Notice2026-21735
Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change by The Options Clearing Corporation Concerning Amendments to Clearing Member Standards
Primary source
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Published
October 26, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 205 (Monday, October 26, 2026)</title>
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[Federal Register Volume 91, Number 205 (Monday, October 26, 2026)]
[Notices]
[Pages 67362-67368]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-21735]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106706; File No. SR-OCC-2026-009]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change by The Options Clearing
Corporation Concerning Amendments to Clearing Member Standards
October 21, 2026.
I. Introduction
On August 19, 2026, the Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange
[[Page 67363]]
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend OCC's requirements and
procedures for membership as well as protective measures and sanctions
including, but not limited to, the suspension of members (hereinafter
``Proposed Rule Change''). The Proposed Rule Change was published for
comment in the Federal Register on September 8, 2026.\3\ The Commission
received comments from interested persons.\4\ For the reasons discussed
below, the Commission is approving the Proposed Rule Change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 106264 (Sept. 2,
2026), 91 FR 57183 (Sept. 8, 2026) (File No. SR-OCC-2026-009)
(``Notice'').
\4\ Comments on the Proposed Rule Change are available at
<a href="https://www.sec.gov/rules-regulations/public-comments/sr-occ-2026-009">https://www.sec.gov/rules-regulations/public-comments/sr-occ-2026-009</a>.
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II. Background
OCC is a central counterparty (``CCP''), which means that, as part
of its function as a clearing agency, it interposes itself as the buyer
to every seller and the seller to every buyer for financial
transactions. As the CCP for the listed options markets in the United
States,\5\ as well as for certain futures and stock loans, OCC is
exposed to various risks arising from providing clearance and
settlement services to its Clearing Members because OCC is obligated to
perform on the contracts it clears.\6\ OCC mitigates such risks, in
part, by setting requirements for its members (and applicants to become
members), the protective measures OCC may impose to manage specific
risks, and the sanctions OCC may impose where members do not comply
with the requirements of membership.
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\5\ OCC describes itself as ``the sole clearing agency for
standardized equity options listed on national securities exchanges
registered with the commission.'' See Securities Exchange Act
Release No. 105208 (Apr. 10, 2026), 91 FR 20192, 20193 (Apr. 15,
2026) (File No. SR-OCC-2026-003).
\6\ Capitalized terms used but not defined herein have the
meanings specified in OCC's Rules and By-Laws, available at <a href="https://www.theocc.com/company-information/documents-and-archives/by-laws-and-rules">https://www.theocc.com/company-information/documents-and-archives/by-laws-and-rules</a>.
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Generally, the proposed changes affect OCC's requirements and
procedures for membership as well as protective measures and sanctions
including, but not limited to, the suspension of members. The proposed
changes related to membership include conditions for admission of
clearing member applicants as well as standards for existing Clearing
Members. The proposed changes also include the adoption of several new
definitions, technical, clarifying changes, amendments to OCC's
governance standards, and, generally, the adoption of new rules
relating to risk mitigation practices.
A. Clearing Membership
As noted above, OCC proposes changes to its membership rules. The
proposed changes would address the conditions for admission of clearing
member applicants as well as the who are authorized to approve or deny
such applications. The proposed changes also would address the ongoing
requirements for Clearing Members.
1. Confidentiality Standards
OCC's proposed confidentiality standards apply generally to its
membership rules. Proposed Rule 207(d) sets forth the standards
Clearing Members must observe when maintaining or exchanging ``OCC
Confidential Information'' \7\--the proposed rule demands that members
exercise a standard of care that it would employ to protect its own
confidential information, but not less than a reasonable standard of
care. The proposed rule further acknowledges that breach of
confidentiality may result in OCC seeking injunction or other equitable
relief against the breaching party and states that the rule does not
preclude or otherwise prohibit OCC from providing confidential
information to the government or other regulatory authority.
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\7\ OCC proposes to define the term OCC Confidential Information
as all non-public information provided by OCC that is marked or,
under the circumstance surrounding disclosure, otherwise identified
in writing prior to disclosure to the recipient as ``confidential''
or ``business sensitive'' and is designated by OCC as confidential
or the recipient knows or ought to reasonably know is confidential.
