjustments. The types of
cleared instruments would be stock option contracts, Treasury
securities option contracts, yield-based Treasury option contracts,
debt securities option contracts, index option contracts, or other
cash-settled option contracts. OCC states that listing the types of
instruments would provide increased specificity.\19\
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\19\ See Notice of Filing, 90 FR at 47472-73.
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2. Clarification of the Securities Committee's Authority
Rule 2802(a)(2) would leave intact the composition and governance
of the Securities Committee, but would update the description of its
authority. The proposed language of Rule 2802(a)(2) would reflect
almost all of the current text of Section 11(c) of Article VI of the
By-Laws. However, the Proposed Rule Change would modify the applicable
title from ``Adjustment Policies and Procedures,'' as is written in
Section 11 of Article VI of the By-Laws, to ``Statements of Adjustment
Policies and Interpretations,'' which would be the title for Rule 2802.
Additionally, Rule 2802(a)(2) would delete text that describes the
Securities Committee's authority as being able to ``make certain
determinations with respect to cleared contracts'' and replace this
language with ``adopt statements of policy or interpretations'' related
to contract adjustments. OCC states that the proposed changes would
more accurately describe the Securities Committee's authority and
clarify that the Securities Committee's function is to issue such
statements.\20\
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\20\ See Notice of Filing, 90 FR at 47473.
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3. Events Not Ordinarily Resulting in Contract Adjustment
OCC currently specifies the types of events not ordinarily
resulting in a contract adjustment under Section 11A of Article VI of
the By-Laws and would continue to do so under proposed Rule 2803(c).
However, OCC proposes new subprovisions describing additional
situations that would not result in contract adjustments regardless of
the manner of payment. Rule 2803(c)(1)(iii)(B) would specify that a
stock dividend or distribution by the issuer of the underlying security
that is paid in lieu of a cash dividend or distribution that itself
would have been an ordinary distribution would be considered an
``ordinary'' dividend or distribution and, therefore, would not
ordinarily result in a contract adjustment.\21\ Similarly, Rule
2803(c)(3)(v) would state that adjustments generally will not be made
where a dividend or distribution is determined to be ordinary
regardless of whether it is subject to a shareholder election regarding
the form in which it will be paid, such as cash or stock. OCC asserts
that these codifications are consistent with current rules as to what
types of events are eligible for adjustment and that, generally, the
determination of whether a dividend or distribution is considered
ordinary will control whether OCC will make an adjustment, regardless
of the form such dividends or distributions take.\22\
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\21\ Generally, OCC will not make an adjustment to an options or
futures contract with respect to ordinary dividends or distributions
that are routinely made by the issuer because ordinary dividends or
distributions may be factored into the economic expectations of the
parties to an options or futures contract even though the event has
not yet been formally announced or declared. See Notice of Filing,
90 FR at 47471.
\22\ See Notice of Filing, 90 FR at 47481.
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Likewise, Rule 2803(c)(3)(iv) would state that a distribution of
non-transferrable property would be considered an event not ordinarily
resulting in an adjustment. OCC asserts that, because distributions of
non-transferable property cannot be traded on a national market or
transferred through the facilities of a central securities depository
clearing agency, there is no practical means to ascertain the trading
price to provide a value, or to facilitate delivery of non-transferable
distributions in fulfilment of option exercises and assignments.\23\
OCC maintains that proposed Rule 2803(c)(3)(iv) reflects past practice
and that OCC would, nevertheless, retain general authority to make
adjustments to non-transferable property on a case-by-case where
necessary.\24\
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\23\ See Notice of Filing, 90 FR at 47483.
\24\ Id.
