[Federal Register: November 25, 2005 (Volume 70, Number 226)]
[Notices]
[Page 71135-71136]
[DOCID:fr25no05-80]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. AD05-13-000]

Joint Boards on Security Constrained Economic Dispatch; Notice
Announcing the Agenda for the PJM/MISO Joint Board Meeting

November 16, 2005.
    On September 30, 2005, the Commission announced its intention to
hold initial joint board meetings.\1\ These joint board meetings are
being held pursuant to section 1298 of the Energy Policy Act of
2005,\2\ which added section 223 to the Federal Power Act (FPA).\3\ FPA
section 223 requires the Commission to convene joint boards on a
regional basis pursuant to FPA section 209 ``to study the issue of
security constrained economic dispatch for the various market
regions,'' ``to consider issues relevant to what constitutes `security
constrained economic dispatch' and how such a mode of operating * * *
affects or enhances the reliability and affordability of service,'' and
``to make recommendations to the Commission.'' Subsequently, several
notices were issued providing details on the joint boards and the joint
board meetings.\4\
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    \1\ Joint Boards on Security Constrained Economic Dispatch, 112
FERC ] 61,353 (2005) (September 30 Order).
    \2\ Pub. L. No. 109-58, Sec.  1298, 119 Stat. 594, 986 (2005).
    \3\ 16 U.S.C. Sec. Sec.  824 et seq. (2000).
    \4\ Three notices were issued on October 14, 21 and 27, 2005, in
accordance with the September 30 Order. The first notice announced
the location and other details for the joint board meetings. The
second notice provided a list of the members of each joint board. A
third notice provided hotel information for the joint board meetings
for the PJM/MISO and Northeast regions and noted that the Province
of Manitoba was participating as an observer in the PJM/MISO joint
board. Subsequent notices announcing the agenda for the West and
South joint board meetings were issued on November 9, 2005.

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    This notice provides the agenda for the initial joint board meeting
for the PJM/MISO region scheduled for Monday, November 21, 2005 from 10
a.m. to 4 p.m. (Central Time) at the Doubletree Hotel O'Hare--Rosemont,
5460 N. River Road, Rosemont, IL 60018.
    Attachment A of this notice contains the agenda for the joint board
meeting.
    Electronic copies of presentation materials will be made available
on the Commission Web site http://www.ferc.gov as they are received (select

the ``Month View'' under the Calendar of Events, then click the ``View
Events'' link for the date of the conference and finally click ``View
Details'' next to the conference to access the information).
    A free Web cast of this event is available through http://www.ferc.gov.
 Anyone with Internet access who desires to view this

event can do so by navigating to http://www.ferc.gov's Calendar of

Events and locating this event in the Calendar. The event will contain
a link to its Web cast. The Capitol Connection provides technical
support for the Web casts; and offers access to the open meetings via
television in the DC area and via phone bridge for a fee. If you have
any questions, visit http://www.CapitolConnection.org or contact

Danelle Perkowski or David Reininger at<PHONE_NUMBER>.
    Transcripts of the meeting will be immediately available for a fee
from Ace Reporting Company<PHONE_NUMBER> or 1-800-336-6646). They will
be available for free on the Commission's eLibrary system seven
calendar days after FERC receives the transcript.
    Comments related to the meeting may be filed in the captioned
docket no later than December 13, 2005. The comments will be publicly
available for review on the Commission's e-Library.
    For more information about the meeting, please contact Sarah
McKinley at<PHONE_NUMBER> or<EMAIL_ADDRESS>
Magalie R. Salas,
Secretary.
 [FR Doc. E5-6487 Filed 11-23-05; 8:45 am]

BILLING CODE 6717-01-P


[Federal Register Volume 80, Number 63 (Thursday, April 2, 2015)]
[Notices]
[Pages 17808-17812]
[FR Doc No: 2015-07523]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74603; File No. SR-OCC-2015-009]

Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of a Proposed Rule Change To Establish Procedures
Regarding the Monthly Resizing of its Clearing Fund and the Addition of
Financial Resources

March 27, 2015.
    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 March 13, 2015, 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.\3\ 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\ On March 13, 2015, OCC formally withdrew the proposed rule
change filed as SR-OCC-2014-22, as modified by Amendment No. 1 and
Amendment No. 2 thereto, the substance of which OCC has refiled as
SR-OCC-2015-009.
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I. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change

    OCC proposes to establish procedures regarding the monthly resizing
of its Clearing Fund and the addition of financial resources through
intra-day margin calls and/or an intra-month increase of the Clearing
Fund to ensure that it maintains adequate financial resources in the
event of a default of a Clearing Member or group of affiliated Clearing
Members presenting the largest exposure to OCC.

