Notice2026-03915
Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change by The Options Clearing Corporation Concerning a Change in Types of Acceptable Collateral and an Update To Mitigate Wrong-Way Risk
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
February 27, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 39 (Friday, February 27, 2026)</title>
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[Federal Register Volume 91, Number 39 (Friday, February 27, 2026)]
[Notices]
[Pages 9897-9904]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-03915]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104882; File No. SR-OCC-2026-001]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change by The Options Clearing
Corporation Concerning a Change in Types of Acceptable Collateral and
an Update To Mitigate Wrong-Way Risk
February 24, 2026.
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 February 12, 2026, The Options Clearing
Corporation (``OCC'' or ``Corporation'') 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. 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.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
This proposed rule change would discontinue two underutilized
collater [sic] types and update OCC's rules to mitigate wrong-way risk.
As the sole clearing agency for standardized equity options listed on
national securities exchanges registered with the SEC, and with respect
to the other products it clears, OCC is exposed to certain risks,
including credit risk arising from its relationships with the Clearing
Members for which OCC becomes the buyer to every seller and the seller
to ever buyer with respect to listed options. In order to manage
counterparty credit risk and mitigate related systemic risks, OCC
requires Clearing Members to collateralize financial obligations that
result from maintaining options, futures and stock loan positions at
OCC.
OCC maintains policies filed with the Commission as OCC rules that
are designed to address such credit risk, including the Collateral Risk
Management (``CRM'') Policy. The CRM Policy identifies OCC's approach
for managing the risks associated with accepting collateral
deposits.\3\ Specifically, the CRM Policy sets the governance processes
for establishing and maintaining standards used to determine acceptable
forms of collateral, as well as the methodology for establishing the
valuation practices, including applicable haircuts and concentration
limits to effectively manage OCC's credit exposure.\4\ In addition, the
CRM Policy describes the requirements for periodically evaluating the
forms of accepted collateral and the ongoing adequacy of the valuation
processes.\5\
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\3\ See Exchange Act Release No. 82311 (Dec. 13, 2017), 82 FR
60252, 60252-53 (Dec. 19, 2017) (SR-OCC-2017-008).
\4\ See id.
\5\ See id. at 60253.
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Consistent with regulatory obligations,\6\ OCC and its Board
reviews these risk management policies at least annually. Through these
annual reviews, OCC has identified certain changes to: (i) discontinue
two underutilized collateral types, and (ii) update OCC's rules design
to mitigate wrong-way risk. In connection with these changes, OCC also
proposes to reorganize and restate OCC Rule 604 (Form of Margin Assets)
to improve its clarity and concision.\7\ Pursuant to the provisions of
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Exchange
Act'' or ``Act''),\8\ and Rule 19b-4 thereunder,\9\ OCC is filing with
Commission a proposed rule change to make those changes.
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\6\ See 17 CFR 240.17Ad-22(e)(3)(i) (requiring, among other
things, that a covered clearing agency subject its risk management
policies, procedures and systems to review on a specified periodic
basis and approval by the board of directors annually).
\7\ See <a href="https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf#page=59">https://www.theocc.com/getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/occ_rules.pdf#page=59</a>. OCC's full By-Laws and Rules can
also 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>.
\8\ 15 U.S.C. 78s(b)(1).
\9\ 17 CFR 240.19b-4.
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Proposed changes to OCC's By-Laws and Rules are included in
Exhibits 5A and 5B to File No. SR-OCC-2026-001, respectively. Proposed
changes to OCC's CRM Policy, Default Management Policy, Liquidity Risk
Management Framework (``LRMF''), Margin Policy, Recovery and Orderly
Wind-Down (``RWD'') Plan, Risk Management Framework, and STANS
Methodology Description (collectively, the ``Policies'') are included
in confidential Exhibits 5C, 5D, 5E, 5F, 5G, 5H, and 5I to File No. SR-
OCC-2026-001. Material proposed to be added 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.
[[Page 9898]]
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
1. Purpose
OCC proposes to make the following changes to its By-Laws, Rules,
and Policies:
a. Discontinue Underutilized Collateral Types
Due to underutilization, OCC is discontinuing letters of credit
\10\ and GSE debt securities \11\ as acceptable collateral types under
OCC's rules. Utilization of these collateral types has historically
been low relative to other eligible collateral types. Since 2023, when
OCC modified its rules concerning its acceptance of letters of credit
and the valuation of GSE debt securities,\12\ OCC has observed a
decline in utilization of these collateral types. For instance, no
Clearing Member has pledged GSE debt securities as margin collateral
since July 11, 2023. From July 3, 2023 through June 30, 2024, use of
letters of credit decreased by 78% (from $115 million to $25 million),
with the remaining amount comprised of a single letter of credit for a
single Clearing Member.\13\ Currently, no letters of credit remain on
deposit.
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\10\ OCC Rule 604(c) currently allows Clearing Members to
deposit letters of credit issued by a bank or trust company approved
by OCC for that purpose subject to certain criteria identified
therein and the Interpretations and Policies (``I&Ps'') to Rule 604.
\11\ OCC's By-Laws define ``GSE debt securities'' to mean such
debt securities issued by Congressionally chartered corporations as
the Risk Committee may from time to time approve for deposit as
margin. OCC's acceptance of GSE debt securities as collateral is
governed by Rule 604(b)(2) and the I&Ps to Rule 604.
\12\ See Exchange Act Release No. 98101 (August 10, 2023), 88 FR
55775 (Aug. 16, 2023) (SR-OCC-2022-012).
\13\ OCC has communicated this proposed change with that member.
Discontinuing letters of credit is not expected to have a material
impact on that Clearing Member.
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Continuing to maintain support for these underutilized collateral
types would impose burdens on OCC and its Clearing Members, including
the cost associated with ongoing risk monitoring and reviews of OCC's
procedures related to these collateral types, as well as the costs of
maintaining systems to facilitate OCC's acceptance of these collateral
types. For example, if OCC were to continue to accept this collateral,
OCC and its Clearing Members would need to test the functionality to
support these collateral types in the new clearance and settlement
system, Ovation, that OCC has been developing to replace its current
system, Encore. In light of the decline in utilization, OCC does not
believe these costs are justified. Accordingly, OCC determined to phase
out these collateral types. On December 19, 2024, OCC issued an
Information Memo \14\ announcing that OCC had determined to disallow
letters of credit and GSE debt securities by exercising its discretion
under I&P .06 to Rule 604 \15\ to withdraw its approval for the
institutions approved as letter of credit issuers and disapproving GSE
debt securities as acceptable collateral under I&P .15 to Rule 604.\16\
As the next phase, this proposed rule change would remove these
collateral types from OCC's rules as follows.
