[Federal Register Volume 81, Number 117 (Friday, June 17, 2016)]
[Notices]
[Pages 39732-39736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14315]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78056; File No. SR-OCC-2016-004]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Instituting Proceedings To Determine Whether To Approve or 
Disapprove a Proposed Rule Change Related to the Adoption of an Options 
Exchange Risk Control Standards Policy

June 13, 2016.

I. Introduction

    On March 4, 2016, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission''), pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to adopt a new 
Options Exchange Risk Control Standards Policy and revise its Schedule 
of Fees to impose on clearing members a fee of two cents per cleared 
options contract (per side) executed on an options exchange that did 
not demonstrate sufficient risk controls designed to meet the proposed 
set of principles-based risk control standards. The proposed rule 
change was published for comment in the Federal Register on March 18, 
2016.\3\ The Commission received six comment letters on the proposed 
rule change.\4\ On April 27, 2016, the Commission designated a longer 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
approve or

[[Page 39733]]

disapprove the proposed rule change.\5\ This order institutes 
proceedings under Section 19(b)(2)(B) of the Act \6\ to determine 
whether to approve or disapprove the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 34-77358 (March 14, 
2016), 81 FR 14921 (March 18, 2016) (File No. SR-OCC-2016-004) 
(``Notice'').
    \4\ See Letters from Mark Dehnert, Managing Director, Goldman 
Sachs & Co., and Kyle Czepiel, Co-Chief Executive Officer, Goldman 
Sachs Execution & Clearing, L.P. (collectively, ``Goldman Sachs''), 
dated March 28, 2016, to Secretary, Commission (``Goldman Sachs 
Letter''); Lisa J. Fall, President, BOX Options Exchange (``BOX''), 
dated April 6, 2016, to Brent J. Fields, Secretary, Commission 
(``BOX Letter''); James G. Lundy, Associate General Counsel, ABN 
AMRO Clearing Chicago LLC (``AACC''), dated April 8, 2016, to Brent 
J. Fields, Secretary, Commission (``AACC Letter''); Ellen Greene, 
Managing Director, Securities Industry and Financial Markets 
Association (``SIFMA''), dated April 12, 2016, to Robert W. Errett, 
Deputy Secretary, Commission (``SIFMA Letter''); Michael J. Simon, 
Secretary and General Counsel, International Securities Exchange, 
LLC (``ISE''), dated April 20, 2016, to Brent J. Fields, Secretary, 
Commission(``ISE Letter''); and Edward T. Tilly, Chief Executive 
Officer, Chicago Board Options Exchange, Inc. (``CBOE''), dated 
April 20, 2016, to Brent J. Fields, Secretary, Commission (``CBOE 
Letter'').
    \5\ See Securities Exchange Act Release No. 77720 (April 27, 
2016), 81 FR 26609 (May 3, 2016).
    \6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    OCC proposes to adopt a new Options Exchange Risk Control Standards 
Policy (``Policy'') for addressing the potential risks arising from 
erroneous trades executed on an options exchange that has not 
demonstrated the existence of certain risk controls that are consistent 
with a set of principles-based risk control standards developed by OCC. 
Among other things, the proposed rule change would establish risk 
control standards and require each options exchange to submit an annual 
certification, attesting that it has sufficient risk controls 
consistent with OCC's Policy.
    The proposed rule change also would revise OCC's Schedule of Fees, 
in accordance with the proposed Policy, to charge and collect from 
clearing members a fee of two cents per cleared options contract (per 
side) (``Fee'') executed on an options exchange that has not 
demonstrated to OCC that it has implemented sufficient controls 
designed to meet OCC's proposed Policy. The proposed rule change would 
require that any funds collected from the Fee be retained as earnings 
and, as such, be eligible for use for clearing member defaults under 
Article VIII, Section 5(d) of OCC's By-Laws,\7\ but would prohibit such 
funds from being used for any other purpose. These funds would be 
available for use by OCC, subject to the unanimous approval from its 
Class A and B common stock shareholders, in accordance with Article 
VIII, Section 5(d) of OCC's By-Laws.\8\
---------------------------------------------------------------------------