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 proposed rule change is intended to describe the situations in
which OCC would exercise authority under its Rules to ensure that it
maintains adequate Financial Resources \4\ in the event that stress
tests reveal a default of the Clearing Member or Clearing Member Group
\5\ presenting the largest exposure would threaten the then-current
Financial Resources. This proposed rule change would establish
procedures governing: (i) OCC's resizing of the Clearing Fund on a
monthly basis pursuant to Rule 1001(a) (the ``Monthly Clearing Fund
Sizing Procedure''); and (ii) the addition of Financial Resources
through an intra-day margin call on one or more Clearing Members under
Rule 609 and, if necessary, an intra-month increase of the Clearing
Fund pursuant to Rule 1001(a) (the ``Financial Resource Monitoring and
Call Procedure'').\6\ The Monthly Clearing Fund Sizing Procedure would
permit OCC to determine the size of the Clearing Fund by relying on a
broader range of sound risk management practices than those
historically used under Rule 1001(a).\7\ The Financial Resource
Monitoring and Call Procedure would require OCC to collect additional
Financial Resources in certain circumstances, establish how OCC
calculates and collects such resources and provide the timing by which
such resources would be required to be deposited by Clearing Members.
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    \4\ ``Financial Resources'' means, with respect to a projected
loss attributable to a particular Clearing Member or Clearing Member
Group, as defined below, the sum of the margin deposits (less any
excess margin a Clearing Member or Clearing Member Group may have on
deposit at OCC) and deposits in lieu of margin in respect of such
Clearing Members' or Clearing Member Groups' accounts, and the value
of OCC's Clearing Fund, including both the Base Amount, as defined
below, and the prudential margin of safety, as discussed below.
    \5\ ``Clearing Member Group'' means a Clearing Member and any
affiliated entities that control, are controlled by or are under
common control with such Clearing Member. See OCC By-Laws, Article
I, Sections 1.C.(15) and 1.M(11).
    \6\ This proposed rule filing has also been filed as an advance
notice filing (SR-OCC-2014-811).
    \7\ The procedures described herein would be in effect until the
development of a new standard Clearing Fund sizing methodology.
Following such development, which will include a quantitative
approach to calculating the ``prudential margin of safety,'' as
discussed below, OCC will file a separate rule change and advance
notice with the Commission that will include a description of the
new methodology as well as a revised Monthly Clearing Fund Sizing
Procedure.
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Background

    OCC monitors the sufficiency of the Clearing Fund on a daily basis
but, prior to emergency action taken on October 16, 2014,\8\ OCC had no
express authority to increase the size of the Clearing Fund on an
intra-month basis.\9\ During ordinary course daily monitoring on
October 15, 2014, and as a result of increased volatility in the
financial markets in October 2014, OCC determined that the Financial
Resources needed to cover the potential loss associated with a default
of the Clearing Member or Clearing Member Group presenting the largest
exposure could have exceeded the Financial Resources then available to
apply to such a default.
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    \8\ On October 16, 2014, OCC filed an emergency notice with the
Commission to suspend the effectiveness of the second sentence of
Rule 1001(a). See Securities Exchange Act Release No. 73579
(November 12, 2014), 79 FR 68747 (November 18, 2014) (SR-OCC-2014-
807). On November 13, 2014, OCC filed SR-OCC-2014-21 with the
Commission to delete the second sentence of Rule 1001(a), preserving
the suspended effectiveness of that sentence until such time as the
Commission approves or disapproves SR-OCC-2014-21. See Securities
Exchange Act Release No. 73685 (November 25, 2014) 79 FR 71479
(December 2, 2014) (SR-OCC-2014-21).
    \9\ See Rule 1001(a).
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    To permit OCC to increase the size of its Clearing Fund prior to
the next monthly resizing that was scheduled to take place on the first
business day of November 2014, OCC's Executive Chairman, on October 16,
2014, exercised certain emergency powers as set forth in Article IX,
Section 14 of OCC's By-Laws \10\ to waive the effectiveness of the
second sentence of Rule 1001(a), which states that OCC will