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2. Conditions for Admission
OCC proposes several changes to its Clearing Membership eligibility
and admission standards, which are generally set forth in Chapter II of
its rules. First, proposed rule 201(b) requires Clearing Members or
applicants to maintain an operating history of at least one year in the
same or substantially same business activities the member or applicant
applies for. Alternatively, the member or applicant can maintain senior
personnel with sufficient background or experience in such business
activities.
Rule 204 sets forth OCC's Conditions to Admission. OCC proposes to
amend its rules with regard to who is authorized to approve or deny
applications for Clearing Membership. In 2016, OCC vested authority to
approve or disapprove new membership applications in the risk committee
of its board of directors (the ``Risk Committee'') and delegated
authority to approve certain applications to specific members of OCC
management.\8\ Now, OCC proposes to allow the Risk Committee to
delegate, to its designated delegates or agents, the ability to approve
or deny new applications or reapplications. Specifically, OCC proposes
amending Rules 203(b) through (e), Rule 204(a), (c) through (e), and
(l) to include the phrase ``or its designated delegates or agents,''
which would vest in OCC's management the Risk Committee's authority to
approve or deny certain applications and reapplications for Clearing
Membership and requests for business expansion. OCC states that the
purpose of permitting such delegation is streamline and accelerate the
decision-making process and approval, while continuing to utilize a
risk-based decision-making approach.\9\ OCC states further that the
change would eliminate the need to wait until scheduled quarterly Risk
Committee meetings to determine whether it will approve such
applications or business expansion requests.\10\
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\8\ See Securities Exchange Act Release No. 78277 (July 11,
2016), 81 FR 16718 (July 15, 2016) (File No. SR-OCC-2016-007).
\9\ See Notice, 91 FR at 57187.
\10\ See id. at 57204.
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The proposed changes would also amend an applicant's obligations to
notify OCC regarding Statutory Disqualification. Specifically, OCC
proposes to require that such notifications be provided not only where
an applicant or Key Person \11\ is subject to a Statutory
Disqualification, but also where the applicant or person is subject to
formal investigation by a regulatory organization. OCC proposes to
require that such notice be provided within two business days.
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\11\ OCC proposes to define the term Key Person to include any
person associated with a Clearing Member or applicant that OCC deems
is critical to the Clearing Member or applicant's operations or risk
management, including, but not limited to, the Clearing Member's
President, Chief Executive Officer, Chief Financial Officer, Chief
Risk Officer, and Chief Compliance Officer, or equivalent positions,
or a major shareholder or partner.
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OCC next proposes amending Chapter II to include new Rules 204(e),
(f) and (g). Rule 204(e) would set forth the standards by which OCC may
disapprove an application or reapplication for membership or otherwise
restrict denied applicants from reapplying upon becoming aware of any
facts or circumstances about said applicant or reapplicant that poses
[[Page 67364]]
elevated risk to OCC or otherwise impacts the suitability of the
applicant as a Clearing Member. Such revisions would include allowing
denial of an application where a Key Person becomes an elevated risk to
OCC or impacts the suitability of the applicant as a Clearing
Member.\12\ Rule 204(f) would require a denied applicant to address the
specific grounds for denial prior to reapplying for membership. Rule
204(g) would require an applicant to maintain physical office space
unless OCC determines that the applicant's use of a remote office
remote model does not present a heightened risk to OCC. Lastly,
proposed Rule 204(g) would make an applicant subject to OCC's procedure
for conducting on-site visits to an applicant's facility as part of
OCC's onboarding process. OCC believes the use of a fully remote, non-
hybrid, office model may introduce challenges for OCC to communicate
with the applicant and perform an onsite examination of the applicant,
therefore posing heightened risk to OCC.\13\
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\12\ Rule 204(e) describes circumstances that may pose elevated
risks to OCC which may include concerns with the result of an
independent assessment of an applicant's ``AML'' program of ``OFAC''
sanctions list and sanctions list data. Proposed Rule 101 would
define the term ``AML,'' when used in respect of an applicant of
Clearing Member's AML controls, as meaning compliance with anti-
money laundering requirements imposed under United States law or
comparable requirements in the Clearing Member's jurisdiction. In
addition, Proposed Rule 101 would define ``OFAC'' as meaning the
U.S. Department of Treasury's Office of Foreign Asset Control.