    \7\ Under Article VIII, Section 5(d) of OCC's By-Laws, usage of 
current or retained earnings may be considered after the defaulting 
clearing member's margin has been exhausted, and it may be used to 
reduce in whole or in part the pro rata contribution otherwise made 
from the Clearing Fund to cover the loss.
    \8\ See Article VIII, Section 5(d).
---------------------------------------------------------------------------

Risk Control Standards

    The proposed Policy includes the risk control standards to which an 
options exchange must attest in order to avoid the Fee charged on 
trades executed on its own platform. According to OCC, the proposed 
risk control standards were developed by OCC in consultation with the 
options exchanges and are designed to provide flexibility for each 
options exchange to develop specific risk controls that best suit its 
own marketplace while still guarding against risks related to erroneous 
transactions. The proposed Policy would include the following 
categories of risk controls: ``Price Reasonability Checks,'' \9\ 
``Drill-Through Protections,'' \10\ ``Activity-Based Protections,'' 
\11\ and ``Kill-Switch Protections.'' \12\
---------------------------------------------------------------------------

    \9\ According to OCC, Mandatory Price Reasonability Checks would 
prevent limit orders, complex orders, and market maker quotes from 
being entered and displayed on an options exchange if the price on 
such order or quote is outside a defined threshold set in relation 
to the current market price or National Best Bid or Offer 
(``NBBO'').
    \10\ OCC states that Drill-Through Protections are closely 
related to Price Reasonability Checks and would require all orders, 
including market orders, limit orders, and complex orders, to be 
executed within pre-determined price increments of the NBBO.
    \11\ OCC explains that Activity-Based Protections would extend 
an options exchange's Risk Controls to factors beyond price and are 
most commonly designed to address risks associated with a high 
frequency of trades in a short period of time. OCC notes that 
Activity-Based Protections may address the maximum number of 
contracts that may be entered as one order, the maximum number of 
contacts that may be entered or executed by one firm over a certain 
period of time, and the maximum number of messages that may be 
entered over a certain period of time.
    \12\ According to OCC, Kill-Switch Protections would provide 
options exchanges, and their market participants, with the ability 
to cancel existing orders and quotes and/or block new orders and 
quotes on an exchange-wide or more tailored basis (e.g., symbol 
specific, by Clearing Member, etc.) with a single message to the 
options exchange after established trigger events are detected. 
According to OCC, a trigger event may include a situation where a 
market participant is disconnected from an options exchange due to 
an abnormally large order or manual errors in the system by a market 
participant causing multiple erroneous trades to occur.
---------------------------------------------------------------------------

Certification Process

    Under the proposed rule change, each options exchange would certify 
to OCC that it has implemented risk controls consistent with OCC's 
Policy using a designed form, which must be signed by an executive 
officer. OCC would then evaluate each options exchange's risk controls 
for compliance with OCC's Policy by reviewing each options exchange's 
certification and supporting materials, including, but not be limited 
to, its proposed rule changes filed with the Commission, approved 
rules, information circulars, and written procedures.
    If OCC \13\ is unable to determine that an options exchange has 
risk controls sufficient to meet the Policy, OCC would furnish the 
options exchange with a concise written statement of the reasons as 
soon as reasonably practicable and the options exchange would have 30 
calendar days following receipt of the concise written statement to 
present further evidence of its sufficient risk controls to OCC. After 
submission of any further evidence by the options exchange, OCC would 
have 30 days to conduct a second review and make a recommendation to 
OCC's Risk Committee \14\ regarding whether the options exchange has 
sufficient risk controls. Within 30 days of receiving the 
recommendation, OCC's Risk Committee would review the recommendation 
and the options exchange's supporting materials, as appropriate, to 
determine whether the options exchange has risk controls sufficient to 
meet the Policy. OCC would furnish the options exchange with a concise 
written statement of the Risk Committee's determination and the reasons 
for such determination as soon as reasonably practicable following the 
Risk Committee's review.
---------------------------------------------------------------------------

    \13\ OCC does not specify in the proposed rule change which part 
of OCC would be responsible for evaluating certifications.
    \14\ OCC's Risk Committee is chaired by a public Director and it 
does not currently have an options exchange representative. In the 
event OCC's Risk Committee has an exchange representative at some 
time in the future, such exchange representative would be recused 
from a decision on the appeal of a determination of an options 
exchange's compliance with the Policy.
---------------------------------------------------------------------------

    On June 30 of each year (following the effective date of the 
proposed rule change), OCC would post a notice to its Web site to which 
clearing members (but not the general public) have access, with respect 
to each options exchange, whether: (1) The options exchange has 
implemented sufficient risk controls to meet the Policy (``Compliant 
Options Exchange''); (2) OCC was unable to determine the options 
exchange has sufficient risk controls that meet the Policy (``Non-
Compliant Options Exchange''); or (3) a certification has not been 
submitted by the options exchange.