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\14\ OCC Information Memo #55740 (Dec. 19, 2024), available at
<a href="https://infomemo.theocc.com/infomemos?number=55740">https://infomemo.theocc.com/infomemos?number=55740</a>.
\15\ OCC Rule 604, I&P .06 (``[OCC] reserves the right in its
sole discretion to refuse or revoke approval of any institution as
an issuer of letters of credit at any time.'').
\16\ OCC Rule 604, I&P .15 (``[OCC] may in its discretion
determine that a security which meets the criteria listed in Rule
604(b) is nevertheless disapproved as margin collateral with respect
to all accounts of all Clearing Members, and therefore not grant
margin credit, based on such factors as (i) trade volume, (ii)
number of outstanding shareholders, (iii) number of outstanding
shares, (iv) volatility and liquidity and (v) any other factors the
Corporation determines are relevant.'')
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First, OCC would remove those provisions of the By-Laws and Rules
that govern the acceptance and valuation of these collateral types.
Specifically, OCC would delete Rule 604(b)(2) (GSE Debt Securities) and
Rule 604(c) (Letters of Credit) in their entirety. OCC would also amend
Rule 604(g) and (e) (renumbered as proposed Rules 604C(a) and (b),
respectively), which concerns OCC's valuation of Government securities
and GSE debt securities, to remove reference to GSE debt securities.
OCC would make the same change to I&P .17 to Rule 604, which concerns
the manner in which Clearing Members may deposit Government securities
and GSE debt securities. OCC would also delete I&Ps .01 through .06 and
.09 through .10 to Rule 604, each of which concerns standards for
letters of credit issuers or limitations on the acceptance of letters
of credit. Remaining provisions of Rule 604 would be renumbered as
discussed below in connection with the reorganization and restatement
of Rule 604. OCC would also make the following amendments to other By-
Laws and Rules:
<bullet> Rule 101 (Definitions) would be amended to remove the
definition for the term ``Restricted Letter of Credit.''
<bullet> Rule 705 (Forms of Margin) would be amended to delete
reference to GSE debt securities and letters of credit as acceptable
forms of margin in X-M accounts.
<bullet> Rule 1104 (Creation of Liquidating Settlement Account)
would be amended to remove provisions in paragraphs (a) and (d) related
to the contribution of funds received from a letter of credit issuer in
the event of a Clearing Member default.
<bullet> By-Law Article I (definitions) would be amended to remove
the definition for the term ``GSE debt securities'' and renumber other
definitions accordingly.
<bullet> By-Law Article VI, Section 27 (Close-Out Netting) would be
amended to delete reference to letters of credit as margin assets and
provisions related thereto in paragraphs (f) and (h).
OCC would also amend the CRM Policy to remove provisions related to
letters of credit and GSE debt securities. Specifically, OCC would:
<bullet> Delete a paragraph specific to how OCC manages the
counterparty credit risk presented by letter of credit issuers.
<bullet> Delete a sentence in the discussion of how OCC manages
sovereign credit risk specific to a foreign-based entity approved to
issue letters of credit.
<bullet> Delete three sentences in the discussion of how OCC
manages concentration risk specific to letters of credit.
<bullet> Delete a reference to ``government sponsored entity
securities'' in the discussion of how OCC applies collateral haircuts
to certain collateral, including Government securities and GSE debt
securities.
OCC would also make conforming amendments to other rules that
reference letters of credit and/or GSE debt securities. Specifically,
OCC would:
<bullet> Delete a reference to letters of credit in the Default
Management Policy's discussion of how OCC would transfer the proceeds
from any demand of payment on a letter of credit to the appropriate
liquidity settlement account in the event of a Clearing Member's
default.
<bullet> Delete letters of credit and GSE debt securities from the
LRMF's list of other liquidity resources that may be used to address
foreseeable liquidity shortfalls
[[Page 9899]]
that would not be covered by OCC's committed resources and help OCC
seek to avoid unwinding, revoking, or delaying the same-day settlement
of payment obligations in the event of the default of the Clearing
Member who deposited them.
OCC would also make conforming amendments to its RWD Plan to delete
references to remove descriptions related to letters of credit and/or
GSE debt securities. Specifically, OCC would:
<bullet> Delete letters of credit and GSE debt securities from a
description of the collateral accepted through cross-margin
arrangements.
<bullet> Delete a description of OCC's external interconnection
with letter of credit banks.
<bullet> Delete a reference to letters of credit as one of the
types of banking relations for which OCC maintains tools to address
credit risks resulting from bank failures.
<bullet> Delete a reference to GSE debt securities as among the
collateral OCC may pledge to the syndicated bank credit facility that
OCC maintains as a source of committed liquidity to meet settlement
obligations as a central counterparty.
b. Wrong-Way Risk Updates
With respect to the collateral that Clearing Members pledge to
satisfy margin requirements, ``wrong-way risk'' is the risk that the
value of the collateral is positively correlated with the
creditworthiness of the Clearing Member.\17\ OCC manages such wrong-way
risk by (1) limiting the valuation of collateral that would likely lose
value in the event that the Clearing Member providing the collateral
defaults, and (2) prohibiting participants from receiving value for
depositing their own, or an affiliate's, debt or equity securities as
collateral.\18\
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\17\ Separately, OCC has established a margin add-on charge, the
Specific Wrong-Way Risk (``SWWR'') Add-on, to address specific
wrong-way risk related to a Clearing Member's positions in cleared
contracts related to securities, including index-linked securities,
issued by that Clearing Member or its affiliates. See Exchange Act
Release No. 87718 (Dec. 11, 2019), 84 FR 68992 (Dec. 17, 2019) (SR-
OCC-2019-010). SWWR is the risk that a clearing agency's exposure to
a participant is highly likely to increase when the creditworthiness
of that participant is deteriorating. See Exchange Act Release No.
78961 (Sept. 29, 2016), 81 FR 70786, 70816 n.317 (Oct. 13, 2016)
(S7-03-14).
