[Federal Register Volume 85, Number 90 (Friday, May 8, 2020)]
[Notices]
[Pages 27470-27488]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09872]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88792; File No. SR-OCC-2020-802]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Advance Notice Related To Proposed Changes to The 
Options Clearing Corporation's Framework for Liquidity Risk Management

May 1, 2020.
    Pursuant to Section 806(e)(1) of Title VIII of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, entitled Payment, Clearing 
and Settlement Supervision Act of 2010 (``Clearing Supervision Act'') 
\1\ and Rule 19b-4(n)(1)(i) \2\ under the Securities Exchange Act of 
1934 (``Act'' or ``Exchange Act''),\3\ notice is hereby given that on 
April 6, 2020, the Options Clearing Corporation (``OCC'') filed with 
the Securities and Exchange Commission (``Commission'') an advance 
notice 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 advance notice from interested persons.
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ 15 U.S.C. 78a et seq.
---------------------------------------------------------------------------

I. Clearing Agency's Statement of the Terms of Substance of the Advance 
Notice

    This advance notice is submitted in in connection with proposed 
changes to amend OCC's Rules, adopt a new Liquidity Risk Management 
Framework (``LRMF''), and revise OCC's Clearing Fund and stress testing 
methodology (``Methodology Description'') to enhance OCC's management 
of liquidity risk and the sizing and monitoring of OCC's liquidity 
resources. Specifically, the proposed changes would:
    (1) Establish a new LRMF document to provide a comprehensive 
overview of OCC's liquidity risk management practices and govern OCC's 
policies and procedures as they relate to liquidity risk management;
    (2) enhance OCC's Methodology Description to describe OCC's 
approach to stress testing and determining the adequacy, sizing and 
sufficiency of its liquidity resources;
    (3) modify OCC's authority to set and increase the Clearing Fund 
Cash Requirement;
    (4) implement a new two-day notice period for substitutions for 
Clearing Fund cash in excess of a Clearing Member's minimum 
requirement;
    (5) enhance OCC's Rules and Contingency Funding Plan for collecting 
additional liquidity resources when a Clearing Member Group's projected 
or actual liquidity risk exceeds certain defined thresholds;
    (6) amend Chapter VI of the Rules to allow OCC to require cash 
margin as a protective measure if a Clearing Member is determined to 
present increased credit risk and is subject to enhanced monitoring and 
surveillance under the Corporation's watch level reporting process;
    (7) amend Chapter X of the Rules to clarify OCC's authority to 
borrow Clearing Fund assets for liquidity risk management purposes;
    (8) amend Chapter III of the Rules regarding the financial 
requirements applicable to Clearing Members to require that Clearing 
Members maintain adequate procedures and controls to ensure that it can 
meet its obligations when owed in connection with membership; and
    (9) make a number of other clarifying, conforming, and 
organizational changes to OCC's Rules, Risk Management Framework Policy 
(``RMF Policy''), Clearing Fund Methodology Policy (``CFM Policy''), 
Collateral Risk Management Policy, Counterparty Credit Risk Management 
Policy (``CCRM Policy''), and Default Management Policy as described 
herein.
    The proposed amendments to OCC's Rules can be found in Exhibit 5A. 
The proposed LRMF and Methodology Description have been submitted in 
confidential Exhibits 5B and 5C, respectively. Proposed changes to the 
RMF Policy, CFM Policy, Collateral Risk Management Policy, CCRM Policy, 
and Default Management Policy (collectively, ``Risk Policies'') have 
been submitted in confidential Exhibits 5D-5H. Material proposed to be 
added to the Rules, Methodology Description, and OCC Risk Policies as 
currently in effect is marked by underlining, and material proposed to 
be deleted is marked in strikethrough text. The LRMF has been submitted 
without marking to facilitate review and readability of the document as 
it is being submitted in its entirety as new rule text.
    All terms with initial capitalization not defined herein have the 
same meaning as set forth in OCC's By-Laws and Rules.\4\
---------------------------------------------------------------------------

    \4\ 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 Advance Notice

    In its filing with the Commission, OCC included statements 
concerning the purpose of and basis for the advance notice and 
discussed any comments it received on the advance notice. 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 and B below, 
of the most significant aspects of these statements.

(A) Clearing Agency's Statement on Comments on the Advance Notice 
Received From Members, Participants or Others

    Written comments were not and are not intended to be solicited with 
respect to the advance notice and none have been received. OCC will 
notify the Commission of any written comments received by OCC.

(B) Advance Notices Filed Pursuant to Section 806(e) of the Payment, 
Clearing, and Settlement Supervision Act

Description of the Proposed Change
Background
    As a central counterparty (``CCP''), OCC is exposed to liquidity 
risk, which is the risk that a counterparty, whether a participant or 
other entity, will have insufficient funds to meet its financial 
obligations as and when expected, although it may be able to do so in 
the future.\5\ OCC's primary liquidity demands in a Clearing Member 
default originate from settlement obligations related to mark-to-market 
settlements on securities financing and futures transactions, expiring 
options, and liquidation of the Clearing Member's portfolio. Given the 
critical role OCC plays within the U.S. financial markets, it is vital 
that OCC maintains a robust framework for managing its liquidity risks. 
Such a framework should set forth the manner in which OCC effectively 
identifies, measures, monitors, and manages its liquidity risk. This 
includes, but is not limited to, how

[[Page 27471]]

OCC: (1) Maintains sufficient liquid resources in all relevant 
currencies that enable OCC to meet its intraday, same-day, and multiday 
settlement obligations; (2) maintains a reliable and diverse set of 
committed liquidity resources with the flexibility and capacity to 
increase those resources should circumstances warrant; (3) conducts 
daily stress testing of potential liquidity demands under a wide range 
of historical and hypothetical scenarios; (4) maintains a contingent 
funding plan that allows OCC to collect additional liquidity resources 
when potential liquidity demands exceed liquidity resources; and (5) 
maintains a reliable and diverse set of liquidity providers and 
settlement banks that are risk managed through a comprehensive 
onboarding and monitoring process.
---------------------------------------------------------------------------

    \5\ See Committee on Payment and Settlement Systems and 
Technical Committee of the International Organization of Securities 
Commissions, Principles for financial market infrastructures (April 
16, 2012), available at http://www.bis.org/publ/cpss101a.pdf.
---------------------------------------------------------------------------

    OCC maintains liquidity resources in the form of its ``committed 
liquidity facilities'' \6\ and a minimum cash contribution requirement 
for its Clearing Fund to ensure that it can meet its daily forecasted 
settlement obligations. From a committed liquidity facility 
perspective, OCC currently endeavors to maintain immediate liquid 
resources to meet observed peak settlements generated by any Clearing 
Member Group with a high degree of confidence. OCC also requires its 
Clearing Members to collectively contribute $3 billion in cash to the 
Clearing Fund to provide an additional source of committed liquidity to 
OCC.
---------------------------------------------------------------------------

    \6\ OCC's committed liquidity facilities may be comprised of 
both bank and non-bank committed facilities.
---------------------------------------------------------------------------

    OCC sizes its liquidity resources based on historically observed 
liquidity demands and analysis of potential large forecasted liquidity 
demands. In certain cases, OCC's primary liquidity demands can be 
forecasted, and as a result, OCC currently establishes certain limits 
to ensure that it can detect aggregations of risk approaching its risk 
tolerances and mitigates these risks by requiring that the Clearing 
Member(s) driving the risk fulfill a specified portion of their margin 
requirement in cash (as discussed in further detail below). OCC 
forecasts its future daily settlement activity under normal market 
conditions (e.g., mark-to-market settlements and settlements resulting 
from the expiration of derivatives contracts) and compares such demands 
to its resources to ensure that it will maintain a positive liquidity 
position to meet settlement obligations.
Proposed Changes
    OCC is proposing a number of enhancements to its rules intended to 
strengthen its overall resiliency, particularly with respect to OCC's 
management of liquidity risk and the sizing and monitoring of OCC's 
liquidity resources. Specifically, the proposed changes would:
    (1) Establish a new LRMF document to provide a comprehensive 
overview of OCC's liquidity risk management practices and govern OCC's 
policies and procedures as they relate to liquidity risk management;
    (2) enhance OCC's Methodology Description to describe OCC's 
approach to stress testing and determining the adequacy, sizing and 
sufficiency of its liquidity resources;
    (3) modify OCC's authority to set and increase the Clearing Fund 
Cash Requirement;
    (4) implement a new two-day notice period for substitutions for 
Clearing Fund cash in excess of a Clearing Member's minimum 
requirement;
    (5) enhance OCC's Rules and Contingency Funding Plan for collecting 
additional liquidity resources when a Clearing Member Group's projected 
or actual liquidity risk exceeds certain defined thresholds;
    (6) amend Chapter VI of the Rules to allow OCC to require cash 
margin as a protective measure if a Clearing Member is determined to 
present increased credit risk and is subject to enhanced monitoring and 
surveillance under the Corporation's watch level reporting process;
    (7) amend Chapter X of the Rules to clarify OCC's authority to 
borrow Clearing Fund assets for liquidity risk management purposes;
    (8) amend Chapter III of the Rules regarding the financial 
requirements applicable to Clearing Members to require that Clearing 
Members maintain adequate procedures and controls to ensure that it can 
meet its obligations when owed in connection with membership; and
    (9) make a number of other clarifying, conforming, and 
organizational changes to the OCC Rules and Risk Policies as described 
herein.
1. Liquidity Risk Management Framework
    OCC proposes to adopt a new LRMF to set forth the manner in which 
OCC effectively measures, monitors, and manages its liquidity risks, 
including how OCC measures, monitors, and manages its settlement and 
funding flows on an ongoing and timely basis, and its use of intraday 
liquidity. Specifically, the LRMF would describe: (1) The 
identification of OCC's liquidity risks; (2) the categories and types 
of OCC's liquidity resources; (3) the stress testing and sizing of 
OCC's liquidity resources; (4) OCC's Contingency Funding Plan for 
collecting additional liquidity resources from Clearing Members; (5) 
the risk management of supporting institutions (e.g., settlement banks, 
custodian banks, and liquidity providers) that may present liquidity 
risks to OCC; and (6) the governance and reporting requirements 
concerning OCC's liquidity risk management. The proposed LRMF would 
govern OCC's policies and procedures as they relate to liquidity risk 
management and is described in further detail below.
Identification of Liquidity Risk
    The LRMF would describe the primary liquidity risks OCC faces, 
which occur between the point of a Clearing Member default and the 
completion of the liquidation and settlement of the defaulted Clearing 
Member's obligations. OCC collects its credit resources with an 
assumption of a two-day margin period of risk, and potential liquidity 
obligations are evaluated using that same concept and assuming the 
liquidation processes detailed in OCC's Default Management Policy.\7\ 
If the liquidity demands result from a Clearing Member as part of an 
external cross-margin relationship, then potential liquidity 
obligations are evaluated in accordance with the provisions of the 
applicable cross-margin agreement. The potential liquidity obligations 
arising from a Clearing Member default that may require OCC to make 
same-day settlement obligations during the period between default and 
the conclusion of a liquidation of a defaulting Clearing Member's 
portfolio are included when estimating the size of OCC's liquidity 
demands for purposes of sizing its liquidity resources. These 
obligations may include mark-to-market obligations on futures and stock 
loan positions, trade premiums, cash-settled exercise and assignment 
(``E&A'') activity, auction payments, settlements resulting from the 
E&A of physically-settled options, and funding of OCC's liquidation 
agents.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 82310 (December 13, 
2017), 82 FR 60265 (December 19, 2017) (SR-OCC-2017-010) (Order 
Approving Proposed Rule Change Relating to The Options Clearing 
Corporation's Default Management Policy).
---------------------------------------------------------------------------

    The LRMF would describe other factors and considerations identified 
by OCC that are not part of its liquidity resource determinations, such 
as margin deficits and other payments associated with a liquidation 
(e.g., brokerage, bank, and legal fees). These factors are not included 
in OCC's liquidity resource determinations because, by their nature, 
they do not generally create immediate

[[Page 27472]]

liquidity demands that could impede settlement. OCC also does not 
consider hedging costs in its liquidity resource determinations because 
OCC's primary goal is to liquidate positions prior to the need for 
hedging, and hedging would only be employed if OCC's liquidation 
activities were unexpectedly delayed. In addition, the LRMF would 
identify other liquidity risks that are not included in its liquidity 
resource sizing evaluation but have a potential impact on the 
management of liquidity risk, such as liquidity provider failures, 
custodian or settlement bank failures or operational disruptions, and 
concentration risks from settlement banks and liquidity providers. 
These risks are mitigated through various tools and processes discussed 
further below.
Liquidity Resources
    The proposed LRMF would describe the various categories and types 
of liquidity resources maintained by OCC, including the qualifying 
liquid resources (as defined in Exchange Act Rule 17Ad-22(a)(14)) \8\ 
maintained by OCC to meet its minimum liquidity resource requirement 
for effecting same-day, intraday and multiday settlement of OCC's 
payment obligations. Under the proposed LRMF, OCC would maintain the 
following categories of liquidity resources: (1) ``Base Liquidity 
Resources,'' (2) ``Available Liquidity Resources,'' (3) ``Required 
Liquidity Resources,'' and (4) ``Other Liquidity Resources.'' The 
proposed LRMF would set forth OCC's requirements for Base Liquidity 
Resources, which are comprised of qualifying liquid resources in the 
form of assets that are readily available and convertible into cash 
through prearranged funding arrangements \9\ and required Clearing Fund 
cash on deposit.\10\ Base Liquidity Resources would be set at an amount 
determined by OCC's Board of Directors (``Board'') based on 
comprehensive analysis including stress testing so that OCC maintains 
sufficient liquid resources at the minimum in all relevant currencies 
to effect same-day and, where appropriate, intraday and multiday 
settlement of payment obligations with a high degree of confidence 
under a wide range of foreseeable stress scenarios that includes, but 
is not limited to, the default of the participant family that would 
generate the largest aggregate payment obligation for OCC in extreme 
but plausible market conditions. The LRMF would also describe how OCC 
ensures that it is continuously able to access the full amount of its 
committed liquidity facilities. Further, the LRMF would require that 
any borrowing from Base Liquidity Resources must be approved by OCC's 
Executive Chairman, Chief Executive Officer, or Chief Operating Officer 
(collectively referred to as the ``Office of the Chief Executive 
Officer,'' ``Office of the CEO,'' or ``OCEO'').
---------------------------------------------------------------------------

    \8\ 17 CFR 240.17Ad-22(a)(14).
    \9\ As noted above, OCC endeavors to maintain committed 
liquidity facilities with both bank and non-bank counterparties. OCC 
currently maintains a committed credit facility syndicated among 
various commercial banks. OCC also attempts to maintain committed 
repurchase agreements, which may be with both bank and non-bank 
counterparties. Under the proposed LRMF, OCC would endeavor to enter 
into agreements with liquidity providers (i.e., committed lines of 
credit and committed repurchase agreements) that do not contain 
material adverse change (``MAC'') provisions. In the event OCC is 
unable to obtain an agreement without a MAC provision, OCC would 
attempt to enter into other prearranged funding agreements. In order 
to qualify as Base Liquidity Resources, these other arrangements 
must be highly reliable in extreme but plausible market conditions, 
as determined by OCC's Board, following a review conducted prior to 
execution, and on an ongoing basis, but not less than annually.
    \10\ OCC Rule 1002(a)(i) currently requires Clearing Members to 
collectively contribute $3 billion in U.S. dollar cash, the currency 
of all OCC liquidity obligations, to the Clearing Fund, which is 
held at either the Federal Reserve Bank of Chicago or a commercial 
bank approved as an OCC cash custodian. Cash held at a commercial 
bank may be invested in overnight reverse repurchase agreements.
---------------------------------------------------------------------------

