[Federal Register Volume 89, Number 111 (Friday, June 7, 2024)]
[Notices]
[Pages 48697-48700]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-12466]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100261; File No. SR-OCC-2024-007]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Update the Options Clearing Corporation's Schedule of Fees

June 3, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on May 29, 2024, 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 primarily by OCC. OCC 
filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) \3\ 
of the Act and Rule 19b-4(f)(2) \4\ thereunder so that the proposal was 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change would revise OCC's schedule of fees. 
Specifically, OCC proposes to update the Options Disclosure Document 
(``ODD'') \5\ fee and make certain other changes, including allowing 
OCC to charge applicable taxes and removing language related to 
authorization stamp fees, which are no longer in use. Proposed changes 
to OCC's schedule of fees are included as Exhibit 5 to File Number SR-
OCC-2024-007. Material proposed to be added to OCC's schedule of fees 
as currently in effect is underlined and material proposed to be 
deleted is marked in strikethrough text. All capitalized terms not 
defined herein have the same meaning as set forth in the OCC By-Laws 
and Rules.\6\
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    \5\ The ODD is written to meet the requirements of Rule 9b-1 
under the Exchange Act that requires the U.S. options markets to 
prepare, and brokerage firms to distribute, a document that 
describes the characteristics of options and the risks to investors 
of maintaining positions in options. More specifically, such 
document will include information pertaining to the mechanics of 
exercising the options, the risks of being a holder or writer of the 
options, and the market or markets in which the options are traded, 
among other items identified in Rule 9b-1(c). See 17 CFR 240.9b-1.
    \6\ OCC's By-Laws and Rules can be found on OCC's public 
website: https://www.theocc.com/Company-Information/Documents-and-Archives/By-Laws-and-Rules.
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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 the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. OCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.

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

(1) Purpose
    The purpose of this filing is to revise OCC's schedule of fees. As 
the sole clearing agency for standardized equity options listed on 
national securities exchanges registered with the Commission, and with 
respect to OCC's clearance and settlement of futures and stock loan 
transactions, OCC maintains policies and procedures to manage the risks 
borne by OCC as a central counterparty. One such risk that OCC manages 
is general business risk--that is, the risk of potential impairment to 
OCC's financial position resulting from a decline in revenues or an 
increase in expenses. To manage this risk and help to ensure that OCC 
can continue operations and services as a going concern if general 
business losses materialize, OCC has filed, and the Commission has 
approved, OCC's Capital Management Policy,\7\ which provides the 
framework by which OCC manages its capital. Amending OCC's schedule of 
fees is one action used by OCC to manage its capital.
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    \7\ See Order Approving Proposed Rule Change to Establish OCC's 
Persistent Minimum Skin-In-The-Game, Exchange Act Release No. 92038 
(May 27, 2021), 86 FR 29861 (June 3, 2021) (SR-OCC-2021-003); Order 
Approving Proposed Rule Change, as Modified by Partial Amendment No. 
1, Concerning a Proposed Capital Management Policy That Would 
Support the Option Clearing Corporation's Function as a Systemically 
Important Financial Market Utility, Exchange Act Release No. 88029 
(Jan. 24, 2020), 85 FR 5500 (Jan. 30, 2020) (SR-OCC-2019-007); see 
also Notice of Filing of Partial Amendment No. 1 and Notice of No 
Objection to Advance Notice, as Modified by Partial Amendment No. 1, 
Concerning a Proposed Capital Management Policy That Would Support 
the Option Clearing Corporation's Function as a Systemically 
Important Financial Market Utility, Exchange Act Release No. 87257 
(Oct. 8, 2019), 84 FR 55194 (Oct. 15, 2019) (SR-OCC-2019-805).
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    In accordance with the Capital Management Policy, OCC management 
reviews the fee schedule at regularly scheduled meetings and, 
considering factors including, but not limited to, projected operating 
expenses, projected volumes, anticipated cashflows, and capital needs, 
recommends to the Board (or a committee to which the Board has 
delegated authority), whether a fee change should be made. In 
accordance with such procedures, OCC management recommended, and the 
Compensation and Performance Committee of OCC's Board approved certain 
fee changes. As further described below, these proposed changes are 
intended to promote cost management by facilitating OCC's ability to 
break even on certain costs. Additional proposed changes are intended 
to ensure OCC's schedule of fees remains current and clear.
ODD Fee Changes
    OCC proposes to update the fee charged for a printed version of the 
ODD to industry participants, including both Clearing Members and non-
Clearing Members. The Characteristics and Risks of Standardized 
Options, also known as the ODD, explains the characteristics and risks 
of exchange traded options. Broker-dealers are required to distribute 
the ODD to customers pursuant to Rule 9b-1 under the Exchange Act.\8\ 
Prior to