\13\ See Notice, 91 FR at 57192. OCC believes that an
applicant's lack of maintaining any physical office facility
presents risks that would not exist in a hybrid office model where
an applicant may have some form of physical office to allow for in-
person communication. OCC believes the risks posed by an applicant
that is fully remote include, but are not limited to, challenges in
communication between the applicant's staff and OCC, and the lack of
visibility that OCC may have into the applicant's operational
stability that could be mitigated during an on-site visit or in-
person meeting. Id.
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OCC is also amending Rule 204(h) (which concerns conditional
approval of an application) to explicitly state that approval of an
application may be conditioned on Clearing Fund deposits and
operational testing requirements. OCC's changes to Rule 204 also
include an amendment to Rule 204(l), which states that any imposed
conditions will remain in effect until OCC judges that the heightened
risks presented by the member are sufficiently reduced. Other changes
to the rules governing conditions to admission include (i) empowering
OCC to deny an application for failure to respond to requests for
information under proposed Rule 204(j); (ii) stating explicitly that
OCC may share information provided by an applicant with designated
examining authorities under proposed Rule 204(k); and (iii) requiring
that an applicant provide to OCC its business plan, supported by
financial projections and assumptions under proposed Rule 204(m).
Additional changes to Rule 204 would authorize OCC to impose risk-based
limitations, restrictions and contingencies on applicants under
proposed Rule 204(n) \14\ and to request that an applicant provide the
annual audited financial statements from its parent or affiliate under
proposed Rule 204(p).
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\14\ Additionally, an application approved with contingencies
may subject a conditional member to a twelve-month probationary
period pursuant to proposed Rule 204(o).
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3. Ongoing Membership Standards
In addition to the conditions and requirements for applicants, OCC
proposes to amend the standards to which current Clearing Members must
adhere. For example, OCC proposes amendments to Rule 301(b), which
would permit OCC to establish discretionary, risk-based minimum capital
levels higher than those specified in current Rule 301. The proposed
change aims to strengthen financial responsibility obligations for
existing Clearing Members.\15\ OCC's amendments to Rule 301(d) would
require that every Clearing Member furnish copies of its contingency
planning procedures upon OCC's request.
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\15\ Notice, 91 FR at 57194.
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Likewise, OCC proposes substantive amendments and clarifying
changes to Rules 302(b), 302(c), and 302(f). Consistent with the
proposed changes to Rule 204(g) described above, proposed Rule 302(b)
would require Clearing Members to maintain a physical office unless OCC
deems the member's fully remote office model does not present a
heightened risk to OCC. Moreover, Rule 302(b) would subject Clearing
Members' physical offices to on-site visits from OCC with no more than
24-hours' notice. Similarly, OCC proposes amending Rule 302(c) to
clarify that a member must make its books and records available for
inspection by OCC upon request.
Next, OCC proposes to update Rule 303(a) to require Clearing
Members to employ individuals with relevant industry experience in
senior management roles or equivalent positions (e.g., President of
Chief Executive Officer). In addition, OCC proposes amending Rule 305,
which concerns Clearing Member Risk Management, to explicitly state
that following periodic review(s) of a Clearing Member's risk
management framework, any of OCC's actions or subsequent imposition of
protective measures will be based on its review of a Clearing Member's
written risk management policies, practices, and procedures.
OCC proposes various changes to Rule 306A, which sets forth the
standards for event-based reporting. Under the rule, Clearing Members
must notify an officer of OCC prior to 3:00 p.m. Central Time on the
next business day if certain, triggering events occur--OCC's proposed
rule changes clarify under what circumstances a Clearing Member must
report. To clarify Rule 306A's meaning, OCC proposes amending the
entirety of the rule to reference Rule 101 definitions, where
applicable. OCC also proposes changing Rule 306A(1)(a) clarify that
OCC's reporting requirements do not supersede laws applicable to the
member that might prevent disclosure of such notice to OCC; OCC adopted
the same requirement for eligible bank Clearing Members in Rule
306A(a)(5)(D). In addition, OCC proposes changing Rule 306A(a)(2)(A)(i)
to require that a Clearing Member report to OCC when its net capital is
less than the greater of 20% above the applicable member's minimum
capital requirement. Rule 306(a)(4)(B)(i) sets forth the same
requirement for non-U.S. securities firms.
