[Federal Register Volume 77, Number 22 (Thursday, February 2, 2012)]
[Notices]
[Pages 5284-5285]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-2288]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66266; File No. SR-OCC-2012-01]


 Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change Relating to Public Directors

January 27, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that 
on January 20, 2012, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change 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. Self-Regulatory Organization's Statement of Terms of Substance of 
the Proposed Rule Change

    The proposed rule change would modify the corporate governance 
structure of OCC by (i) increasing the number of public directors on 
the Board from one to three and (ii) adding a public director to the 
Nominating Committee.

II. Self-Regulatory Organization's Statement of Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, OCC included statements 
concerning the purpose 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 such statements.

A. Self-Regulatory Organization's Statement of Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of this proposed rule change is to modify the corporate 
governance structure of OCC by (i) increasing the number of public 
directors on the Board from one to three and (ii) adding a public 
director to the Nominating Committee. OCC believes that the proposed 
changes will be beneficial as a matter of good corporate governance. In 
addition, OCC is proposing a nonsubstantive amendment to both the By-
Laws and the Certificate of Incorporation to remove obsolete provisions 
relating to Directors elected prior to 1999 that no longer have any 
effect.
I. Background
    The OCC Board currently has 16 members consisting of nine Clearing 
Member directors (``Member Directors''), five directors nominated by 
the stockholder exchanges (``Exchange Directors''), one director who is 
not affiliated with any national securities exchange, national 
securities association or broker or dealer in securities (``Public 
Director''), and the Chairman of the Board, who is the Management 
Director. See Article II, Section 7 of OCC's By-Laws. Member Directors 
are divided into three equal classes elected for staggered three-year 
terms and are nominated by the Nominating Committee. Each Exchange 
Director serves a one-year term and is nominated by one of the five 
stockholder exchanges although a single Exchange Director may represent 
more than one exchange. The Public Director serves a three-year term 
and is nominated by the Chairman with the approval of the Board. The 
Management Director serves a one-year term. Section 1 and Section 3 of 
Article III of the By-Laws generally provide that if the combined 
number of Exchange Directors and the Public Director exceeds eight, the 
number of Member Directors will be increased to exceed the combined 
number of Exchange Directors and the Public Director by at least two 
Member Directors.
    The Nominating Committee is composed of six members who are divided 
into two equal classes elected for staggered two-year terms. Prior to 
each annual meeting of stockholders, the Nominating Committee nominates 
a slate of nominees for election to the class of Member Directors and 
to the class of Nominating Committee members whose terms expire at that 
meeting. In selecting such nominees, the Nominating Committee seeks to 
achieve balanced representation among Clearing Members, giving due 
consideration to the various business activities of different 
categories of Clearing Members and their geographical distribution.
    This governance structure was carefully designed to meet the 
statutory

[[Page 5285]]

requirements of ``fair representation'' of OCC stockholders and 
Clearing Members in the selection of directors and administrators of 
OCC's affairs, and to facilitate the performance of the Corporation's 
role as a market utility.
2. Proposed By-Law Changes
    Article III of OCC's By-Laws governs the composition of the Board, 
the qualifications of directors and the procedures for nominating and 
electing directors. OCC proposes to amend Article III such that, 
beginning with OCC's 2012 annual meeting, the number of Public 
Directors on the Board will be increased from one to three. The Public 
Directors will be divided into three equal classes, will be elected for 
staggered three-year terms, and will continue to be nominated by the 
Chairman with the approval of the Board of Directors. Accordingly, OCC 
proposes to remove reference to the two-year term of office for Public 
Directors elected prior to 1999, which references will no longer be 
applicable to any Public Director. OCC proposes to amend Section 1 and 
Section 3 of Article III of the By-Laws to provide that the number of 
Member Directors will generally exceed the combined number of Exchange 
Directors and Public Directors by one Member Director (presently by two 
Member Directors) if the combined number of Exchange Directors and 
Public Directors exceeds nine (presently eight) in order to accommodate 
the increased number of Public Directors without automatically 
requiring a further increase in the number of Member Directors. 
Additionally, OCC proposes to increase the number of members of the 
Nominating Committee from six to seven by adding a Public Director 
member. The Public Director member of the Nominating Committee will be 
nominated by the Chairman with the approval of a majority of the Board 
and will serve a three-year term. A vacancy in the position of Public 
Director member of the Nominating Committee will be filled with another 
Public Director by a majority vote of the directors then in office.
3. Proposed Amendment to OCC's Certificate of Incorporation
    OCC also intends to make amendments to the provision of OCC's 
Certificate of Incorporation governing Directors to (i) remove 
reference to the term of office of Public Directors elected prior to 
1999 and (ii) provide that Public Directors may only be removed from 
office for cause. The proposed amendments to OCC's Certificate of 
Incorporation are included as Exhibit 5 to OCC's filing.

Effectiveness of Proposed Rule Change

    OCC will delay effectiveness of the proposed rule change following 
Commission approval until the proposed amendments to OCC's Certificate 
of Incorporation are filed with the Secretary of State of Delaware.
* * * * *
    The proposed changes to OCC's By-Laws are consistent with the 
purposes and requirements of Section 17A of the Act because by 
enhancing the corporate governance structure of OCC through the 
addition of two Public Directors and the addition of a Public Director 
to the Nominating Committee they are designed to better protect 
investors and the public interest. The proposed rule change is not 
inconsistent with any rules of OCC, including any proposed to be 
amended.

B. Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any 
burden on competition.

C. Self-Regulatory Organization'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 the proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 may be submitted by using the 
Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml), or send an email to [email protected]. Please include 
File No. SR-OCC-2012-01 on the subject line.
     Paper comments should be sent in triplicate to Elizabeth 
M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-OCC-2012-01. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of OCC and on OCC's Web 
site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_12_01.pdf. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly.
    All submissions should refer to File Number SR-OCC-2012-01 and 
should be submitted on or before February 23, 2012.


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-2288 Filed 2-1-12; 8:45 am]
BILLING CODE 8011-01-P