    The LRMF would further describe how OCC uses the Clearing Fund as a 
source of liquidity (either directly or by using Clearing Fund assets 
to borrow or obtain funds from third parties) in the event a Clearing 
Member defaults on an obligation to OCC, in the event any bank or 
securities or commodities clearing organization defaults on its 
obligations to OCC, or to facilitate OCC's completion of same-day 
settlement obligations in the event of an operational disruption at a 
bank or securities or commodities clearing organization, consistent 
with OCC's Rules.\11\
---------------------------------------------------------------------------

    \11\ See Securities Exchange Release No. 82296 (December 12, 
2017), 82 FR 59685 (December 15, 2017) (SR-OCC-2017-806). See also 
Securities Exchange Release No. 82501 (January 12, 2018), 83 FR 2843 
(January 19, 2018) (SR-OCC-2017-808).
---------------------------------------------------------------------------

    The proposed LRMF also defines OCC's Available Liquidity Resources, 
which are comprised of OCC's Base Liquidity Resources plus Clearing 
Fund cash deposits in excess of the minimum required amount.\12\ These 
resources are intended to supplement OCC's Base Liquidity Resources and 
are included in the calculation to determine liquidity resources 
available to OCC on a given day. As described further below, OCC would 
generally require a two-day notification period if a Clearing Member 
requests to substitute Government Securities for cash deposits above 
their minimum requirement. Once the substitution request is made, OCC 
would remove the cash deposits in question from subsequent Contingency 
Funding Plan calculations.
---------------------------------------------------------------------------

    \12\ These excess amounts are only included in Available 
Liquidity Resources by the amount the required Clearing Fund size 
exceeds the minimum Clearing Fund sized as determined by OCC Rule 
1001(b). Cash deposits in excess of a Clearing Member's total 
Clearing Fund requirement would not be included.
---------------------------------------------------------------------------

    The proposed LRMF would describe OCC's Required Liquidity 
Resources, which are comprised of OCC's Available Liquidity Resources 
plus any amount of cash margin deposits of a Clearing Member Group 
required under the Contingency Funding Plan (described in further 
detail below). These required cash margin deposits supplement OCC's 
Base Liquidity Resources and are only included as a Required Liquidity 
Resource for the Clearing Member Group from which they are called.
    In addition, the LRMF would describe Other Liquidity Resources, 
which are those liquid resources that may or may not be available to 
OCC in a default situation (e.g., non-compulsory cash deposits of the 
defaulting Clearing Member; other margin deposits of the defaulting 
Clearing Member, including letters of credit, Government Securities, 
and Government Sponsored Entity securities that may be liquidated for 
same-day or next day settlement). Other Liquidity Resources are not 
committed resources; therefore, they are not included in OCC's Base, 
Available, or Required Liquidity Resource calculations. These resources 
may, however, be available in a default situation and could be used to 
address foreseeable liquidity shortfalls that would not be covered by 
OCC's committed resources and help OCC seek to avoid unwinding, 
revoking, or delaying the same-day settlement of payment obligations.
    In addition, the LRMF would describe generally how OCC would 
utilize its liquidity resources in accordance with its Default 
Management Policy and the actions OCC would take if it needs to 
increase its liquidity resources to respond to changing business or 
market conditions (such as increasing the Clearing Fund Cash 
Requirement pursuant to Rule 1002(a) or using any uncommitted accordion 
\13\ features embedded in any syndicated credit facility).
---------------------------------------------------------------------------

    \13\ An accordion is an uncommitted expansion of the credit 
facility generally on the same terms as the credit facility.

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

[[Page 27473]]

Stress Testing and Liquidity Resource Sizing
    The proposed LRMF would describe OCC's overall approach to 
liquidity stress testing and liquidity resource sizing. Under the 
proposed LRMF, OCC would perform daily stress testing using standard 
and predetermined parameters and assumptions. The proposed approach to 
liquidity stress testing would rely on the stressed scenarios and 
prices generated under OCC's current stress testing and Clearing Fund 
methodology.\14\ The scenarios used are pre-identified by OCC's Stress 
Test Working Group (``STWG'') and the output of these scenarios would 
be used for liquidity resource evaluation and would be reviewed daily 
by OCC's Financial Risk Management department (``FRM'').\15\ The stress 
tests in question consider a range of relevant stress scenarios and 
possible price changes in liquidation periods, including but not 
limited to: (1) Relevant peak historic price volatilities; (2) shifts 
in other market factors including, as appropriate, price determinants 
and yield curves; (3) the default of one or multiple members; (4) 
forward-looking stress scenarios; and (5) reverse stress tests aimed at 
identifying extreme default scenarios and extreme market conditions for 
which the OCC's resources would be insufficient.
---------------------------------------------------------------------------

    \14\ See infra notes 22 and 23 and associated text.
    \15\ Under the proposed LRMF and Methodology Description, the 
output of these stress test scenarios would assume that the National 
Securities Clearing Corporation (``NSCC'') accepts and guarantees 
all E&A activity under the Stock Options and Futures Settlement 
Agreement by and between OCC and NSCC. See OCC Rule 901 and 
Securities Exchange Act Release No. 81266 (July 31, 2017), 82 FR 
36484 (August 4, 2017) (SR-OCC-2017-013) (Order Approving Proposed 
Rule Changes Concerning the Adoption of a New Stock Options and 
Futures Settlement Agreement Between the National Securities 
Clearing Corporation and The Options Clearing Corporation) and 
Securities Exchange Act Release No. 81260 (July 31, 2017), 82 FR 
36476 (August 4, 2017) (SR-OCC-2017-804) (Notice of No Objection to 
Advance Notices Concerning the Adoption of a New Stock Options and 
Futures Settlement Agreement Between the National Securities 
Clearing Corporation and The Options Clearing Corporation). OCC 
plans to submit separate regulatory filings to address liquidity 
risk that may be posed by limited scenarios where NSCC may not 
accept and guaranty all E&A transactions associated with a defaulted 
Clearing Member.
---------------------------------------------------------------------------

    Under the proposed LRMF, the minimum amount of OCC's Base Liquidity 
Resources would be determined by OCC's Board based on a recommendation 
from OCC's Risk Committee. On an annual basis (or more frequently as 
needed),\16\ FRM would present to the Board and Risk Committee an 
analysis summarizing the projected liquidity demands OCC may face under 
a variety of stress scenarios, including the sufficiency of OCC's Base 
Liquidity Resources against OCC's liquidity risk tolerance, extreme 
historical scenarios such as a 1987 historical market event and 2008 
historical market event, and certain scenarios used to size OCC's 
Clearing Fund.\17\ This analysis may also include the results of a 
comprehensive review of any parameters and assumptions used by OCC's 
stress testing system, the output of which is used to project potential 
liquidity demands under stressed market conditions.\18\ In addition, 
the analysis may include the current composition of OCC's various 
liquidity resources and recommended changes, if applicable.
---------------------------------------------------------------------------

    \16\ See the ``Governance and Reporting'' section below, which 
discusses the proposed process for reporting and escalating material 
issues identified with respect to the adequacy of OCC's liquidity 
resources.
    \17\ Given the different coverage standards used by OCC to 
calculate its credit and liquidity resources (i.e., Cover 2 versus 
Cover 1, respectively) and the potential limitations on the 
frequency with which OCC would be able to adjust the size of certain 
of its liquidity resources (e.g., its committed credit facilities 
and repurchase agreements), the Board and Risk Committee could 
consider the analysis provided in part, or its entirety, for the 
purposes of determining the size of Base Liquidity Resources.
    \18\ These parameters and assumptions are routinely reviewed by 
STWG, on at least a monthly basis.
---------------------------------------------------------------------------

    OCC's approach to liquidity stress testing and the proposed changes 
to OCC's Methodology Description are discussed in further detail below.
Contingency Funding Plan
    The proposed LRMF would describe OCC's Contingency Funding Plan, 
which enables OCC to: (1) Collect additional liquidity resources from a 
Clearing Member Group when that Clearing Member Group's projected or 
actual liquidity risk exceeds certain thresholds or (2) quickly 
supplement OCC's Available Liquidity Resources outside of the annual 
sizing process, should the circumstances warrant. The Contingency 
Funding Plan and associated OCC Rule changes are discussed in more 
detail in the ``Contingency Funding Plan'' section below.
Supporting Institutions
    OCC's management of liquidity risk is dependent on a number of 
supporting institutions, such as settlement banks, custodian banks, 
central banks, and liquidity providers. The LRMF would describe OCC's 
overall framework for monitoring, managing, and limiting its risks and 
exposures to theses supporting institutions, which is primarily 
governed by OCC's CCRM Policy.\19\ This includes rigorous onboarding 
and monitoring processes, including but not limited to: (1) Conducting 
initial and ongoing due diligence to confirm each commercial 
institution meets OCC's financial and operational standards; (2) 
confirming that each commercial institution has access to liquidity to 
meet its commitments to OCC; (3) monitoring and managing direct, 
affiliated, and concentrated exposures; and (4) meeting with these 
commercial institutions and conducting operational reviews as required 
by OCC's policies and procedures. The proposed LRMF would also set 
forth OCC's requirements for performing due diligence to confirm it has 
a reasonable basis to believe each of its liquidity providers has (1) 
sufficient information to understand and manage the potential liquidity 
demands of OCC and its associated liquidity risk and (2) the capacity 
to perform as required under its commitments, including the execution 
of periodic test borrows no less than once every 12 months to measure 
the performance and reliability of the liquidity facilities. The 
proposed LRMF would also describe OCC's use of accounts and services at 
the Federal Reserve Bank of Chicago, and in particular, its use of 
accounts at the Federal Reserve Bank of Chicago to custody funds to 
reduce counterparty credit risks.
---------------------------------------------------------------------------

    \19\ See Securities Exchange Act Release No. 82312 (December 13, 
2017), 82 FR 60242 (December 19, 2017) (SR-OCC-2017-009) (Order 
Approving Proposed Rule Change Relating to The Options Clearing 
Corporation's Counterparty Credit Risk Management Policy).
---------------------------------------------------------------------------

Governance and Reporting
    The proposed LRMF would set forth the governance, review, 
monitoring, and reporting activities performed by OCC with respect to 
liquidity risk management. On a daily basis, FRM would be responsible 
for reviewing the results of OCC's liquidity stress test exposures and 
the sufficiency of OCC's Base Liquidity Resources and Required 
Liquidity Resources, including the adequacy of such resources in 
covering OCC's risk tolerance. The chair of the STWG or the Executive 
Vice President of FRM would immediately escalate any material issues 
identified with respect to the adequacy of OCC's liquidity resources to 
the Credit and Liquidity Risk Working Group (``CLRWG'') \20\ to 
determine if it would be appropriate to recommend a change the size of 
OCC's Base Liquidity Resources in accordance with relevant 
procedure(s).
---------------------------------------------------------------------------

    \20\ If escalation to the CLRWG is not practical, issues would 
be escalated to OCC's Management Committee.
---------------------------------------------------------------------------

    On at least a monthly basis, FRM would prepare reports that provide

[[Page 27474]]

details and trend analysis of daily stress tests with respect to the 
Base Liquidity Resources, including the results of daily stress tests 
and a review of the adequacy of OCC's liquidity resources, and provide 
these reports to the STWG. The STWG would perform a comprehensive 
review of the existing stress test results and scenarios, and their 
underlying parameters and assumptions, the output of which is used to 
project liquidity demands, and consequently evaluate their 
appropriateness for determining the level of liquidity resources that 
OCC must maintain under current and evolving market conditions and 
consider proposed enhancements to the scenarios used for stress testing 
based on the results of this comprehensive review. Such an analysis 
would be conducted more frequently than monthly when products cleared 
or markets served display high volatility or become less liquid, or 
when the size or concentration of positions held by OCC's participants 
increases significantly.\21\ In addition, FRM would be responsible for 
preparing a summary of the adequacy of OCC's Base and Available 
Liquidity Resources, as well as actions taken under the Continency 
Funding Plan, and results from its monthly comprehensive review to 
provide to OCC's Management Committee and Risk Committee to demonstrate 
compliance with OCC's minimum liquidity resource requirements. If 
needed, any issues that are detected with respect to the adequacy of 
OCC's Base Liquidity Resources would be promptly escalated to the 
Management Committee intra-month pursuant to FRM procedures. In the 
performance of monthly review of liquidity results and analysis, and 
when considering whether escalation is appropriate, due consideration 
would be given to the intended purpose of the proposed LRMF to: (1) 
Assess the adequacy of, and adjust as necessary, OCC's Base Liquidity 
Resources; (2) support compliance with the minimum requirements under 
applicable regulations; and (3) and any other relevant aspects of OCC's 
liquidity risk management.
---------------------------------------------------------------------------

    \21\ FRM would maintain procedures for determining whether, and 
in what circumstances, such intra-month reviews shall be conducted, 
and which officers have responsibility for making the determination.
---------------------------------------------------------------------------

    On at least an annual basis, FRM would assesses the adequacy of 
OCC's stress testing methodology, the output of which is used to 
evaluate OCC's liquidity resource risks. Proposed changes resulting 
from such review would be sent to the Risk Committee for approval. In 
addition, the CLRWG would be responsible for reviewing the LRMF and any 
and liquidity resource sizing recommendations, with proposed changes 
resulting from such review being sent to the Risk Committee for 
approval. Finally, on at least an annual basis, OCC's Model Validation 
Group would perform a review of risk methodologies and the usage of any 
models to inform the management of liquidity risk.
2. Liquidity Stress Testing
    OCC proposes to enhance its management of liquidity risk by 
introducing a new approach to stress testing and determining the 
adequacy, sizing, and sufficiency of its liquidity resources. OCC's 
liquidity stress testing would be based on output of its current stress 
testing and Clearing Fund methodology,\22\ which would be used to 
project OCC's potential liquidity demands under stressed market 
conditions.
---------------------------------------------------------------------------

    \22\ See Securities Exchange Act Release No. 83714 (July 26, 
2018), 83 FR 37570 (August 1, 2018) (SR-OCC-2018-803) (Notice of No 
Objection to Advance Notice, as Modified by Amendments No. 1 and 2, 
Concerning Proposed Changes to The Options Clearing Corporation's 
Stress Testing and Clearing Fund Methodology) and Securities 
Exchange Act Release No. 83735 (July 27, 2018), 83 FR 37855 (August 
2, 2018) (SR-OCC-2018-008) (Order Approving Proposed Rule Change, as 
Modified by Amendments No. 1 and 2, Related to The Options Clearing 
Corporation's Stress Testing and Clearing Fund Methodology).
---------------------------------------------------------------------------