OCC's proposed change to Rule 306B(b) would require Clearing
Members to provide OCC with a complete copy of the annual audited
financial statements of the Clearing Member's parent or affiliate; if
such statements are not available, the member must provide unaudited
financial statements, or applicable financial information, upon OCC's
request. In addition, OCC proposes adding Rule 306B(f), which would
explicitly require Clearing Members to provide accurate, complete and
timely responses to its annual and periodic due diligence information
requests.
Lastly, OCC proposes amending Rule 2212 to require all clearing
members that are participants of the Stock Loan/Hedge program to
register their existing Master Securities Loan Agreement relationship
within OCC's clearing system.\16\ OCC's proposed changes to
[[Page 67365]]
Rule 2212 also include removing the modifying term ``Hedge'' from Rule
2212's text and removing the phrase ``within the Stock Loan/Hedge
Program'' from Rule 2212(a).
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\16\ OCC also proposes a technical update to Rule 302(f) to
rescind the term ``Stock Loan/Hedge'' and replace it with the term
``Market Loan,'' which accurately identifies the Market Loan Program
described in the rule--such an update would clarify what members and
applicants are subject to the aforementioned conditions to
admission. This technical change comports with the OCC's proposed
changes to Rule 2212, which concerns the procedures for closing out
a Clearing Member's Match-Book Positions following suspension.
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B. Admission and Disciplinary Proceedings
1. Membership Applications
OCC proposes changes to its rules regarding the process provided
both to applicants for membership as well as to members subject to
disciplinary sanctions. OCC proposes adopting rules setting forth in
expanded detail the processes and procedures for review of an
application or reapplication by the Risk Committee or its delegates,
which include: (i) the procedures to request a hearing following denial
of an application or reapplication; (ii) procedure for submitting,
precedent to a hearing, a concise statement setting for a member's
objection to the denial; and (iii) the specific procedures for
conducting a hearing before the risk committee, including, but not
limited to, procedures for proffering documents and presenting
testimony.\17\
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\17\ See generally OCC Rule 203(b)(6).
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In addition, OCC proposes adopting a rule explicitly stating that
any decision by the Risk Committee or its delegate to deny an
application or reapplication must be written and noticed to the
applicant--the proposed changes go on to state that a decision rendered
by OCC is final upon the date an applicant receives notice of said
decision. Lastly, OCC's proposed changes to Rule 203 include clarifying
that any final decision to deny a reapplication pursuant to OCC Rule
309 constitutes grounds for summary suspension under OCC Rule 1102.
OCC's rules currently require a Clearing Member to notify OCC of
material changes (e.g., merger, sale, name change).\18\ OCC proposes to
amend its rules to empower OCC to require a Clearing Member to reapply
for membership following notice of such a change. OCC proposes adopting
Rule 309 in connection with Rule 306A(b)(1)--Rule 309 sets forth the
processes and procedures for reapplying for membership. Rule 309(a)
would authorize OCC to require a Clearing Member to reapply for
membership if OCC determines, in its sole discretion, that the
financial or operational condition of a Clearing Member has materially
changed or materially changes the business strategy of the member in a
manner that might adversely affect OCC. As proposed, Rule 309(b) would
permit a Clearing Member to conditionally maintain its membership
during the application period, notwithstanding any protective measures
implemented pursuant to Rules 307 through 307C. Lastly, proposed Rule
309(c) would require that the denial of Clearing Membership following
reapplication is subject to the process provided under Rule 203, as
described above. Other proposed changes include amending rules
306A(a)(5)(C) and (D) to clarify that reporting obligations are
triggered by the receipt of notice of any violation delineated in Rule
306A, amending Rule 306A(b)(1) to require that members provide notice
of any material changes in its form of organization or ownership
structure, and updating Rule 306A(c) to reference the newly adopted
term ``Key Person.''
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\18\ See OCC Rule 306A(b). Proposed changes to OCC Rule 306A are
described above in Section II.A.3.
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2. Disciplinary Proceedings
OCC also proposes changes to Chapter XII, including amendments and
clarifying additions to Rule 1201, which concerns sanctions. OCC
proposes including among the sanctions available under Rule 1201(a)
fines. OCC also proposes amending Rule 1201 to explicitly state that a
Clearing Member may be sanctioned for violating statutory rules of OCC
(i.e., in addition to violating the By-Law and Rules). To clarify what
conduct might constitute a sanction under the rule, OCC proposes adding
Rules 1201(a)(1)-(5), which set forth examples of conduct that may
warrant sanctions, including: (i) failure by a member to provide
adequate personnel or facilities; (ii) failure by a member to comply
with a protective measure proscribed under Rules 307 or 307C; (iii)
exhibiting a pattern of tardily providing financial information; (iv)
providing false financial information, or (iv) exhibiting a pattern of
regulatory or legal infractions.
