[Federal Register Volume 80, Number 51 (Tuesday, March 17, 2015)]
[Notices]
[Pages 13936-13938]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-06019]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74476; File No. SR-OCC-2015-005]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Concerning the Account From Which Certain Clearing Members May Fund the 
Additional Margin Requirement Associated With Overnight Trading 
Sessions

March 11, 2015.
    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 February 26, 2015, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared 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 by The Options Clearing Corporation 
(``OCC'') would permit an OCC clearing member that is a registered 
futures commission merchant (``FCM'') that has been

[[Page 13937]]

approved to clear customer futures transaction, but that has not been 
approved to clear proprietary futures transactions, to participate in 
overnight trading sessions by allowing such a clearing member to post 
additional margin equal to the lesser of $10 million or 10% of the 
clearing member's net capital (``Additional Margin'') with OCC in the 
clearing member's customer segregated futures account instead of its 
proprietary account.

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
    This proposed rule change would permit an OCC clearing member that 
is a registered FCM that has been approved to clear futures customer 
transactions, but that has not been approved to clear proprietary 
futures transactions (i.e., is not authorized to maintain a firm 
account with OCC), to participate in overnight trading sessions by 
depositing the Additional Margin required to participate in overnight 
trading sessions in the clearing members' segregated futures account at 
OCC, instead of requiring such a clearing member to establish and 
maintain a proprietary account solely for this purpose.
    By way of background, OCC recently submitted a proposal to the 
Commission that allows for the clearance of confirmed trades that are 
executed in overnight trading sessions and are offered by exchanges for 
which OCC provides clearance and settlement services (``Prior 
Filing'').\3\ Pursuant to the Prior Filing, OCC would impose an 
Additional Margin requirement on clearing members eligible to 
participate in overnight trading sessions. The Prior Filing states that 
the Additional Margin must be posted by participating clearing members 
in their proprietary account. The Additional Margin requirement is 
designed to ensure that, if a clearing member's credit risk increases 
during an overnight trading session, OCC will have access to the 
Additional Margin notwithstanding that OCC will not be able to draft a 
clearing member's bank account for funds because settlement banks are 
closed during overnight hours.\4\ OCC believes that requiring clearing 
members that are registered FCMs, and are only approved to carry 
customer accounts, to establish and maintain proprietary accounts 
solely for the purpose of posting Additional Margin to participate in 
overnight trading sessions would be an inefficient use of OCC's and the 
clearing members' resources and would lead to unnecessary operational 
complexity.
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    \3\ See Securities Exchange Act Release No. 74268 (February 12, 
2015), 80 FR 8917 (February 19, 2015) (SR-OCC-2014-24). See also 
Securities Exchange Act Release No. 74241 (February 10, 2015), 80 FR 
8383 (February 17, 2015) (SR-OCC-2014-812). This rule change has 
been approved by the Commission. OCC implemented the Prior Filing on 
March 2, 2015.
    \4\ Additional details about such Additional Margin, including 
the manner in which OCC will calculate the required amount of 
Additional Margin, are included in the Prior Filing.
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    A small number of OCC clearing members are registered FCMs that 
only carry customer accounts and therefore do not currently maintain a 
proprietary account at OCC. Pursuant to the Prior Filing, if an FCM 
that only carries customer accounts wants to participate, or continue 
participating,\5\ in overnight trading sessions it must establish a 
proprietary account at OCC solely for the purpose of posting Additional 
Margin. Such an FCM would be required to go through the process that 
OCC clearing members must complete in order to be approved to maintain 
a proprietary account that, by the nature of FMC business, would not 
carry positions.\6\ Additionally, in the event of a clearing member 
default, all or a portion of the Additional Margin would be transferred 
from the defaulting clearing member's proprietary account to its 
customer segregated futures account. These additional steps would not 
be required if the clearing member posts Additional Margin in its 
customer segregated futures account. Therefore, OCC is proposing to 
allow FCMs participating in overnight trading sessions that do not 
currently maintain a proprietary account at OCC to post any required 
Additional Margin in their customer segregated futures account.
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    \5\ Several OCC clearing members that are FCMs that only carry 
customer accounts have been participating in overnight trading 
sessions on CBOE Futures Exchange, LLC.
    \6\ See OCC By-Laws Article V, section 1. In order to be 
approved for a proprietary account, FCMs would subject to OCC's 
business expansion process that takes approximately three months to 
complete.
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    OCC is not proposing to alter in any way the manner in which 
Additional Margin is calculated or any other procedures governing 
overnight trading sessions. Rather, OCC is only proposing to allow FCM 
clearing members that do not maintain proprietary accounts with OCC to 
deposit Additional Margin in a customer segregated futures account.\7\ 
Moreover, the proposed rule change would not increase risk presented to 
OCC because, in the case of FCM clearing members that do not maintain 
proprietary accounts with OCC, all positions of the clearing member 
cleared by OCC would be held in the customer segregated futures 
account.