Current Stress Testing Approach for Clearing Fund
    OCC determines its Clearing Fund size based on the results of 
stress tests conducted daily using standard predetermined parameters 
and assumptions. These daily stress tests consider a range of relevant 
stress scenarios and possible price changes in liquidation periods, 
including but not limited to: (1) Relevant peak historic price 
volatilities; (2) shifts in other market factors including, as 
appropriate, price determinants and yield curves; and (3) the default 
of one or multiple Clearing Members. OCC also conducts reverse stress 
tests for informational purposes aimed at identifying extreme default 
scenarios and extreme market conditions for which the OCC's financial 
resources may be insufficient.
    As set forth in the Methodology Description, the methodology 
includes two primary types of scenarios: ``Historical Scenarios'' and 
``Hypothetical Scenarios.'' Historical Scenarios attempt to replicate 
historical events in current market conditions, which includes the set 
of currently existing securities, their prices, and volatility levels. 
These scenarios provide OCC with information regarding pre-defined 
reference points determined to be relevant benchmarks for assessing 
OCC's exposure to Clearing Members and the sufficiency of its financial 
resources. Hypothetical Scenarios represent events in which market 
conditions change in ways that have not yet been observed. The 
Hypothetical Scenarios are derived using statistical methods (e.g., 
draws from estimated multivariate distributions) or created based on a 
mix of statistical techniques and expert judgment (e.g., a 15% decline 
in market prices and 50% increase in volatility). These scenarios give 
OCC the ability to change the distribution and level of stress in ways 
necessary to produce an effective forward-looking stress testing 
methodology. OCC uses these pre-determined stress scenarios in stress 
tests, conducted on a daily basis, to determine OCC's risk exposure to 
each Clearing Member Group by simulating the profits and losses of the 
positions in their respective account portfolios under each such stress 
scenario.
    OCC performs daily stress testing using a wide range of scenarios, 
both Hypothetical and Historical, designed to serve multiple purposes. 
OCC's stress testing inventory contains scenarios designed to: (1) 
Determine whether the financial resources collected from all Clearing 
Members collectively are adequate to cover OCC's risk tolerance (``CF 
Adequacy Scenarios''); (2) establish the monthly size of the Clearing 
Fund necessary for OCC to maintain sufficient pre-funded financial 
resources to cover losses arising from the default of the two Clearing 
Member Groups that would potentially cause the largest aggregate credit 
exposure to OCC as a result of a 1-in-80 year hypothetical market event 
(``CF Sizing Scenarios''); (3) measure the exposure of the Clearing 
Fund to the portfolios of individual Clearing Member Groups, and 
determine whether any such exposure is sufficiently large as to 
necessitate OCC calling for additional resources so that OCC continues 
to maintain sufficient financial resources to guard against potential 
losses under a wide range of stress scenarios, including extreme but 
plausible market conditions (``CF Sufficiency Scenarios''); \23\ and 
(4)

[[Page 27475]]

monitor and assess the size of OCC's pre-funded financial resource 
against a wide range of stress scenarios that may include extreme but 
implausible and reverse stress testing scenarios (``CF Informational 
Scenarios'').
---------------------------------------------------------------------------

    \23\ Under OCC Rule 609, the Policy, and the Methodology 
Description, if a CF Sufficiency Stress Test identifies exposures 
that exceed 75% of the current Clearing Fund requirement less 
deficits (the ``75% threshold'' or ``Sufficiency Stress Test 
Threshold 1''), OCC may require additional margin deposits from the 
Clearing Member Group(s) driving the breach. All such margin calls 
must be approved by a Vice President (or higher) of FRM; however, if 
the margin call imposed on an individual Clearing Member exceeds 
$500 million, OCC's Stress Testing and Liquidity Risk Management 
group (``STLRM'') must provide written notification to the Office of 
the CEO.
---------------------------------------------------------------------------

Proposed Liquidity Stress Testing
    OCC proposes to revise its Methodology Description to enable OCC to 
use the output of its current stress testing methodology to determine 
the adequacy, sizing, and sufficiency of OCC's liquidity resources. The 
proposed revisions to the Methodology Description would primarily 
address the construction and aggregation of stress test portfolios and 
add a new section to discuss how OCC would calculate its stressed 
liquidity demands.
Portfolio Construction and Aggregation
    The revised Methodology Description would describe how OCC 
endeavors to construct Clearing Member portfolios and aggregate results 
consistent with business practices that would be followed in an actual 
liquidation of a defaulter's portfolio. Currently, the Methodology 
Description describes OCC's process for creating the ``Synthetic 
Accounts'' used in credit stress testing. When aggregating results for 
credit purposes, the focus is on calculating the liquidating value of 
the portfolio. OCC would revise the Methodology Description to describe 
OCC's process for portfolio construction and aggregation for liquidity 
stress testing purposes under the proposed LRMF. Specifically, the 
Methodology Description would be revised to highlight the importance of 
the timing of the cashflows from the liquidation since an offsetting 
debit and credit may occur on different days thus creating a liquidity 
demand when there is no credit demand. The Methodology Description 
would also be revised to clarify that Clearing Member positions are 
held in accounts based on a business type classification and/or by 
cross margining relationships with other clearing houses, and in many 
instances, Clearing Members maintain several accounts of the same 
business type.
    OCC also proposes to revise the Methodology Description to 
streamline the description of how OCC aggregates positions into stress 
test accounts and closes certain positions out to account for 
differences in aggregation for credit and liquidity purposes. For 
example, Rule 1106(d) provides that, in lieu of closing long positions 
and short positions in the same series of cleared contract carried by a 
suspended Clearing Member through closing transactions on an Exchange, 
OCC is permitted to close long and short positions of a suspended 
Clearing Member in the same series by offset. OCC refers to this 
process of closing long and short positions in the same series in the 
same account type as ``netting'' \24\ and closing long and short 
positions in the same series between account types as 
``internalization.'' \25\ For internalization, proceeds associated with 
the close out would be debited and credited, as applicable, between the 
account types involved and the proceeds would be tracked and included 
in subsequent calculations of the liquidating value associated with 
each account type.\26\ The aggregation of results from an account to a 
Clearing Member or Clearing Member Group level is designed to follow 
how OCC would account for the proceeds during an actual Clearing Member 
liquidation. For instance, positions and collateral credited to a 
particular type of Clearing Member account (e.g., customer, firm or 
market-maker) are, depending on the account type, potentially subject 
to a lien \27\ in favor of OCC. Specifically, OCC's By-Laws and Rules 
contemplate that the positions and collateral in an account may be 
subject to a ``general lien'' \28\ or a ``restricted lien'' \29\ in 
favor of OCC. It is also the case that in some instances there is no 
lien in favor of OCC (e.g., segregated long options positions in the 
customers' account).\30\ These liens (or the absence of any lien) are 
respected when summing results from a business account type level to 
the Clearing Member level, and then all Clearing Member results are 
summed to a Clearing Member Group level; however, OCC may not use a 
credit of one legal entity to offset losses of another affiliated legal 
entity.
---------------------------------------------------------------------------

    \24\ For example, a customer account may be long 10 contracts 
and short 5 contracts in the same series. After netting, the 
customer account will be long 5 contracts in the series, but there 
is no need to transfer a marking price associated with the effective 
sale of the 5 long contracts because the closure by offset is 
accomplished within the same account type.
    \25\ For example, if the customer account is long 10 contracts 
in a particular series and the firm account is short 5 contracts in 
the same series, OCC would effectively create an ``internalized 
transaction'' to sell 5 contracts in the series from the customer 
account and purchase 5 contracts in the series from the firm 
account. OCC would debit the firm account for the marking price 
associated with the sale of the 5 contracts and credit the customer 
account in connection with the purchase. As a matter of the 
positions in the series maintained in each account, after the 
internalization, there would be 5 contracts remaining in the 
customer account and no positions in the firm account.
    \26\ Id.
    \27\ Pursuant to Article I, Section 1L(3) of OCC's By-Laws, a 
``lien'' is a ``security interest'' as defined in applicable 
provisions of the Uniform Commercial Code as in effect in the 
relevant jurisdictions and, where used in respect of OCC's security 
interest in cleared contracts carried in the account of Clearing 
Members, shall include an ``issuer's lien'' within the meaning of 
the 1977 amendments to the Uniform Commercial Code.
    \28\ ``General lien'' means that OCC has a security interest in 
all or specified assets in a Clearing Member account as security for 
all of the Clearing Member's obligations to OCC regardless of the 
source or nature of such obligations. See Article I, Section 1G(1) 
of OCC's By-Laws.
    \29\ A ``restricted lien'' is a security interest of OCC in 
specified assets (including any proceeds thereof) in an account of a 
Clearing Member with OCC as security for the Clearing Member's 
obligations arising from such account or, to the extent so provided 
in the By-Laws or Rules, a specified group of accounts that includes 
such account including, without limitation, obligations in respect 
of all confirmed trades effected through such account or group of 
accounts, short positions maintained in such account or group of 
accounts, and exercise notices assigned to such account or group of 
accounts. See Article I, Section 1R(7) of OCC's By-Laws.
    \30\ See Article VI, Section 3(e) of OCC's By-Laws.
---------------------------------------------------------------------------

Liquidity Stress Testing
    OCC proposes to revise the Methodology Description to describe how 
OCC would use the output from its current stress testing system to 
measure and monitor the sufficiency of OCC's liquidity resources. The 
Methodology Description would be revised to generally summarize OCC's 
LRMF and to set forth key assumptions in the construction of its 
liquidity calculations. For example, for purposes of its liquidity 
calculations, OCC would assume: (1) A liquidation horizon of two days 
(which aligns with its two-day margin period of risk); (2) that a 
Clearing Member default occurs sometime after the collection of 
collateral on the day before the default (D-1) up to or at settlement 
on day of default (D); (3) that cash-settled option liquidity demands 
due on the morning of default are conservatively calculated using gross 
positions; (4) NSCC normally guarantees the settlement of any E&A 
transactions; \31\ (5) OCC accounts for liquidity demands as required 
by relevant cross-margin agreements; (6) that auction bids are

[[Page 27476]]

represented by stressed prices at the contract level; (7) that credits 
that occur on the first day of a liquidation persist and are available 
to offset debits on subsequent days; (8) that auction proceeds settle 
on D+2; (9) liquidity demands associated with Specific Wrong Way Risk 
(``SWWR'') positions are included in the appropriate calculations; and 
(10) early exercise is not assumed in estimating liquidity demands.\32\
---------------------------------------------------------------------------

    \31\ OCC also projects liquidity demands for using a liquidation 
agent to act as a ``substitute broker'' for informational purposes. 
``Substitute broker'' refers to the use of another OCC clearing 
member that remains in good standing at NSCC and that, on OCC's 
behalf, will facilitate settlement of OCC's delivery obligations of 
the E&A transactions at NSCC.
    \32\ OCC recognizes that early exercises may potentially be 
incentivized by certain situations, such as a favorable present 
value of interest income that can be earned on strike premium over 
the remaining life of a contract for deep in-the-money puts or with 
dividend capture strategies on call contracts, where the dividend 
amount exceeds the costs associated with purchasing the underlying 
stock and a related put contract having an identical strike and 
expiration. However, OCC believes standard expiration is generally 
more meaningful than early exercise risk when calculating the 
liquidity risk associated with E&A activity. For example, OCC 
reviewed early exercises during a period of market stress, 
specifically, the days leading up to, and immediately following, the 
events of February 5, 2018. In comparison to all long equity put 
option open interest during this period, OCC found that less than 
one percent of equity put contracts were exercised early on February 
5, 2018 and February 6, 2018, as opposed to the standard monthly 
February expiration, where a total of approximately six percent of 
equity calls and five percent of equity puts were exercised on 
February 16, 2018.
---------------------------------------------------------------------------

    Under the proposed approach, OCC would assume that positions \33\ 
with an expiration date of D+1 or greater will be liquidated via 
auction. With respect to collateral positions, accounts with excess 
collateral would be evaluated and adjusted since excess collateral may 
be withdrawn prior to default. If there is excess collateral, the 
portfolio would be adjusted by removing excess cash, letters of credit, 
government securities, and valued securities in that order until no 
excess collateral remains. In addition, any option positions expiring 
on D-1 or D would be evaluated for moneyness,\34\ and then assumed to 
be liquidated through normal OCC cash settlement processes or through 
physical settlement at NSCC. Moreover, under the proposed approach, 
credits from earlier dates would only reduce debits for later dates 
when evaluating liquidity demands.
---------------------------------------------------------------------------

    \33\ Neither stock loan nor futures would be included in this 
calculation. Stock loan positions are handled through a separate 
buy-in/sell-out process. Futures positions are included in the 
auction portfolio, but mark-to-market calculations capture the 
liquidity risk that arises from futures.
    \34\ The term ``moneyness'' refers to the relationship between 
the current market price of the underlying interest and the exercise 
price.
---------------------------------------------------------------------------

    As discussed above, the proposed approach to liquidity stress 
testing would assume that NSCC accepts and guarantees all E&A activity 
under the Stock Options and Futures Settlement Agreement by and between 
OCC and NSCC.\35\ In the unlikely event there is a rejection by NSCC, 
OCC would attempt to use a liquidation agent acting as a substitute 
broker to settle the E&A activity through NSCC. This method of 
settlement would not be used in OCC's liquidity resource sizing 
assumptions, but OCC would monitor the potential liquidity demands 
through the use of informational stress test scenarios, which would be 
part of OCC's daily stress testing and monitored and reported regularly 
to the STWG.
---------------------------------------------------------------------------

    \35\ See supra note 15.
---------------------------------------------------------------------------

    OCC's proposed approach to liquidity stress testing would utilize 
output from its current stress testing methodology, and the same 
scenarios would be used for Sufficiency and Adequacy stress testing. 
OCC would perform daily liquidity risk stress testing using standard 
and predetermined parameters and assumptions, and the output of these 
scenarios would be used for liquidity resource evaluation and reviewed 
daily by FRM. Specifically OCC's proposed liquidity stress tests would 
consist of a range of Historical and Hypothetical Scenarios, and the 
output would be used to: (1) Assess OCC's projected liquidity demands 
under stressed scenarios against OCC's Base and Available Liquidity 
Resources; (2) assess OCC's Base and Available Liquidity Resources 
against OCC's liquidity risk tolerance (``Adequacy Scenarios''); (3) 
measure the sufficiency of potential exposures in excess of OCC's 
liquidity resources to determine if additional risk mitigation is 
needed when those exposures indicate potential breaches of certain 
thresholds under OCC's Contingency Funding Plan (``Sufficiency 
Scenarios''); and (4) monitor and assess OCC's liquidity resources 
under a variety of stress conditions, which may include extreme but 
implausible scenarios and reverse stress test scenarios 
(``Informational Scenarios''). Under the proposed LRMF, Adequacy 
Scenarios would be used to evaluate OCC's Base Liquidity Resources 
against OCC's risk tolerance of a 1-in-50-year market event at a 99.5% 
confidence interval over a two-year look back period. The output of 
Sufficiency Scenarios would be used to assess potential liquidity 
exposures in excess of OCC's Available Liquidity Resources under a wide 
range of historical and hypothetical stress scenarios, including but 
not limited to, a 1987 historical market event and a 2008 historical 
market event, and if a Clearing Member Group's exposures breach certain 
thresholds, OCC would require the breaching Clearing Member Group to 
maintain cash deposits in lieu of other forms of acceptable collateral 
to supplement OCC's Available Liquidity Resources pursuant to the 
Contingency Funding Plan (discussed further below). The output of 
Informational Scenarios would be used to assess OCC's liquidity under a 
variety of extreme stress conditions, both plausible and implausible, 
as well as reverse stress tests.\36\
---------------------------------------------------------------------------

