[Federal Register Volume 85, Number 108 (Thursday, June 4, 2020)]
[Notices]
[Pages 34468-34470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-12018]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88974; File No. SR-OCC-2020-005]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Extend the Deadline for Clearing Members To Provide an Actionable 
Identifier on Customer and Non-Customer Securities Options Trades Other 
Than Market Maker Trades

May 29, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 19, 2020, the Options Clearing Corporation (``OCC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I, II, and III below, which Items 
have been prepared by OCC. OCC filed the proposed rule change pursuant 
to Section 19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(1) \4\ 
thereunder so that the proposal was effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    OCC proposes to amend Rule 401 to modify the implementation and 
enforcement timeline for requiring an ``Actionable Identifier'' to be 
included on all customer and non-customer securities options trades 
submitted to OCC for processing, other than Market-Maker trades. The 
proposed changes to OCC's Rules are contained in Exhibit 5 of the 
filing. Material proposed to be added to OCC's Rules as currently in 
effect is marked by underlining and material proposed to be deleted is 
marked with strikethrough text. All terms with initial capitalization 
that are not otherwise defined herein have the same meaning as set 
forth in the By-Laws and Rules.\5\
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    \5\ OCC's By-Laws and Rules can be found on OCC's public 
website: http://optionsclearing.com/about/publications/bylaws.jsp.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, OCC included statements 
concerning

[[Page 34469]]

the purpose of and basis for the proposed rule change and discussed any 
comments it received on the proposed rule change. The text of these 
statements may be examined at the places specified in Item IV below. 
OCC has prepared summaries, set forth in sections (A), (B), and (C) 
below, of the most significant aspects of these statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, he Proposed Rule Change