\18\ Notwithstanding this prohibition, securities of
participants can be used to hedge options positions on such
securities. See OCC Rule 604, I&P .16. In that event, OCC
systematically limits the number of shares the Clearing Member is
allowed to deposit to the delta offset. See infra note 19.
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OCC is proposing changes to address the wrong-way risk related to a
Clearing Member's cleared positions in exchange traded products
(``ETPs'') \19\ that hold spot cryptocurrency \20\ for which the
Clearing Member serves as the custodian of the fund's cryptocurrency
holdings.\21\ Under OCC's existing Margin Policy, OCC applies a SWWR
Add-on based on the assumption that, when a Clearing Member defaults,
the value of any equity security issued by the Clearing Member or its
affiliates would fall to zero. OCC proposes to amend the Margin Policy
to extend this approach to a Clearing Member's positions in spot
cryptocurrency fund shares for which the Clearing Member or its
affiliates serve as the custodian of the fund's cryptocurrency holdings
(e.g., all fund shares, call options and put options would be valued at
zero). OCC believes that extending the SWWR Add-on to spot
cryptocurrency ETPs when the Clearing Member is affiliated with the
custodian of such ETP is appropriate given the unique custody risks
associated with cryptocurrencies. For example, a cybersecurity event
affecting a Clearing Member and its affiliates may result in the theft
or loss of the cryptocurrency and a potential decline in the value of
the ETP at the same time that the Clearing Member may default on
obligations to OCC. OCC does not expect this change to have any impact
on existing Clearing Members, only one of whom has an affiliate that is
a trust custodian for a spot cryptocurrency ETP.
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\19\ OCC's By-Laws define ``fund share'' to mean a publicly
traded security, as defined in Section 3(a)(10) of the Exchange Act,
15 U.S.C. 78c(a)(10), that represents an interest in a trust,
investment company, commodity pool, or similar entity holding and/or
trading in one or more investments and, where the investments are
commodities, that is subject to any applicable advisory exemption or
other relief or guidance issued by the CFTC. As such, the definition
encompasses ETPs.
\20\ On January 10, 2024, the Commission approved proposed rule
changes filed by several national securities exchanges to list spot
bitcoin-based, commodity-based ETPs. See Exchange Act Release No.
99306 (Jan 10, 2024), 89 FR 3008 (Jan. 17, 2024) (SR-NYSEARCA-2021-
90, et al.). This proposed rule change would apply to those fund
shares and any other commodity-based ETPs holding cryptocurrency
that are subsequently approved or listed.
\21\ Under I&P .15 and .16 to current Rule 604, OCC already
limits such ETPs as collateral to the amount that is risk reducing
for activity in cleared positions. See OCC Information Memo #54918
(July 22, 2024), available at <a href="https://infomemo.theocc.com/infomemos?number=54918">https://infomemo.theocc.com/infomemos?number=54918</a>. Such cleared positions include both stock
borrow positions and options positions following the Commission's
approval of proposed rule changes filed by national securities
exchanges to permit the listing and trading of options on such fund
shares. See, e.g., Exchange Act Release No. 101128 (Sept. 20, 2024),
89 FR 78942 (Sept. 26, 2024) (SR-ISE-2024-03). OCC began clearing
options on such fund shares after staff of the CFTC's Division of
Clearing and Risk issued a staff advisory regarding the clearing of
options on spot commodity-based ETPs. See Staff Advisory Relating to
the Clearing of Options on Spot Commodity Exchange Traded Funds
(ETFs), CFTC 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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c. Rule 604 Restatement
In addition to the substantive changes to OCC's By-Laws, Rules and
Procedures discussed above, OCC also proposes to reorganize and restate
Rule 604 to provide a clearer and more transparent presentation of the
details. In particular, OCC proposes to (i) subdivide Rule 604 into
three parts--Rule 604A, Rule 604B, and Rule 604C--to align with the
three topics currently addressed by Rule 604, namely (A) the form of
margin collateral that OCC accepts, (B) how OCC holds and invests such
collateral, and (C) how OCC values the collateral; (ii), to incorporate
those of the eighteen existing I&Ps that remain after the deletions
specific to letters of credit, discussed above, into the relevant text
of Rules 604A through 604C, so that the provisions applicable to a
particular type collateral are consolidated within the Rules governing
these three topics, and (iii) make other textual edits to improve
clarity without changing the meaning of the existing rules, including
the following types of changes:
<bullet> Dividing lengthy paragraphs into subdivisions organized
logically by topic, as discussed in connection with the reorganization
discussed below.
<bullet> Adding titles to paragraphs, as appropriate, to improve
clarity and organization.
<bullet> Restate provisions in the active voice.\22\
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\22\ See Exhibit 5B, proposed Rules 604A(b)(2)(D),
604A(b)(4)(D), 604A(b)(4)(F), 604A(b)(5), 604B(b)(1), 604B(c)(1),
604B(c)(2), 604B(d)(1), 604B(d)(2), 604B(d)(3), 604B(e), 604B(f)(1),
604B(g)(1), Rule 604C(b), Rule 604C(c).
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<bullet> Restate provisions using plain language (e.g., replacing
``shall'' with ``must,'' ``will,'' ``is'' or ``may,'' as the context
dictates, and otherwise eliminating formal legal phrases).\23\
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\23\ See Exhibit 5B, proposes Rules 604A(b)(2)(B),
604A(b)(2)(C), 604A(b)(3)(A), 604A(b)(3)(B)(ii), 604A(b)(4)(D),
604A(b)(4)(E), 604A(b)(4)(F), 604A(b)(5), Rule 604B(a), 604B(b)(1),
604B(b)(2)(A), 604B(b)(3), 604B(b)(4), 604B(c)(1), 604B(c)(3).
604B(d)(2), 604B(d)(3), 604B(d)(4), 604B(e), 604B(f)(1), 604B(f)(2),
604B(g)(1), 604B(g)(2), 604C(a), 604C(e).
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<bullet> Renumbering cross-references to other Rules or I&Ps,
consistent with the proposed reorganization and restatement.
i. Rule 604A (Form of Margin Assets)
Proposed Rule 604A would capture the existing requirements for
eligible collateral, other than GSE debt securities and letters of
credit, currently captured in Rule 604(a) (Cash) and Rule
[[Page 9900]]
604(b) (Securities) and certain interpretations and policies that
address OCC's authority to disapprove otherwise eligible collateral or
accept collateral that does not meet the minimum requirements.
