[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88163-88173]
[FR Doc No: 2023-27912]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99169; File No. SR-OCC-2023-008]

Self-Regulatory Organizations; the Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Concerning Amendments to the Options Clearing Corporation's Collateral
Risk Management Policy and Margin Policy

December 14, 2023.
    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 December 4, 2023, The Options Clearing
Corporation (``OCC'' or ``Corporation'') filed with the Securities and
Exchange Commission (``SEC'' or ``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)(i) \3\ of the Act and Rule 19b-4(f)(1)
\4\ thereunder, such that the proposed rule change was immediately
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)(i).
    \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

    This proposed rule change would amend OCC's Collateral Risk
Management Policy (``CRM Policy'') and Margin Policy (collectively,
``OCC Policies''). The proposed changes are designed to update the OCC
Policies to better align the descriptions therein with OCC's current
practices, delete extraneous information, and make other non-
substantive clarifying, conforming and administrative changes.
    The proposed changes to the OCC Policies are included in
confidential Exhibits 5A and 5B to File No. SR-OCC-2023-008. Material
proposed to be added to the OCC Policies 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.\5\
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    \5\ 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

    As the sole clearing agency for standardized equity options listed
on national securities exchanges registered with the Commission
(``listed options''), OCC is exposed to certain risks, including credit
risk arising from its relationships with the Clearing Members for which
OCC becomes the buyer to every seller and the seller to ever buyer with
respect to listed options. In order to manage counterparty credit risk
and mitigate related systemic risks, OCC requires Clearing Members to
collateralize financial obligations that result from maintaining
options, futures and stock loan positions at OCC.
    OCC maintains policies filed with the Commission as OCC rules that
are designed to address such credit risk,