Collection of Proposed Fee

    Beginning on the first business day that is at least 60 days after 
OCC posts such notice, OCC would charge and collect the Fee for trades 
executed on a Non-Compliant Options Exchange. The Fee would continue to 
be charged to and collected from clearing members, and the notice would 
remain posted on OCC's Web site to which clearing members (but not the 
general public) have access, until the options exchange is able to 
demonstrate that its risk controls satisfy the Policy.
    Under the proposed rule change, any funds collected from the Fee 
would be retained as earnings and, as such, be eligible for use for 
clearing member defaults under Article VIII, Section 5(d)

[[Page 39734]]

of OCC's By-Laws,\15\ but such funds would be prohibited from being 
used for any other purpose. These funds would be available for use by 
OCC, subject to the unanimous approval from its Class A and B common 
storck shareholders, in accordance with Article VIII, Section 5(d) of 
OCC's By-Laws.\16\
---------------------------------------------------------------------------

    \15\ See Article VIII, Section 5(d).
    \16\ Id.
---------------------------------------------------------------------------

Exception and Escalation Processes

    The proposed Policy also provides that, on rare occasions, OCC may 
grant exceptions to the Policy to appropriately address immediate 
business issues and provides for an escalation process to report 
breaches of the Policy.\17\
---------------------------------------------------------------------------

    \17\ OCC does not provide additional information in the proposed 
rule change regarding its process for granting exceptions and which 
part of OCC would be responsible for granting such exceptions, aside 
from identifying who must approve exceptions and be notified 
exceptions to the Policy.
---------------------------------------------------------------------------

III. Summary of Comment Letters

    The Commission received six comment letters in response to the 
proposed rule change.\18\ Five comment letters were written in support 
of the proposed rule change and one comment letter from BOX, objecting 
to the proposed rule change. The supporting comment letter from ISE 
also responded to BOX's objections.
---------------------------------------------------------------------------

    \18\ See supra note 4.
---------------------------------------------------------------------------

A. Supporting Comments

    Five commenters, Goldman Sachs, AACC, SIFMA, CBOE and ISE, 
submitted comment letters in support of the proposed rule change. All 
of these commenters express concern regarding the risk that erroneous 
trades may pose to the listed-options market and its participants. Each 
of these commenters support effective risk management controls by an 
options exchange to minimize the risk of erroneous trades and the 
attendant consequences. Recognizing the role OCC plays in the listed-
options market, these commenters state that OCC's proposed rule change 
would minimize the likelihood of erroneous trades occurring and reduce 
risk \19\ by incentivizing options exchanges to create risk 
controls.\20\ One commenter states that because clearing members 
guarantee the clearance and settlement of trades by their clients, it 
is critical for clearing member risk management purposes that there be 
robust and centralized risk controls at the options exchanges.\21\
---------------------------------------------------------------------------

    \19\ See CBOE Letter, supra note 4, at 1; SIFMA Letter, supra 
note 4, at 2.
    \20\ See Goldman Letter, at 2 (stating that OCC's rule will 
provide appropriate and necessary incentives to create necessary 
risk controls at all Options Exchanges.); SIFMA Letter, at 2 
(stating that the proposed rule change provides strong incentives 
for Options Exchanges to comply with risk control standards in the 
Policy since an exchange's non-compliance will be ``punitive'' to 
clearing members transacting on that exchange.); AACC Letter, supra 
note 4, at 1 (supporting the use of a fee to incentivize Options 
Exchanges to adopt and maintain risk controls that are consistent 
with the risk control standards in the Policy and the use of the fee 
to provide additional funds for OCC to manage the increased risk and 
to cover the potential losses caused by erroneous or violative 
transactions); ISE Letter, supra note 4, at 4 (stating that the Fee 
was added to provide ``strong encouragement to the options exchanges 
to comply with the Policy).
    \21\ See Goldman Letter, supra note 4, at 2.
---------------------------------------------------------------------------