Specifically, the first sentence of Rule 604(a), which provides that
Clearing Members may deposit U.S. dollars in accordance with procedures
acceptable to OCC, would be renumbered Rule 604A(a) and amended to
provide that such deposits may be made ``[t]o satisfy margin
requirements.'' The same amendment would be added to the beginning of
each provision that introduces an acceptable type of margin
collateral.\24\ As so amended, the introductory paragraph to existing
Rule 604 would no longer be necessary and would therefore be
deleted.\25\ Other provisions of current Rule 604(a) would be relocated
to proposed Rule 604B (Holding and Investing Margin Assets), as
discussed below.
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\24\ See Exhibit 5B, Proposed Rules 604A(b)(1) (Government
Securities); 604A(b)(2) (Stocks); 604A(b)(4) (Money Market Fund
Shares).
\25\ For the same reason, OCC proposes to delete the
introductory paragraph to current Rule 604(b).
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Current Rule 604(b), which concerns the deposit of securities to
satisfy margin requirements, would be renumbered Rule 604A(b). The
first sentence of current Rule 604(b)(1), which concerns the deposit of
Government securities, would become Rule 604A(b)(1). Other provisions
of current Rule 604(b) would be relocated to Rule 604B, as discussed
below. Current Rule 604(b)(4)(i), which concerns the deposit of stocks,
would be renumbered Rule 604A(b)(2). The existing definition of
``stocks'' as applicable to Rule 604, which includes ETPs (i.e., ``fund
shares'') \26\ and exchange traded notes (``ETNs'' or ``index-linked
securities'') \27\ as those terms are defined in Article I of OCC's By-
Laws, would be relocated from Rule 604(b)(4)(iii) to the introductory
paragraph of proposed Rule 604A(b)(2).\28\ The term ``stock'' would be
used throughout the remainder of the proposed rule, rather than
``common stock,'' except where the provision applies specifically to a
particular type of stock, such as a fund share or index-linked
security. In addition, OCC would subdivide other relevant provisions of
Rule 604(b)(4)(i) \29\ into items (A), (B) and (D), which would provide
that:
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\26\ OCC's By-Laws define ``fund share'' to mean a publicly
traded security, as defined in Section 3(a)(10) of the Exchange Act,
15 U.S.C. 78c(a)(10), that represents an interest in a trust,
investment company, commodity pool, or similar entity holding and/or
trading in one or more investments and, where the investments are
commodities, that is subject to any applicable advisory exemption or
other relief or guidance issued by the CFTC. As such, the definition
encompasses ETPs.
\27\ OCC By-Laws define ``index-linked security'' to mean a debt
security listed on a national securities exchange, the payment upon
maturity of which is based in whole or in part upon the performance
of an index or indexes of equity securities or futures contracts,
one or more physical commodities, currencies or debt securities, or
a combination of any of the foregoing. As such, the definition
encompasses ETNs.
\28\ For the avoidance of doubt, ``includes'' as used in this
definition means ``includes, but is not limited.'' The definition is
meant to indicate that fund shares and index-linked securities are
included within the meaning of ``stock.'' However, per proposed Rule
604A(b)(2)(A), ``stock'' also includes any covered security within
the meaning of Section 18(b)(1) of the Securities Act of 1933.
\29\ The penultimate sentence of current Rule 604(b)(4)(i) would
be deleted as redundant of proposed Rule 604B(b), which relocates
the third sentence of current Rule 604(d). The final sentence of
current Rule 604(b)(4)(i) would be relocated to proposed Rule 604C,
as discussed below.
(A) A stock must be a ``covered security'' within the meaning of
Section 18(b)(1) of the Securities Act of 1933 \30\ (i.e.,
authorized for listing on a national securities exchange);
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\30\ See 17 U.S.C. 77r(b)(1).
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(B) A stock that is neither an underlying security nor a fund
share that has as its reference index an index that underlies any
cleared contract must have a market value of at least $3 per share,
as determined by the Corporation, subject to OCC's right to waive
the minimum value requirement; \31\ and
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\31\ See Exchange Act Release No. 61006 (Nov. 16, 2009), 74 FR
61182 (Nov. 23, 2009) (SR-OCC-2009-15) (establishing a minimum value
requirement for collateral other than ``Options-Related Stocks,''
which are already subject to minimum requirements by virtue of OCC's
agreements with and the rules of the options exchanges).
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(D) A Clearing Member may not deposit a stock that is suspended
from trading by the market that listed or qualified the stock for
trading because of volatility, lack of liquidity, or similar
characteristics, subject to OCC's discretion in cases where markets
do not take the same action with respect to the stock.
OCC would also relocate the second sentence of current Rule
604(b)(4)(iii), which provides that fund shares and index-linked
securities must be of a class approved by the Corporation for deposit
as margin, as proposed Rule 604(b)(4)(C). As reorganized, OCC would
further amend the provision to remove unnecessary and redundant
reference to the other requirements Rule 604(b)(4). Current Rule
604(b)(4)(ii), which concerns the manner of depositing securities,
requirements for securities depositories, as defined below, and the
Clearing Member's interest in any dividends or gains received on stocks
deposited as margin, would be relocated to proposed Rule 604B, as
discussed below.
Current I&Ps .15 and .16 to Rule 604, which address the
circumstances in which OCC may disapprove securities that otherwise
meet the requirements of Rule 604, would be relocated to proposed Rule
604A(b)(3). Proposed Rule 604A(b)(3)(A) would relocate I&P .15, which
concerns the factors OCC may use in exercising its authority to
disapprove a security as margin collateral with respect to all accounts
of all Clearing Members, and therefore not grant margin credit.
Proposed Rule 604A(b)(3)(B) would relocate the provisions related to
disapproval of securities as margin collateral for a particular
Clearing Member found in I&P .16 current to Rule 604. That Rule would
be further subdivided into sections addressing (i) disapproval with
respect to some or all of the shares of a stock to address
concentration risk, and (ii) disapproval with respect to stocks issued
by such Clearing Member or an affiliate of such Clearing Member to
address wrong-way risk. The final sentence of I&P .16 to current Rule
604, which provides an exception for securities disapproved under this
Rule to the extent they hedge cleared contracts held in the same
account, would be relocated to proposed Rule 604A(b)(3)(C).