(1) Purpose
Background
    The Clearing Member Trade Assignment (``CMTA'') process at OCC 
allows a Clearing Member that executed a securities options trade 
(i.e., the Executing Clearing Member) to send the trade directly 
through OCC to another Clearing Member for clearance and settlement 
(i.e., the Carrying Clearing Member).\6\ Under the CMTA process, an 
Executing Clearing Member and a Carrying Clearing Member can agree to 
have securities options trades for customers and non-customers effected 
by the Executing Clearing Member sent directly through OCC to the 
Carrying Clearing Member's omnibus accounts at OCC for clearance and 
settlement.\7\ One potential risk that may arise in the CMTA process is 
that Clearing Members may receive customer trades that they do not 
recognize in a timely manner because the trades do not include 
information that allows them to quickly identify the correct customer 
account at the Carrying Clearing Member or that the trade should have 
been sent to another Carrying Clearing Member.
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    \6\ See OCC Rule 407. An ``Executing Clearing Member'' is 
defined in Article I, Section 1.E.(12) of the By-Laws as ``a 
Clearing Member, on its own behalf or as the Clearing Member of an 
Introducing Broker that has been authorized by a Carrying Clearing 
Member to direct confirmed trades to be transferred to a designated 
account of the Carrying Clearing Member pursuant to such Clearing 
Members' CMTA arrangement.'' A ``Carrying Clearing Member'' is 
defined in Article I, Section 1.C.(12) of the By-Laws as ``a 
Clearing Member that has authorized an Executing Clearing Member to 
direct the transfer of a confirmed trade to a designated account of 
such Carrying Clearing Member pursuant to a CMTA arrangement.''
    \7\ The term ``customer'' is defined in Article I, Section 1.C. 
(37) of the By-Laws with regard to listed options as ``a person 
having a securities account at a broker or dealer other than a non-
customer of such broker or dealer.'' The term ``non-customer'' is 
defined in Article I, Section 1.N.(1) of the By-Laws effectively as 
``a person that is not a customer of a broker or dealer as defined 
in Rules 8c-1 and 15c2-1 under the Securities Exchange Act of 
1934,'' including ``a Member Affiliate that has consented to having 
its securities account at a Clearing Member treated as a non-
customer account.'' OCC Clearing Members hold omnibus accounts at 
OCC for customer positions (i.e., a ``customers' account'' as 
defined in Article I, Section 1.C.(37) of the By-Laws) and non-
customer positions (i.e., a ``firm account'' as defined in Article 
I, Section 1.F.(6) of the By-Laws).
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    On May 6, 2019, the Commission approved a proposed rule change by 
OCC to amend Rule 401 to require that an Actionable Identifier be 
included on all customer and non-customer securities options trades 
submitted to OCC for processing, other than Market-Maker trades.\8\ 
Actionable Identifier is defined in Interpretation and Policy .06 to 
Rule 401 as either the name, series of numbers, or other identifying 
information assigned by a Purchasing Clearing Member or Writing 
Clearing Member to a customer or non-customer account (other than a 
Market-Maker account) at the Clearing Member that originated the 
options transaction. The introduction of the Actionable Identifier 
requirement was intended to minimize the risks Clearing Members face in 
handling trades they cannot timely identify in connection with the CMTA 
process.
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    \8\ See Securities Exchange Act Release No. 85779 (May 6, 2019), 
84 FR 20689 (May 10, 2019) (SR-OCC-2019-003).
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    The implementation plan for Actionable Identifier requirement, 
which is specified in Interpretation and Policy .06 to Rule 401, sets 
forth the effective dates for the rule change, providing that: (a) From 
the date on which the Actionable Identifier requirement is approved 
(``approval date'') to the end of the twelfth month from such approval 
date, OCC will not treat as a violation of Rule 401 the failure to 
include an Actionable Identifier or the failure of a Clearing Member's 
policies and procedures to provide that sufficient information is 
included in the Actionable Identifier field to allow the Clearing 
Member receiving such Actionable Identifier to promptly clear the 
transaction; (b) from the thirteenth to the end of the eighteenth month 
from such approval date, an Actionable Identifier will be required but 
OCC will not treat as a violation of Rule 401 the failure of a Clearing 
Member's policies and procedures to provide that sufficient information 
is included in the Actionable Identifier field to allow the Clearing 
Member receiving such Actionable Identifier to promptly clear the 
transaction; and (c) from the nineteenth month after such approval date 
and thereafter, OCC will treat as a violation of Rule 401 the failure 
to include an Actionable Identifier or the failure of a Clearing 
Member's policies and procedures to provide that sufficient information 
is included in the Actionable Identifier field to allow the Clearing 
Member receiving such Actionable Identifier to promptly clear the 
transaction, subject to the manner in which OCC enforces violations of 
its rules in Rule 1201. This phased implementation plan was intended to 
provide time for Clearing Members to work together to determine 
appropriate Actionable Identifiers for the accounts subject to their 
CMTA arrangements and coordinate on processes to include Actionable 
Identifiers on trades submitted through the give-up process.
    Recently, some Clearing Members have requested that OCC delay the 
deadline for requiring an Actionable Identifier on trades (``Actionable 
Identifier Deadline''), which is set for June 8, 2020. On this date, 
OCC would begin to enforce the Actionable Identifier requirement but 
would not treat as a violation of Rule 401 the failure of a Clearing 
Member's policies and procedures to provide that sufficient information 
is included in the Actionable Identifier field. Due to the COVID-19 
pandemic, many Clearing Members are functioning under business 
continuity plans. OCC has been informed by many Clearing Members that 
because they are operating under business continuity plans, system 
enhancements are now limited to critical or essential system 
installations only. As a result, Clearing Members cannot install system 
functionality that will allow them to comply with the June 8, 2020 
Actionable Identifier Deadline. Additionally, Clearing Members require 
input from floor brokers to implement Actionable Identifier 
information.\9\ Clearing Members are limited by remote working 
conditions to coordinate directly with the floor brokers on the changes 
needed to populate the identifier on the trades. Given these factors, 
Clearing Members may require additional time to comply with the 
requirements of Rule 401(a)(1)(iii) and Interpretation and Policy .06.
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    \9\ Floor brokers receive and execute trades on behalf of 
customers. Clearing Members and floor brokers will therefore need to 
coordinate to have an agreed upon identifier for their various 
customers.
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Proposed Change
    OCC proposes to amend Interpretation and Policy .06 to Rule 401 to 
extend the deadline for requiring Actionable Identifiers on all 
customer and non-customer securities options trades submitted to OCC 
for processing, other than Market-Maker trades, by an additional three 
months from June 2020 to September 2020. OCC believes that extending 
the Actionable Identifier Deadline by three months will provide 
Clearing Members with the additional