including the CRM Policy and the Margin Policy. The CRM Policy
identifies OCC's approach for managing the risks associated with
accepting collateral deposits.\6\ Specifically, the CRM Policy sets the
governance processes for establishing and maintaining standards used to
determine acceptable forms of collateral, as well as the methodology
for establishing the valuation practices, including applicable haircuts
and concentration limits to effectively manage OCC's credit
exposure.\7\ In addition, the CRM Policy describes the requirements for
periodically evaluating the forms of accepted collateral and the
ongoing adequacy of the valuation processes.\8\ The Margin Policy
describes OCC's approach to managing credit exposure presented by its
Clearing Members by requiring Clearing Members to deposit margin, which
OCC would use to cover losses if a member defaults.\9\ The Margin
Policy addresses positions considered for margin calculations, cross-
margining, treatment of collateral included in margin calculations, key
margin assumptions, OCC's margin methodologies, protocols for margin
calls and adjustments, and margin monitoring, including through daily
backtesting and model validation that OCC conducts to assess the
performance of its margin methodologies.\10\
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    \6\ See Exchange Act Release No. 82311 (Dec. 13, 2017), 82 FR
60252, 60252-53 (Dec. 19, 2017) (SR-OCC-2017-008).
    \7\ See id.
    \8\ See id. at 60253.
    \9\ See Exchange Act Release No. 82658 (Feb. 7, 2018), 83 FR
6646, 6646 (Feb. 14, 2018) (SR-OCC-2017-007).
    \10\ See id. at 6647.
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    Consistent with regulatory obligations,\11\ OCC and its Board
reviews these risk management policies at least annually. Through these
annual reviews, OCC has identified proposed revisions intended to
revise certain descriptions to better reflect current practices, remove
extraneous information and make other non-substantive, clarifying and
administrative changes to the text of those policies. These changes are
designed to enhance the clarity of OCC's internal governance
arrangements and are not expected to have any impact on OCC's Clearing
Members or other market participants.
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    \11\ See 17 CFR 240.17Ad-22(e)(3)(i) (requiring, among other
things, that a covered clearing agency subject its risk management
policies, procedures and systems to review on a specified periodic
basis and approval by the board of directors annually).
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(1) Purpose
    OCC proposes to make the following changes to the CRM Policy and
Margin Policy to better reflect current practices, remove extraneous
information and make other non-substantive, clarifying and
administrative changes to the text of those policies.
1. CRM Policy
    OCC proposes to add a statement in the Purpose section that the CRM
Policy sets forth processes to establish and maintain standards used to
``maintain a collateral system that is well-designed and operationally
flexible.'' OCC's Collateral Management system meets this standard
today and no changes to its operations would be required. The proposed
revision would merely clarify that OCC's collateral system conforms to
the standard established at Principle 5, Key Consideration 6 of the
Principles for Financial Market Infrastructures.\12\
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    \12\ See Committee on Payment and Settlement Systems and
Technical Committee of the International Organization of Securities
Commissions (``CPSS-IOSCO''), Principles for financial market
infrastructures (Apr. 16, 2012) (stating that ``[a]n FMI should use
a collateral management system that is well-designed and
operationally flexible''), available at http://www.bis.org/publ/cpss101a.pdf. In 2014, the CPSS became the Committee on Payments and
Market Infrastructures (``CPMI'').
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    OCC proposes to insert an Applicability and Scope section that,
consistent with other recently filed policies,\13\ would identify the
primary OCC business units that support OCC's approach to managing the
risks associated with accepting collateral deposits, including but not
limited to Pricing and Margins (``P&M''), Collateral Services, and
Quantitative Risk Management (``QRM'').
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    \13\ See Exchange Act Release No. 93916 (Jan. 6, 2022), 87 FR
1819, 1820 (Jan. 12, 2022) (SR-OCC-2021-014) (discussing the
applicability and scope of OCC's Cash and Investment Management
Policy).
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    OCC proposes to retitle the Policy Detail section as the Policy
Content section to conform with current OCC titling conventions as
reflected in other policies. OCC also proposes to amend a statement
therein that Clearing Members must maintain sufficient collateral at
OCC to meet their margin and clearing fund obligations ``at all
times.'' OCC proposes to remove this phrase that could imply that a
Clearing Member's failure to maintain sufficient collateral would
constitute a violation of OCC's Rules (i.e., if the value of the
collateral on deposit fell below the Clearing Member's margin
requirement). Such a reading would be inconsistent with OCC operations
and the implicit intent behind OCC Rules 601 and 1001, which establish
OCC's ability to call for margin and Clearing Fund collateral as
needed. The revised statement would better describe OCC's long-standing
requirements and practices.
    OCC proposes to remove lists of acceptable margin and Clearing Fund
collateral types from the Margin and Clearing Fund sections. OCC Rules
604 and 610 describe asset types that OCC accepts as margin collateral
and OCC Rule 1002 describes Clearing Fund collateral. Because the list
of acceptable collateral to be removed is appropriately reflected in
the Rulebook, it need not be duplicated in the CRM Policy. Similarly,
OCC proposes to delete a statement regarding the current composition of
sovereign debt accepted by OCC in the Sovereign Credit Risk section.
This text provides background information regarding the current
composition of OCC's sovereign debt collateral and maintaining this
description in the CRM Policy text raises the risk of inaccuracy should
OCC's collateral composition change over time. The statement does not
establish a stated policy, practice or interpretation of OCC regarding
the forms of Government securities acceptable to OCC, which are
established by OCC Rules 604 and 1002.
    OCC proposes to restate Financial Risk Management's (``FRM'')
stated obligation in the Market Risk section to value collateral
``continuously,'' to ``throughout regular market trading hours.'' The
modifier ``continuously'' could imply that FRM is required to value
collateral on a 24/7 basis. OCC's policies and procedures are designed
to set and enforce appropriately conservative haircuts for the
collateral it accepts,\14\ but OCC does not believe this would require
it to adhere to a standard of continuous and ongoing revaluation of
collateral. Accordingly, OCC proposes these revisions to more clearly
reflect its long-standing practices. Similarly, OCC proposes to restate
the obligation in the Valuations section from requiring P&M to perform
its collateral valuation processes ``on a continuous basis'' to
``during regular market trading hours.'' In each case the revised
statements are fairly and reasonably implied by OCC's rules.\15\
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    \14\ See 17 CFR 240.17Ad-22(e)(5).
    \15\ For example, the CRM Policy explains that OCC's approach to
valuation includes that the maximum period between collateral
revaluations is at least daily. See Exchange Act Release No. 82009
(Nov. 3, 2017), 82 FR 52079, 52080-81 (Nov. 9, 2017) (SR-OCC-2017-
008).
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    OCC proposes to amend the description of its approach to
concentration risk in the Concentration Risk section. The current
description focuses on OCC's measures to mitigate