3. Suspension of a Clearing Member
Further, OCC proposes to Chapter XI of its Rules modify the
procedures for summary suspension of a Clearing Member. OCC proposes
adding Rule 1101(b), which would require any non-U.S. Clearing Member
subject to expulsion or suspension by a non-U.S. regulatory agency or
securities exchange to immediately notify OCC of any such occurrence.
OCC also proposes amending Rule 1102(b)(5) to include examples of when
a member is in such financial or operating difficulty that OCC may
exercise its discretion to suspend the member (e.g., the member loses
access to sufficient financial resources or the ability to participate
in default management activities). Under the proposed changes to
Chapter XI, a Clearing Member could also be subject to suspension if it
is in default in the payment of funds or other obligations in respect
of Rule 707 X-M accounts or if it does not meet OCC's membership
standards following reapplication under Rule 309. Lastly, OCC proposes
an amendment clarifying that any event described in Rule 1102(a)
constitutes a ``default'' and any default under any part of the rules
must be noticed to OCC's Board if the suspension determination is made
by any agent of OCC other than the Board itself.
C. Clearing Member Risk Criteria
OCC proposes to expand Rule 307(a) to include in the universe of
risks factors that may precipitate the imposition of protective
measures ``market risk'' and ``regulatory or compliance risks.'' In
addition, OCC proposes amending Rule 307 to state that new Clearing
Members may be subject to enhanced monitoring and surveillance. OCC
also proposes adding Rules 307(b) and (c), which empower OCC to impose
protective measures on any Clearing Member or applicant at their
discretion, on a case-by-case basis depending on factors which include,
but are not limited to, the member or applicant's financial or
operational risk profile.
OCC proposes amending Rule 307B(b) to include new procedures
relating the imposition of restrictions on certain transactions,
positions and activities, which include: (i) requiring a Clearing
Member to notice in writing its objections to any imposed restrictions
and its intent to retain counsel; (ii) specifying OCC's notice of
hearing obligations and stating that any hearing will proceed pursuant
to Rule 203(b)(6); and (iii) setting forth the procedure and
requirements by which OCC will provide a member a notice of its final
decision.
OCC also proposes amending Rule 307C, which delineates additional
operational, personnel, financial, and risk management requirements, to
empower OCC to require a financial guaranty from a Clearing Member's
parent company or affiliate, to impose limitations on a member's
financial leverage, to require a member to fill a key risk management
or operational role created by the loss of a Key Person, or to require
that members implement or enhance certain internal controls, procedures
or systems.
[[Page 67366]]
III. Discussion and Commission Findings
Section 19(b)(2)(C) of the Exchange Act requires the Commission to
approve a proposed rule change of a self-regulatory organization if it
finds that the proposed rule change is consistent with the requirements
of the Exchange Act and the rules and regulations thereunder applicable
to the organization.\19\ 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.'' \20\
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\19\ 15 U.S.C. 78s(b)(2)(C).
\20\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
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Based on a review of the Proposed Rule Change, the Proposed Rule
Change is consistent with the requirements of the Exchange Act and the
rules and regulations thereunder applicable to OCC. The Proposed Rule
Change is consistent with Sections 17A(b)(3)(F),\21\ 17A(b)(3)(H),\22\
17A(b)(4)(B),\23\ 17A(b)(5) \24\ of the Exchange Act, and Rules 17ad-
22(e)(18) \25\ thereunder.
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\21\ 15 U.S.C. 78q-1(b)(3)(F).
\22\ 15 U.S.C. 78q-1(b)(3)(H).
\23\ 15 U.S.C. 78q-1(b)(4)(B).
\24\ 15 U.S.C. 78q-1(b)(5).
\25\ 17 CFR 240.17ad-22(e)(18).