    In addition to expressing general support for the objective of the 
proposed rule change, commenters also support specific aspects of the 
proposed rule change. One commenter supports OCC's principles-based 
approach and states that such approach would allow options exchanges to 
develop specific risk controls in each category best-suited for their 
markets.\22\ Another commenter describes the Policy's certification 
requirement as ``exceedingly reasonable'' and notes that this 
requirement is consistent with certification requirements in other 
areas of the financial services industry, including those instituted by 
the Commission and other self-regulatory organizations, such as 
Financial Industry Regulatory Authority.\23\ According to this 
commenter, OCC's proposed approach for the certification and review 
process would provide reasonable steps for the options exchanges to 
communicate and escalate issues raised by OCC in connection with the 
evaluation of an options exchange.\24\
---------------------------------------------------------------------------

    \22\ See CBOE Letter, supra note 4, at 2.
    \23\ See AACC letter, supra note 4, at 2.
    \24\ Id.
---------------------------------------------------------------------------

    Two commenters reference the relationship between the proposed rule 
change and the existing regulatory framework. One commenter claims that 
the proposed rule change complements Rule 15c3-5 (``Market Access 
Rule'') \25\ under the Act and Regulation Systems Compliance and 
Integrity (``Regulation SCI'') \26\ by providing additional and ``much 
needed layers of protections'' at the options exchange level.\27\ The 
other commenter similarly suggests that the proposed rule change, in 
conjunction with the Market Access Rule, will ``advance a strong, 
centralized structure of risk controls.'' \28\
---------------------------------------------------------------------------

    \25\ See 17 CFR 240.15c3-5.
    \26\ See Securities Exchange Act Release No. 73639 (November 19, 
2014), 79 FR 72252 (December 5, 2014) (Regulation SCI Adopting 
Release).
    \27\ See AACC Letter, supra note 4, at 1.
    \28\ See SIFMA Letter, supra note 4, at 2.
---------------------------------------------------------------------------

    Finally, one commenter provides several recommendations that it 
believes would further improve the proposed rule change. In particular, 
this commenter suggests that the proposed rule change be amended to 
specify that the options exchanges make their risk controls visible and 
transparent to members, trading permit holders, and customers.\29\ For 
the ``backup alternative messaging systems'' that are a part of the 
Kill Switch Protections, the commenter recommends that OCC clarify in 
the proposed rule change that the options exchanges would need to 
provide the methodology, access protocols, controls, and management of 
such systems.\30\ The same commenter urges that the proposed rule 
change be clarified to require options exchanges to bear the full cost 
of the Fee to prevent the options exchanges from passing the cost along 
to their member firms, trading permit holders, and/or customers.\31\
---------------------------------------------------------------------------

    \29\ See AACC Letter, supra note 4, at 2.
    \30\ Id.
    \31\ Id. at 3.
---------------------------------------------------------------------------

B. Objecting Comments

    One commenter, BOX, raises several objections to the proposed rule 
change.
Authority To Prescribe Risk Control for Options Exchanges
    BOX questions whether OCC has the authority generally to prescribe 
risk controls for options exchanges under the Act.\32\ BOX asserts that 
it is unable to find a provision in the Act or otherwise that grants 
OCC with the authority to regulate the options exchanges. Moreover, BOX 
contends that because the U.S. Congress gave the Commission express 
authority under the Act to regulate the national securities exchanges, 
including options exchanges, any industry-wide requirements imposed on 
the options exchanges should be mandated by the Commission, not OCC.
---------------------------------------------------------------------------

    \32\ See BOX Letter, supra note 4, at 2.
---------------------------------------------------------------------------

    BOX also asserts that it is the Commission's role, through the rule 
filing process under Section 19(b) of the Act and the rules and 
regulations thereunder, to determine whether the rules and procedures 
of the individual options exchanges meet the requirements of Section 6 
of the Act. BOX argues that allowing OCC to require options exchanges 
to have certain procedures and rules would give OCC the authority to 
determine the sufficiency of an options exchange's rules thus giving 
OCC the ability to act as a ``de facto regulator'' over the options 
exchanges and, more broadly, the options markets.\33\
---------------------------------------------------------------------------

    \33\ Id. at 2-3.