    \36\ Under the LRMF, the output of Informational Scenarios may 
inform decisions about the adequacy of OCC's liquidity resources but 
would not be directly used to make decisions regarding the size of 
OCC's liquidity resources. Informational Scenarios may, however, be 
re-categorized as Adequacy or Sufficiency upon the approval of the 
Risk Committee.
---------------------------------------------------------------------------

    OCC also proposes to make other conforming and organizational 
changes to the Methodology Description to reflect the implementation of 
the new liquidity stress testing approach and make other non-
substantive clarifications to the document. For example, OCC would 
reorganize the document to relocate content specific to credit stress 
testing to sections of the document focused only on credit stress 
testing. OCC would also make clarifying and conforming changes to 
differentiate the usage of Adequacy, Sizing, Sufficiency, and 
Informational Scenarios for credit and liquidity purposes. OCC also 
proposes changes to more accurately describe the scope of volatility 
instruments cleared by OCC. In addition, OCC would clarify that in most 
SWWR stress test scenarios, SWWR Equity and ETN charges computed for 
margins are added to stress scenario profit and loss calculations in 
order to account for SWWR in the stress testing system.\37\ OCC would 
also remove duplicative language regarding Idiosyncratic Scenarios, 
Sizing Scenarios, and certain key assumptions from the executive 
summary of the Methodology Description as this information is covered 
in greater detail later in later sections of the document.
---------------------------------------------------------------------------

    \37\ See Securities Exchange Act Release No. 87673 (December 6, 
2019), 84 FR 67981 (December 12, 2019) (SR-OCC-2019-807) (Notice of 
No Objection To Advance Notice Related to Proposed Changes to The 
Options Clearing Corporation's Rules, Margin Policy, Margin 
Methodology, Clearing Fund Methodology Policy, and Clearing Fund and 
Stress Testing Methodology To Address Specific Wrong-Way Risk) and 
Securities Exchange Act Release No. 87718 (December 11, 2019), 84 FR 
68992 (December 17, 2019) (SR-OCC-2019-010) (Order Approving 
Proposed Rule Change Related to Proposed Changes to the Options 
Clearing Corporation's Rules, Margin Policy, Margin Methodology, 
Clearing Fund Methodology Policy, and Clearing Fund and Stress 
Testing Methodology To Address Specific Wrong-Way Risk).

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

[[Page 27477]]

3. Clearing Fund Cash Requirement
Current Rules
    Pursuant to OCC Rule 1002(a), Clearing Members are required to 
collectively contribute $3 billion in cash to the Clearing Fund. In 
addition, OCC's Executive Chairman, Chief Executive Officer, and Chief 
Operating Officer each have the authority, upon providing notice to the 
Risk Committee, 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 for the protection of OCC, Clearing Members 
or the general public. Any such determination must (i) be based upon 
then-existing facts and circumstances, (ii) be in furtherance of the 
integrity of OCC and the stability of the financial system, and (iii) 
take into consideration the legitimate interests of Clearing Members 
and market participants. Moreover, any temporary increase in the Cash 
Clearing Fund Requirement must be reviewed by the Risk Committee as 
soon as practical (but in any event, such review must occur within 20 
calendar days of such increase) and, if such temporary increase is 
still in effect, the Risk Committee shall determine whether (A) the 
increase in the Cash Clearing Fund Requirement is no longer required, 
or (B) OCC's rules should be modified to ensure that OCC continues to 
maintain sufficient liquidity resources.
    In addition, Interpretation and Policy .03 to Rule 1002 Clearing 
Fund currently requires that any increase in the Cash Clearing Fund 
Requirement be satisfied no later than one hour before the close of the 
Fedwire on the business day following the issuance of an instruction to 
increase cash contributions.
Proposed Changes
    OCC proposes to amend Rule 1002(a) to modify its authority to set 
and to temporarily increase the minimum amount of cash required in its 
Clearing Fund.\38\ The proposed change is intended to provide OCC with 
the flexibility to periodically set its Base Liquidity Resources and to 
adjust Base Liquidity Resources in response to changing market and 
business conditions to ensure that OCC maintains sufficient liquidity 
resources to cover its liquidity risk exposures at all times. OCC's 
Board would have the authority to periodically adjust the Clearing Fund 
Cash Requirement (typically during the annual review of OCC's Base 
Liquidity Resources as required under the proposed LRMF based on 
analysis of OCC's projected liquidity demands under a variety of stress 
scenarios.\39\ However, revised Rule 1002(a) would require that the 
Clearing Fund Cash Requirement never be at set at an amount lower than 
$3 billion.
---------------------------------------------------------------------------

    \38\ OCC also proposes non-substantive revisions to its Rules 
and OCC Risk Policies to redefine this requirement as the ``Clearing 
Fund Cash Requirement.''
    \39\ OCC's Risk Committee has initially determined that OCC's 
Clearing Fund Cash Requirement should be increased to $3.5 billion 
based on an analysis of stress test results demonstrating that this 
amount, combined with OCC's committed liquidity facilities, should 
be sufficient to cover OCC's liquidity risk tolerance of a 1-in-50 
year statistical market event at a 99.5% confidence level over a 
two-year look back period. In evaluating the proposed size of the 
Clearing Fund Cash Requirement, OCC analyzed stress test results for 
the period January 2017-June 2019. This analysis has been provided 
in confidential Exhibit 3 to File No. SR-OCC-2020-802. OCC would 
inform Clearing Members of any change in the Clearing Fund Cash 
Requirement through Information Memoranda and Clearing Fund sizing 
reports.
---------------------------------------------------------------------------

    In addition, OCC proposes to remove the description of the specific 
OCC officers authorized to temporarily increase the size of the 
Clearing Fund as this authority is already discussed in OCC's CFM 
Policy and will also be described in the proposed LRMF.\40\ Rule 
1002(a)(i) would be revised to instead state that ``the Corporation'' 
shall have the authority to increase the amount of cash required to be 
maintained in the Clearing Fund. OCC believes the internal governance 
process for temporary increases in the Clearing Fund Cash Requirement 
are appropriately documented in its filed policies (and proposed LRMF) 
and that the proposed change would reduce the risk of potential 
inconsistencies between OCC's Rules and its filed policies.
---------------------------------------------------------------------------

    \40\ OCC also proposes similar changes to Rule 1001(d) 
concerning temporary increases to the overall Clearing Fund Size. 
This authority is also discussed in OCC's CFM Policy.
---------------------------------------------------------------------------

    OCC also proposes to modify Rule 1002(a)(i)(A) to provide that the 
Clearing Fund Cash Requirement may be temporarily increased ``to 
respond to changing business or market conditions'' for the protection 
of OCC, Clearing Members or the general public and to move certain 
existing criteria (i.e., that any determination to implement a 
temporary increase in the Clearing Fund Cash Requirement (i) be based 
upon then-existing facts and circumstances, (ii) be in furtherance of 
the integrity of OCC and the stability of the financial system, and 
(iii) take into consideration the legitimate interests of Clearing 
Members and market participants) to be applied to the Risk Committees 
review of any such increase. The proposed change would provide 
flexibility for OCC's executive management to increase liquidity 
resources as circumstances warrant and put into place more detailed 
criteria for the Risk Committee's review of such an increase when 
determining whether changes should be made on a more permanent basis.
    Under the requirements of the proposed LRMF, the Risk Committee's 
review would include a determination as to whether the increase was 
appropriately made on a temporary basis or whether OCC's Liquidity Risk 
Management Framework, stress testing methodology, Base Liquidity 
Resources, or Contingency Funding Plan should be modified to ensure 
that OCC continues to maintain sufficient liquidity resources to meet 
its regulatory obligations. This determination would (1) be based upon 
then-existing facts and circumstances, (2) be in furtherance of the 
integrity of OCC and the stability of the financial system, and (3) 
take into consideration the legitimate interests of Clearing Members 
and market participants. In addition, the Risk Committee would maintain 
sole authority to decrease the amount of the Clearing Fund Cash 
Requirement, incrementally or in full, to any amount greater than or 
equal to the amount set during the last yearly sizing process.\41\ The 
LRMF would also clarify that any such increase may occur during the 
monthly Clearing Fund sizing process, or on an intra-month basis. The 
proposed change is designed to ensure that OCC maintains appropriate 
flexibility to manage its liquidity risks in response to changing 
market and business conditions while also providing an appropriate 
governance structure for making such decisions on a temporary basis 
(i.e., through authority limited to OCC's executive management team) 
and for reviewing such decisions and making determinations on further 
enhancements to OCC's framework for managing liquidity risk (i.e., 
through oversight and ultimate decision-making authority by OCC's 
Board-level Risk Committee).
---------------------------------------------------------------------------

    \41\ OCC notes that the Clearing Fund Cash Requirement would 
initially be set at $3.5 billion.
---------------------------------------------------------------------------

    OCC also proposes to amend Interpretation and Policy .03 to Rule 
1002 to require that any increase in the Clearing Fund Cash Requirement 
be satisfied no later than the second business day following 
notification unless the Clearing Member is notified by an officer of 
OCC an alternative time to satisfy such obligation. Interpretation and 
Policy .03 to Rule 1002 currently requires Clearing Members to fund an 
increase in Clearing Fund Cash

[[Page 27478]]

Requirement no later than one hour before the close of Fedwire on the 
business day following notification by OCC. The proposed change is 
intended to more closely align timeframes for meeting an increase in 
the Clearing Fund Cash Requirement with the timing for satisfying 
Clearing Fund deficits in the monthly and intra-month sizing processes. 
OCC believes that standardizing these timeframes would provide more 
clarity and simplicity in OCC's Rules and would help Clearing Members 
better understand and manage their obligations to OCC.
4. Two-Day Notice Period for Substitutions Involving Excess Clearing 
Fund Cash
    Under OCC's current operational practices, Clearing Members may 
substitute Government Securities for cash deposits in the Clearing Fund 
in excess of their minimum cash requirements, and such substitutions 
are generally completed on the same day of the request. OCC proposes to 
adopt new Rule 1002(a)(iv) to introduce a two-day notice period for any 
Clearing Member requesting to substitute Government Securities for cash 
deposits in excess of such Clearing Member's proportionate share of the 
Clearing Fund Cash Requirement. For purposes of determining permitted 
substitution amounts and eligible cash withdrawals during any two-day 
notification period, deposits of Government Securities or any other 
non-cash collateral transactions that result in excess Clearing Fund 
contributions of the Clearing Member will not be deemed to be excess 
until the completion of the two-day notification period. The proposed 
change is intended to provide additional certainty around the level of 
liquidity resources available to OCC at any given time by fixing the 
amount of cash in the Clearing Fund, and thereby fixing the amount of 
OCC's Available Liquid Resources, for any given two-day liquidation 
horizon. Under the proposed LRMF, once the substitution request is 
made, OCC would remove the cash deposits in question from subsequent 
Contingency Funding Plan calculations (discussed below). OCC believes 
that the proposed change would also eventually result in a natural 
equilibrium of excess cash in Clearing Fund as Clearing Members 
determine how best to fund their Clearing Fund requirement. OCC notes 
that Clearing Members would continue to be able to immediately withdraw 
cash deposits that are above their Clearing Fund Cash Requirement 
provided that they have an equivalent amount of excess Clearing Fund 
deposits (as provided under Rule 1008).
    Proposed Rule 1002(a)(iv) would also provide OCC with the 
discretion to waive the two-day notification period if the substitution 
would not result in any Clearing Member's settlement obligations, 
including potential settlement obligations under stressed market 
conditions, exceeding the liquidity resources available to satisfy such 
settlement obligations.
5. Contingency Funding Plan
    OCC proposes several enhancements to its Contingency Funding Plan, 
which would be described in the proposed Rules, LRMF, and Methodology 
Description. OCC's current Contingency Funding Plan and proposed 
changes thereto are discussed in detail below.
Current Process
    OCC's Contingency Funding Plan primarily consists of a process by 
which OCC monitors and evaluates the reasonably anticipated settlement 
obligations of its Clearing Members against OCC's liquidity resources 
and calls for cash margin deposits in circumstances where such 
settlement obligations may exceed OCC's liquidity resources. In 2014, 
OCC filed a proposed rule change for immediate effectiveness that, 
among other things, required OCC to issue an intra-day margin call \42\ 
in situations in which a Clearing Member's reasonably anticipated 
settlement obligations to OCC exceeded the liquid financial resources 
available to satisfy such obligations.\43\ The filing made it clear 
that such action would be taken even if OCC has made no adverse 
determination as to the financial condition of the Clearing Member, the 
market risk of the Clearing Member's positions or the adequacy of the 
Clearing Member's total margin deposit in the accounts in question. One 
primary circumstance in which such action may be required is the 
``unwinding'' of a ``box spread'' position.\44\ Box spreads can be used 
as financing transactions, and they may require very large fixed 
payments upon expiration. In this situation, if the margin deposited by 
a Clearing Member participating in such a box spread is in the form of 
common stock, and if the Clearing Member failed to make the settlement 
payment, OCC's available liquid financial resources may be insufficient 
to cover the settlement obligation. In anticipation of such a 
settlement, OCC requires the Clearing Member to deposit intra-day 
margin in the form of cash so that OCC's liquid financial resources 
would be sufficient to cover the Clearing Member's obligations.\45\
---------------------------------------------------------------------------

    \42\ OCC Rule 609 provides OCC with the discretion to require 
the deposit of additional margin by any Clearing Member in any 
account at any time during a given business day.
    \43\ See Securities Exchange Act Release No. 72266 (May 28, 
2014), 79 FR 32009 (June 3, 2014) (SR-OCC-2014-10) (Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Require That 
Intraday Margin be Collected and Margin Assets Not be Withdrawn When 
a Clearing Member's Reasonably Anticipated Settlement Obligations to 
OCC Would Exceed the Liquidity Resources Available to OCC to Satisfy 
Such Settlement Obligations).
    \44\ A box spread position involves a combination of two long 
and two short options on the same underlying interest with the same 
expiration date that results in an amount to be paid or received 
upon settlement that is fixed regardless of fluctuations in the 
price of the underlying interest. See http://www.cboe.com/learncenter/glossary.aspx#b.
    \45\ In advance of such margin call being made, a Clearing 
Member may elect to deposit margin in the form of cash, thereby 
increasing liquid resources available to OCC. If a margin deposit in 
the form of cash is made by the Clearing Member before the call is 
issued, it may obviate the need for the call altogether.
---------------------------------------------------------------------------

    Currently, OCC generally monitors for potential liquidity 
shortfalls beginning thirty days prior to a given settlement. For 
purposes of determining whether the reasonably anticipated settlement 
obligations of a Clearing Member Group may exceed the liquid financial 
resources available to satisfy such obligations, OCC compares the 
forecasted liquidity amount against the drawable amount of its 
committed liquidity facilities.\46\
---------------------------------------------------------------------------

    \46\ See supra note 6.
---------------------------------------------------------------------------