adjust the size of the Clearing Fund monthly and that any resizing will
be based on data from the preceding month. OCC then filed an emergency
notice with the Commission pursuant to Section 806(e)(2) of the
Payment, Clearing and Settlement Supervision Act of 2010 \11\ and
increased the Clearing Fund size for the remainder of October 2014 as
otherwise provided for in the first sentence of Rule 1001(a).\12\
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    \10\ OCC also has submitted an advance notice that would provide
greater detail concerning conditions under which OCC would increase
the size of the Clearing Fund intra-month. The change would permit
an intra-month increase in the event that the five-day rolling
average of projected draws are 150% or more of the Clearing Fund's
then current size. See Securities Exchange Act Release No. 72804
(August 11, 2014), 79 FR 48276 (August 15, 2014) (SR-OCC-2014-804).
    \11\ 12 U.S.C. 5465(e)(2).
    \12\ See supra, note 8.
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    Clearing Members were informed of the action taken by the Executive
Chairman \13\ and the amount of their additional Clearing Fund
requirements, which were met without incident. As a result of these
actions, OCC's Clearing Fund for October 2014 was increased by $1.8
billion. In continued reliance on the emergency rule waiver and in
accordance with the first sentence of Rule 1001(a), OCC set the
November 2014 Clearing Fund size at $7.8 billion, which included an
amount determined by OCC to be sufficient to protect OCC against loss
under simulated default scenarios (i.e., $6 billion), plus a prudential
margin of safety (the additional $1.8 billion collected in
October).\14\ All required contributions to the November 2014 Clearing
Fund were met by affected Clearing Members.
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    \13\ See Information Memorandum #35397, dated October 16, 2014,
available on OCC's Web site, http://www.theocc.com/clearing/clearing-infomemos/infomemos1.jsp. Clearing members also were
informed that a prudential margin of safety of $1.8 billion would be
retained until a new Clearing Fund sizing formula has been approved
and implemented.
    \14\ See Information Memorandum # 35507, dated October 31, 2014,
available on OCC's Web site, http://www.theocc.com/clearing/clearing-infomemos/infomemos1.jsp.
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    Under Article IX, Section 14(c), absent the submission of a
proposed rule change to the Commission seeking approval of OCC's waiver
of the provisions of the second sentence of Rule 1001(a), such waiver
would not be permitted to continue for more than thirty calendar days
from the date thereof.\15\ Accordingly, on November 13, 2014, OCC
submitted SR-OCC-2014-21 to delete the second sentence of Rule 1001(a)
and, by the terms of Article IX, Section 14(c), preserve the suspended
effectiveness of the second sentence of Rule 1001(a) beyond thirty
calendar days.\16\
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    \15\ See OCC By-Laws, Article IX, Section 14(c).
    \16\ See supra, note 8. OCC also submitted this proposed rule
change to the Commodity Futures Trading Commission.
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    SR-OCC-2014-21 was submitted in part to permit OCC to determine the
size of its Clearing Fund by relying on a broader range of sound risk
management practices than considered in basing such size on the average
daily calculations under Rule 1001(a) that are performed during the
preceding calendar month. The Monthly Clearing Fund Sizing Procedure,
as described below, is based on such broader risk management practices
and establishes the procedures OCC would use to determine the size of
the Clearing Fund on a monthly basis. Similarly, SR-OCC-2014-21 was
submitted in part to permit OCC to resize the Clearing Fund more
frequently than monthly when the circumstances warrant an increase of
the Clearing Fund. The Financial Resource Monitoring and Call
Procedure, as described below, establishes the procedures that OCC
would use to add Financial Resources through an intra-day margin call
on one or more Clearing Members under Rule 609 and, if necessary, an
intra-month increase of the Clearing Fund pursuant to Rule 1001(a).\17\
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    \17\ As noted in SR-OCC-2014-21, OCC would use its intra-month
resizing authority only to increase the size of the Clearing Fund
where appropriate, not to decrease the size of the Clearing Fund.
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Monthly Clearing Fund Sizing Procedure