---------------------------------------------------------------------------

[[Page 39735]]

Burden on Competition
    BOX states that the proposed rule change would impose burdens on 
competition that OCC fails to justify. First, according to BOX, even if 
OCC deems an options exchange to be in compliance with OCC's Policy, a 
substantial burden would be placed on individual options exchanges, 
including, but not limited to, expending initial resources to ensure 
that an exchange has the required risk controls in place and devoting 
resources annually to ensure that the exchange is continually compliant 
with OCC's risk control standards. BOX contends that this burden would 
be especially high for smaller exchanges.
    Second, BOX states that the potential application of an increased 
clearing fee to a single exchange could have devastating effects on 
that exchange's ability to compete in the ``highly competitive 
environment'' in the options market where any increase in fees can make 
``a world of difference.'' \34\ BOX attributes this to the ``direct 
effect it will have on the total transaction cost to market 
participants and the effect it will have on the exchange's revenue.'' 
\35\ BOX asserts that firms would include the Fee in their 
determination of where to route trade orders based upon the total 
transaction costs. As a result, BOX argues that, options exchanges 
would have to decrease all fees by two cents to ``maintain the status 
quo or be at an economic disadvantage to their competition.'' \36\
---------------------------------------------------------------------------

    \34\ Id. at 3-4.
    \35\ Id.
    \36\ Id, at 5. Cf. Another commenter urges that the proposed 
rule change be clarified to require the options exchanges to bear 
the full cost of the Fee (or any increased incentive fee) to prevent 
the options exchanges from passing this increased cost along to 
their member firms, trading permit holders, and/or customers. See 
AACC Letter, supra note 4, at 3.
---------------------------------------------------------------------------

The Proposed Fee is a De Facto Fee on the Options Exchanges 
Inconsistent With Section 17A(b)(3)(D) of the Act
    BOX argues that the charging of an additional fee for transactions 
occurring on a specific exchange is essentially the same as charging a 
fee on the exchange directly and is not consistent with Section 
17A(b)(3)(D) of the Act. It also questions whether OCC is permitted to 
charge different fees for clearing transactions based on the executing 
exchange, which departs from treating all options exchange the 
same.\37\
---------------------------------------------------------------------------

    \37\ See BOX Letter, supra note 4, at 5.
---------------------------------------------------------------------------

C. Comments in Response to BOX

    One commenter, ISE, submitted a comment letter to respond to BOX's 
objections to the proposed rule change.
Authority To Prescribe Risk Control for Options Exchanges
    ISE suggests that BOX's arguments regarding whether OCC has the 
authority to regulate options exchanges lack legal reasoning.\38\ ISE 
argues that the relevant legal question for Commission consideration is 
whether the Act gives OCC authority to adopt the Policy, which, 
according to ISE it does. Moreover, ISE contends that, as the sole 
registered clearing agency for all listed options transactions and a 
systemically important financial market utility, risks that arise from 
erroneous transactions are exactly the risks that OCC has authority to 
address under Section 17A of the Act.\39\
---------------------------------------------------------------------------

    \38\ See ISE Letter, supra note 4, at 2.
    \39\ Id. at 2.
---------------------------------------------------------------------------

Burden on Competition
    ISE states that BOX fails to analyze its burden on competition 
claim under the governing law. ISE argues that the appropriate 
questions to pose when evaluating the proposed rule change's burden on 
competition are: (1) Whether any discriminatory effect on exchanges 
that do not adopt the Policy is necessary or appropriate; and (2) 
whether there is a further inappropriate or unnecessary discriminatory 
effect on smaller exchanges. ISE contends that because OCC has the 
authority to adopt the Policy, treating transactions on Compliant 
Options Exchanges more favorably than those on Non-Compliant Options 
Exchanges is neither inappropriate nor unreasonable. Furthermore, ISE 
claims that the Act does not contain provisions that require less 
robust regulations or ``special treatment'' for smaller exchanges such 
as BOX.\40\
---------------------------------------------------------------------------

    \40\ Id. at 3.
---------------------------------------------------------------------------