Current Rule 604(b)(3) (Money Market Fund Shares or ``MMF
Shares''), would be relocated to proposed Rule 604A(b)(4).\32\ An
introductory paragraph would be added that authorizes Clearing Members
to deposit MMF shares to satisfy margin requirements if such MMF Shares
satisfy the requirements found in existing items (i) through (v), which
would be renumbered as Items A through F.\33\ In addition, the
provision regarding limits to address wrong-way risk (current Rule
604(b)(3)(iii)/proposed Rule 604A(b)(4)(D)) would be restated to
conform the language to other provisions regarding wrong-way risk in
Rule 604A.
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\32\ No MMF Shares are currently deposited as collateral, and
additional changes to the Rules are contemplated before MMF Shares
could be accepted. OCC is not seeking to pursue such changes at this
time. The proposed changes are merely to restate the existing
requirements consistent with the broader reorganization of exiting
Rule 604.
\33\ The last two sentences of current Rule 604(b)(3)(i) would
be reorganized into its own item (B) of Rule 604A(b)(4).
---------------------------------------------------------------------------
Finally, I&P .13 to current Rule 604 would be relocated to propose
Rule 604A(b)(5). That provision would address OCC's authority to accept
securities deposited by Clearing Members that do not satisfy the
requirements of propose Rule 604A and that such securities and any
securities that cease to meet the requirements of Rule 604A will be
subject to OCC's lien and other rights under the Rule and By-Laws, but
that they will be valued at zero for margin purposes unless and
[[Page 9901]]
until such securities meet such requirements.
ii. Rule 604B (Holding and Investing Margin Assets)
Proposed Rule 604B would relocate existing provisions of Rule 604
and its interpretations and policies that specify a Clearing Member's
property interest in margin assets, the manner in which margin assets
must be deposited by a Clearing Member and held by OCC, the Clearing
Member's rights to gains received in respect of the margin deposits,
and OCC's current authority to invest margin cash in Government
securities for its own account. Specifically, Rule 604B(a) (Clearing
Member Funds) would relocate the first sentence of existing Rule
604(d), which concerns a Clearing Member's property interest in margin
assets.
Proposed Rule 604B(b) would aggregate existing requirements related
to the deposit of margin, including (1) the manner in which Clearing
Members must deposit margin assets and (2) the manner in which the
Corporation will hold such funds at approved depositories.
Specifically, proposed Rule 604B(b)(1) would provide that (A) a
Clearing Member must deposit margin assets with respect to a designated
account of a Clearing Member in an OCC account in an approved
depository in OCC's name, or by such other method as OCC may from time
to time approve (current Rule 604(b)(1) and (4)(i)); (B) that all
assets pledged to OCC must be free of any lien or other encumbrances
senior to that of OCC (I&P .07 to current Rule 604); and (C) that
margin assets in the form of securities are deemed to be deposited when
OCC receives written confirmation from the depository or confirmation
that the securities have been pledged to the Corporation (i.e., with
respect to deposits in lieu of margin under Rule 610) (penultimate
sentence of current Rule 604(b)(4)(ii)). With respect to conditions for
approved depositories, Rule 604(b)(2) would relocate provisions
requiring that (A) except as otherwise under subitem (B) of the
proposed Rule,\34\ margin assets will be held in accounts at such
approved depositories designated as Clearing Member margin accounts
(current Rule 604(d)); (C) the arrangement with the depository must (i)
permit the securities to be promptly sold by or on OCC's order for the
account of the Clearing Member without notice and (ii) require the
Clearing Member to pay all fees and expenses incident to the ownership
or sale of the securities or the arrangement with the depository
(current Rule 604(b)(4)(ii)); and (D) OCC will not accept margin
securities from a depository if such depository, a parent, or an
affiliate has an equity interest of 20% or more in the depositing
Clearing Member's total capital (current Rule 604, I&P .11).
---------------------------------------------------------------------------
\34\ Currently, Rule 604(d) provides two exceptions for when
margin assets need not be held in an account at a depository
designated as a Clearing Member margin account: (i) margin cash
invested in Government securities under current Rule 601(a), and
(ii) funds credited to a Liquidating Settlement Account under
Chapter XI of OCC's Rules for managing a Clearing Member default.
For clarity, proposed Rule 604B(b)(2)(B) would add a third exception
with respect to non-customer margin funds held in an account a
Federal Reserve Bank, which is currently addressed by I&P .18 to
Rule 604.
---------------------------------------------------------------------------
Proposed Rule 604B(c) would aggregate provisions concerning the
commingling of funds, including that: (1) OCC will not commingle margin
assets with OCC's own funds or use margin assets as working capital
(current Rule 604(d)); (2) notwithstanding proposed Rule 604B(c)(1),
OCC may commingle non-customer funds with cash Clearing Fund
contributions in an account at a Federal Reserve Bank that is not
designated as a Clearing Member margin account \35\ (current Rule 604,
I&P .18); and (3) OCC may commingle margin assets for the account of
any Clearing Member with margin assets as margin for other Clearing
Members (current Rule 604(d)).
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\35\ See Exchange Act Release No. 90100 (Oct. 6, 2020), 85 FR
64603 (Oct. 13, 2020) (SR-OCC-2020-010) (approving OCC's proposal to
hold cash Clearing Fund contributions and certain non-customer cash
margin assets in OCC's account at the Federal Reserve Bank of
Chicago).
---------------------------------------------------------------------------
Proposed Rule 604B(d) would relocate current Rule 604(b)(5), which
concerns restrictions on the types of accounts to which a Clearing
Member may deposit securities held for the account of others (i.e.,
non-firm accounts). The proposed Rule would subdivide these
restrictions into those that: (1) prohibit a Clearing Member from
depositing securities held for the account of a securities customer in
any account other than a customers' account and customers' lien
account, (2) prohibit a Clearing Member from depositing securities held
for any Market Maker in any account other than a Market-Makers' account
in which such Market Maker is a participant, and (3) prohibit the
deposit of a ``fully paid security'' or an ``excess margin security''
within the meaning of SEC Rule 15c3-3 \36\ in any account except to the
extent permitted pursuant to interpretative guidance or no-action
relief of the SEC or another SRO.\37\ The last sentence of current Rule
604(b)(5), which concerns securities held for the account of a futures
customer, would be renumbered Rule 604B(d)(4) and amended in line with
the other provisions of proposed Rule 604(b) to prohibit a Clearing
Member from depositing securities held for the account of a futures
customer in any account other than a segregated futures account or
segregated futures professional account. Current Rule 604(d)'s
requirement that OCC hold margin assets in respect of a segregated
futures account in accordance with Section 4d of the Commodity Exchange
Act \38\ and regulations thereunder \39\ would be renumbered as Rule
604B(e).