[[Page 48698]]

buying or selling an option, investors must be given a copy of the ODD. 
Investors may also obtain a printed version of the ODD from any 
exchange on which options are traded or by placing an order on OCC's 
website. Additionally, OCC provides an option to electronically 
download the full version of the ODD on its website for no charge.\9\ 
OCC advises broker-dealers to consult with their legal and compliance 
resources to determine the appropriate means of delivery of the ODD to 
investors.\10\ Electronic delivery of the ODD is permissible if the 
requirements for electronic delivery as established by the Commission 
are met.\11\ Additionally, OCC makes available a print-ready PDF 
version of the ODD to Clearing Members and non-Clearing Members so that 
firms who wish to print the ODD through their own printing services may 
do so.\12\
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    \8\ 17 CFR 240.9b-1.
    \9\ The ODD is available electronically at https://www.theocc.com/company-information/documents-and-archives/publications.
    \10\ See OCC's website for additional information regarding 
electronic delivery and print copies at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document.
    \11\ See Exchange Act Release No. 37183 (May 9, 1996), 61 FR 
24652 (May 15, 1996) (adopting technical amendments to the 
Commission's rules that are premised on the distribution of paper 
documents).
    \12\ Firms may contact OCC to request the print-ready PDF 
version. See supra note 10.
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    OCC proposes to update the fee charged for a printed copy of the 
ODD from $0.45 to $0.95. The current fee is charged when the order is 
placed with OCC. OCC has not increased this fee since 1994 and it is 
out of sync with the current environment. There has been notable 
inflation over the past 30 years. For instance, the dollar had an 
average inflation rate of 2.52% per year between 1994 and 2023, 
producing a cumulative price increase of approximately 106%.\13\ The 
proposed fee constitutes a 111% increase from the fee adopted in 1994, 
which deviates only slightly from the cumulative rate. OCC believes the 
proposed fee increase is reasonable given that the costs and expenses 
associated with the ODD (e.g., printing, preparation, and labor costs), 
as well as the form of the ODD itself,\14\ have changed since 1994.
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    \13\ See the inflation calculator at https://www.officialdata.org/us/inflation/1994?endyear=2023.
    \14\ For example, in 2021, OCC integrated all prior ODD 
supplements into one document and eliminated the distribution of 
supplements. While the integration of the supplements created a more 
digestible document for investors, the change increased the printing 
costs for OCC.
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    ODD costs are difficult to predict. New versions of the ODD may be 
issued at various times as needed to address new products or industry 
changes, and it may be necessary to distribute multiple new versions of 
the ODD within a year.\15\ OCC proposes to increase the current fee to 
$0.95 per copy, which reflects the current cost to print and distribute 
the ODD.\16\ OCC does not intend to generate a profit through this 
change. This proposal is designed to facilitate OCC's ability to break 
even on the costs of printing and distributing the ODD. Additionally, 
as a clarification, OCC proposes to update the current reference to the 
ODD in the fee schedule from ``Disclosure Documents'' to ``Options 
Disclosure Document.'' The proposed changes to the fee schedule are set 
out below.
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    \15\ Because it is difficult to forecast the number of printed 
versions that OCC needs to purchase to fulfill orders, OCC may place 
several orders of different quantities throughout the year. OCC's 
printing costs generally depend on the quantity ordered.
    \16\ This fee is the sum of current per copy printing and 
distribution costs. Current per copy printing costs were derived 
through a weighted average based on the volume of ODD copies that 
OCC purchased at different price points from 2020 through 2023 from 
its printer. Current per copy distribution costs were derived using 
estimated yearly costs incurred by OCC in distributing the ODD, such 
as maintenance and storage, accounting, legal, waste, and growth.