    Under the Monthly Clearing Fund Sizing Procedure, OCC would
continue to calculate the size of the Clearing Fund based on its daily
stress test exposures under simulated default scenarios as described in
the first sentence of Rule 1001(a) and resize the Clearing Fund on the
first business day of each month. However, instead of resizing the
Clearing Fund based on the average of the daily calculations during the
preceding calendar month, as stated in the suspended second sentence of
Rule 1001, OCC would resize the Clearing Fund so that it is the sum of:
(i) An amount equal to the peak five-day rolling average of Clearing
Fund draws observed over the preceding three calendar months of daily
idiosyncratic default and minor systemic default scenario calculations
based on OCC's daily Monte Carlo simulations (``Base Amount'') and (ii)
a prudential margin of safety determined by OCC and currently set at
$1.8 billion.\18\
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    \18\ On a daily basis, OCC computes its exposure under the
idiosyncratic and minor systemic events. The greater of these two
exposures is that day's ``peak exposure.'' To calculate the
``rolling five day average'' OCC computes the average of the peak
exposure for each consecutive five-day period observed over the
prior three-month period. To determine the Base Amount, OCC would
use the largest five-day rolling average observed over the past
three-months. This methodology was used to determine the Base Amount
of the Clearing Fund for November 2014 and December 2014.
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    OCC believes that the proposed Monthly Clearing Fund Sizing
Procedure provides a sound and prudent approach to ensure that the
Financial Resources are adequate to protect against the largest risk of
loss presented by the default of a Clearing Member or Clearing Member
Group. By virtue of using only the peak five-day rolling average and by
extending the look-back period, the proposed Monthly Clearing Fund
Sizing Procedure is both more responsive to sudden increases in
exposure and less susceptible to recently observed decreases in
exposure that would reduce the overall sizing of the Clearing Fund,
thus mitigating procyclicality.\19\ Furthermore, the prudential margin
of safety provides an additional buffer to absorb potential future
exposures not previously observed during the look-back period. The
proposed Monthly Clearing Fund Sizing Procedure would be supplemented
by the Financial Resource Monitoring and Call Procedure, described
below, to provide further assurance that the Financial Resources are
adequate to protect against such risk of loss.
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    \19\ Considering only the peak exposures is a more conservative
methodology that gives greater weighting to sudden increases in
exposure experienced by Clearing Members, thus enhancing the
responsiveness of the procedure to such sudden increases. By using a
longer look-back period, the methodology would respond more slowly
to recently observed decreases in peak exposures.
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Financial Resource Monitoring and Call Procedure

    Under the Financial Resource Monitoring and Call Procedure, OCC
would use the same daily idiosyncratic default calculation as under the
Monthly Clearing Fund Sizing Procedure to monitor daily the adequacy of
the Financial Resources to withstand a default by the Clearing Member
or Clearing Member Group presenting the largest exposure under extreme
but plausible market conditions.\20\ If such a daily idiosyncratic
default calculation projected a draw on the Clearing Fund (a
``Projected Draw'') that is at least 75% of the Clearing Fund
maintained by OCC, OCC would be required to issue an intra-day margin
call pursuant to Rule 609 against the Clearing Member or Clearing
Member Group that caused such a draw (``Margin Call Event'').\21\