Charging De Facto Fees on the Exchange
    ISE asserts that OCC has the authority to adopt the Fees based on 
whether an options exchange meets OCC's risk control standards. 
According to ISE, the relevant question under the Act is whether the 
adoption of the Policy and imposition of the associated Fee results in 
unfair discrimination. Although ISE concedes that the proposed rule 
change ``clearly discriminates between exchanges,'' it contends that 
requiring clearing members that transact on non-compliant options 
exchanges to pay higher fees is ``eminently fair discrimination.'' ISE 
argues that the Policy and Fee are discriminatory only against those 
options exchanges that have not adopted risk protections that OCC deems 
necessary for it to discharge its obligations as a registered clearing 
agency and systemically important financial market utility. ISE also 
notes that the risk control standards in the proposed rule change were 
developed in consultation with a working group that included all the 
options exchanges, including BOX.\41\
---------------------------------------------------------------------------

    \41\ Id. at 3-4.
---------------------------------------------------------------------------

    ISE contends that BOX's conclusion of the Fee being a de facto fee 
on options exchanges is grounded in ``faulty logic'' and ``without 
merit.'' ISE asserts that an options exchange can avoid having clearing 
members pay the Fee by complying with the Policy. ISE believes that an 
options exchange that chooses not to comply with the Policy is making 
an ``economic decision'' that non-compliance is economically 
preferable. Moreover, ISE argues that because an options exchange 
establishes its own fees, an options exchange that chooses not to incur 
the cost of compliance can charge lower fees than a competitor that is 
compliant. Thus, ISE believes that the proposed Fee levels the playing 
field and avoids ``economically rewarding exchanges'' that choose to 
avoid the costs of complying with the Policy.\42\
---------------------------------------------------------------------------

    \42\ Id. at 4.
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove SR-OCC-
2016-004 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \43\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of proceedings is 
appropriate at this time in view of the legal and policy issues raised 
by the proposed rule change. As noted above, institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, the Commission seeks and 
encourages interested persons to comment on the proposed rule change, 
and provide arguments to support the Commission's analysis as to 
whether to approve or disapprove the proposed rule change.
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\44\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposed rule

[[Page 39736]]

change's consistency with the Act and the rules thereunder. 
Specifically, the Commission believes that OCC's proposed rule change 
raises questions as to whether it is consistent with: (i) Section 
17A(b)(3)(I) of the Act,\45\ which provides that clearing agency rules 
cannot impose a burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act; (ii) Section 
17A(b)(3)(D) of the Act,\46\ which requires clearing agency rules to 
provide for the equitable allocation of reasonable dues, fees and other 
charges among its participants; (iii) Rule 17Ad-22(d)(1) under the 
Act,\47\ which requires clearing agencies to establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to provide a well-founded, transparent, and enforceable legal 
framework; and (iv) Rule 17Ad-22(d)(7) under the Act,\48\ which 
requires clearing agencies to establish, implement, maintain and 
enforce written policies and procedures reasonably designed to evaluate 
the potential sources of risks that can arise when a clearing agency 
establishes links to clear or settle trades, and ensure that the risks 
are managed prudently on an ongoing basis.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78s(b)(2)(B).
    \45\ 15 U.S.C. 78q-1(b)(3)(I).
    \46\ 15 U.S.C. 78q-1(b)(3)(D).
    \47\ 17 CFR 240.17Ad-22(d)(1).
    \48\ 17 CFR 240.17Ad-22(d)(7).
---------------------------------------------------------------------------

V. Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to issues 
raised by the proposed rule change. In particular, the Commission 
invites the written views of interested persons concerning whether the 
proposed rule change is consistent with Sections 17A(b)(3)(I) and 
17A(b)(3)(D) of the Act and Rules 17Ad-22(d)(1) and 17Ad-22(d)(7) under 
the Act, or any other provision of the Act, or the rules and 
regulations thereunder.
    Interested persons are invited to submit written data, views, and 
arguments on or before July 8, 2016. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal on or 
before July 22, 2016. 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-2016-004 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-2016-004. 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 
10:00 a.m. and 3:00 p.m. Copies of such filings 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_16_004.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-2016-004 and 
should be submitted on or before July 8, 2016. If comments are 
received, any rebuttal comments should be submitted on or before July 
22, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
---------------------------------------------------------------------------

    \49\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-14315 Filed 6-16-16; 8:45 am]
 BILLING CODE 8011-01-P