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4. Cash in Lieu of Fractional Entitlements
The Proposed Rule Change would address adjustments in the context
of cash in lieu of fractional entititlements.\25\ First, OCC proposes a
clarification related to cash in lieu of fractional entitlements, which
would be added at the end of Rule 2803(c)(2). Currently, OCC generally
will not make an adjustment to a stock option contract for any cash
dividend or distribution by the issuer of the underlying security if
such dividend or distribution is less than $0.125 per share. OCC
indicates that this general practice would not change.\26\ However, OCC
would codify in a new, final sentence of Rule 2803(c)(2) that, this
general rule would not apply to contract adjustment determinations
involving cash paid in lieu of fractional share entitlements for a
stock option contract (e.g., in respect of stock rights, contingent
value rights, or other distributions). OCC states that this proposed
text is consistent with longstanding practices and is necessary to
clarify that adjustments in lieu of property are governed by other
provisions of proposed Rule 2803.\27\
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\25\ See Notice of Filing, 90 FR at 47481-82. For example, OCC
states that ``[i]n certain circumstances, the terms of a corporate
action on an underlying security of an option may result in a
fractional entitlement per 100 shares of stock for which cash will
be paid in lieu of the fractional shares. In such situations, a
contract adjustment that is effective on the option in response to
the corporate action on the underlying security may result in an
adjusted option deliverable that includes a cash component in lieu
of fractional shares.'' Notice of Filing, 90 FR at 47481.
\26\ See Notice of Filing, 90 FR at 47482.
\27\ Id.
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Secondly, Rule 2803(k) would provide that cash amounts in lieu of
fractional share entitlements included in adjusted deliverables will
generally be made in a manner consistent with any determinations by a
central securities depository clearing agency (i.e., Depository Trust
Company). OCC represents that Rule 2803(k) would reflect an established
practice and clarify that, where a stock dividend or distribution by an
issuer involves some cash amount in lieu of fractional share
entitlements and OCC determines that an adjustment is necessary
pursuant to its By-Laws and Rules, OCC will generally seek to align its
distribution with the approach taken by the central
[[Page 58666]]
securities depository clearing agency so that an option's adjusted
deliverable resulting from a corporate action reflects the amount of
cash paid in lieu of fractional shares that the holder of 100 shares of
the underlying security receives from the corporate action.\28\ OCC
notes that because it cannot facilitate settlement of fractional
shares, it may be necessary for OCC, in rare circumstances, to
independently determine a cash in lieu price for fractional shares
because of the terms of the underlying corporate action.\29\ OCC states
that in such uncommon cases, Rule 2803(k) would work in conjunction
with Rule 2803(j) in determining the cash value of any distributed
property.\30\
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\28\ See Notice of Filing, 90 FR at 47481-82. OCC cited to past
Information Memos #54176, #36262, and #20861 as examples where
adjustments were made after the cash-in-lieu price was available
from the central securities depository clearing agency. Id.
\29\ As an example, OCC pointed to Information Memo #23267,
writing that ``on July 13, 2007, options on CBOT Holdings, Inc.
(``BOT'') were adjusted to reflect the merger between BOT and CME
Group Inc. (``CME''). Notice of Filing, 90 FR at 47482.The adjusted
options deliverable became (1) 37 CME Group Inc. (``CME'') Common
Shares and (2) cash in lieu of .5 fractional CME shares. However,
pursuant to the terms of the corporate action, CME issued fractional
shares instead of paying cash in lieu of fractional shares. Because
OCC cannot facilitate settlement of fractional shares, it was
determined that the closing price from the day prior to the
consummation of the merger would be used to determine the cash-in-
lieu amount.'') Id.
\30\ Id.
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OCC would retain its authority to determine the value of
distributed property with respect to any adjustments, as currently laid
out in Section 11A(e) of Article VI and the last sentence of Section
3(e) of Article XII of the By-Laws, and proposed to be consolidated and
moved to Rule 2803(j). However, OCC proposes to add a second sentence
to Rule 2803(j), explicitly providing that it may use this authority in
circumstances that include but are not limited to cases in which OCC
determines that the final amount or distribution resulting from a
corporate action may not be determined for a long period. OCC maintains
that the additional text would clarify that OCC would consider using
its authority to determine the value of distributed property when OCC
expects that it may take a long period of time to determine the final
amount of a distribution resulting from a corporate action.\31\ OCC
states that if a lengthy delay to determine the distributed property
value is expected, options or stock futures contracts may expire or
mature prior to the time when the value is determined, which would
leave such contract holders uncertain about the value of their
position, and their positions subject to delayed settlement for an
extended period of time.\32\ In such situations, OCC represents that it
is appropriate to use its existing authority to determine the cash
value of distributed property.\33\
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\31\ See Notice of Filing, 90 FR at 47483.