Subject to a limitation described below, the amount of the margin call
would be the difference between the Projected Draw and the Base
Clearing Fund (``Exceedance Above Base Amount''). In the case of a
Clearing Member Group that causes the Exceedance Above Base Amount, the
Exceedance Above Base Amount would be pro-rated among the individual
Clearing Members that compose the Clearing Member Group based on each
individual Clearing Member's proportionate share of the ``total risk''
for such Clearing Member Group as defined in Rule 1001(b), i.e., the
margin requirement with respect to all accounts of the Clearing Member
Group exclusive of the net asset value of the positions in such
accounts aggregated across all such accounts. However, in the case of
an individual Clearing Member or a Clearing Member Group, the margin
call would be subject to a limitation under which it could not exceed
the lower \22\ of: (a) $500 million, or (b) 100% of a Clearing Member's
net capital. Such limitation would be measured in aggregate with any
funds remaining on deposit with OCC deposited by the same Clearing
Member pursuant to a Margin Call Event within the same monthly period,
as applicable until collection of all funds to satisfy the next regular
monthly Clearing Fund resizing (the ``500/100 Limitation'').\23\
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    \20\ Since the minor systemic default scenario contemplates two
Clearing Members' simultaneously defaulting and OCC maintains
Financial Resources sufficient to cover a default by a Clearing
Member or Clearing Member Group representing the greatest exposure
to OCC, OCC does not use the minor systemic default scenario to
determine the adequacy of the Financial Resources under the
Financial Resource Monitoring and Call Procedure.
    \21\ Rule 609 authorizes OCC to require the deposit of
additional margin in any account at any time during any business day
by any Clearing Member for, inter alia, the protection of OCC, other
Clearing Members or the general public. Clearing Members must meet a
required deposit of intra-day margin in immediately available funds
at a time prescribed by OCC or within one hour of OCC's issuance of
debit settlement instructions against the bank account(s) of the
applicable Clearing Member(s), thereby ensuring the prompt deposit
of additional Financial Resources.
    \22\ ``Capping'' the intra-day margin call avoids placing a
``liquidity squeeze'' on the subject Clearing Member(s) based on
exposures presented by a hypothetical stress test, which would have
the potential for causing a default on the intra-day margin call.
Back testing results determined that such calls would have been made
against Clearing Members that are large, well-capitalized firms,
with more than sufficient resources to satisfy the call for
additional margin with the proposed limitations.
    \23\ The Risk Committee would be notified, and could take action
to address potential Financial Resource deficiencies, in the event
that a Projected Draw resulted in a Margin Call Event and as a
result of the 500/100 Limitation the margin call was less than the
Exceedance Above Base Amount, but the Projected Draw was not so
large as to result in an increase in the Clearing Fund as discussed
below.
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    Upon satisfaction of the margin call, OCC would use its authority
under Rule 608 to preclude the withdrawal of such additional margin
amount until it collects all of the funds determined by the next
Monthly Clearing Fund Sizing Procedure. Based on three years of back
testing data, OCC determined that it would have had Margin Call Events
in 10 of the months during this time period. For each of these months,
the maximum call amount would have been equal to $500 million, with one
exception in which the maximum call amount for the month was $7.7
million.\24\ After giving effect to the intra-day margin calls, i.e.,
by increasing the Financial Resources by $500 million, there was only
one Margin Call Event where there was an observed stress test
exceedance of the Financial Resources.
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    \24\ The back testing analysis performed assumed a single
Clearing Member caused the exceedance.
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    To address this one observed instance, the Financial Resource
Monitoring and Call Procedure also would require OCC to increase the
size of the Clearing Fund (``Clearing Fund Intra-month Increase
Event'') if a Projected Draw exceeds 90% of the Clearing Fund, after
applying any funds then on deposit with OCC from the applicable
Clearing Member or Clearing Member Group pursuant to a Margin Call
Event. The amount of such increase (``Clearing Fund Increase'') would
be the greater of: (a) $1 billion; or (b) 125% of the difference
between (i) the Projected Draw, as reduced by the deposits resulting
from the Margin Call Event and (ii) the Clearing Fund. Each Clearing
Member's proportionate share of the Clearing Fund Increase would equal
its proportionate share of the variable portion of the Clearing Fund
for the month in question as calculated pursuant to Rule 1001(b).
    OCC would notify the Risk Committee of the Board of Directors (the
``Risk Committee''), Clearing Members and appropriate regulatory
authorities of the Clearing Fund Increase on the business day on which
the Clearing Fund Intra-month Increase Event occurred. This ensures
that OCC management maintains authority to address any potential
Financial Resource deficiencies when compared to its Projected Draw
estimates. The Risk Committee would then determine whether the Clearing
Fund Increase was sufficient, and would retain authority to increase
the Clearing Fund Increase or the margin call made pursuant to a Margin
Call Event in its discretion. Clearing Members would be required to
meet the call for additional Clearing Fund assets by 9:00 a.m. CT on
the second business day following the Clearing Fund Intra-Month
Increase Event. OCC believes that this collection process ensures
additional Clearing Fund assets are promptly deposited by Clearing
Members following notice of a Clearing Fund Increase, while also
providing Clearing Members with a reasonable period of time to source
such assets. Based on OCC's back testing results, after giving effect
to the intra-day margin call in response to a Margin Call Event plus
the prudential margin of safety, the Financial Resources would have
been sufficient upon implementing the one instance of a Clearing Fund
Intra-month Increase Event.
    OCC believes the Financial Resource Monitoring and Call Procedure
strikes a prudent balance between mutualizing the burden of requiring
additional Financial Resources and requiring the Clearing Member or
Clearing Member Group causing the increased exposure to bear such
burden. As noted above, in the event of a Margin Call Event, OCC limits
the margin call until collection of all funds to satisfy the next
regular monthly resizing to an aggregate of $500 million, or 100% of a
Clearing Member's net capital in order to avoid putting an undue
liquidity strain on any one Clearing Member. However, where a Projected
Draw exceeds 90% of OCC's Clearing Fund, OCC must act to ensure that it
has sufficient Financial Resources, and determined that it should
mutualize the burden of the additional Financial Resources at this
threshold through a Clearing Fund Increase. OCC believes that this
balance would provide OCC with sufficient Financial Resources without
increasing the likelihood that its procedures would, based solely on
stress testing results, cause a liquidity strain on any on Clearing
Member that could result in such member's default.
    The following examples illustrate the manner in which the Financial
Resource Monitoring and Call Procedure would be applied. All assume
that the Clearing Fund size is $7.8 billion, $6 billion of which is the
Base Amount and $1.8 billion of which is the prudential margin of
safety. The 75% threshold in these examples is $5.85 billion.

Example 1: Single CM

    Under OCC's stress testing the Projected Draw attributable to
Clearing Member ABC, a Clearing Member with no affiliated Clearing
Members and net capital of $500 million, is $6.4 billion, or 82% of the
Clearing Fund. OCC would make a margin call for $400 million, which
represents the Exceedance Above Base Amount. In this case the 500/100
Limitation would not be applicable because the Exceedance Above Base
Amount is less than $500 million and 100% of the Clearing Member's net
capital. The Clearing Member would be required to meet the $400 million
call within one hour unless OCC prescribed a different time, and OCC
would retain the $400 million until collection of all the funds to
satisfy

the next monthly Clearing Fund sizing calculation.
    If, on a different day within the same month, CM ABC's Projected
Draw minus the $400 million already deposited with OCC results in an
Exceedance above Base Amount, another Margin Call Event would be
triggered, with the amount currently deposited with OCC applying toward
the 500/100 Limitation.

