[Federal Register Volume 83, Number 31 (Wednesday, February 14, 2018)]
[Notices]
[Pages 6651-6653]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-02972]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82657; File No. SR-OCC-2018-005]
Self-Regulatory Organizations; the Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Revise the Options Clearing Corporation's Schedule of Fees
February 8, 2018.
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 29, 2018, 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. Items
I and II have been prepared primarily by OCC. OCC filed the proposed
rule change pursuant to Section 19(b)(3)(A)(ii) of the Act \3\ and Rule
19b-4(f)(2) \4\ thereunder so that the proposal was effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
[[Page 6652]]
I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
The proposed rule change by OCC would revise OCC's Schedule of Fees
to introduce a cash management fee that would cover administrative and
other operational expenses incurred by OCC in connection with
maintaining cash deposits that are held in OCC's Federal Reserve bank
account and passing-through to Clearing Members the interest earned on
such deposits. The proposed changes to the Schedule of Fees can be
found in Exhibit 5 to the proposed rule change. Material proposed to be
added to OCC's Fee Schedule as currently in effect is marked by
underlining and material proposed to be deleted is marked by
strikethrough text; material proposed to be added to OCC's Fee Schedule
by proposed rule change SR-OCC-2018-004 is marked by double underlining
and material proposed to be deleted by proposed rule change SR-OCC-
2018-004 is marked by double strikethrough text. All capitalized terms
not defined herein have the same meaning as set forth in the OCC By-
Laws and Rules.\5\
---------------------------------------------------------------------------
\5\ OCC's By-Laws and Rules can be found on OCC's public
website: http://optionsclearing.com/about/publications/bylaws.jsp.
---------------------------------------------------------------------------
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
The purpose of this proposed rule change is to revise OCC's
Schedule of Fees to introduce a cash management fee that would cover
administrative and other operational expenses incurred by OCC in
connection with maintaining cash deposits that are held in OCC's
Federal Reserve bank account and passing-through to Clearing Members
the interest earned on such deposits. The revised fee schedule would
become effective on March 1, 2018.
By way of background, on January 12, 2018, Commission approved
changes to OCC's By-Laws and Rules that establish a new minimum cash
contribution requirement for OCC's Clearing Fund and provide for the
pass-through to OCC's Clearing Members of interest income earned on
cash Clearing Fund deposits held in OCC's Federal Reserve bank
account.\6\ As approved, the minimum cash contribution requirement will
require OCC's Clearing Members to collectively contribute $3 billion in
cash to OCC's Clearing Fund, with each Clearing Member's proportionate
share of the minimum cash requirement being equal in percentage to its
proportionate share of the Clearing Fund.\7\ In addition, OCC's
Executive Chairman, Chief Administrative Officer, or Chief Operating
Officer, upon providing notice to the Risk Committee of OCC's Board of
Directors, will have the ability, under certain limited circumstances,
to temporarily increase the amount of cash required to be maintained in
the Clearing Fund up to an amount that includes the size of the
Clearing Fund.\8\
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 34-82502 (January
12, 2018), 82 FR 2825 (January 19, 2018) (SR-OCC-2017-019).
\7\ Id. Each Clearing Member's proportionate share of the
Clearing Fund is determined by the Clearing Fund allocation
methodology in current Rule 1001.
\8\ See supra note 6.
---------------------------------------------------------------------------
In connection with the minimum cash Clearing Fund requirement,
substantially all of OCC's Clearing Fund deposits consisting of cash
will be held in OCC's Federal Reserve bank account.\9\ OCC will pass
the interest income earned in such account through to its Clearing
Members, provided that each such Clearing Member has provided OCC with
all tax documentation as OCC may from time to time require in order to
effectuate such payment.\10\ Interest earned will be calculated daily
based on each Clearing Member's pro rata share of Clearing Fund cash
deposits.\11\ In maintaining these minimum cash balances in OCC's
Federal Reserve bank account and facilitating the pass-through of
interest earned on such balances, OCC will incur certain administrative
and other operational expenses. These expenses will include the
operation of the Federal Reserve bank account, certain systems
enhancements needed to maintain minimum cash deposits and facilitate
pass-through of interest earned, and staffing costs to operate the cash
management and funding desk. In order to defray these expenses, OCC is
proposing to implement a cash management fee.