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\36\ 17 CFR 240.15c3-3.
\37\ See Exchange Act Release No. 61425 (Jan. 26, 2010), 75 FR
5366 (Feb. 2, 2010).
\38\ 7 U.S.C. 6d.
\39\ See 17 CFR 1.20.
---------------------------------------------------------------------------
Proposed Rule 604B(f) would aggregate provisions concerning a
Clearing Member's rights to any interest, dividend or gain received on
securities. Specifically, proposed Rule 604B(f)(1) would relocate the
final sentence of Rule 604(b)(1), which provides that all interest or
gain received or accrued on Government securities deposited as margin
collateral, prior to any sale or negotiation, will belong to the
depositing Clearing Member, and OCC will credit any interest on, or
proceeds from the maturity of, such Government securities that OCC
receives to the account of the Clearing Member in respect of which the
deposit was made. Proposed Rule 604B(f)(2) would relocate the final
sentence of current Rule 604(b)(4)(ii), which provides that all
dividends or gain received or accrued on stocks, prior to any sale or
negotiation, will belong to the depositing Clearing Member.
Proposed Rule 604B(g) would aggregate provisions concerning OCC's
investment of margin cash. Specifically, the second sentence of current
Rule 604(a), which provides OCC's authority to invest margin cash
deposits, partially or in whole, for its account in Government
securities, would be renumbered Rule 604B(g)(1). The penultimate
sentence of current Rule 604(d), which provides that OCC will maintain
records clearly identifying any Government securities from such
investment as held in trust for Clearing Members, would become Rule
604B(g)(2). Current I&P .12 to Rule 04, which provides that OCC will
invest margin in a segregated futures account or segregated futures
professional account in accordance with Commodity Futures Trading
Commission (``CFTC'') Regulations 1.25, 1.26, and 1.27 \40\ and such
other rules as may be adopted by the CFTC to govern the investment of
such funds, would become Rule
[[Page 9902]]
604B(g)(3). In addition, that provision would be restated as a
conditional statement (i.e., ``[i]f the Corporation invests'' such
segregated futures customer account funds, then proposed Rule
604B(g)(2) would apply). OCC does not currently invest such futures
customer cash margin under its Cash and Investment Management
Policy.\41\
---------------------------------------------------------------------------
\40\ 17 CFR 1.25-1.27.
\41\ See Exchange Act Release No. 93916 (Jan. 6, 2022), 87 FR
1819, 1822 n.29 (Jan 12, 2022) (SR-OCC-2021-014).
---------------------------------------------------------------------------
iii. Rule 604C (Valuation of Margin Assets)
Proposed Rule 604C (Holding and Investing Margin Assets) would
relocate existing provisions of existing Rule 604 and its
interpretations and policies that specify how OCC values margin assets
deposited to meet margin requirements. Specifically, current Rule
604(g), which provides that OCC may elect to value margin assets in the
form of securities, other than Government securities,\42\ using the
same multivariate analysis applied under Rule 601 to underlying
interests rather than assigning any fixed dollar value to such margin
assets, would be renumbered Rule 604C(a). Current Rule 604(e), which
concerns collateral haircuts for Government securities and GSE debt
securities, would be relocated to Rule 604C(b), as amended to remove
reference to GSE debt securities. With respect to the valuation of MMF
Shares, the last two sentences of current Rule 604(b)(3)(iv) would
become Rule 604C(c). Current Rule 604(f), which provides that OCC may
value assets denominated in a foreign currency using such exchange
rates and applying such ``haircuts'' as it deems appropriate for its
protection, would become Rule 604C(d). Finally, the final sentence of
current Rule 604(b)(4)(i), which provides that OCC will assign no value
to stock deposited pursuant to Rule 610 \43\ (i.e., deposits in lieu of
margin) for purposes of Rule 604C, would become Rule 604C(e). Rule
604C(e) would be further amended to remove reference to Rule 610T,
which was a rule that predated current Rule 610.\44\ Rule 610T was
removed from OCC's Rules following a transitional period to the current
escrow deposit program.\45\ Accordingly, references to the transitional
Rule 610T throughout OCC's Rules are no longer necessary.
---------------------------------------------------------------------------
\42\ See Exchange Act Release No. 98101 (Aug. 10, 2023), 88 FR
55775 (Aug. 16, 2023) (SR-OCC-2022-012).
\43\ OCC would also delete an outdated reference to Rule 610T,
which was a temporary Rule in effect during a transition period to
the current means of making deposits in lieu of margin under current
Rules 610, 610A, 610B and 610C.
\44\ OCC would apply the same change to Rules 1506, 1701, 2301,
and 2701. Rule 1506 would be further amended for grammatical
consistency with those other Rules.
\45\ See Exchange Act Release No. 78675 (Aug. 25, 2016), 81 FR
60099, 60105 (Aug. 31, 2016) (SR-OCC-2016-009).
---------------------------------------------------------------------------
iv. Conforming Changes
In connection with the reorganization discussed above, OCC would
amend cross references to Rule 604 in other rules. Specifically, OCC
would:
<bullet> Amend Rule 601(c) to refer to proposed Rule 604C when
referencing the Rule providing for how OCC values margin assets. In
addition, OCC would add numbering and titles to the multiple paragraphs
of Rule 601(c) for clarity and ease of reference.
<bullet> Amend I&P .06 to Rule 601 to refer to proposed Rule 604C
when referring to the Rule that provides for how OCC values margin
assets other than stocks. In addition, that I&P would be further
amended to (i) conform with Rule 604A(b)(2)'s definition of ``stock''
and include a cross-reference thereto; and (ii) conform a cross
reference to the new paragraph numbers under Rule 601(c).