Example 2: Clearing Member Group

    Under OCC's stress testing the Projected Draw attributable to
Clearing Member Group DEF, comprised of two Clearing Members each with
net capital of $800 million, is $6.2 billion, or 79% of OCC's Clearing
Fund. OCC would initiate a margin call on Clearing Member Group DEF for
$200 million. The call would be allocated to the two Clearing Members
that compose the Clearing Member Group based on each Clearing Member's
risk margin allocation. In this case the 500/100 Limitation would not
be applicable because the Exceedance Above Base Amount is less than
$500 million and 100% of net capital. The margin call would be required
to be met within one hour of the call unless OCC prescribed a different
time. For example, in the case where one Clearing Member accounts for
75% of the risk margin for the Clearing Member Group, that Clearing
Member would be allocated $150 million of the call and the other
Clearing Member, accounting for 25% of the risk margin for the Clearing
Member Group, would be allocated $50 million of the call. The funds
would remain deposited with OCC until collection of all the funds to
satisfy the next monthly Clearing Fund sizing calculation.

Example 3: Clearing Member Group With $500 Million Cap

    Under OCC's stress testing the Projected Draw attributable to
Clearing Member Group GHI, comprised of two Clearing Members each with
net capital of $800 million, is $6.8 billion, or 87% of the Clearing
Fund. The Exceedance Above Base Amount would be $800 million, allocated
to the two Clearing Members that compose the Clearing Member Group
based on each Clearing Member's risk margin allocation. Using the 75/25
risk margin allocation from Example 2, one Clearing Member would be
allocated $600 million and the other Clearing Member would be allocated
$200 million. The first Clearing Member would be required to deposit
$500 million with OCC, which is the lowest of $500 million, that
member's net capital, or that member's share of the Exceedance Above
Base Amount, and the other Clearing Member would be required to deposit
$200 million with OCC. After collecting the additional margin, OCC
would determine whether the Projected Draw would exceed 90% of the
Clearing Fund after reducing the Projected Draw by the additional
margin. This calculation would divide a Projected Draw of $6.1 billion,
which is the original Projected Draw of $6.8 billion reduced by the
additional margin, by the Clearing Fund of $7.8 billion. The resulting
percentage of 78% would be below the 90% threshold, and accordingly
there would not be a Clearing Fund Intra-month Increase Event.

Example 4: Margin Call and Increase in Size of Clearing Fund

    Under OCC's stress testing the Projected Draw attributable to
Clearing Member JKL, a Clearing Member with no affiliated Clearing
Members and net capital of $600 million, is $10.0 billion, or 128% of
the Clearing Fund. OCC would make a margin call for $500 million, which
represents the lowest of the Exceedance Above Base Amount, $500 million
and 100% of net capital. The Clearing Member would be required to meet
the $500 million call within one hour unless OCC prescribed a different
time, and OCC would retain the $500 million until collection of all the
funds to satisfy the next monthly Clearing Fund sizing calculation.
    After collecting the additional margin, OCC would determine whether
the Projected Draw would exceed 90% of the Clearing Fund after reducing
the Projected Draw by the additional margin. This calculation would
divide a Projected Draw of $9.5 billion, which is the original
Projected Draw of $10 billion reduced by the additional margin, by the
Clearing Fund of $7.8 billion. The resulting percentage of 122%, while
lower, would still exceed the 90% threshold, and accordingly OCC would
declare a Clearing Fund Intra-month Increase Event. To calculate the
Clearing Fund Increase, OCC would first determine the difference
between the modified Projected Draw ($9.5 billion) and the Clearing
Fund ($7.8 billion), which in this case would be $1.7 billion, OCC
would then multiply this by 1.25, resulting in $2.125 billion. Because
this amount is greater than $1 billion, the Clearing Fund Increase
would be $2.125 billion and a modified Clearing Fund of OCC totaling
$9.925 billion ($425 million in excess of the modified Projected Draw
of $9.5 billion).
2. Statutory Basis
    OCC believes the proposed rule change is consistent with Section
17A(b)(3)(F) of the Act,\25\ and the rules and regulations thereunder.
By establishing sound procedures governing the monthly resizing of the
Clearing Fund and how OCC would add Financial Resources in response to
a Margin Call Event and a Clearing Fund Intra-month Increase Event, the
proposed modifications would further ensure that OCC is capable of
safeguarding securities and funds which are in the custody or control
of OCC or for which it is responsible and protecting investors and the
public interest. The development of the Monthly Clearing Fund Sizing
Procedure and the Financial Resource Monitoring and Call Procedure also
ensures that OCC has procedures designed to maintain sufficient
financial resources to withstand, at a minimum, a default by the
participant family to which it has the largest exposure in extreme but
plausible market conditions, in compliance with Rule 17Ad-22(b)(3).\26\
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    \25\ 15 U.S.C. 78q-1(b)(3)(F).
    \26\ 17 CFR 240.17Ad-22(b)(3).
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(B) Clearing Agency's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any
burden on competition.\27\ OCC believes the proposed rule change would
not unfairly inhibit access to OCC's services or disadvantage or favor
any particular user in relationship to another user because OCC would
establish the size of the Clearing Fund in accordance with the Monthly
Clearing Fund Sizing Procedure and without regard to any particular
user or Clearing Member that makes Clearing Fund contributions.
Furthermore, OCC would respond to a Margin Call Event and Clearing Fund
Intra-month Increase Event in accordance with the Financial Resource
Monitoring and Call Procedure without regard to any particular user or
Clearing Member.
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    \27\ 15 U.S.C. 78-q1(b)(3)(I).
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    For the foregoing reasons, OCC believes that the proposed rule
change is in the public interest, would be consistent with the
requirements of the Act applicable to clearing agencies, and would not
impose a burden on competition.