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           Current fee schedule                 Proposed fee schedule
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Disclosure Documents--$0.45...............  Options Disclosure Document--
                                             $0.95.
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    The proposed changes are designed to promote cost management in 
compliance with Rule 17Ad-22(e)(15) under the Exchange Act that, among 
other things, requires OCC to identify, monitor, and manage its general 
business risk,\17\ which includes the risk of potential impairment to 
OCC's financial position resulting from a decline in revenues or an 
increase in expenses. The proposed increase in the ODD fee is designed 
to facilitate OCC's ability to break even on the costs of printing and 
distributing the ODD. OCC does not intend to make a profit with this 
increase and as discussed above, OCC makes available additional options 
for ODD distribution at no charge, including an electronic version and 
a print-ready PDF version. Implementation of the proposed fee increase 
is designed to bring the ODD fee in sync with the current environment 
as well as the current form of the ODD.
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    \17\ See 17 CFR 240.17Ad-22(e)(15).
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Additional Fee Changes
    Additional proposed changes allow OCC to charge applicable taxes. 
OCC currently does not charge sales tax. For example, in connection 
with the ODD, OCC pays the sales tax and absorbs the cost. OCC believes 
it is reasonable to allocate rather than absorb the cost of applicable 
taxes because it will facilitate OCC's ability to break even on these 
types of required costs. Under the amended fee schedule, OCC may charge 
state sales or use tax when due in connection with any of its listed 
fees. OCC does not believe such change would create a financial burden 
as it is limited to the cost of applicable taxes, which OCC does not 
control. Moreover, OCC believes charging sales or use tax where 
applicable is reasonable because it is similar to a practice currently 
employed by another self-regulatory organization.\18\
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    \18\ See New York Stock Exchange (``NYSE'') Fee Schedule at 
https://www.nyse.com/publicdocs/nyse/markets/nyse/nyse_price_list.pdf. NYSE charges sales tax for various products 
where applicable.
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    Finally, OCC proposes to remove an outdated fee for authorization 
stamps because authorization stamps are no longer used by OCC. OCC 
previously used authorization stamps as a security measure for 
authentication. OCC removed provisions in its Rules related to such 
stamps in 2023.\19\ Such change is intended to ensure that the fee 
schedule remains current and accurate.
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    \19\ See Exchange Act Release No. 97439 (May 5, 2023), 88 FR 
30373 (May 11, 2023) (SR-OCC-2023-002) (removing provisions related 
to authorization stamps in then-existing Rule 212).
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Implementation Timeframe
    OCC proposes to implement the fee changes within 60 days from the 
date that OCC receives all necessary regulatory approvals for the 
filing. OCC will announce the implementation date of the proposed fee 
changes by an Information Memorandum posted to its public website at 
least seven days prior to implementation. Such implementation is 
proposed to provide notice to industry participants and to allow OCC to 
complete any necessary steps in its order system to effect the fee 
changes. Additionally, OCC would not make the fee changes operative 
until after the time required to self-certify the proposed change with 
the Commodity Futures Trading Commission (``CFTC'').
(2) Statutory Basis
    OCC believes the proposed rule change is consistent with the Act 
\20\ and the rules and regulations thereunder. In particular, OCC 
believes that the proposed fee changes are also consistent with Section 
17A(b)(3)(D) of the Act,\21\ which requires that the rules of a 
clearing agency provide for the equitable allocation of reasonable 
dues,