<bullet> Amend Rule 610 to refer to proposed Rule 604A(b)(1) when
referencing the Rule governing the eligibility of Government securities
as collateral.
<bullet> Amend Rule 705 to refer to proposed Rule 604A(b)(2) when
referencing the Rule governing eligibility of stock as collateral, and
to conform with Rule 604A's definition of ``stock.''
<bullet> Amend I&P .04 to Rule 1002 to refer to proposed Rule
604B(c)(2) when referencing the Rule providing OCC with authority to
commingle non-customer margin assets with Clearing Fund contributions
at an account at a Federal Reserve Bank.
<bullet> Amend Rules 1006(c) and 1006(f)(1)(C) and the Risk
Management Framework \46\ to refer to proposed Rule 604B(g) when
referencing the rules governing OCC's investment of margin cash.
---------------------------------------------------------------------------
\46\ In addition, OCC would also amend the applicable statement
in the Risk Management Framework to refer to OCC's Cash and
Investment Management Policy, which has been filed with the
Commission. See Exchange Act Release No. 93916, supra note 39.
---------------------------------------------------------------------------
<bullet> Amend the CRM Policy and the Margin Policy \47\ to refer
to proposed Rule 604A when referencing the rules governing eligible
forms of collateral.
---------------------------------------------------------------------------
\47\ In addition, OCC would amend the Margin Policy to correct
an outdated reference to its Business Backtesting Procedures, which
were retired in favor of OCC's consolidated Backtesting Procedures.
See Exchange Act Release No. 100998 (Sept. 11, 2024), 89 FR 76171
(Sept. 17, 2024) (SR-OCC-2024-009).
---------------------------------------------------------------------------
<bullet> Amend the CRM Policy to refer to proposed Rule 604B when
referencing the rules governing deposit of margin assets.
<bullet> Amend a footnote in the CRM Policy concerning the rules
governing the eligibility of MMF Shares to refer to proposed Rule
604A(b)(4).
<bullet> Amend the CRM Policy to refer to proposed Rule 604C(b)
when referring to the rules governing collateral haircuts applicable to
Government securities.
<bullet> Amend the RWD Plan to correct a cross reference to current
Rule 604(a) when it would be more appropriate to cite to Rule 609(b)
when referring to OCC's authority to require the deposit of intra-day
margin in the form of required cash if OCC forecasts that Clearing
Member's potential settlement obligations could be in excess of OCC's
liquidity resources.
<bullet> Amend the Risk Management Framework's discussion of OCC's
management of collateral risk to reference proposed OCC Rules 604A
through 604C.
2. Statutory Basis
OCC believes the proposed rule change is consistent with Section
17A of the Act \48\ and the Exchange Act Rules 17Ad-22(e)(1), (3), (5),
and (21) \49\ thereunder for the reasons discussed below.
---------------------------------------------------------------------------
\48\ 15 U.S.C. 78q-1.
\49\ 17 CFR 240.17Ad-22(e)(1), (3), (5), (21).
---------------------------------------------------------------------------
Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act \50\ requires, among other things,
that the rules of a clearing agency be designed to promote the prompt
and accurate clearance and settlement of securities transactions and,
to the extent applicable, derivative agreements, contracts, and
transactions and to assure the safeguarding of securities and funds
which are in the custody or control of the clearing or agency or for
which it is responsible. The proposed changes to OCC's rules with
respect to the management of wrong-way risk and concentration risk are
intended to ensure that OCC maintains sufficient collateral, in both
form and amount, to address the default of the depositing Clearing
Member. OCC would use the margin collateral it has collected from a
defaulting Clearing Member to protect other Clearing Members and their
customers from default losses and ensure that OCC can continue the
prompt and accurate clearance and settlement for the markets it serves.
In addition, OCC believes the proposed restatement of Rule 604 is
designed to
[[Page 9903]]
provide for the safeguarding of securities and funds in OCC's custody
or control by providing additional clarity and transparency about how
securities and funds are held and/or invested by OCC (i.e., proposed
Rule 604B) and by removing unnecessary Rules related to the acceptance
of collateral types that OCC will no longer accept going forward (i.e.,
letters of credit and GSE debt securities).
---------------------------------------------------------------------------
\50\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Exchange Act Rule 17Ad-22(e)(1)
Exchange Act Rule 17Ad-22(e)(1) requires OCC to establish, maintain
and enforce written policies and procedures reasonably designed to,
among other things, ensure a clear and transparent legal basis for each
aspect of OCC's activities in all relevant jurisdictions.\51\ In
connection with the annual review of its collateral risk management
practices, OCC has determined to no longer accept certain underutilized
collateral types, pursuant to existing authority to disapprove such
collateral. This proposed rule change would remove those collateral
types from OCC rules, which provide the legal basis for OCC's clearance
and settlement activity, to enhance their clarity and transparency. In
addition, OCC proposes to reorganize and restate OCC Rule 604,
including by organizing the surviving provisions of that Rule by topic
into Rules 604A, 604B and 604C, integrating the surviving
interpretations and policies to that Rule into the text of the re-
organized Rules, and restating the rules to reduce the use of passive
voice and to promote the use of plain language. OCC believes that these
proposed enhancements to the presentation of Rule 604 are consistent
with Exchange Act Rule 17Ad-22(e)(1) \52\ by enhancing the clarity and
transparency of its Rules.
---------------------------------------------------------------------------
\51\ 17 CFR 240.17Ad-22(e)(1).
\52\ Id.
---------------------------------------------------------------------------
Exchange Act Rule 17Ad-22(e)(3)
Exchange Act Rule 17Ad-22(e)(3) requires OCC to establish, maintain
and enforce written policies and procedures reasonably designed to,
among other things, maintain a sound risk management framework that
includes policies, procedures and systems that are designed to manage
risks that arise in or are borne by OCC and which are subject to
periodic review and annual approval by OCC's Board.\53\ As discussed
above, the proposed changes arise from OCC's annual review of its
collateral risk management, presented to and approved by its Board. OCC
believes the change to recognize the wrong-way risk inherent in spot
cryptocurrency where the Clearing Member or its affiliate serve as
custodian of that cryptocurrency, and to impose a SWWR Add-on for such
cryptocurrency, limits the risk that a Clearing Member may lose the
cryptocurrency at or around the same time that it may default on its
obligations to OCC. Accordingly, OCC believes the proposed changes help
to maintain the soundness of its risk management framework by limiting
that specific risk borne by OCC, consistent with Exchange Act Rule
17Ad-22(e)(3).\54\
---------------------------------------------------------------------------
\53\ 17 CFR 240.17Ad-22(e)(3).