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A. Consistency With Sections 17A(b)(3)(F) and 17A(b)(4)(B) of the
Exchange Act
Section 17A(b)(3)(F) of the Exchange Act requires that the rules of
a clearing agency are designed, in general, to protect investors and
the public interest while not being designed to permit unfair
discrimination in the admission of participants or among participants
in the use of the clearing agency.\26\ Relatedly, Section 17A(b)(4)(B)
of the Exchange Act provides that a clearing agency may deny
participation to, or condition the participation of, any person if such
person does not meet such standards of financial responsibility,
operational capability, experience, and competence as are prescribed by
the rules of the clearing agency.\27\ Section 17A(b)(4)(B) of the
Exchange Act also provides that a registered clearing agency may
examine and verify the qualifications of an applicant to be a
participant in accordance with procedures established by the rules of
the clearing agency.\28\
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\26\ 15 U.S.C. 78q-1(b)(3)(F).
\27\ 15 U.S.C. 78q-1(b)(4)(B).
\28\ Id.
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As described in Section II.A.2, OCC proposes to authorize the Risk
Committee to continue to approve or deny applications and to delegate
such authority to streamline the process. The proposed change would
continue to rely on the current risk-based decision-making approach to
reviewing applications without requiring an applicant to wait for a
quarterly meeting of the Risk Committee for final determination.
Although the initial decision could be made by a delegee, an applicant
would continue to have the right to challenge a denial before the Risk
Committee, preserving Board-level oversight of the process.
Further, OCC proposes changes to the substantive requirements both
for applicants and members addressing various concerns. As described
above, OCC proposes changes related to financial responsibility,
including the change to OCC Rule 301(a) that would authorize OCC in to
increase a Clearing Member's minimum capital requirement to mitigate
various risks (e.g., an inadequate liquidity profile) \29\ and the
proposed new section (p) of OCC Rule 204 that would authorize OCC to
require an applicant to produce the financial statements of its parent
or affiliate. Other proposed changes pertain to an applicant's or
member's operations, such as compliance with the confidentiality
requirements of proposed OCC Rule 207(d), the physical office
requirements of proposed Rules 204(g) and 302(b), and the books and
records requirements of proposed Rule 302. The proposal also includes
changes related to experience and competence, such as the requirement
for a viable business plan under proposed OCC Rule 204(m), an operating
history of one year or for an applicant or Clearing Member to employ
sufficiently experienced senior personnel in the relevant area of
business activity under proposed OCC Rule 201(b), and responsibilities
for employing risk management personnel under proposed Rule 303. OCC
also proposes replacing a reference in the definition of the term
``Office'' to Rule 201 with a reference to Rule 302 to comport with
proposed rule changes to Chapter II Clearing Membership and Chapter III
Membership Standards.
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\29\ A commenter supported the proposed change regarding minimum
capital requirements. Comment from Sarthak Gupta (Sept. 25, 2026),
available at <a href="https://www.sec.gov/comments/SR-OCC-2026-009/srocc2026009-3721146.htm">https://www.sec.gov/comments/SR-OCC-2026-009/srocc2026009-3721146.htm</a>. The commenter raised ``[t]hree points that
could make the proposal stronger before approval'' but did not
condition support on any of these points. Id. OCC did not amend its
filing, and the analysis here reflects consideration of the proposal
as filed.
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One commenter took issue with the addition of certain requirements
for applicants and members stating that the proposal erects nearly
insurmountable barriers for anyone trying to enter the market.\30\
Specifically, the commenter states that requiring an established
operating history penalizes lean startups and that ``[m]andating
traditional physical office facilities disregards modern, secure remote
infrastructure, forcing early-stage teams to absorb unnecessary real
estate expenses before generating revenue.'' \31\
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\30\ Comment from Anonymous Prospective Market Participant
(Sept. 4, 2026), available at <a href="https://www.sec.gov/comments/SR-OCC-2026-009/srocc2026009-3349768_0.htm">https://www.sec.gov/comments/SR-OCC-2026-009/srocc2026009-3349768_0.htm</a>.
\31\ Id.
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With regard to the year of operating history, OCC states that this
proposed requirement would provide OCC with additional data or
information (e.g., an applicant or Clearing Member's operating history
and its senior management's employment history) to determine whether
they meet OCC's membership standards.\32\ With regard to the
requirement for a physical office, OCC explains that the purpose of the
proposed requirement is to address issues of communication and
transparency.\33\
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\32\ See Notice, 91 FR at 57186.
\33\ See id. at 57192.