\32\ Id.
\33\ Id. As an example, OCC points to Information Memo #39462,
which discussed the adjustment of options on Winthrop Realty Trust
(``FUR'') on August 8, 2016, in response to the liquidation of the
underlying security. Id. OCC states that ``assets and liabilities of
the trust were transferred to a liquidating trust, and each FUR
share would be converted into a nontransferable Unit of Beneficial
Interest in the liquidating trust. Since the timing and amount of
any liquidating distributions were unknown and because the Unit of
Beneficial Interest could not be transferred, the adjustment
determination was made to set a cash value equivalent for FUR Shares
using a high and low price from the last day of trading, thereby
allowing settlement to occur in a timely manner.'' Id.
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5. Other Scenarios Affecting Adjustments
Rule 2803(i) would provide that the deliverable resulting from an
adjustment in the case of an election merger or similar event involving
shareolder elections, such as shareholder election of a non-ordinary
dividend, will generally be based on the consideration accruing to a
non-electing shareholder if OCC determines in its sole discretion that
it is readily able to facilitate delivery of that consideration. OCC
states that this provision makes explicit a longstanding practice and
provides additional details regarding corporate action events involving
shareholder elections to reflect, to the extent possible, what a
shareholder who does not make an election will receive.\34\ OCC
represents that there may be circumstances where it is not possible to
determine an adjustment that aligns with the interest of a non-electing
shareholder.\35\
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\34\ See Notice of Filing, 90 FR at 47482.
\35\ See Notice of Filing, 90 FR at 47482, n. 24.
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OCC proposes to add Rule 2803(l), which would provide that, in
general, all contract adjustments will be made net of any relevant
foreign withholding taxes, with the exception of events for which local
tax authorities issue rulings that exempt certain groups from the
withholding tax and it is reasonable that U.S. investors collectively
can be included in such groups. OCC maintains that Rule 2803(l)
clarifies to market participants that OCC's contract adjustments will
ordinarily include foreign withholding taxes, unless there is an
exception from local tax authorities in the foreign jurisdiction of
which OCC reasonably believes U.S. investors could avail
themselves.\36\ Additionally, OCC represents that it routinely
investigates withholding tax information on foreign securities and
intends to adjust options taking withholding tax into account in the
manner described above when such information is readily available.\37\
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\36\ See Notice of Filing, 90 FR at 47483.
\37\ Id.
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Rule 2803(m) would provide that all contract adjustments will be
made on a per contract basis. OCC states that Rule 2803(m) would
improve the clarity and consistency of its Rules by explicitly
describing the practice of exercising and assigning options based on a
single contract as the lowest possible holding of an option.\38\ OCC
maintains that this existing practice is required for the proper
functioning of the exercise and assignment process.\39\
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\38\ See Notice of Filing, 90 FR at 47483-84.
\39\ Id.
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B. Non-Substantive Reorganization of Adjustment-Related Provisions
As stated above, OCC proposes to rearrange adjustment-related
provisions in its By-Laws and Rules.\40\ The Proposed Rule Change would
(i) relocate OCC's existing adjustment-related provisions from its By-
Laws to proposed Chapter XXVIII of the Rules, while making certain non-
substantive clarifying changes to the relocated language; (ii)
consolidate provisions regarding OCC's adjustment authority and
practices for actively traded products with similar methods of
adjustments \41\ to eliminate duplicative provisions (e.g.,
consolidating provisions for adjustments to stock futures and stock
options); and (iii) update references to current adjustment By-Laws
sections contained in other adjustment provisions of the By-Laws for
products not actively traded, and with regard to governance provisions
for amendments to Rules and By-Laws.\42\
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\40\ See Notice of Filing, 90 FR at 47470.
