[Federal Register Volume 78, Number 120 (Friday, June 21, 2013)]
[Notices]
[Pages 37640-37642]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-14791]


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SECURITIES AND EXCHANGE COMMISSION

[(Release No. 34-69771; File No. SR-OCC-2013-09]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
1, To Separate the Powers and Duties Currently Combined in the Office 
of OCC's Chairman Into Two Offices, Executive Chairman and President, 
and Create an Additional Directorship To Be Occupied by the President

June 17, 2013.
    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 June 4, 2013, The Options Clearing Corporation (``OCC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by OCC. On June 10, 2013, OCC filed Amendment No. 1 to the 
proposed rule change.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as modified by Amendment 
No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 modified Exhibit 3A to the original filing 
to correct an erroneous reference contained therein.
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    OCC proposes to separate the powers and duties currently combined 
in the office of OCC's Chairman into two offices, Executive Chairman 
and President, and create an additional directorship to be occupied by 
the President.

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

    The purpose of this proposed rule change is to provide for 
separation of the powers and duties currently combined in the office of 
OCC's Chairman into two offices, Executive Chairman and President, and 
create an additional directorship to be occupied by the President. 
These changes resulted from a review of the structure of OCC's Board, 
with particular consideration given to the trend in many corporations 
toward separating the positions of Chief Executive Officer and Chairman 
of the Board. OCC's Board of Directors ultimately determined that as a 
corporate governance matter dividing the powers and duties of the 
Chairman into two positions was desirable. Under the proposal, the 
Executive Chairman would be responsible for the control functions of 
OCC, including enterprise risk management, internal audit and 
compliance, as well as for external affairs, and for presiding at all 
meetings of the Board and the stockholders. The President would report 
to the Chairman and be responsible for all aspects of OCC's business 
that do not report directly to the Chairman. OCC intends that the 
President, who would be OCC's Chief Executive Officer,\4\ would focus 
on the effectiveness of OCC's day-to-day operations, as well as 
strategic initiatives for the future, while the Chairman would provide 
objective oversight over the entire organization, including the 
President.
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    \4\ While the By-Laws would make it clear that the President is 
OCC's Chief Executive Officer, for simplicity the officer in 
question would be referred to only as the ``President.''
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    OCC believes that the proposed change would enhance oversight of 
management because the Chairman will be independent of most management 
functions. The separation would also avoid concentrating too much power 
over OCC's operations in the hands of a single individual, and heighten 
accountability of management to the Board. Furthermore, the Board of 
Directors found that separation of these offices would better align 
OCC's governance structure with global standards for financial services 
organizations.
    While OCC's Board of Directors determined that its Chairman should 
no longer function as its chief executive officer, in light of OCC's 
status as a registered clearing organization and designated clearing 
organization, it concluded that the Chairman should have executive 
responsibilities relating to risk management, compliance and similar 
issues. The Board of Directors believes that the Chairman's direct 
oversight of these control functions will increase independence by 
limiting management's influence over them.\5\ The Board also believes 
that the significance of these control functions for a clearing 
organization warrants full-time oversight, which can only be provided 
by an executive of OCC.
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    \5\ The proposed structure of OCC's Board, including the 
utilization of an executive chairman, is similar to that employed by 
the Depository Trust & Clearing Corporation and CME Group Inc. See 
Article III of the Depository Trust & Clearing Corporation's By-
Laws, effective April 2012, available at http://www.dtcc.com/legal/rules_proc/dtc_rules.pdf, and Article V of CME Group Inc.'s Tenth 
Amended and Restated By-Laws, effective as of April 17, 2013, 
available at http://investor.cmegroup.com/investor-relations/groupBylaws.cfm).
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    To reflect the above changes in its governance structure, OCC is 
proposing to revise Section 7 of Article III of its By-Laws to include 
OCC's President as a Management Director, along with OCC's Chairman. 
Accordingly, Sections 1, 7 and 12 of Article III will also be amended 
to reflect the existence of an additional Management Director. 
Furthermore, OCC proposes to amend Section 15 of Article III to grant 
the President the same authority to act in the case of an emergency as 
the Chairman and, consequently, OCC also proposes to remove the 
President as one of the ``Designated Officers'' to whom such authority 
would devolve if certain enumerated officers are unavailable. Section 3 
of Article III would also be amended to clarify the timing of the 
annual meetings at which the initial election of each class of Member 
Directors in fact occurred.
    OCC is proposing to revise Article IV of its By-Laws to include 
references to the President in certain provisions governing OCC's 
officers. In particular, Section 8 of Article IV would no longer give 
the Board the option of electing a President, but would make such 
office required, and, accordingly, Section 1 of Article IV would 
include the President, along with the Chairman, as an officer elected 
by the Board of Directors. Sections 6 and 8 would also be amended to 
specify the Chairman's duties and the President's duties, respectively, 
as described above. OCC also proposes to amend Sections 2, 3 and 13 of 
Article IV to provide that, like the Chairman, the President may 
appoint and remove certain officers and