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Based on the information provided, the proposed requirements around
operations, experience, and competence are consistent with the Exchange
Act. The Exchange Act does not permit unfair discrimination, but it
does acknowledge the potential need to deny participation based on
specific criteria. The commenter's concern regarding a one-year
operating history ignores the alternative that OCC offers in its
proposed rules (e.g., employing sufficiently experienced personnel).
Similarly, the proposed rules allow for a scenario in which an
applicant or member may operate in a fully remote business model but
allow OCC to assess the potential risks of such an operating model. OCC
is permitted to adopt rules that limit participation to the extent such
rules are consistent with the requirements of the Exchange Act, such as
not discriminating unfairly and not imposing a burden on competition
that is not unnecessary or inappropriate.
Accordingly, the Proposed Rule Change is consistent with the
requirements of Sections 17A(b)(3)(F) and 17A(b)(4)(B) of the Exchange
Act.\34\
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\34\ 15 U.S.C. 78q-1(b)(3)(F) and 15 U.S.C. 78q-1(b)(4)(B).
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B. Consistency With Sections 17A(b)(3)(H) and 17A(b)(5)(B) of the
Exchange Act
Section 17A(b)(3)(H) of the Exchange Act requires that the rules of
a clearing agency are in accordance with the
[[Page 67367]]
provisions of Section 17A(b)(5) of the Exchange Act, and, in general,
provide a fair procedure with respect to the disciplining of
participants, the denial of participation to any person seeking
participation therein, and the prohibition or limitation by the
clearing agency of any person with respect to access to services
offered by the clearing agency.\35\ Section 17A(b)(5)(B) of the
Exchange Act provides for the requirements related to any proceeding by
a clearing agency to determine whether a person shall be denied
participation or prohibited or limited with respect to access to
services offered by the clearing agency.\36\
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\35\ 15 U.S.C. 78q-1(b)(3)(H) and 15 U.S.C. 78q-1(b)(5)(B).
\36\ 15 U.S.C. 78q-1(b)(5)(B).
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As described in Section II.B.2, OCC proposes changes to the
procedures around the denial of participation whether through the
review of a membership application or disciplinary proceedings.
Regarding the review of applications, the proposed changes explicitly
provide procedures for the request a hearing following denial of an
application as well as how such a hearing would proceed. For example,
the proposed rules require that such a hearing proceed before the Risk
Committee. OCC's proposed changes also include amending Rules 203 and
309 (i.e., OCC's admissions procedures), to cover and encompass
reapplications for Clearing Membership. In addition, the proposed
changes to Rule 203 include amendments that specify in detail the
processes and procedures for requesting a hearing contesting the denial
of a Clearing Membership application or reapplication. The proposed
amendments to the admission procedures serve to provide applicants and
reapplicants an opportunity to be heard upon and explicitly provides
for OCC to keep a record of any such hearing. After a hearing, the
proposed rules would require that OCC produce a written statement
setting forth specific grounds underlying the risk committee's
disapproval decision. More specifically, proposed Rule 203(b)(8)
mirrors proposed Rule 1201(b), which provides the same with respect to
a suspension or expulsion following disciplinary proceedings undertaken
pursuant to Chapter XII.
Likewise, Rule 309(c), as described in Section II.B.1., is
consistent with Section 17A(b)(5)(B) of the Exchange Act. Proposed Rule
309(c) provides that any decision to deny Clearing Membership following
reapplication will be made pursuant to Rule 203. The admission
procedures described in Rule 203 already provide for the requirements
outlined in Section 17A(b)(5)(B) of the Exchange Act, specifically in
proposed Rules 203(b)(3) and (4). OCC's proposed changes to Rule 1201,
which governs sanctions and is described above in Section II.B.2.,
describes, defines and explicitly delineates the universe of sanctions
that OCC may impose on a Clearing Member.
Accordingly, the Proposed Rule Change is consistent with the
requirements of Sections 17A(b)(3)(H) and 17A(b)(5)(B) of the Exchange
Act.\37\
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\37\ 15 U.S.C. 78q-1(b)(3)(H) and 15 U.S.C. 78q-1(b)(5)(B).