\41\ See supra note 16.
\42\ See Notice of Filing, 90 FR at 47470.
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1. Relocation
Provisions related to adjustments of contracts currently are set
forth in various parts of OCC's By-Laws, including, for example, in
Article VI, Section 11 and 11A, covering options contract adjustments,
and in Article XII, Sections 3, 4, and 4A, covering futures contracts
and futures options adjustments. The Proposed Rule Change would
relocate these adjustment-related provisions from the By-Laws to a
single location in OCC's Rules, the newly numbered Chapter XXVIII. OCC
also proposes to make clarifying edits to certain text in these
provisions,
[[Page 58667]]
including where the language pertaining to different instruments is
similar.\43\ The proposal would update cross-references to
corresponding Rules, as well as add italicized headers to most of the
paragraphs and subparagraphs in Chapter XXVIII of the Rules to provide
a brief preview and description of the provisions. OCC states that this
relocation will improve readability, promote clarity and consistency,
and increase understanding of the process governing adjustments for all
instruments.\44\ Additionally, OCC represents that these adjustment-
related provisions are more appropriately organized as Rules, rather
than By-Laws, because the relocation would more accurately reflect
typical corporate bylaws, which usually focus on governance and
administrative matters of an entity, such as OCC.\45\
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\43\ See Notice of Filing, 90 FR at 47472 (``[. . .] e.g., where
OCC's adjustment determinations are the same for options contracts
and futures contracts.'').
\44\ See Notice of Filing, 90 FR at 47471-72. OCC represents
that ``when OCC makes a determination to adjust an options or
futures contract, all market participants holding options or futures
contracts are uniformly subject to OCC's adjustment determination.''
Notice of Filing, 90 FR at 47471.
\45\ See Notice of Filing, 90 FR at 47471, n. 10.
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Chapter XXVIII would be divided into five rules, numbering from
2801 to 2805. A summary of each rule follows, while further details and
comparative charts are available in the Notice of Filing.\46\ Other
than those changes described above in Section II.A., OCC is not
proposing to make substantive changes to the rules that it propose to
move. Rule 2801 would describe how OCC makes adjustment determinations,
including the factors \47\ it takes into account in making these
determinations, and would include the provision that every adjustment
determination shall be within OCC's sole discretion and shall be
conclusive and binding on all investors, and not subject to review.
Rule 2802 primarily would discuss the Securities Committee's authority
to adopt statements of policies and interpretations regarding contract
adjustments, as well as its composition and governance. Rule 2803 would
comprise provisions governing the details of the adjustments, including
the subprovision stating that when a corporate action impacts an
underlying security, OCC may adjust any or a combination of the
following regarding all outstanding stock option contracts and stock
futures in the underlying security: (1) the number of shares; (2) the
unit of trading in the case of an options contract or the unit of
trading (or settlement price) in the case of a stock future; (3) the
exercise price in the case of an options contact; and (4) the
underlying security. Rule 2803 also would identify events ordinarily
and not ordinarily resulting in a contract adjustment, in addition to
providing for other types of scenarios affecting adjustments, including
the timing of cash value determinations and the determination of cash
amounts in lieu of fractional share entitlements. Rule 2804 would
pertain to the adjustment of index options and futures and certain
other cash-settled options and futures. Rule 2805 would cover the
adjustment of cash-settled foreign currency options and futures.
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\46\ See Notice of Filing, 90 FR at 47471-47480.
\47\ No substantive changes are being proposed to these factors,
which are (i) fairness to holders and writers (or purchasers and
sellers) of the affected contracts; (ii) the maintenance of a fair
and orderly market in the affected contracts; (iii) consistency of
interpretation and practice; (iv) efficiency of exercise settlement
procedures; and (v) the coordination with other clearing agencies of
the clearance and settlement of transactions in the underlying
interest.