\54\ 17 CFR 240.17Ad-22(e)(3).
---------------------------------------------------------------------------
Exchange Act Rule 17Ad-22(e)(5)
Exchange Act Rule 17Ad-22(e)(5) requires OCC to establish, maintain
and enforce written policies and procedures reasonably designed to,
among other things, limit the assets it accepts as collateral to those
with low credit, liquidity, and market risks, and set and enforce
appropriately conservative collateral concentration limits, and require
a review of the sufficiency of such concentration limits not less than
annually.\55\ When adopting the Standards for Covered Clearing
Agencies, the Commission noted that when assessing compliance with the
requirements of Exchange Act Rule 17Ad-22(e)(5),\56\ a covered clearing
agency's policies and procedures generally should account for wrong-way
risk by limiting the acceptance of collateral that would likely lose
value in the event that the participant providing the collateral
defaults.\57\ The Board has approved changes to address the potential
wrong-way risk associated with collateral in the form of a spot
cryptocurrency ETP for a Clearing Member who is the custodian or is
affiliated with the custodian of that ETP. As discussed above, the
proposed changes are designed to address custody risks that are unique
to cryptocurrency that could result in a loss of value for the spot
cryptocurrency ETP for which the Clearing Member or its affiliate
serves as a custodian at the same time that the Clearing Member may
experience financial or operational difficulty in meeting its
obligations to OCC. OCC believes the proposed changes would help to
ensure that the collateral it accepts from that Clearing Member is of
low credit risk by limiting the value it would assign to spot
cryptocurrency ETPs. As such OCC believes that the proposed changes are
consistent with Exchange Act Rule 17Ad-22(e)(5).\58\
---------------------------------------------------------------------------
\55\ 17 CFR 240.17Ad-22(e)(5).
\56\ 17 CFR 240.17Ad-22(e)(5).
\57\ See Exchange Act Release No. 78961, supra note 15, 81 FR at
70816.
\58\ 17 CFR 240.17Ad-22(e)(5).
---------------------------------------------------------------------------
Exchange Act Rule 17Ad-22(e)(21)
Exchange Act Rule 17Ad-22(e)(21) requires OCC to establish,
maintain and enforce written policies and procedures reasonably
designed to, among other things, be efficient and effective in meeting
the requirements of its participants and the markets it serves, and
that OCC's management regularly review the efficiency and effectiveness
of its clearing and settlement arrangements and operating structure,
including risk management policies, procedures and systems.\59\ In
connection with OCC's annual review of its collateral risk management,
OCC has determined to discontinue the acceptance of letters of credit
and GSE debt securities as margin collateral. Utilization of these
collateral types by OCC's participants has declined since the last time
that OCC amended the rules applicable thereto in 2023. GSE debt
securities have not been pledged since July of 2023 and no letters of
credit remain on deposit. As such, OCC does not believe that the
operational burden associated with maintaining these collateral types
is justified. In making this determination, OCC has also considered the
burden on OCC and its Clearing Members that would be associated with
testing the functionality for supporting these collateral types in
Ovation, OCC's forthcoming clearance and settlement system.
Accordingly, OCC believes that eliminating these underutilized
collateral types and removing them from OCC's rules would promote OCC's
efficiency and effectiveness, consistent with Exchange Act Rule 17Ad-
22(e)(21).\60\
---------------------------------------------------------------------------
\59\ 17 CFR 240.17Ad-22(e)(21).
\60\ Id.
---------------------------------------------------------------------------
(B) Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act \61\ requires that the rules of a
clearing agency not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. OCC does not
believe that the proposed rule changes concerning removing letters of
credit and GSE debt securities as collateral types under OCC rules, or
the reorganization or restatement of Rule 604 would impact or impose
any burden on competition. None of these changes would inhibit access
to OCC's services or disadvantage or favor any particular user in
relationship to another, and all
[[Page 9904]]
of the changes would be applied uniformly to all Clearing Members. In
addition, the changes to collateral types are not expected to have an
impact on Clearing Members because no GSE debt securities or letters of
credit are currently deposited. Accordingly, the proposed rule change
would not unfairly inhibit access to OCC's services or disadvantage or
favor any particular user in relationship to another user.
---------------------------------------------------------------------------
\61\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------
While management of wrong-way risk is necessarily specific to the
firm pledging the collateral, and the impact on any one firm will be
dependent on the identity of that firm and its affiliates, the
collateral that it pledges and its cleared contracts, OCC believes that
the proposed changes are necessary and appropriate in furtherance of
the purposes of the Act. As discussed above, OCC is proposing changes
to its collateral risk management to extend its approach to managing
SWWR to spot cryptocurrency fund shares for which the Clearing Member
or an affiliate acts as a custodian of the fund's cryptocurrency
holdings to address collateral risks that are unique to these new types
of ETPs. To the extent the proposed changes cause any burden on
competition, OCC believes that they are necessary to fairly account for
the SWWR inherent in these new products that were not contemplated when
the current SWWR Add-ons were implemented. OCC further believes that
these proposed changes would better enable OCC to account for wrong-way
risk, consistent with and appropriate in furtherance of the purposes of
Rule 17Ad-22(e)(5) under the Act.\62\
---------------------------------------------------------------------------
\62\ 17 CFR 240.17Ad-22(e)(5).
---------------------------------------------------------------------------
(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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
The proposal shall not take effect until all regulatory actions
required with respect to the proposal are completed.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the 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#daa8afb6bff7b9b5b7b7bfb4aea99aa9bfb9f4bdb5ac"><span class="__cf_email__" data-cfemail="9ceee9f0f9b1fff3f1f1f9f2e8efdceff9ffb2fbf3ea">[email protected]</span></a>. Please include
file number SR-OCC-2026-001 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-2026-001. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of such filing 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-2026-001 and
should be submitted on or before March 20, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\63\
---------------------------------------------------------------------------
\63\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-03915 Filed 2-26-26; 8:45 am]
BILLING CODE 8011-01-P
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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.