Proposed Changes
    OCC proposes to make several enhancements to its Contingency 
Funding Plan, which are discussed in detail below.
Stress Test-Based Forecasting
    As discussed above, OCC's proposed approach to liquidity stress 
testing would include the use of certain Sufficiency Scenarios designed 
to assess potential liquidity exposures in excess of OCC's Available 
Liquidity Resources. OCC proposes to use the output of these 
Sufficiency Scenarios in place of its current process for forecasting 
reasonably anticipated settlement obligations to determine whether to 
require additional cash deposits from its Clearing Members. These 
Sufficiency Scenarios may include a range of Historical and 
Hypothetical Scenarios, including but not limited to, a 1987 historical 
market event and a 2008 historical market event. OCC notes that the 
proposed change would involve assessing OCC's projected settlement 
obligations against OCC's Available Liquidity Resources as opposed to 
its

[[Page 27479]]

committed liquidity facilities in order to fully account for the amount 
of cash committed to OCC beyond its liquidity facilities (e.g., the 
Clearing Fund Cash Requirement). The proposed change would allow OCC to 
more appropriately monitor its liquidity exposures under a variety of 
foreseeable stress scenarios, including the default of the Clearing 
Member Group that would generate the largest aggregate payment 
obligation to OCC in extreme but plausible market conditions, and to 
call for additional liquid resources in the form of cash deposits to 
ensure that OCC continues to maintain sufficient liquid resources to 
meet its settlement obligations with a high degree of confidence.
Required Cash Deposits
    Under the proposed LRMF, OCC would produce projections of near-term 
potential liquidity demands using its Sufficiency Scenarios for each 
Clearing Member Group. In the event OCC projects that a Clearing Member 
Group's projected liquidity demands exceed 80% of OCC's Available 
Liquidity Resources, FRM would initiate enhanced monitoring of the 
Clearing Member Group's liquidity demand. If any stressed liquidity 
demand from a Sufficiency Scenario is greater than, or equal to, 90% of 
Available Liquidity Resources, OCC may require the Clearing Member 
Group to post deposits or substitute collateral in the form of cash 
(``Required Cash Deposits'') to supplement OCC's Available Liquidity 
Resources.\47\ In addition, the proposed LRMF would establish other 
thresholds designed to monitor the impact of Required Cash Deposits on 
individual Clearing Members. Specifically, if a Required Cash Deposit 
for an individual Clearing Member exceeds $500 million or 75% of the 
Clearing Member's excess net capital, STLRM would be required to notify 
the OCEO. If the Required Cash Deposit imposed on an individual 
Clearing Member would exceed 100% of an individual Clearing Member's 
net capital, the Required Cash Deposit shall be escalated to the OCEO, 
and any member of the OCEO would have the authority individually to 
determine whether OCC should continue calling for additional liquidity 
resources in excess of 100% of the net capital amount. OCC believes 
that this notification and escalation process would enable OCC to 
appropriately require those Clearing Members that bring elevated 
liquidity exposures to OCC to bear the costs of those risks in the form 
of Required Cash Deposits while also allowing OCC to take into 
consideration a particular Clearing Member's ability to meet the call 
based on its financial condition and the amount of collateral it has 
available to pledge when certain pre-identified thresholds have been 
exceeded.
---------------------------------------------------------------------------

    \47\ The amount of any Required Cash Deposit would be determined 
by calculating the value of 90% of the total Available Liquidity 
Resources for the Clearing Member Group in question less amount of 
the largest stressed liquidity demand for that member resulting from 
OCC's Sufficiency Scenarios. Required Cash Deposits would be re-
calculated daily and remain in place until the projected demand no 
longer exceeds 90% of Available Liquidity Resources.
---------------------------------------------------------------------------

    These thresholds and any recommend changes thereto would be 
reviewed by the CLRWG and sent to the Risk Committee for approval 
during an annual review. Under the proposed LRMF, each member of OCC's 
Office of the Chief Executive Officer would maintain separate authority 
to approve temporary changes to the thresholds outside of the annual 
review process due to changing market or business conditions. Any 
temporary change in Contingency Funding Plan thresholds shall be 
reviewed by the Risk Committee within 20 calendar days of such increase 
to determine whether the increase was appropriate on a temporary basis, 
or whether OCC's Liquidity Risk Management Framework, stress testing 
methodology, Base Liquidity Resources, or Contingency Funding Plan 
should be modified to ensure that OCC continues to maintain sufficient 
liquidity resources to meet its regulatory obligations. Such a 
determination would (i) be based upon then-existing facts and 
circumstances, (ii) be in furtherance of the integrity of OCC and the 
stability of the financial system, and (iii) take into consideration 
the legitimate interests of Clearing Members and market participants. 
If the Risk Committee determines that a permanent change is required to 
OCC's Liquidity Risk Management Framework, stress testing methodology, 
Base Liquidity Resources, or Contingency Funding Plan, OCC would 
continue to maintain any temporary changes in Contingency Funding Plan 
thresholds through the completion of any necessary regulatory filings 
to ensure that it maintains sufficient liquidity resources during the 
regulatory review and approval process.
    Pursuant to procedures maintained by OCC's FRM department, a 
Clearing Member Group would be required to maintain a Required Cash 
Deposit in the account(s) where the demand is being generated until the 
stressed liquidity demand falls below established thresholds or until 
the settlement demand is met. OCC would generally require funding of 
Required Cash Deposits five business days before the date of the 
projected demand but may require funding up to 20 business days before 
the projected date as facts and circumstances may warrant.
Increases to Base Liquidity Resources
    Under the proposed LRMF, the Contingency Funding Plan would also 
include increases in OCC's Base Liquidity Resources through an increase 
in the Clearing Fund Cash Requirement pursuant to proposed Rule 1002(a) 
as discussed above.\48\ Additionally, OCC endeavors to have an 
uncommitted accordion \49\ feature embedded in any syndicated credit 
facility, potentially allowing OCC to borrow additional funds from 
existing or new bank syndicate liquidity providers. The availability of 
an accordion is based on the willingness and ability of the syndicate 
members to fund the additional borrowing request. OCC can initiate a 
request to utilize an accordion at any time and it can be expected that 
it would take a period of weeks to exercise this feature.
---------------------------------------------------------------------------

    \48\ See supra notes 37-41 and associated text.
    \49\ An accordion is an uncommitted expansion of a credit 
facility generally on the same terms as a credit facility.
---------------------------------------------------------------------------

Changes to OCC's Rules
    OCC proposes changes to Chapters VI (Margins) and X (Clearing Fund) 
of its Rules to implement the proposed enhancements to its Contingency 
Funding Plan. OCC proposes to adopt new Rule 601(g) and Rule 609(b) to 
provide that, in cases when OCC forecasts that a Clearing Member's 
potential settlement obligations, including potential settlement 
obligations under stressed market conditions, could be in excess of 
OCC's committed liquidity resources available to satisfy such 
obligations, OCC may impose Required Cash Deposits either as part of 
the Clearing Member's normal daily margin requirement under Rule 601 or 
through the deposit of intra-day margin in the form of cash under Rule 
609. Proposed Rules 601(g) and 609(b) would also provide that OCC would 
generally require funding of Required Cash Deposits five business days 
before the date of the projected demand but may require funding up to 
20 business days before the projected date as facts and circumstances 
may warrant. Rule 609(b) would further provide that any such deposit of 
intra-day margin must be satisfied within one hour of the issuance of 
an instruction debiting the applicable bank account of the Clearing 
Member unless the Clearing Member is notified by an officer of OCC of 
an alternative time to satisfy such obligation, which is generally 
consistent

[[Page 27480]]

with OCC's current intra-day margin authority under Rule 609 (and newly 
amended Rule 609(a)). OCC believes the proposed changes would provide 
additional clarity and transparency around its authority to impose 
Required Cash Deposits.
    OCC also proposes clarifying changes to Rule 608 concerning 
withdrawals of margin to provide that the existing prohibition on 
withdrawing margin for liquidity purposes would now be based on 
liquidity demands forecasted by OCC that may include potential 
settlement obligations under stressed market conditions. OCC also would 
adopt new Interpretation and Policy .08 to Rule 601 and amend 
Interpretation and Policy .02 to Rule 608 and Interpretation and Policy 
.01 to Rule 609 to clarify that, for purposes of determining whether a 
Clearing Member's forecasted settlement obligations to the Corporation 
could exceed the liquidity resources available to satisfy such 
obligations, OCC would consider, as forecasted settlement obligations, 
the settlement obligations of the Clearing Member and any Member 
Affiliates of the Clearing Member, as well as consider as liquidity 
resources the margin assets remaining on deposit with respect to such 
accounts that are in the form of U.S. dollars.
6. Required Cash Deposits for Clearing Members on Watch Level
    In addition to the proposed enhancements to the Contingency Funding 
Plan discussed above, OCC proposes to add new Rule 604(g) to provide 
OCC with authority to require Clearing Members to deposit a specified 
amount of cash to satisfy its margin requirements as a protective 
measure if the Clearing Member is determined to present increased 
credit risk and is subject to enhanced monitoring and surveillance 
under OCC's watch level reporting process.\50\ Under the proposed rule, 
Clearing Members may be required to satisfy such required cash deposits 
through their daily margin requirements under Rule 601 or through 
intra-day margin calls under Rule 609. The proposed change is designed 
to provide OCC with an additional tool to mitigate potential liquidity 
risks of those Clearing Members identified as presenting increased risk 
to OCC through its ongoing monitoring processes outside of the 
forecasting process in the Contingency Funding Plan.
---------------------------------------------------------------------------

    \50\ OCC's watch level reporting process is outlined in its CCRM 
Policy. See supra note 19.
---------------------------------------------------------------------------

7. Enhancements to Rules Concerning the Borrowing of Clearing Fund 
Assets
    Under Chapter X of OCC's Rules, OCC has authority in certain 
circumstances to take possession of cash or securities contributed to 
the Clearing Fund and to use such assets for borrowings. OCC also 
generally requires Clearing Members to collectively contribute a 
minimum of $3 billion in cash to the Clearing Fund, which is intended 
to provide OCC with a reliable amount of qualifying liquid resources to 
account for the event that there is an extreme scenario in the 
financial markets and OCC has to address any resultant liquidity 
demands. In addition to providing OCC with sufficient pre-funded 
financial resources to cover potential credit losses, these Clearing 
Fund contributions serve as an important source of liquidity for OCC to 
manage potential liquidity risks associated with a Clearing Member 
default or the failure or operational disruption of a bank or 
securities or commodities clearing organization. OCC is proposing 
several changes to its rules to clarify its authority to borrow 
Clearing Fund contributions to address potential liquidity needs.
Authority To Borrow Cash Clearing Fund Contributions for Liquidity 
Purposes
    OCC Rule 1006(f) describes OCC's use of the Clearing Fund for 
liquidity purposes, specifically, the use of Clearing Fund for 
borrowing or otherwise obtaining funds to be used for liquidity 
purposes. Rule 1006(f) primarily discusses the use of Clearing Fund 
securities to borrow or otherwise obtain funds from third parties to 
meet its settlement obligations; however, OCC would be unlikely to use 
Clearing Fund cash deposits to borrow collateral from a third party in 
the same, fungible form, incur costs associated with the borrowing, and 
then use that fungible collateral to meet OCC's obligations. Rather, 
OCC would directly borrow Clearing Fund cash under the same general 
terms and conditions as it would to effect a borrowing pursuant to Rule 
1006(f). This is further reinforced by OCC's Default Management Policy, 
which provides that ``[i]n order to meet financial resource obligations 
as a result of a clearing member suspension. OCC is able to utilize the 
following resources . . . Clearing Fund deposits of the suspended 
member. OCC may utilize any cash, convert Clearing Fund deposits to 
cash, or effect borrowing or other transactions using such deposits. 
Clearing Fund deposits of non-defaulting members. OCC may utilize any 
cash, convert Clearing Fund deposits to cash, or effect borrowing or 
other transactions using such deposits.'' (emphasis in original).\51\
---------------------------------------------------------------------------

    \51\ See supra note 7.
---------------------------------------------------------------------------

    OCC proposes to amend Rules 1006(a) and (f) to clarify that, where 
the Clearing Fund is already allowed to be used for borrowings, OCC has 
authority to borrow cash directly instead of pledging Clearing Fund 
cash or securities to a third party to borrow or otherwise obtain 
funds. Making this authority explicit will provide OCC with clear and 
transparent flexibility to access cash contributions to the Clearing 
Fund in relevant circumstances rather than pledging Clearing Fund 
securities to borrow on a secured basis. Consistent with OCC's current 
rules applicable to using Clearing Fund assets to effect borrowings, 
OCC would be permitted to borrow Clearing Fund cash directly for any 
means determined to be reasonable by the Executive Chairman, Chief 
Executive Officer, or Chief Operating Officer in his discretion and 
shall not be deemed to be a charge against the Clearing Fund for a 
period not to exceed thirty days, and, during said period, shall not 
affect the amount or timing of any charges otherwise required to be 
made against the Clearing Fund pursuant to Chapter X of the Rules. OCC 
believes the proposed change would provide additional clarity and 
transparency to its Clearing Members regarding OCC's use of Clearing 
Fund cash as a liquidity resource and would help Clearing Members 
better understand their and OCC's rights and obligations as they relate 
to the Clearing Fund.
Authority To Reject Substitution Requests for Clearing Fund Collateral
    OCC proposes to amend Rule 1006(f) to permit OCC to reject a 
Clearing Member's substitution request regarding a security contributed 
to the Clearing Fund where OCC has already used the security to borrow 
or otherwise obtain funds. OCC's current By-Laws and Rules do not 
explicitly address its right to reject a request by a Clearing Member 
to substitute Government Securities that have been pledged to its 
liquidity facilities; however, OCC's Rules provide it with plenary 
authority to use such securities for the purposes of borrowing from its 
liquidity facilities without restriction or limitation on OCC regarding 
any obligation or timing for making a substitution. Specifically, Rule 
1006(f) provides OCC with broad authority to take possession of cash or 
securities deposited by Clearing Members as contributions to the

[[Page 27481]]

Clearing Fund and use such assets to borrow or otherwise obtain funds, 
including through its committed liquidity facilities, to meet 
obligations arising out of the default or suspension of a Clearing 
Member, the failure of a bank or securities or commodities clearing 
organization to meet its obligations, or where OCC believes it 
necessary to borrow to meet its liquidity needs for same-day settlement 
as a result of the failure of any bank or securities or commodities 
clearing organization. Rule 1006(f) further provides OCC with the 
authority to pledge such cash and securities to borrow from its 
liquidity facilities for a period of up to thirty days.\52\
---------------------------------------------------------------------------

    \52\ OCC notes that while the terms of its committed liquidity 
facilities may generally permit OCC to substitute pledged collateral 
during the course of a borrowing, nothing in the agreements requires 
OCC to make such a substitution at the request of a Clearing Member.
---------------------------------------------------------------------------