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2. Consolidation
Currently, the provisions related to contract adjustments for
various types of instruments cleared by OCC are dispersed throughout
the By-Laws, including, for example, those covering options contracts
in Article VI; futures, futures options, and commodity options in
Article XII; index options and certain other cash-settled options in
Article XVII; and cash-settled foreign currency options in Article
XXII. OCC represents that these adjustment-related provisions often are
substantially similar or identical to one another.\48\ To streamline
these adjustment-related provisions currently found in the By-Laws, OCC
proposes to consolidate their relevant text into Chapter XXVIII of the
Rules, while ensuring the terminology applies to the specific
product.\49\ For instance, proposed Rule 2803(h) would account for the
fact that options contracts involve an exercise price while a stock
future involves a settlement price. Accordingly, where OCC proposes to
integrate text about stock futures into existing language in an
options-related adjustment provision, OCC proposes to add a reference
to a stock future's settlement price where the current provision
references an exercise price.
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\48\ See Notice of Filing, 90 FR at 47480-81 (``For example,
Section 11(a) of Article VI of the By-Laws (regarding options),
Section 3(b) of Article XII of the By-Laws (regarding futures), and
Section 3(b) of Article XVII (regarding index options and certain
other cash-settled options) each provide, among other things, that
OCC shall determine whether to make adjustments to reflect
particular events in respect of an underlying interest based on
OCC's judgment as to what is appropriate for the protection of
investors and the public interest, taking into account such factors
as fairness to holders and writers (or purchasers and sellers) of
the instruments, the maintenance of a fair and orderly market in the
affected contracts, and consistency of interpretation and
practice.''). See also Notice of Filing, 90 FR at 47481, n. 13
(``The adjustment provisions for options contracts and futures
contracts also specify two additional criteria to be considered: (i)
the efficiency of exercise settlement procedures and (ii) the
coordination with other clearing agencies of the clearance and
settlement of transactions in the underlying interest. OCC proposes
that all instruments would be subject to these two additional
criteria pursuant to proposed Rule 2801, which OCC believes are also
potentially relevant considerations for determining adjustments for
index options and certain other cash-settled options.'').
\49\ See Notice of Filing, 90 FR at 47481.
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3. Updated References
In light of the relocation and consolidation discussed above in
Sections II.B.1.-2., OCC proposes to make non-substantive updates to
adjustment-related references in the Rules and By-Laws. Certain
provisions in OCC's By-Laws discuss products that are not actively
traded and their related contract adjustments. Currently, these
provisions state that, generally, adjustments for inactive products
will be governed by Sections 11 and 11A of Article VI of the By-Laws
or, in the case of Packaged Spread Options, Section 3 of Article XVII
of the By-Laws. Since the Proposed Rule Change would relocate these
adjustment-related provisions from the By-Laws to the Rules, cross-
references to inactive products and their contract adjustments would be
updated to correspond to the applicable provisions in Chapter XXVIII of
the Rules. Specific modifications would cover cross-references to
binary options and trade options, foreign currency options, yield-based
Treasury options, BOUNDS, and packaged spread options.\50\ OCC
represents that even though these proposed changes are not substantive,
they are necessary to ensure consistency in the Rules.\51\
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\50\ See Notice of Filing, 90 FR at 47484, for additional
detail.
\51\ See Notice of Filing, 90 FR at 47484.
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Additionally, Article XI, Section 1 of the By-Laws states that
amendment to certain provisions of the By-Laws, including Sections 11
and 11A of Article VI, requires approval of the holders of all
outstanding Common Stock of OCC. However, OCC proposes to relocate the
text of Sections 11 and 11A of Article VI of the By Laws to the Rules.
As such, the Proposed Rule Change would add language to Section 2 of
Article XI of the By-Laws cross-referencing the Rules and specifying
that Chapter XXVIII of the Rules may not be amended by action of the
Board of Directors without the approval of the
[[Page 58668]]
holders of all OCC outstanding common stock.
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Exchange Act directs the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that such proposed rule change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to such organization.\52\ Under the Commission's
Rules of Practice, the ``burden to demonstrate that a proposed rule
change is consistent with the Exchange Act and the rules and
regulations issued thereunder . . . is on the self-regulatory
organization [`SRO'] that proposed the rule change.'' \53\
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\52\ 15 U.S.C. 78s(b)(2)(C).