[[Page 48699]]

fees, and other charges among its participants.
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    \20\ 15 U.S.C. 78a et seq.
    \21\ 15 U.S.C. 78q-1(b)(3)(D).
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    OCC believes that the proposed fee changes are reasonable. The 
current ODD fee has not increased since 1994 and is out of sync with 
the current environment. As discussed above, there has been notable 
inflation over the past 30 years. OCC believes the proposed fee 
increase is reasonable given that the costs and expenses associated 
with the ODD (e.g., printing, preparation, and labor costs), as well as 
the form of the ODD itself, have changed since 1994. The proposed fee 
is designed to reflect the current cost to print and distribute the ODD 
to facilitate OCC's ability to break even on these costs. In addition, 
OCC believes it is reasonable to allocate rather than absorb the cost 
of applicable taxes because it will facilitate OCC's ability to break 
even on these types of required costs. OCC does not believe such change 
would create a financial burden as it is limited to the cost of 
applicable taxes, which OCC does not control. Moreover, OCC believes 
charging appropriate sales or use tax is reasonable because it is 
similar to a practice currently employed by another self-regulatory 
organization.\22\ Furthermore, OCC believes it is reasonable to remove 
the fee for authorization stamps, as OCC no longer uses authorization 
stamps. This change would ensure that the fee schedule remains current 
and accurate.
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    \22\ See supra note 18.
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    OCC also believes that the proposed fee changes would result in an 
equitable allocation of fees. The ODD fee increase would apply equally 
to all industry participants that order printed copies of the ODD. 
Moreover, OCC makes available additional options for ODD distribution 
at no charge, including an electronic version and a print-ready PDF 
version. The additional changes, including allowing OCC to charge 
applicable taxes and removing outdated language, would also be applied 
equally to industry participants that utilize OCC's services. As a 
result, OCC believes that the proposed changes to OCC's fee schedule 
provide for the equitable allocation of reasonable fees in accordance 
with Section 17A(b)(3)(D) of the Act.\23\
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    \23\ 15 U.S.C. 78q-1(b)(3)(D).
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    In addition, OCC believes that the proposed rule change is 
consistent with Rule 17Ad-22(e)(15), which requires that OCC establish, 
implement, maintain and enforce written policies and procedures 
reasonably designed to identify, monitor, and manage OCC's general 
business risk.\24\ The proposed fee changes are designed to promote 
cost management by facilitating OCC's ability to break even on certain 
costs, which would promote OCC's ability to manage its general business 
risk or the risk of potential impairment to OCC's financial position 
resulting from a decline in revenues or an increase in expense. 
Therefore, OCC believes that the proposed changes to OCC's schedule of 
fees are consistent with Rule 17Ad-22(e)(15).\25\
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    \24\ 17 CFR 240.17Ad-22(e)(15).
    \25\ Id.
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(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act \26\ requires that the rules of a 
clearing agency not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act. OCC does not 
believe that the proposed rule change would have any impact or impose a 
burden on competition. OCC believes that the proposed rule change would 
not disadvantage or favor any particular user of OCC's services in 
relationship to another user because the proposed changes would equally 
apply to all industry participants. In addition, OCC does not believe 
the fee changes impose a significant burden, as the changes are 
intended to reflect current costs incurred by OCC rather than generate 
a profit. Accordingly, OCC does not believe that the proposed rule 
change would have any impact or impose a burden on competition.
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    \26\ 15 U.S.C. 78q-1(b)(3)(I).
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(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants or Others

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

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

    Pursuant to Section 19(b)(3)(A)(ii) \27\ of the Act, and Rule 19b-
4(f)(2) thereunder,\28\ the proposed rule change is filed for immediate 
effectiveness as it constitutes a change in fees. 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. The proposal shall not take effect until 
all regulatory actions required with respect to the proposal are 
completed.\29\
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    \27\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \28\ 17 CFR 240.19b-4(f)(2).
    \29\ Notwithstanding its immediate effectiveness, implementation 
of this rule change will be delayed until this change is deemed 
certified under CFTC Regulation 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 Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-OCC-2024-007 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-2024-007. 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 (https://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 
a.m. and 3 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/Company-Information/Documents-and-Archives/By-Laws-and-Rules. Do not include personal identifiable 
information in submissions; you should submit only information that you 
wish to make

[[Page 48700]]

available publicly. We may redact in part or withhold entirely from 
publication submitted material that is obscene or subject to copyright 
protection.
    All submissions should refer to File Number SR-OCC-2024-007 and 
should be submitted on or before June 28, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-12466 Filed 6-6-24; 8:45 am]
BILLING CODE 8011-01-P