[[Page 34470]]

time they will need to make the necessary system changes to comply with 
the requirements of Rule 401. OCC believes the proposed rule change is 
appropriate given current conditions caused by the COVID-19 pandemic 
and does not believe that changes to the final implementation deadline 
of December 7, 2020, are necessary at this time.
(2) Statutory Basis
    Section 17A(b)(3)(F) of the Act \10\ requires, among other things, 
that the rules of a clearing agency be designed to promote the prompt 
and accurate clearance and settlement of securities and derivatives 
transactions and to foster cooperation and coordination with persons 
engaged in clearance and settlement of securities transactions. The 
Actionable Identifier requirements of Rule 401 are designed to enable 
Clearing Members to more promptly and accurately clear and settle 
securities options trades that are subject to CMTA and give-up 
arrangements. The proposed rule change would provide additional time 
for OCC's Clearing Members to make the necessary system changes to 
effectively implement Actional Identifiers given the recent 
complications caused by the COVID-19 pandemic. In this way, the 
proposed rule change is designed to promote the prompt and accurate 
clearance and settlement of securities transactions and foster 
cooperation and coordination with persons engaged in clearance and 
settlement of securities transactions in accordance with the 
requirements of Section 17A(b)(3)(F).\11\
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    \10\ 15 U.S.C. 78q-1(b)(3)(F).
    \11\ Id.
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    In addition, the proposed rule change is not inconsistent with the 
existing By-Laws and Rules of OCC, including any rules proposed to be 
amended.

(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act \12\ requires that the rules of a 
clearing agency not impose any burden on competition not necessary or 
appropriate in furtherance of the Act. OCC does not believe that the 
proposed rule change would impact or impose any burden on competition. 
The proposed rule change would provide Clearing Members with additional 
time to comply with the Actionable Identifier requirements previously 
approved by the Commission.\13\ The proposed rule change would not 
affect the competitive dynamics between Clearing Members in that it 
would apply to all Clearing Members equally. The proposed rule change 
also would not inhibit access to OCC's services or disadvantage or 
favor any particular user in relationship to another. In this regard, 
as described above, the proposed rule change is designed to further 
facilitate the prompt and accurate clearance and settlement of 
securities transaction.
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    \12\ 15 U.S.C. 78q-1(b)(3)(I).
    \13\ See supra note 8.
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

    Written comments on the proposed rule change were not and are not 
intended to be solicited with respect to the proposed rule change and 
none have been received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Pursuant to Section 19(b)(3)(A) \14\ of the Act, and Rule 19b-
4(f)(1) thereunder,\15\ the proposed rule change is filed for immediate 
effectiveness as it constitutes a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule. The proposed rule change would modify 
the implementation and enforcement dates of rule changes previously 
approved by the Commission in OCC filing SR-OCC-2019-003.\16\ 
Accordingly, the proposed rule change constitutes a stated policy, 
practice, or interpretation with respect to the administration and 
enforcement of an existing rule of OCC.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(1).
    \16\ See supra note 8.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.\17\
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    \17\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC Rule 40.6.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comment

     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-2020-005 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-OCC-2020-005. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of OCC and on OCC's website at 
https://www.theocc.com/about/publications/bylaws.jsp.
    All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly.
    All submissions should refer to File Number SR-OCC-2020-005 and 
should be submitted on or before June 25, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-12018 Filed 6-3-20; 8:45 am]
BILLING CODE 8011-01-P