[[Page 37641]]

agents to carry out the functions assigned to him and may determine the 
salaries of these appointees and agents. Finally, OCC is proposing to 
amend Sections 7 and 9 to add references to the President, in addition 
to the Chairman, when referencing the highest-ranking officers of OCC.
Amendments to Certificate of Incorporation and Stockholders Agreement
    OCC is proposing to amend Articles IV and V of its Certificate of 
Incorporation to reflect the existence of an additional Management 
Director.\6\ OCC is also proposing to amend Sections 2 and 3 of the 
Stockholders Agreement to provide for the election of the President, in 
addition to the Chairman, as a Management Director.\7\
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    \6\ See the proposed Fifth Certificate of Amendment of Restated 
Certificate of Incorporation of the Options Clearing Corporation, 
attached hereto as Exhibit 3A.
    \7\ See Amendment No. 10 to the Stockholders Agreement, attached 
hereto as Exhibit 3B.
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Effect on Clearing Members
    The proposed rule change relates to OCC governance issues. OCC 
believes that it would affect all clearing members equally, and that it 
would not impose any compliance burdens on clearing members.
Notice of Implementation
    Following approval of this rule change by the Commission, OCC 
expects to provide notice to its clearing members of the date on which 
it intends to implement this rule change by separating the powers and 
duties of OCC's Chairman into two offices and creating the additional 
directorship. Such notice will be provided to clearing members through 
an information memo posted on OCC's Web site. The implementation of the 
rule change will occur no later than December 31, 2013.
    OCC believes that the proposed rule change is consistent with 
Section 17A of the Act \8\ and the rules and regulations thereunder, 
including Rule 17Ad-22(d)(8), because the proposed modifications would 
help ensure that the rules of OCC are designed to protect investors and 
the public interest \9\ and that OCC's governance arrangements are 
clear and transparent, fulfill the public interests requirements in 
Section 17A, support the objectives of owners and participants and 
promote the effectiveness of OCC's risk management procedures \10\ by 
separating the powers and duties currently combined in the office of 
Chairman into two offices.
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    \8\ 15 U.S.C. 78q-1.
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ 17 CFR 240.17Ad-22(d)(8).
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(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose a 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.\11\ With respect to any burden 
on competition among clearing agencies, OCC is the only clearing agency 
that performs central counterparty services for the options markets.
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    \11\ 15 U.S.C. 78q-1(b)(3)(I).
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    Changes to the rules of a clearing agency may have an impact on the 
participants in a clearing agency and the markets that the clearing 
agency serves. However, this proposed rule change primarily affects OCC 
in that it separates the powers and duties of the office of OCC's 
Chairman into two offices and creates an additional directorship. OCC 
does not believe that these changes with respect to governance would 
disparately treat any clearing member or group of clearing members or 
otherwise disparately affect access to or use of any of OCC's 
facilities or disadvantage or favor any user in relationship to any 
other such user. In this connection, OCC notes that the provision of 
Section 1 of Article III of the By-Laws that requires that the number 
of Member Directors must exceed the sum of the number of Exchange 
Directors and the number of Public Directors by at least one is not 
being changed as a result of the proposed rule change. In addition, OCC 
believes that the proposed rule change would in fact allow OCC's Board 
to supervise management more effectively and thereby help ensure 
against any particular clearing member's exercising undue influence 
over management to the detriment of other clearing members.
    For the foregoing reasons, OCC believes that the proposed rule 
change is in the public interest, that it would promote transparency, 
fairness and competition in the options markets served by OCC, and it 
would not impose any burden on competition that is unnecessary or 
inappropriate in furtherance of the purposes of the Act.\12\
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    \12\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    Written comments on the proposed rule change 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.

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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-OCC-2013-09 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549.

All submissions should refer to File Number SR-OCC-2013-09. 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.,

[[Page 37642]]

Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing, and the amendment 
thereto, also will be available for inspection and copying at the 
principal office of OCC and on OCC's Web site: http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_13_09.pdf.http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_13_09_a1.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-2013-09 
and should be submitted on or before July 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-14791 Filed 6-20-13; 8:45 am]
BILLING CODE 8011-01-P