(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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self- regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-OCC-2015-009 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2015-009. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of OCC and on OCC's
Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_15_009.pdf. All comments received will be
posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly.
    All submissions should refer to File Number SR-OCC-2015-009 and
should be submitted on or before April 23, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-07523 Filed 4-1-15; 8:45 am]
BILLING CODE CODE 8011-01-P


MEMORANDUM

SUBJECT: ESA section 7(a)(2) and EPA withdrawal of federal aquatic life water quality criteria for lead and federal human health criteria for chlorodibromomethane and dichlorobromomethane applicable to certain waters in California

FROM:

TO:

Purpose of the Memo

Section 7 of the Endangered Species Act (ESA) and federal regulations at 50 CFR Part 402, requires federal agencies to consult with the U.S. Fish and Wildlife Service (FWS) and/or the Nation Marine Fisheries Service (NMFS) on agency actions that "may affect" federally-listed threatened and endangered species that reside within the action area.  Federal agencies subsequently conduct a biological assessment (or biological evaluation) to determine whether any such species or their critical habitat are likely to be adversely affected by the agency action.  Consultation is only required for actions that "may affect" listed species or designated critical habitat.  40 CFR § 402.03. The purpose of this memo is to document the Environmental Protection Agency's (EPA) plans for complying with ESA section 7(a)(2) and federal regulations at 50 CFR Part 402 concerning its withdrawal of federal aquatic life water quality criteria for lead and federal human health criteria for chlorodibromomethane and dichlorobromomethane applicable to certain waters in California.

Summary of Federal Action

EPA is amending its federal regulations to withdraw human health (water & organisms) criteria for chlorodibromomethane and dichlorobromomethane for a segment of New Alamo Creek and a segment of Ulatis Creek, California. In addition, EPA is amending its federal regulations to withdraw freshwater acute and chronic aquatic life criteria for lead for the Los Angeles River and its tributaries. By withdrawing these criteria, the federal action will enable California to implement the State-adopted, EPA-approved water quality criteria for the same waterbodies where federally promulgated water quality criteria were previously applicable.  Upon finalizing this federal action, these federally promulgated water quality criteria will no longer be applicable for CWA purposes.  California's water quality criteria, approved by EPA, will be the effective criteria for CWA purposes.

Relevant Background of Federal Action and Anticipated No Effect Determination

Lead

On May 18, 2000, as part of a final rule known as the "California Toxics Rule" (CTR), EPA promulgated federal regulations establishing aquatic life water quality criteria for lead. On July 11, 2016, California completed its adoption process to incorporate water quality objectives for lead for the Los Angeles River and its tributaries. On July 19, 2016, the State submitted the site-specific objectives to EPA Region 9 for CWA 303(c) review and approval. On December 12, 2016, EPA approved the site-specific objectives for lead for the Los Angeles River and its tributaries. The Los Angeles Regional Water Quality Control Board adopted these site-specific objectives under Resolution No. R15-004.  The California State Water Resources Control Board in Resolution No. 2015-0069 subsequently approved the Regional Board action on these site-specific objectives, and EPA subsequently approved the State Board action. EPA approved the State's site-specific objectives for lead.  Although less stringent than the federally promulgated criteria, EPA determined that the State's site-specific objectives were scientifically sound and protective of the designated use(s) for the Los Angeles River and its tributaries and met the requirements of the CWA and EPA's implementing regulations at 40 CFR 131.