    OCC proposes to amend Rule 1006(f) to explicitly permit OCC to 
reject a Clearing Member's substitution request regarding a security 
contributed to the Clearing Fund where OCC has already used the 
security to borrow or otherwise obtain funds. OCC believes that 
providing this discretion will strengthen OCC's access to liquidity 
through secured borrowing arrangements by ensuring OCC is able to 
preserve the pledge of particular securities where necessary or 
appropriate.
Timeframe To Determine Losses Resulting From Borrowing
    OCC Rule 1006(f) currently provides, in part, that funds obtained 
by OCC through a borrowing shall not be deemed to be charges against 
the Clearing Fund for a period not to exceed thirty days, and, during 
that period, shall not affect the amount or timing of any charges 
otherwise required to be made against the Clearing Fund; however, if 
all or a part of any transaction effected by OCC under Rule 1006(f) 
remains outstanding after thirty days, OCC shall consider the amount of 
Clearing Fund assets used to support its obligations under the 
outstanding transaction as an actual loss to the Clearing Fund and 
immediately allocate such loss in accordance with Chapter X of the 
Rules.
    OCC proposes to amend Rule 1006(f) to clarify that OCC is not 
required to wait thirty days prior to determining that any borrowing 
represents an actual loss to the Clearing Fund. Making this authority 
more explicit will help ensure that OCC is able to make proportionate 
charges against Clearing Member contributions to the Clearing Fund in a 
timely manner to make good the related losses and replenish its credit 
and liquidity resources.
8. Requirement for Clearing Members To Maintain Contingency Plans for 
Settlement
    OCC Rule 301(d) currently requires that every Clearing Member have 
access to sufficient financial resources to meet obligations arising 
from clearing membership in extreme but plausible market conditions. 
OCC rules do not address circumstances in which a Clearing Member has 
sufficient resources to meet its obligations but is unable to meet 
settlement obligations due to, for example, a failure or operational 
issue at its primary settlement bank. As a result, OCC proposes to 
amend Rule 301(d) to further require that every Clearing Member 
maintain adequate procedures, including but not limited to contingency 
funding, to ensure that it is able to meet its obligations arising in 
connection with clearing membership when such obligations arise. OCC 
believes that it is important that OCC and its members maintain 
processes that are resilient to a variety of potential operational and 
financial disruptions and that Clearing Members maintain robust 
contingency plans designed to effect timely settlement of their 
obligations to reduce the likelihood member would be unable to satisfy 
their settlement obligations, risking possible suspension. Examples of 
such arrangements could include maintaining ability to wire funds 
directly to OCC via Fedwire or by providing instructions to another 
bank to effect the movement of funds.
9. Other Clarifying and Conforming Changes
    OCC also proposes to make conforming changes to the OCC Risk 
Policies to replace references to OCC's Liquidity Risk Management 
Policy with references to the LRMF, align descriptions of OCC's 
liquidity risk management practices with the proposed LRMF, and make 
other non-substantive administrative changes to enhance the accuracy 
and clarity of the Risk Policies. In addition, OCC would revise the 
definition of Committed Liquidity Facilities to better align that term 
with (1) the discussion of such facilities in the LRMF and (2) the 
definition of ``qualifying liquid resources'' (as defined in Exchange 
Act Rule 17Ad-22(a)(14)).\53\
---------------------------------------------------------------------------

    \53\ 17 CFR 240.17Ad-22(a)(14).
---------------------------------------------------------------------------

    Finally, OCC proposes to revise the policy exception and violation 
reporting requirements in the Risk Policies and make other 
administrative updates to policy cross-references. OCC's Compliance 
Department is responsible for maintaining OCC's internal policy 
concerning the governance and content of OCC's policies and procedures. 
This includes the development of standard templates for OCC policy 
documentation and ensuring that those templates include appropriate and 
consistent requirements for the reporting and escalation of policy 
exceptions and violations. OCC proposes to revise the Risk Policies to 
incorporate new, standardized policy exception and violation reporting 
requirements, which apply to all internal OCC policies and procedures. 
The proposed change would simplify and centralize the escalation path 
for policy document owners and ensure that OCC's Compliance department, 
and if appropriate the Enterprise Risk Management department, is 
notified in a consistent manner of any exceptions or violations. OCC 
does not believe the proposed change would have a material impact on 
operations under the Risk Policies. The proposed change is intended to 
ensure that the administration of policy exception and violation 
reporting is done in a consistent manner throughout OCC's policies.
Clearing Member Outreach
    To inform Clearing Members of the proposed changes, OCC has 
provided an overview of the proposed changes to the Financial Risk 
Advisory Council (``FRAC''), a working group comprised of exchanges, 
Clearing Members and indirect participants of OCC and the OCC 
Roundtable, which was established to bring Clearing Members, exchanges 
and OCC together to discuss industry and operational issues.\54\ OCC 
will also provide parallel testing prior to implementation and perform 
direct outreach to Clearing Members most likely to be materially 
impacted by the proposed changes and answer any questions Clearing 
Members may have. To-date, OCC has not received any material objections 
or concerns in response to this outreach.
---------------------------------------------------------------------------

    \54\ The OCC Roundtable is comprised of representatives of the 
senior OCC staff, participant exchanges and Clearing Members, 
representing the diversity of OCC's membership in industry segments, 
OCC-cleared volume, business type, operational structure and 
geography.
---------------------------------------------------------------------------

Implementation Timeframe
    OCC expects to implement the proposed changes within sixty (60) 
days after the date that OCC receives all necessary regulatory 
approvals for the proposed changes. OCC will announce the 
implementation date of the

[[Page 27482]]

proposed change by an Information Memorandum posted to its public 
website at least two (2) weeks prior to implementation.
Expected Effect on and Management of Risk
    The proposed changes are designed to enhance OCC's overall 
framework for managing liquidity risk. OCC believes the proposed 
changes would mitigate the risks presented to and by OCC and improve 
OCC's resilience as a systemically important financial market utility 
for the reasons set forth below.
1. Liquidity Risk Management Framework
    The proposed LRMF would set forth the manner in which OCC 
effectively measures, monitors, and manages its liquidity risks, 
including how OCC measures, monitors, and manages its settlement and 
funding flows on an ongoing and timely basis, and its use of intraday 
liquidity. Specifically, the LRMF would describe: (1) The 
identification of OCC's liquidity risks; (2) the categories and types 
of OCC's liquidity resources; (3) the stress testing and sizing of 
OCC's liquidity resources; (4) OCC's Contingency Funding Plan for 
collecting additional liquidity resources from Clearing Members; (5) 
the risk management of supporting institutions (e.g., settlement banks, 
custodian banks, and liquidity providers) that may present liquidity 
risks to OCC; and (6) the governance and reporting requirements 
concerning OCC's LRMF. Taken together, the proposed LRMF is designed to 
ensure that OCC comprehensively manages its liquidity risks and 
maintains sufficient liquid resources to allow OCC to continue the 
prompt and accurate clearance and settlement of securities and assure 
the safeguarding of securities and funds which are in its custody or 
control or for which it is responsible, notwithstanding a default of 
the Clearing Member Group that would generate the largest aggregate 
payment obligation for OCC in extreme but plausible market conditions.
2. Liquidity Stress Testing
    OCC proposes to adopt a liquidity stress testing approach to 
effectively measure and monitor the sufficiency of OCC's liquidity 
resources. OCC would perform daily liquidity risk stress testing using 
standard and predetermined parameters and assumptions, and the output 
of these scenarios would be used for liquidity resource evaluation. 
OCC's proposed liquidity stress tests would consist of a range of 
Historical and Hypothetical Scenarios, and the output would be used to: 
(1) Assess OCC's projected liquidity demands under stressed scenarios 
against OCC's Base and Available Liquidity Resources; (2) assess OCC's 
liquidity resources against OCC's liquidity risk tolerance; (3) measure 
the sufficiency of potential exposures in excess of OCC's liquidity 
resources to determine if additional risk mitigation is needed when 
those exposures indicate potential breaches in scenarios including but 
not limited to, a 1987 historical market event and a 2008 historical 
market event; and (4) monitor and assess OCC's liquidity resources 
under a variety of stress conditions, which may include extreme but 
implausible scenarios and reverse stress test scenarios. The proposed 
change is designed to ensure that OCC comprehensively manages its 
liquidity risks and maintains sufficient liquid resources to allow OCC 
to continue the prompt and accurate clearance and settlement of 
securities and assure the safeguarding of securities and funds which 
are in its custody or control or for which it is responsible, 
notwithstanding a default of the Clearing Member Group that would 
generate the largest aggregate payment obligation for OCC in extreme 
but plausible market conditions.
3. Clearing Fund Cash Requirement
    The proposed changes to OCC's Clearing Fund Cash Requirement are 
designed to improve the resiliency of OCC's liquidity resources by 
providing OCC with the flexibility to periodically set its Base 
Liquidity Resources and to adjust Base Liquidity Resources in response 
to changing market and business conditions to ensure that OCC maintains 
sufficient liquidity resources to meet its settlement obligations in a 
timely manner. Specifically, the proposed changes would provide OCC's 
Risk Committee with the authority to initially reset the Clearing Fund 
Cash Requirement to $3.5 billion based on an analysis of stress test 
results demonstrating that this amount, in combination with OCC's 
committed liquidity facilities, should be sufficient to cover OCC's 
liquidity risk tolerance of a 1-in-50 year statistical market event at 
a 99.5% confidence level over a two-year look back period.\55\ It would 
also allow the Risk Committee to further adjust OCC's Base Liquidity 
Resources based on future stress test results in a timely manner. In 
addition, it would allow OCC's executive management team to adjust 
OCC's Base Liquidity Resources on a temporary basis, subject to 
notification and review by the Risk Committee, in response to changing 
market and business conditions.
---------------------------------------------------------------------------

    \55\ See supra note 39.
---------------------------------------------------------------------------

4. Two-Day Notice Period for Substitutions Involving Excess Clearing 
Fund Cash
    OCC proposes to introduce a two-day notice period for any Clearing 
Member requesting to substitute Government Securities for cash deposits 
in excess of such Clearing Member's proportionate share of the Clearing 
Fund Cash Requirement. The proposed change is intended to provide 
additional certainty around the level of liquidity resources available 
to OCC at any given time by fixing the amount of cash in the Clearing 
Fund, and thereby fixing the amount of OCC's Available Liquid 
Resources, for any given two-day liquidation horizon.\56\ The proposed 
change would enhance OCC's management of liquidity risk by providing 
additional certainty around its liquidity resource calculations and 
thereby help to ensure that OCC maintains sufficient liquidity 
resources to continue the prompt and accurate clearance and settlement 
of securities and assure the safeguarding of securities and funds which 
are in its custody or control or for which it is responsible in the 
event of a default of the Clearing Member Group that would generate the 
largest aggregate payment obligation for OCC in extreme but plausible 
market conditions.
---------------------------------------------------------------------------

    \56\ OCC notes that Clearing Members would continue to be able 
to immediately withdraw cash deposits that are above their Clearing 
Fund Cash Requirement provided that they have equivalent amount of 
excess Clearing Fund deposits (as provided under Rule 1008).
---------------------------------------------------------------------------

5. Contingency Funding Plan
    The proposed enhancements to the Contingency Funding Plan would 
include the use of certain Sufficiency Scenarios designed to assess 
potential liquidity exposures in excess of OCC's Available Liquidity 
Resources in place of OCC's current process for forecasting reasonably 
anticipated settlement obligations to determine whether to require 
additional cash deposits from its Clearing Members. The proposed 
changes would allow OCC to more appropriately monitor its liquidity 
exposures under a variety of foreseeable stress scenarios, and to call 
for additional liquid resources in the form of cash deposits to ensure 
that OCC continues to maintain sufficient liquid resources to meet its 
settlement obligations with a high degree of confidence, or to respond 
to a reduction in the amount of OCC's Base Liquidity Resources in an 
extreme event, such as the potential failure of a liquidity

[[Page 27483]]

provider. OCC's Contingency Funding Plan is designed to enable OCC to 
meet its settlement obligations in all relevant currencies when OCC 
experiences or projects a liquidity shortfall exceeding its financial 
resources without unwinding, revoking, or delaying same-day and where 
appropriate, intraday and multiday, settlement obligations. The 
proposed changes are designed to ensure that OCC comprehensively 
manages its liquidity risks and maintains sufficient liquid resources 
to allow OCC to continue the prompt and accurate clearance and 
settlement of securities and assure the safeguarding of securities and 
funds which are in its custody or control or for which it is 
responsible.
6. Required Cash Deposits for Clearing Members on Watch Level
    OCC proposes to add new Rule 604(g) to provide OCC with authority 
to require Clearing Members to deposit a specified amount of cash to 
satisfy its margin requirements as a protective measure if the Clearing 
Member is determined to present increased credit risk and is subject to 
enhanced monitoring and surveillance under OCC's watch level reporting 
process. Under the proposed rule, Clearing Members may be required to 
satisfy such required cash deposits through their daily margin 
requirements under Rule 601 or through intra-day margin calls under 
Rule 609. The proposed change is designed to provide OCC with an 
additional tool to mitigate potential liquidity risks of those Clearing 
Members identified as presenting increased risk to OCC through its 
ongoing monitoring processes outside of the forecasting process in the 
Contingency Funding Plan. The proposed change would allow OCC to 
collect additional liquid resources from a Clearing Member 
demonstrating potentially increasing levels of risk through the watch 
level review process so that OCC can continue the prompt and accurate 
clearance and settlement of securities and assure the safeguarding of 
securities and funds which are in its custody or control or for which 
it is responsible in the event such a Clearing Member defaults.
7. Enhancements to Rules Concerning the Borrowing of Clearing Fund 
Assets
    OCC is proposing several changes to its rules to clarify its 
authority to use Clearing Fund assets to address potential liquidity 
needs. First, OCC proposes to amend Rules 1006(a) and (f) to clarify 
that, where the Clearing Fund is already allowed to be used for 
borrowings, OCC has authority to borrow cash directly instead of 
pledging Clearing Fund cash or securities to a third party to borrow or 
otherwise obtain funds. The proposed change would provide additional 
clarity and transparency to OCC's Clearing Members regarding OCC's use 
of Clearing Fund cash as a liquidity resource and would help Clearing 
Members better understand their and OCC's rights and obligations as 
they relate to the Clearing Fund.\57\ Second, OCC proposes to amend 
Rule 1006(f) to permit OCC to reject a Clearing Member's collateral 
substitution request concerning a security contributed to the Clearing 
Fund where OCC has already used the security to borrow or otherwise 
obtain funds. Explicitly providing this discretion in OCC's Rules will 
strengthen OCC's access to liquidity through secured borrowing 
arrangements by ensuring OCC is able to preserve the pledge of 
particular securities where necessary or appropriate. Finally, OCC 
proposes to amend Rule 1006(f) to clarify that OCC is not required to 
wait thirty days prior to determining that any borrowing represents an 
actual loss to the Clearing Fund. Making this authority more explicit 
will help ensure that OCC is able to make proportionate charges against 
Clearing Member contributions to the Clearing Fund in a timely manner 
and make good the related losses. OCC believes that these proposed 
changes provide important clarity around its ability to borrow and use 
Clearing Fund assets for liquidity risk management purposes, and to 
replenish such resources in a timely fashion.
---------------------------------------------------------------------------