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C. Consistency With Section 17A(b)(5)(C) Under the Exchange Act
Section 17A(b)(5)(C) of the Exchange Act authorizes a registered
clearing agency to summarily suspend a participant who: (i) has been
and is expelled or suspended from any SRO; (ii) is in default of any
delivery of funds or securities to the clearing agency; or (iii) is in
such financial or operating difficulty that the clearing agency
determines that suspension of the participant is necessary for the
protection of the clearing agency, its participants, creditors, or
investors.\38\ Section 17A(b)(5)(C) also provides that a summarily
suspended participant shall be promptly afforded an opportunity for a
hearing by the clearing agency in accordance with 17A(b)(5)(A) of the
Exchange Act.\39\
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\38\ 15 U.S.C. 78q-1(b)(5)(C).
\39\ 15 U.S.C. 78q-1(b)(5)(C).
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As described above, OCC proposes to reorganize and amend its rules
pertaining to summary suspension of a Clearing Member. Specifically,
the changes to Rule 1102(a) clarify upon what grounds OCC may summarily
suspend a Clearing Member, by adding a nonexclusive list of scenarios
involving financial or operating difficulty that may serve as grounds
for suspension. The proposed changes would further clarify the current
grounds for suspension related to OCC Rule 707 (i.e., failure to meet
an obligation in respect to cross-margin accounts). The proposed
changes would also add a potential ground for suspension and proposed
Rule 309 (i.e., for Clearing Member who do not meet OCC's membership
standards following reapplication). Further, the proposed changes would
clarify that a summary suspension constitutes a default, following
which OCC would cease to act for the suspended Clearing Member.
Accordingly, the proposed changes to Chapter XI of OCC's Rules are
consistent with the requirements of Section 17A(b)(5)(C) of the
Exchange Act.\40\
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\40\ 15 U.S.C. 78q-1(b)(5)(C).
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D. Consistency With Rule 17ad-22(e)(18) Under the Exchange Act
Rule 17ad-22(e)(18) under the Exchange Act requires a clearing
agency, in part, to ``[e]stablish objective, risk-based, and publicly
disclosed criteria for participation'' that ``require participants to
have sufficient financial resources and robust operational capacity to
meet obligations arising from participation in the clearing agency''
and ``monitor compliance with such participation requirements on an
ongoing basis.'' \41\
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\41\ 17 CFR 240.17ad-22(e)(18).
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As discussed above, Section 17A(b)(4)(B) of the Exchange Act, the
Proposed Rule Change would expand OCC's existing financial and
operational membership standards to address specific risks such as
allowing OCC to set higher capital requirements where a member has an
inadequate liquidity profile. The proposed changes to Rules 204(g) and
302(b) allowing for on-site visits by OCC would facilitate OCC's
ability to monitor for compliance with its participation requirements.
Similarly, the proposed changes to Rules 306B, 307, 307B and 307C
provide for additional notification and reporting requirements that
support OCC's monitoring of its members as well as protective measures
OCC may impose. Protective measures such as restricting transactions
that pose additional risk or increasing operation, personnel, financial
resource and risk management requirements would support OCC's ability
to set membership requirements aimed to ensure that participants to
have sufficient financial resources and robust operational capacity to
meet obligations arising out of clearing transactions with OCC.
Accordingly, the Proposed Rule Change is consistent with the
requirements of Rule 17ad-22(e)(18).\42\
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\42\ 17 CFR 240.17ad-22(e)(18).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
Proposed Rule Change is consistent with the requirements of the
Exchange Act, and in particular, with the requirements of Sections
17A(b)(3)(F),\43\ 17A(b)(3)(H),\44\ 17A(b)(4)(B),\45\ and 17A(b)(5)(B)
\46\ of the
[[Page 67368]]
Exchange Act, and Rule 17ad-22(e)(18) \47\ thereunder.
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\43\ 15 U.S.C. 78q-1(b)(3)(F).
\44\ 15 U.S.C. 78q-1(b)(3)(H).
\45\ 15 U.S.C. 78q-1(b)(4)(B).
\46\ 15 U.S.C. 78q-1(b)(5)(B).
\47\ 17 CFR 240.17ad-22(e)(18).
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It is therefore ordered pursuant to Section 19(b)(2) of the
Exchange Act \48\ that the proposed rule change (SR-OCC-2026-009) be,
and hereby is, approved.\49\
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\48\ 15 U.S.C. 78s(b)(2).
\49\ In approving the Proposed Rule Change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
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\50\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-21735 Filed 10-23-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on October 26, 2026.
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