Because California now has site-specific objectives for lead for the protection of aquatic life, approved by EPA for CWA purposes, for the Los Angeles River and its tributaries, EPA has determined that the federally promulgated freshwater acute and chronic aquatic life criteria for lead are no longer applicable for the Los Angeles River and its tributaries.

EPA anticipates concluding that there will be no effect on federally-listed threatened and endangered species and designated critical habitat from its withdrawal of the previously applicable, federally promulgated aquatic life criteria for lead because EPA plans to complete consultation with FWS on its approval of California's newly adopted aquatic life water quality objectives for lead for the Los Angeles River and its tributaries ("state lead objectives") by the finalization of this federal rulemaking.  EPA initiated consultation with FWS concerning EPA's approval of the state lead objectives on December 12, 2016.  On December 12, 2016, EPA submitted a Biological Evaluation (BE) for FWS's review that determined that EPA's approval of the state lead objectives was not likely to adversely affect federally-listed species or adversely modify designated critical habitat. Furthermore, the consultation on EPA's approval of the state lead objectives was premised on these objectives henceforth being the CWA-applicable water quality objectives.  But an additional step is necessary, in addition to the approval, to make the state lead objectives effective for CWA purposes.  The additional step is the withdrawal of EPA's federally promulgated criteria for lead for the Los Angeles River and its tributaries ("federal lead criteria").  EPA's withdrawal of the federal lead criteria will not result in any consequence to listed species.  Effects of the state's lead objectives on listed species were considered during EPA's approval of those objectives and reflected in the BE that has been transmitted to FWS.

Relevant Background of Federal Action and No Discretion Determination

Chlorodibromomethane and dichlorobromomethane

On May 18, 2000, as part of the CTR, EPA promulgated federal regulations establishing human health water quality criteria for chlorodibromomethane and dichlorobromomethane. On November 3, 2011, California completed its adoption process to incorporate human health water quality criteria for chlorodibromomethane and dichlorobromomethane, for a segment of New Alamo Creek and a segment of Ulatis Creek. On December 13, 2011, the State submitted the site-specific objectives to EPA Region 9 for review and approval. On April 9, 2013, EPA approved site-specific objectives for that segment of New Alamo Creek and that segment of Ulatis Creek. The Central Valley Regional Water Quality Control Board subsequently adopted the objectives in Resolution No. R5-2010-0047, and the State Water Resources Control Board approved of the objectives in Resolution 2011-0036, which was submitted to EPA by the State. EPA approved the State's site-specific objectives. Although less stringent than the federally promulgated criteria, EPA determined that the State's site-specific objectives were scientifically sound and protective of the designated use(s) for the segment of New Alamo Creek and the segment of Ulatis Creek.

Because California now has site-specific human health (for water and organisms) criteria approved by EPA for CWA purposes for chlorodibromomethane and dichlorobromomethane for a segment of New Alamo Creek and a segment of Ulatis Creek, EPA determined that the federally promulgated human health (water and organisms) criteria are no longer needed for that segment of New Alamo Creek and that segment of Ulatis Creek.

EPA has concluded that it has no discretion to consult on its withdrawal of the previously applicable human health (water & organisms) criteria for chlorodibromomethane and dichlorobromomethane because the action pertains to criteria supporting designated uses other than aquatic life (e.g., fish consumption, full-body contact, partial-body contact). The rationale for this decision is articulated in the 2009 Memorandum from Benjamin Grumbles, Office of Water Assistant Administrator, which stated that:

      For ESA section 7(a)(2) to apply, EPA must be taking an action in which it has sufficient discretionary involvement or control to protect listed species. State WQS actions where EPA has concluded that it lacks such discretion include... approval of water quality criterion to protect human health... Human heath water quality criteria are designed to protect humans, not plants and animals. EPA's discretion to act on a State submission is limited to determining whether the criteria ensure protection of designated uses upon which the criteria are based (i.e. use by humans). Therefore, EPA has no discretion to revise an otherwise approvable human health criterion to benefit listed species.

Although the rationale articulated in the 2009 Memorandum is provided within the context of EPA approval of state WQS actions, EPA also considers the rationale relevant and applicable to withdrawals of federally promulgated water quality criteria that effectuate the approval of state WQS actions. Therefore, consultation under Section 7 is not required for EPA's withdrawal of chlorodibromomethane and dichlorobromomethane human health water quality criteria for a segment of New Alamo Creek and a segment of Ulatis Creek.