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    \7\ Under the Prior Filing, because the Additional Margin would 
be deposited in respect of a proprietary account, the source of the 
Additional Margin would by necessity consist of proprietary funds. 
Under the proposed rule change the source of the Additional Margin 
could be customer funds to the extent permitted by applicable 
regulations.
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2. Statutory Basis

    OCC believes that the proposed rule change is consistent with 
section 17A(b)(3)(F) of the Securities Exchange Act of 1934, as amended 
(the ``Act''),\8\ because it would protect investors and the public 
interest by permitting customers of FCMs that do not maintain 
proprietary accounts at OCC with the ability to participate in 
overnight trading sessions. As described above, pursuant to the Prior 
Filing, FCM clearing members that do not maintain proprietary accounts 
with OCC would be required to establish a proprietary account in order 
to participate, or continue participating, in overnight trading 
sessions. Since these FCMs do not maintain proprietary accounts with 
OCC, their participation in overnight trading sessions is necessarily 
on behalf of their customers. OCC believes that these FCM clearing 
members may cease participating in overnight trading sessions on behalf 
of their customers if they were required to take the steps necessary to 
establish and maintain a proprietary account solely for the purposes of 
participating in overnight trading sessions for their customers. OCC 
believes that preventing this outcome, while still requiring the 
Additional Margin to cover potential increased credit risk during 
overnight trading sessions, protects investors engaging in overnight 
trading sessions and furthers the public interest of permitting FCM 
customers to continue to avail themselves of overnight trading 
sessions. As mentioned above, the proposed rule change does not affect 
the protections afforded by the Additional Margin, because the manner 
in which Additional Margin is calculated is not

[[Page 13938]]

proposed to be changed, and OCC is not proposing to change any other 
aspect of its procedures governing overnight trading, which have 
previously been approved by the Commission. Finally, the proposed 
change is not inconsistent with the existing rules of OCC, including 
any other rules proposed to be amended.
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    \8\ 15 U.S.C. 78q-1(b)(3)(F).
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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.\9\ The proposed rule change concerns operational 
changes that are designed to reduce OCC's exposure to risk as a result 
of clearing member activities during overnight trading sessions and is 
protective in nature. This change will be applied uniformly across all 
clearing members participating in overnight trading sessions. 
Accordingly, OCC does not believe that the proposed rule change would 
impose a burden on competition.
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    \9\ 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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act and paragraph (f) of Rule 19b-4 thereunder. At 
any time within 60 days of the filing of the proposed rule change, the 
Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

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-2015-005 on the subject line.

Paper Comments

     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-2015-005. 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 Section, 100 F Street 
NE., Washington, DC 20549, on official business days between the hours 
of 10:00 a.m. and 3:00 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_15_005.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-2015-005 
and should be submitted on or before April 7, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-06019 Filed 3-16-15; 8:45 am]
 BILLING CODE 8011-01-P