\53\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
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The description of a proposed rule change, its purpose and
operation, its effect, and a legal analysis of its consistency with
applicable requirements must all be sufficiently detailed and specific
to support an affirmative Commission finding,\54\ and any failure of an
SRO to provide this information may result in the Commission not having
a sufficient basis to make an affirmative finding that a proposed rule
change is consistent with the Exchange Act and the applicable rules and
regulations.\55\ Moreover, ``unquestioning reliance'' on an SRO's
representations in a proposed rule change is not sufficient to justify
Commission approval of a proposed rule change.\56\
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\54\ Id.
\55\ Id.
\56\ Susquehanna Int'l Group, LLP v. Securities and Exchange
Commission, 866 F.3d 442, 447 (D.C. Cir. 2017).
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After carefully considering the Proposed Rule Change, the
Commission finds that the Proposed Rule Change is consistent with the
requirements of the Exchange Act and the rules and regulations
thereunder applicable to OCC. More specifically, the Commission finds
that the Proposed Rule Change is consistent with Section 17A(b)(3)(F)
of the Exchange Act,\57\ and with Exchange Act Rule 17ad-22(e)(21) \58\
as described in detail below.
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\57\ 15 U.S.C. 78q-1(b)(3)(F).
\58\ 17 CFR 240.17ad-22(e)(21).
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A. Consistency With Section 17A(b)(3)(F) of the Exchange Act
Section 17A(b)(3)(F) of the Exchange Act requires, among other
things, that a clearing agency's rules are designed to ``promote the
prompt and accurate clearance and settlement of securities transactions
and, to the extent applicable, derivatives agreements, contracts, and
transactions.'' \59\ Based on the Commission's review of the record,
and for the reasons described below, the changes described above are
consistent Section 17A(b)(3)(F) of the Exchange Act.\60\
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\59\ 15 U.S.C. 78q-1(b)(3)(F).
\60\ Id.
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As discussed above, the proposed changes would codify in OCC's
Rules certain longstanding adjustment practices that previously had
been outlined in non-consecutive, sporadically released Information
Memos. These practices, although found in separate guidance documents,
describe specific situations where OCC used a consistent process to
make contract adjustments to preserve the economic value of the
affected instruments. By transfering these practices out of guidance
and codifying them as Rules, the Proposed Rule Change helps strengthen
the practices' application to and impact on the instruments OCC clears
and settles, and, as such, to promote the prompt and accurate
settlement of such transactions. Additionally, the remaining
adjustment-related text would be consolidated and relocated from OCC's
By-Laws to a single location in OCC's Rules, leaving intact the factors
behind adjustment determinations, detailed procedures for stock
adjustments in cases of corporate actions affecting underlying stocks,
and events ordinarily and not ordinarily resulting in contract
adjustments, among other substantive provisions. Thus the existing
adjustment process would remain unchanged, continuing to promote the
prompt and accurate clearance and settlement of transactions.
Accordingly, the Proposed Rule Change is consistent with the
requirements of Section 17A(b)(3)(F) of the Exchange Act.\61\
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\61\ Id.
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B. Consistency With Rule 17ad-22(e)(21) Under the Exchange Act
Rule 17ad-22(e)(21) under the Exchange Act requires, in part, that
a covered clearing agency establish, implement, maintain, and enforce
written policies and procedures that are reasonably designed to be
efficient and effective in meeting the requirements of its participants
and the markets it serves.\62\
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\62\ 17 CFR 240.17ad-22(e)(21).
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As described above, OCC proposes to codify longstanding practices
related to its contract adjustment process and reorganize adjustment-
related provisions into a single chapter in the Rules, while
consolidating similarly worded provisions and updating cross-
references. The proposed Chapter XXVIII, which contains Rules 2801
through 2805, would list specific types of instruments subject to the
adjustment-related rules; clarify the Securities Committee's authority;
outline additional events not ordinarily resulting in contract
adjustment; describe in greater detail the adjustment process
concerning cash in lieu of fractional entitlements; and state in
writing the adjustment practices related to election mergers, foreign
withholding taxes, and per-contract basis treatment. The Proposed Rule
Change also would relocate adjustment-related provisions from the By-
Laws to the Rules, consolidate substantially similar or identical
language from separately laid out provisions, and update cross-
references to adjustment-related provisions across the Rules and By-
Laws.