    \57\ OCC notes that the proposed changes to Rule 1006 are 
aligned with OCC's existing Default Management Policy, which 
provides that ``[i]n order to meet financial resource obligations as 
a result of a clearing member suspension. OCC is able to utilize the 
following resources . . . Clearing Fund deposits of the suspended 
member. OCC may utilize any cash, convert Clearing Fund deposits to 
cash, or effect borrowing or other transactions using such deposits. 
Clearing Fund deposits of non-defaulting members. OCC may utilize 
any cash, convert Clearing Fund deposits to cash, or effect 
borrowing or other transactions using such deposits.'' (emphasis in 
original). See supra note 51 and associated text.
---------------------------------------------------------------------------

8. Requirement for Clearing Members To Maintain Contingency Plans for 
Settlement
    OCC proposes to amend Rule 301(d) to require that every Clearing 
Member maintain adequate procedures, including but not limited to 
contingency funding, to ensure that it is able to meet its obligations 
arising in connection with clearing membership when such obligations 
arise. The proposed change is intended to reduce liquidity risk at OCC 
by requiring that Clearing Members have adequate contingency planning 
designed to effect timely settlement of their obligations with OCC 
despite a disruption by their primary settlement bank. OCC believes 
that it is important that OCC and its members maintain processes that 
are resilient to a variety of potential operational and financial 
disruptions and that Clearing Members maintain robust contingency plans 
designed to effect timely settlement of their obligations to reduce the 
likelihood member would be unable to satisfy its settlement 
obligations, risking possible suspension.
9. Other Clarifying and Conforming Changes
    OCC proposes to make a number of other clarifying, conforming, and 
organizational changes to the OCC Rules and Risk Policies to ensure the 
accuracy and consistency of its liquidity risk management rules and 
practices. The proposed changes are therefore designed to ensure that 
OCC is able to effectively manage its liquidity risks and maintain 
sufficient liquid resources to allow OCC to continue the prompt and 
accurate clearance and settlement of securities and assure the 
safeguarding of securities and funds which are in its custody or 
control or for which it is responsible, notwithstanding a default of 
the Clearing Member Group that would generate the largest aggregate 
payment obligation for OCC in extreme but plausible market conditions.
Consistency With the Payment, Clearing and Settlement Supervision Act
    The stated purpose of the Clearing Supervision Act is to mitigate 
systemic risk in the financial system and promote financial stability 
by, among other things, promoting uniform risk management standards for 
systemically important financial market utilities and strengthening the 
liquidity of systemically important financial market utilities.\58\ 
Section 805(a)(2) of the Clearing Supervision Act \59\ also authorizes 
the Commission to prescribe risk management standards for the payment, 
clearing and settlement activities of designated clearing entities, 
like OCC, for which the Commission is the supervisory agency. Section 
805(b) of the Clearing Supervision Act \60\ states that the objectives 
and principles for risk management standards prescribed under Section 
805(a) shall be to:
---------------------------------------------------------------------------

    \58\ 12 U.S.C. 5461(b).
    \59\ 12 U.S.C. 5464(a)(2).
    \60\ 12 U.S.C. 5464(b).
---------------------------------------------------------------------------

     promote robust risk management;
     promote safety and soundness;
     reduce systemic risks; and

[[Page 27484]]

     support the stability of the broader financial system.
    OCC believes that the proposed changes described herein are 
consistent with the objectives and principles of Section 805(b) of the 
Clearing Supervision Act \61\ and the risk management standards adopted 
by the Commission in Rule 17Ad-22 under the Act for the reasons set 
forth below.\62\
---------------------------------------------------------------------------

    \61\ Id.
    \62\ 17 CFR 240.17Ad-22. See Securities Exchange Act Release 
Nos. 68080 (October 22, 2012), 77 FR 66220 (November 2, 2012) (S7-
08-11) (``Clearing Agency Standards''); 78961 (September 28, 2016), 
81 FR 70786 (October 13, 2016) (S7-03-14) (``Standards for Covered 
Clearing Agencies''). OCC is a ``covered clearing agency'' (or 
``CCA'') as defined in Rule 17Ad-22(a)(5) and therefore must comply 
with the requirements of Rule 17Ad-22(e).
---------------------------------------------------------------------------

Consistency With Objectives and Principles of the Clearing Supervision 
Act
    OCC believes the proposed changes are consistent with the 
objectives and principles of Section 805(b) of the Clearing Supervision 
Act.\63\ The proposed changes are generally designed to enhance OCC's 
overall framework for managing liquidity risk. As described above, OCC 
proposes to adopt a new LRMF to set forth the manner in which OCC 
effectively measures, monitors, and manages its liquidity risks, 
including how OCC measures, monitors, and manages its settlement and 
funding flows on an ongoing and timely basis, and its use of intraday 
liquidity. Specifically, the LRMF would describe: (1) The 
identification of OCC's liquidity risks; (2) the categories and types 
of OCC's liquidity resources; (3) the stress testing and sizing of 
OCC's liquidity resources; (4) OCC's Contingency Funding Plan for 
collecting additional liquidity resources from Clearing Members; (5) 
the risk management of supporting institutions (e.g., settlement banks, 
custodian banks, and liquidity providers) that may present liquidity 
risks to OCC; and (6) the governance and reporting requirements 
concerning OCC's liquidity risk management.
---------------------------------------------------------------------------

    \63\ 12 U.S.C. 5464(b).
---------------------------------------------------------------------------

    OCC also proposes to enhance its management of liquidity risk by 
introducing a new approach to stress testing and determining the 
adequacy, sizing, and sufficiency of its liquidity resources. OCC's 
liquidity stress testing would be based on output of its current stress 
testing and Clearing Fund methodology, which would be used to project 
OCC's potential liquidity demands under stressed market conditions. 
OCC's proposed liquidity stress tests would consist of a range of 
Historical and Hypothetical Scenarios, and the output would be used to: 
(1) Assess OCC's projected liquidity demands under stressed scenarios 
against OCC's Base and Available Liquidity Resources; (2) assess OCC's 
liquidity resources against OCC's liquidity risk tolerance; (3) measure 
the sufficiency of potential exposures in excess of OCC's liquidity 
resources to determine if additional risk mitigation is needed when 
those exposures indicate potential breaches in scenarios including but 
not limited to, a 1987 historical market event and a 2008 historical 
market event; and (4) monitor and assess OCC's liquidity resources 
under a variety of stress conditions, which may include extreme but 
implausible scenarios and reverse stress test scenarios. The proposed 
change is designed to ensure that OCC comprehensively manages its 
liquidity risks and maintains sufficient liquid resources to allow OCC 
to continue the prompt and accurate clearance and settlement of 
securities and assure the safeguarding of securities and funds which 
are in its custody or control or for which it is responsible, 
notwithstanding a default of the Clearing Member Group that would 
generate the largest aggregate payment obligation for OCC in extreme 
but plausible market conditions.
    In addition, the proposed changes to OCC's Clearing Fund Cash 
Requirement are designed to improve the resiliency of OCC's liquidity 
resources by providing OCC with the flexibility to periodically set and 
adjust its Base Liquidity Resources in response to changing market and 
business conditions, and the proposed two-day notice period 
substitutions of Government Securities for excess Clearing Fund cash 
deposits would provide additional certainty around the level of 
liquidity resources available to OCC at any given for any given two-day 
liquidation horizon.
    Moreover, the proposed enhancements to the Contingency Funding Plan 
would include Sufficiency Scenarios designed to assess potential 
liquidity exposures in excess of OCC's Available Liquidity Resources to 
determine whether to require additional cash deposits from its Clearing 
Members. The proposed changes would allow OCC to more appropriately 
monitor its liquidity exposures under a variety of foreseeable stress 
scenarios, and to call for additional liquid resources in the form of 
cash deposits to ensure that OCC continues to maintain sufficient 
liquid resources to meet its settlement obligations with a high degree 
of confidence, or to respond to a reduction in the amount of OCC's Base 
Liquidity Resources in an extreme event, such as the potential failure 
of a liquidity provider.
    In addition, OCC proposes to mitigate its liquidity risk by 
adopting new rules to require its Clearing Members to deposit a 
specified amount of cash to satisfy its margin requirements as a 
protective measure if a Clearing Member is determined to present 
increased credit risk and is subject to enhanced monitoring and 
surveillance under OCC's watch level reporting process and to require 
that every Clearing Member maintain adequate procedures, including but 
not limited to contingency funding, to ensure that it is able to meet 
its obligations arising in connection with clearing membership when 
such obligations arise. OCC would also revise its Rules to clarify its 
authority to use Clearing Fund assets to address potential liquidity 
needs.
    Taken together, OCC believes that the proposed enhancements to its 
overall framework for managing liquidity risk would improve OCC's 
resilience as a systemically important market utility by promoting 
robust risk management and safety and soundness and thereby reducing 
systemic risks and supporting the stability of the broader financial 
system. This is further evidenced by their consistency with the risk 
management standards adopted by the Commission in Rule 17Ad-22 under 
the Act, which is discussed in detail below.
Consistency With Risk Management Standards in Exchange Act Rule 17Ad-22
    OCC also believes the proposed changes are consistent with the risk 
management standards adopted by the Commission in Rule 17Ad-22 under 
the Act for the reasons set forth below.
1. Liquidity Risk Management Framework
    Rules 17Ad-22(e)(7)(i) and (ii) \64\ require a CCA to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to maintain sufficient liquid resources at the 
minimum in all relevant currencies to effect same-day and, where 
appropriate, intraday and multiday settlement of payment obligations 
with a high degree of confidence under a wide range of foreseeable 
stress scenarios that includes but is not limited to, the default of 
the participant family that would generate the largest aggregate 
payment obligation for the CCA in extreme but plausible market 
conditions and to maintain such resources in the form of qualifying

[[Page 27485]]

liquid resources and in each relevant currency for which the CCA has 
payment obligations owed to clearing members. The proposed LRMF would 
describe: (1) OCC's approach to liquidity stress testing; (2) OCC's 
process for determining the size of OCC's liquidity resources based on 
analyses of projected liquidity demands under a variety of stress 
scenarios (e.g., stress scenarios representing OCC's liquidity risk 
tolerance, extreme historical scenarios such as a 1987 historical 
market event and 2008 historical market event, and certain scenarios 
used to size OCC's Clearing Fund); (3) OCC's process for testing the 
sufficiency of its liquidity resources and Contingency Funding Plan for 
collecting additional liquidity resources when necessary; and (4) the 
various categories and types of liquidity resources maintained by OCC, 
including the qualifying liquid resources maintained by OCC to meet its 
minimum liquidity resource requirement for effecting same-day, intraday 
and multiday settlement of OCC's payment obligations. OCC therefore 
believes the proposed LRMF is reasonably designed to comply with the 
requirements of Rules 17Ad-22(e)(7)(i) and (ii).\65\
---------------------------------------------------------------------------

    \64\ 17 CFR 240.17Ad-22(e)(7)(i) and (ii).
    \65\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(7)(iii) \66\ requires that a CCA establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to use access to accounts and services at a Federal 
Reserve Bank, or other relevant central bank, when available and where 
determined to be practical by the board of directors of the CCA, to 
enhance its management of liquidity risk. The proposed LRMF would 
describe OCC's use of accounts and services at the Federal Reserve Bank 
of Chicago in accordance with this requirement.
---------------------------------------------------------------------------

    \66\ 17 CFR 240.17Ad-22(e)(7)(iii).
---------------------------------------------------------------------------

    Rules 17Ad-22(e)(7)(iv) and (v) \67\ require that a CCA establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to: (1) Undertake due diligence to confirm that it 
has a reasonable basis to believe each of its liquidity providers has 
sufficient information to understand and manage the liquidity 
provider's liquidity risks and the capacity to perform as required 
under its commitments to provide liquidity to the CCA and (2) maintain 
and test with each liquidity provider, to the extent practicable, the 
CCA's procedures and operational capacity for accessing each type of 
relevant liquidity resource at least annually. The proposed LRMF would 
set forth OCC's requirements for performing due diligence to confirm it 
has a reasonable basis to believe each of its liquidity providers has 
sufficient information to understand and manage OCC's liquidity risk 
profile and the capacity to perform as required under its commitments. 
The proposed LRMF would also require the execution of periodic test 
borrows no less than once every 12 months to measure the performance 
and reliability of the liquidity facilities. As a result, OCC believes 
the proposed LRMF is consistent with Rules 17Ad-22(e)(7)(iv) and 
(v).\68\
---------------------------------------------------------------------------

    \67\ 17 CFR 240.17Ad-22(e)(7)(iv) and (v).
    \68\ Id.
---------------------------------------------------------------------------

    Rule 17Ad-22(e)(7)(vi)(A) \69\ requires that a CCA establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to determine the amount and regularly test the 
sufficiency of the liquid resources held for purposes of meeting the 
minimum liquid resource requirement by conducting stress testing of its 
liquidity resources at least once each day using standard and 
predetermined parameters and assumptions. Under the proposed LRMF, OCC 
would perform daily stress tests using its Sufficiency Scenarios to 
assess potential liquidity exposures in excess of OCC's Available 
Liquidity Resources under a range of stress scenarios, including but 
not limited to, a 1987 historical market event and a 2008 historical 
market event, and if a Clearing Member Group's exposures breach certain 
thresholds, OCC would require the breaching Clearing Member Group to 
maintain cash deposits in lieu of other forms of acceptable collateral 
to supplement OCC's Available Liquidity Resources pursuant to the 
Contingency Funding Plan.\70\ OCC therefore believes that the proposed 
LRMF is reasonably designed to comply with the requirements of Rule 
17Ad-22(e)(7)(vi)(A).\71\
---------------------------------------------------------------------------

    \69\ 17 CFR 240.17Ad-22(e)(7)(vi)(A).
    \70\ OCC also would perform daily stress tests using Adequacy 
and Informational Scenarios to evaluate the sufficiency of its 
liquidity resources under a wide range of historical and 
hypothetical stress scenarios.
    \71\ 17 CFR 240.17Ad-22(e)(7)(vi)(A).
---------------------------------------------------------------------------

    Rules 17Ad-22(e)(7)(vi)(B)-(D) \72\ further require a CCA to 
maintain policies and procedures for: (1) Conducting a comprehensive 
analysis on at least a monthly basis of the existing stress testing 
scenarios, models, and underlying parameters and assumptions used in 
evaluating liquidity needs and resources, and considering modifications 
to ensure they are appropriate for determining the clearing agency's 
identified liquidity needs and resources in light of current and 
evolving market conditions; (2) conducting a comprehensive analysis 
more frequently than monthly when the products cleared or markets 
served display high volatility or become less liquid, when the size or 
concentration of positions held by the clearing agency's participants 
increases significantly, or in other appropriate circumstances 
described in such policies and procedures; and (3) reporting the 
results of such analyses to appropriate decision makers at the CCA, 
including but not limited to, its risk management committee or board of 
directors, and using these results to evaluate the adequacy of and 
adjust its liquidity risk management methodology, model parameters, and 
any other relevant aspects of its liquidity risk management framework. 
The proposed LRMF would set forth the governance, review, monitoring, 
and reporting activities performed by OCC with respect to liquidity 
risk management. This would include the comprehensive review of 
existing stress test results and scenarios, and their underlying 
parameters and assumptions, the output of which is used to project 
liquidity demands, and evaluation of their appropriateness for 
determining the level of liquidity resources that OCC must maintain 
under current and evolving market conditions, with such an analysis 
being conducted more frequently than monthly when products cleared or 
markets served display high volatility or become less liquid, or when 
the size or concentration of positions held by OCC's participants 
increases significantly. In addition, under the proposed LRMF, FRM 
would be responsible for preparing a summary of the adequacy of OCC's 
Base Liquidity Resources and results from its monthly comprehensive 
review to provide to OCC's Management Committee and Risk Committee and 
any issues would be promptly escalated to OCC's Management Committee 
intra-month when circumstance warrant. Accordingly, OCC believes that 
the proposed LRMF is reasonably designed to comply with the 
requirements of Rules 17Ad-22(e)(7)(vi)(B)-(D).\73\
---------------------------------------------------------------------------