---------------------------------------------------------------------------
\9\ See supra note 6. OCC retains discretion to maintain a small
portion of Clearing Fund cash deposits in other accounts (e.g.,
accounts with commercial banks) for various reasons, including
facilitating normal substitution activity by its Clearing Members.
\10\ See supra note 6. Interest earned will be calculated daily
based on each Clearing Member's pro rata share of Clearing Fund cash
deposits.
\11\ See supra note 6.
---------------------------------------------------------------------------
The proposed cash management fee would be an annual rate equal to 5
basis points (0.05%), calculated on a 365-day calendar, and billed
monthly on each Clearing Member's daily proportionate share of cash on
deposit in OCC's Federal Reserve bank account.\12\ This proposed change
is designed to provide OCC with a level of revenue sufficient to cover
OCC's administrative and operating expenses, as described above.
---------------------------------------------------------------------------
\12\ Accordingly, a Clearing Member can determine the monthly
amount of its cash management fee by (1) dividing the annual
interest rate by 365; (2) then multiplying the product by the
Clearing Member's proportionate share of cash on deposit in OCC's
Federal Reserve bank account for each calendar day in a given month;
and (3) taking the sum all of the products in step (2) for the given
month.
---------------------------------------------------------------------------
(2) Statutory Basis
Section 17A(b)(3)(D) of the Act requires that the rules of a
clearing agency provide for the equitable allocation of reasonable
dues, fees, and other charges among its participants.\13\ The proposed
cash management fee would cover administrative and other operational
expenses incurred by OCC in connection with passing through to Clearing
Members the interest earned on Clearing Fund cash deposits that are
held in an account established by OCC at a Federal Reserve bank. OCC
believes the proposed fee change is reasonable because the new cash
management fee would be set at a level intended to cover OCC's expenses
associated with maintaining a minimum amount of Clearing Fund cash
(which requirement is designed to satisfy certain liquidity
requirements under Rule 17Ad-22(e)(7)) and with passing-through to
Clearing Members the interest earned on such deposits held in OCC's
Federal Reserve bank account. Moreover, OCC believes that the proposed
fee change would result in an equitable allocation of fees among its
participants because it is a fee that would be equally applicable to
all similarly situated participants (i.e., Clearing Members). As a
result, OCC believes that the proposed fee schedule provides for the
equitable allocation of reasonable fees in accordance with Section
17A(b)(3)(D) of the Act.\14\ The proposed rule change is not
inconsistent with the existing rules of OCC, including any other rules
proposed to be amended.
---------------------------------------------------------------------------
\13\ 17 U.S.C. 78q-1(b)(3)(D).
\14\ 17 U.S.C. 78q-1(b)(3)(D).
---------------------------------------------------------------------------
[[Page 6653]]
(B) Clearing Agency's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act \15\ requires that the rules of a
clearing agency not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. OCC does not
believe that the proposed rule change would have any impact or impose a
burden on competition. Although this proposed rule change affects
Clearing Members, their customers, and the markets that OCC serves, OCC
believes that the proposed rule change would not disadvantage or favor
any particular user of OCC's services in relationship to another user
because the proposed cash management fee would apply equally to all
Clearing Members. Accordingly, OCC does not believe that the proposed
rule change would have any impact or impose a burden on competition.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------
(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)(ii) of the Act \16\ and Rule 19b-4(f)(2) \17\ 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.\18\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
\17\ 17 CFR 240.19b-4(f)(2).
\18\ Notwithstanding its immediate effectiveness, implementation
of this rule change will be delayed until this change is deemed
certified under CFTC Rule 40.6.
---------------------------------------------------------------------------
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-2018-005 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2018-005. 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 website (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 website 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 filing also will be available for inspection
and copying at the principal office of OCC and on OCC's website at
https://www.theocc.com/about/publications/bylaws.jsp.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly.
All submissions should refer to File Number SR-OCC-2018-005 and
should be submitted on or before March 7, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-02972 Filed 2-13-18; 8:45 am]
BILLING CODE 8011-01-P