The Proposed Rule Change is consistent with Rule 17Ad-22(e)(21)
\63\ because it is designed as a continuation of established and
publicly released practices related to contract adjustment. By
codifying longstanding processes, as previously described in public but
disparately released Information Memos, the Proposed Rule Change helps
clarify such processes and bolster their impact as OCC Rules governing
the adjustment process. This clarity and impact, in turn, leads to more
effectiveness in meeting the requirements of OCC's participants,
specifically, their need to understand the details behind the contract
adjustment determinations by which they are bound. Similarly, the non-
substantive reorganization of adjustment-related provisions streamlines
substantially similar or identical text into a single location, and
better reflects the typical scope and purpose of an entity's corporate
by-laws. As a result, the non-substantive re-organization helps to
increase the consistency, readability, and, thus, the efficiency of
OCC's Rules and By-Laws.
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\63\ Id.
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Accordingly, the Proposed Rule Change is consistent with Rule 17ad-
22(e)(21) under the Exchange Act.\64\
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\64\ Id.
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IV. Solicitation of Comments on Partial Amendment No. 1 to the Proposed
Rule Change
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
[[Page 58669]]
change, as modified by Partial Amendment No. 1, is consistent with the
Exchange 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#2755524b420a44484a4a424953546754424409404851"><span class="__cf_email__" data-cfemail="a7d5d2cbc28ac4c8cacac2c9d3d4e7d4c2c489c0c8d1">[email protected]</span></a>. Please include
file number SR-OCC-2025-017 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-2025-017. 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 of submission. The Commission will post all
comments on the Commission's website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</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-2025-017
and should be submitted on or before January 7, 2026.
V. Accelerated Approval of Proposed Rule Change, as Modified by Partial
Amendment No. 1
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Exchange Act,\65\ to approve the proposed rule change prior to the
30th day after the date of publication of notice of the filing of
Partial Amendment No. 1 in the Federal Register. As discussed above,
Partial Amendment No. 1 modified the original proposed rule change to
(1) correct proposed rule text describing the current composition and
governance of OCC's Securities Committee; \66\ and (2) conform cross
references in OCC's interpretive guidance to the restatement of the
contract adjustment rules proposed in the Notice of Filing. Partial
Amendment No. 1 does not change the purpose of or basis for the
proposed changes.
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\65\ 15 U.S.C. 78s(b)(2).
\66\ See Exchange Act Release No. 93102 (Sept. 22, 2021), 86 FR
53718 (Sept. 28, 2021) (SR-OCC-2021-007).
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For similar reasons as discussed above, the Commission finds that
Partial Amendment No. 1 is consistent with the requirement that OCC's
rules be designed to promote the prompt and accurate clearance and
settlement of securities transactions under Section 17A(b)(3)(F) of the
Exchange Act.\67\ Accordingly, the Commission finds good cause,
pursuant to Section 19(b)(2) of the Exchange Act, to approve the
proposed rule change, as modified by Partial Amendment No. 1, on an
accelerated basis, pursuant to Section 19(b)(2) of the Exchange
Act.\68\
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\67\ 15 U.S.C. 78q-1(b)(3)(F).
\68\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change, as modified by Partial Amendment No. 1, is
consistent with the requirements of the Exchange Act, and in
particular, the requirements of Section 17A of the Exchange Act \69\
and the rules and regulations thereunder.
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\69\ In approving the Proposed Rule Change, the Commission has
considered the proposed rules' impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\70\ that the proposed rule change (SR-OCC-2025-017), as
modified by Partial Amendment No. 1, be, and hereby is, approved.
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\70\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\71\
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\71\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-23077 Filed 12-16-25; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on December 17, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.