    \72\ 17 CFR 240.17Ad-22(e)(7)(vi)(B)-(D).
    \73\ Id.
---------------------------------------------------------------------------

2. Liquidity Stress Testing
    Rule 17Ad-22(e)(7)(i) \74\ requires a CCA to establish, implement, 
maintain and enforce written policies and procedures reasonably 
designed to maintain sufficient liquid resources at the minimum in all 
relevant currencies to effect same-day and, where appropriate, intraday 
and multiday

[[Page 27486]]

settlement of payment obligations with a high degree of confidence 
under a wide range of foreseeable stress scenarios that includes but is 
not limited to, the default of the participant family that would 
generate the largest aggregate payment obligation for the CCA in 
extreme but plausible market conditions. Rule 17Ad-22(e)(7)(vi)(A) \75\ 
further requires that a CCA establish, implement, maintain and enforce 
written policies and procedures reasonably designed to determine the 
amount and regularly test the sufficiency of the liquid resources held 
for purposes of meeting the minimum liquid resource requirement by 
conducting stress testing of its liquidity resources at least once each 
day using standard and predetermined parameters and assumptions. As 
described above, OCC's proposed liquidity stress tests would consist of 
a range of Historical and Hypothetical Scenarios, the output of which 
would be used to: (1) Assess OCC's projected liquidity demands under 
stressed scenarios against OCC's Base and Available Liquidity 
Resources; (2) assess OCC's liquidity resources against OCC's liquidity 
risk tolerance; (3) measure the sufficiency of potential exposures in 
excess of OCC's liquidity resources to determine if additional risk 
mitigation is needed when those exposures indicate potential breaches 
in scenarios including but not limited to, a 1987 historical market 
event and a 2008 historical market event; and (4) monitor and assess 
OCC's liquidity resources under a variety of stress conditions, which 
may include extreme but implausible scenarios and reverse stress test 
scenarios. The proposed change is designed to ensure that OCC maintains 
sufficient liquid resources to settle its payment obligations with a 
high degree of confidence under a wide range of foreseeable stress 
scenarios that includes but is not limited to, the default of the 
Clearing Member Group that would generate the largest aggregate payment 
obligation for in extreme but plausible market conditions. It would 
also allow OCC to conduct daily sufficiency stress tests to assess 
potential liquidity exposures in excess of its Available Liquidity 
Resources under a range of stress scenarios, including but not limited 
to, a 1987 historical market event and a 2008 historical market event, 
and if a Clearing Member Group's exposures breach certain thresholds, 
OCC would require the breaching Clearing Member Group to maintain cash 
deposits in lieu of other forms of acceptable collateral to supplement 
OCC's Available Liquidity Resources pursuant to the Contingency Funding 
Plan.\76\ OCC therefore believes that the proposed liquidity stress 
testing enhancements are reasonably designed to comply with the 
requirements of Rule 17Ad-22(e)(7)(i) and (e)(vi)(A).\77\
---------------------------------------------------------------------------

    \74\ 17 CFR 240.17Ad-22(e)(7)(i).
    \75\ 17 CFR 240.17Ad-22(e)(7)(vi)(A).
    \76\ OCC also would perform daily stress tests using Adequacy 
and Informational Scenarios to evaluate the sufficiency of its 
liquidity resources under a wide range of historical and 
hypothetical stress scenarios.
    \77\ 17 CFR 240.17Ad-22(e)(7)(i) and (e)(vi)(A).
---------------------------------------------------------------------------

3. Clearing Fund Cash Requirement
    Rule 17Ad-22(e)(7)(i) \78\ requires that a CCA establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to effectively measure, monitor and manage 
liquidity risk that arises in or is borne by the CCA, including by 
maintaining sufficient liquid resources at the minimum in all relevant 
currencies to effect same-day settlement, and where appropriate, 
intraday and multiday settlement of payment obligations with a high 
degree of confidence under a wide range of stress scenarios, that 
includes but is not limited to, the default of the participant family 
that would generate the largest aggregate payment obligation for OCC in 
extreme but plausible market conditions. As explained above, OCC has 
performed an analysis of its stressed liquidity demands, including 
Adequacy Scenarios that demonstrate that its potential stressed 
liquidity demands may exceed the size OCC's committed liquidity 
facilities and current Cash Clearing Fund Requirement. The proposed 
changes would allow OCC to adjust its Base Liquidity Resources to 
account for extreme scenarios that may result in liquidity demands 
exceeding OCC's Cover 1 liquidity resources. In this regard, OCC 
believes the proposed changes concerning the Clearing Fund Cash 
Requirement are designed to satisfy the requirements of Rule 17Ad-
22(e)(7)(i).\79\
---------------------------------------------------------------------------

    \78\ 17 CFR 240.17Ad-22(e)(7)(i).
    \79\ Id.
---------------------------------------------------------------------------

    Further, Rule 17Ad-22(e)(7)(viii) \80\ requires that a CCA address 
foreseeable liquidity shortfalls that would not be covered by its 
liquid resources and Rule 17Ad-22(e)(7)(ix) \81\ requires that a CCA 
describe its process to replenish any liquid resources that it may 
employ during a stress event. OCC believes that additional flexibility 
for temporarily increasing the Clearing Fund Cash Requirement up to an 
amount that includes the size of the Clearing Fund would provide OCC 
with an additional means of addressing liquidity shortfalls that 
otherwise would not be covered by OCC's liquid resources. Further, 
because the Clearing Fund is a resource that is replenished in 
accordance with OCC Rule 1006(h), to the extent that Clearing Members 
are required to replenish their required contributions--in whole or in 
part--with cash following a proportionate charge, the proposed change 
would provide a form of replenishment of OCC's liquid resources. In 
this regard, OCC believes the proposed change is consistent with the 
requirements of Rules 17Ad-22(e)(7)(viii) and (ix).\82\
---------------------------------------------------------------------------

    \80\ 17 CFR 240.17Ad-22(e)(7)(viii).
    \81\ 17 CFR 240.17Ad-22(e)(7)(ix).
    \82\ 17 CFR 240.17Ad-22(e)(7)(viii) and (ix).
---------------------------------------------------------------------------

4. Two-Day Notice Period for Substitutions Involving Excess Clearing 
Fund Cash
    Rules 17Ad-22(e)(7)(i) and (ii) \83\ require a CCA to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to maintain sufficient liquid resources at the 
minimum in all relevant currencies to effect same-day and, where 
appropriate, intraday and multiday settlement of payment obligations 
with a high degree of confidence under a wide range of foreseeable 
stress scenarios that includes but is not limited to, the default of 
the participant family that would generate the largest aggregate 
payment obligation for the CCA in extreme but plausible market 
conditions and to maintain such resources in the form of qualifying 
liquid resources and in each relevant currency for which the CCA has 
payment obligations owed to clearing members. The proposed two-day 
notice period for Clearing Fund cash substitutions would provide 
additional certainty around the level of OCC's Available Liquidity 
Resources (which would be comprised of qualifying liquid resources) for 
any given two-day liquidation horizon, thereby enhancing OCC's ability 
to ensure that it maintains sufficient qualifying liquid resources to 
effect settlement of its payment obligations with a high degree of 
confidence under a wide range of foreseeable stress scenarios that 
includes but is not limited to, the default of the participant family 
that would generate the largest aggregate payment obligation for OCC in 
extreme but plausible market conditions. OCC therefore believes the 
proposed change is consistent with the requirements of Rules 17Ad-
22(e)(7)(i) and (ii).\84\
---------------------------------------------------------------------------

    \83\ 17 CFR 240.17Ad-22(e)(7)(i) and (ii).
    \84\ Id.

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

[[Page 27487]]

5. Contingency Funding Plan
    Rule 17Ad-22(e)(7)(vi)(A) \85\ requires that a CCA establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to determine the amount and regularly test the 
sufficiency of the liquid resources held for purposes of meeting the 
minimum liquid resource requirement by conducting stress testing of its 
liquidity resources at least once each day using standard and 
predetermined parameters and assumptions. Further, Rule 17Ad-
22(e)(7)(viii) \86\ requires such policies and procedures to address 
foreseeable liquidity shortfalls that would not be covered by the CCA's 
liquid resources and seek to avoid unwinding, revoking, or delaying the 
same-day settlement of payment obligations. Under the proposed LRMF and 
changes to the Contingency Funding Plan, OCC would perform daily stress 
tests using its Sufficiency Scenarios to assess potential liquidity 
exposures in excess of OCC's Available Liquidity Resources under a 
range of stress scenarios, including but not limited to, a 1987 
historical market event and a 2008 historical market event, and if a 
Clearing Member Group's exposures breach certain thresholds, OCC would 
require the breaching Clearing Member Group to maintain cash deposits 
in lieu of other forms of acceptable collateral to supplement OCC's 
Available Liquidity Resources pursuant to the Contingency Funding Plan. 
Accordingly, the Contingency Funding Plan enhancements also allow OCC 
to address foreseeable liquidity shortfalls that would not be covered 
by its currently available liquid resources. OCC therefore believes 
that the proposed LRMF and changes to the Contingency Funding Plan are 
reasonably designed to comply with the requirements of Rules 17Ad-
22(e)(7)(vi)(A) and 17Ad-22(e)(7)(viii).\87\
---------------------------------------------------------------------------

    \85\ 17 CFR 240.17Ad-22(e)(7)(vi)(A).
    \86\ 17 CFR 240.17Ad-22(e)(7)(viii).
    \87\ 17 CFR 240.17Ad-22(e)(7)(vi)(A) and (e)(7)(viii).
---------------------------------------------------------------------------

6. Required Cash Deposits for Clearing Members on Watch Level
    Rule 17Ad-22(e)(7) \88\ requires generally that a CCA establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to effectively measure, monitor and manage 
liquidity risk that arises in or is borne by the CCA. OCC believes that 
the proposed change to require cash deposits from Clearing Members on 
enhanced watch level monitoring is reasonably designed to comply with 
the requirements of Rule 17Ad-22(e)(7) \89\ because it would provide 
OCC with an additional tool to manage potential liquidity risks of 
those Clearing Members identified as presenting increased risk to OCC 
through its ongoing monitoring processes.
---------------------------------------------------------------------------

    \88\ 17 CFR 240.17Ad-22(e)(7).
    \89\ Id.
---------------------------------------------------------------------------

7. Enhancements to Rules Concerning the Borrowing of Clearing Fund 
Assets
    Rule 17Ad-22(e)(7) \90\ requires generally that a CCA establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to effectively measure, monitor and manage 
liquidity risk that arises in or is borne by the CCA. Rule 17Ad-
22(e)(7)(ix) \91\ further requires such policies and procedures to 
describe the CCA's process to replenish any liquid resources that the 
clearing agency may employ during a stress event. OCC believes that the 
proposed clarifications to its Rules concerning OCC's authority to use 
Clearing Fund assets to address potential liquidity needs are 
reasonably designed to provide important clarity around its ability to 
borrow and use Clearing Fund assets for liquidity risk management 
purposes, and to replenish such resources in a timely fashion, in a 
manner consistent with Rules 17Ad-22(e)(7) and (e)(7)(ix).\92\
---------------------------------------------------------------------------

    \90\ 17 CFR 240.17Ad-22(e)(7).
    \91\ 17 CFR 240.17Ad-22(e)(7)(ix).
    \92\ 17 CFR 240.17Ad-22(e)(7) and (e)(7)(ix).
---------------------------------------------------------------------------

8. Requirement for Clearing Members To Maintain Contingency Plans for 
Settlement
    Rule 17Ad-22(e)(18) \93\ requires, in part, that a CCA establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to establish objective, risk-based, and publicly 
disclosed criteria for participation, which permit fair and open access 
by participants and, require participants to have sufficient financial 
resources and robust operational capacity to meet obligations arising 
from participation in the clearing agency. OCC believes the proposed 
amendments to Rule 301(d) are objective and risk-based in that they 
would apply to all Clearing Members and are intended to reduce the 
likelihood that a Clearing Member would be unable to satisfy their 
settlement obligations to OCC by requiring that Clearing Members have 
adequate contingency plans for financial resources and robust 
operational capacity to meet such obligations. The proposed requirement 
would also be publicly disclosed in OCC's Rules. OCC therefore believes 
the proposed change is consistent with Rule 17Ad-22(e)(18).\94\
---------------------------------------------------------------------------

    \93\ 17 CFR 240.17Ad-22(e)(18).
    \94\ Id.
---------------------------------------------------------------------------

9. Other Clarifying and Conforming Changes
    Rules 17Ad-22(e)(2)(i) and (v) \95\ require each CCA to establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to provide for governance arrangements that are 
clear and transparent and specify clear and direct lines of 
responsibility. As discussed above, OCC would revise its Risk Policies 
to incorporate standardized policy exception and violation reporting 
requirements, which would apply to all internal OCC policies and 
procedures. The proposed change would simplify and centralize the 
escalation path for policy document owners and ensure that OCC's 
Compliance department, and if appropriate the Enterprise Risk 
Management department, is notified in a consistent manner of any 
exceptions or violations. OCC therefore believes the proposed change is 
consistent with Rule 17Ad-22(e)(2)(i) and (v).\96\
---------------------------------------------------------------------------

    \95\ 17 CFR 240.17Ad-22(e)(2)(i) and (v).
    \96\ Id.
---------------------------------------------------------------------------

III. Date of Effectiveness of the Advance Notice and Timing for 
Commission Action

    The proposed change may be implemented if the Commission does not 
object to the proposed change within 60 days of the later of (i) the 
date the proposed change was filed with the Commission or (ii) the date 
any additional information requested by the Commission is received. OCC 
shall not implement the proposed change if the Commission has any 
objection to the proposed change.
    The Commission may extend the period for review by an additional 60 
days if the proposed change raises novel or complex issues, subject to 
the Commission providing the clearing agency with prompt written notice 
of the extension. A proposed change may be implemented in less than 60 
days from the date the advance notice is filed, or the date further 
information requested by the Commission is received, if the Commission 
notifies the clearing agency in writing that it does not object to the 
proposed change and authorizes the clearing agency to implement the 
proposed change on an earlier date, subject to any conditions imposed 
by the Commission.

[[Page 27488]]

    OCC shall post notice on its website of proposed changes that are 
implemented. The proposal shall not take effect until all regulatory 
actions required with respect to the proposal are completed.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the advance 
notice is consistent with the Clearing Supervision 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-2020-802 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2020-802. 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 advance notice that are filed with the 
Commission, and all written communications relating to the advance 
notice 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 the filing also will be available for inspection 
and copying at the principal office of the self-regulatory 
organization.
    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-2020-802 and 
should be submitted on or before May 26, 2020.

    By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09872 Filed 5-7-20; 8:45 am]
 BILLING CODE 8011-01-P