concentration risk in relatively limited scenarios, including where
appropriate to limit the aggregation or concentration of large
positions in a single security or mitigate price dislocation when
selling a large position into a thin market. This description does not
address other relevant instances where OCC could face or seek to
mitigate concentration risk. As such, OCC proposes to more broadly
describe its approach to mitigating concentration risk, which consists
of restrictions for certain assets intended to allow OCC to liquidate
collateral quickly without adverse price effects. The proposed
revisions would more fully describe OCC's approach to mitigating
concentration risk without altering the substance or requirements of
the CRM Policy as they relate to OCC's core risk management activities.
    The Systems and Processing section describes OCC's collateral
management system as highly automated yet flexible enough to accept a
variety of collateral types. While this description of the system's
flexibility is accurate, it does not establish a rule, standard or
interpretation with respect to OCC's operation of the system. OCC
proposes to replace the extraneous discussion of flexibility with a
statement indicating that the system supports the maintenance and
processing of various asset types, which more objectively conveys
similar information. This section further provides that the collateral
management system maintains the same performance, efficiency and
effectiveness for each collateral type OCC accepts. OCC proposes to
delete this provision because different processing methods for
collateral types and associated timelines could render that statement
inaccurate and the discussion of the collateral system's capabilities
likewise does not establish a stated policy, practice or interpretation
and should not be considered a rule per se. The proposed revisions
would clarify the description of OCC's collateral management system in
accordance with current OCC operations.
    In the Reconciliation section, OCC intends to clarify that the
information it uses in the daily balancing of collateral against
activity and inventory reports is not limited to end-of-day reports
provided by custody banks and depositories. Accordingly, OCC proposes
to remove the ``end-of-day'' modifier and include OCC's internal
systems within the description of potential sources of information and
reports used for daily balancing activity. These revisions are intended
to better reflect the sources of information OCC uses when conducting
its daily balancing activity.
    The Reconciliation section also provides exceptions to the daily
monitoring requirement concerning certain collateral for which OCC's
daily balancing activities previously were impractical. OCC believes
these reviews and associated exceptions to the daily monitoring
requirement are no longer necessary. Specifically, OCC would delete
reference to the monthly reviews of collateral deposited pursuant to
letters of credit or depository receipts and security agreements. With
respect to letters of credit, the monthly reviews date to when
documentation for such collateral was maintained in physical files.
Currently, OCC verifies and electronically retains documentation for
letters of credit on the date a letter of credit is processed
consistent with the CRM Policy's daily monitoring requirement, making
the monthly review exception for letters of credit redundant and
unnecessary. With respect to depository receipts and security
agreements, the processing of Canadian Government securities, to which
those monthly reviews apply, no longer rely on such documentation. In
any event, Collateral Services conducts a daily inventory
reconciliation of Canadian Government securities, which is reasonably
and fairly implied by the generally applicable daily balancing
requirement under the Reconciliation section, discussed above.
Accordingly, OCC proposes to delete the reference to these monthly
reviews from the CRM Policy because the monthly reviews no longer serve
any practical purpose.
    Similarly, OCC proposes to remove the CRM Policy's discussion of
the requirement that Collateral Services regularly review escrow
deposit banks to ensure acceptable and sufficient collateral is
maintained. This review dates to a time when OCC did not have daily
visibility into the actual collateral holdings held at the banks as
supporting collateral.\16\ OCC would review a collateral listing
supplied by the banks on a quarterly basis. Currently, all non-cash
collateral is pledged to OCC through the Depository Trust Company
(``DTC''), which not only provides OCC with visibility into the
holdings but allows OCC to validate and value the collateral in an
automated fashion prior to giving credit to such deposits.\17\ OCC
reconciles the non-cash inventory daily and performs a daily audit of
any cash collateral maintained at the escrow banks against what OCC
maintains in its systems. These daily reconciliation activities are
reasonably and fairly implied by the generally applicable daily
balancing requirement under the Reconciliation section, discussed
above.
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    \16\ See Exchange Act Release No. 79094 (Oct. 13, 2016), 81 FR
72129 (Oct. 19, 2016) (SR-OCC-2016-009) (approving changes to OCC's
escrow deposit program).
    \17\ Id. at 72129.
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    The Reconciliation section also requires OCC's Collateral Services
team to ``immediately address'' any discrepancies identified during its
activity reviews and inventory balancing. How Collateral Services
addresses such discrepancies is addressed in procedures maintained by
Collateral Services. OCC proposes to revise the text of this section to
recognize that Collateral Services maintains procedures to satisfy this
obligation.
    OCC proposes to remove the entirety of the Margin Offset section,
which consists of a description of margin collateral assets that are
permitted to directly offset cleared positions (i.e., deposits in lieu
of margin) and a statement that cleared positions can be fully covered
by such assets and thus excluded from margin calculations. OCC Rules
610 and 601(f)(2) authorize such offsets and describe the collateral
assets permitted to be offset. As such, OCC believes it is unnecessary
to duplicate this information in the CRM Policy.
    The Governance and Annual Review section provides that a
recommendation to add a new collateral type for margin or clearing fund
purposes must address whether the collateral should be subject to a
haircut or modeled within the System for Theoretical Analysis and
Numerical Simulation (``STANS''). OCC proposes to specify in the CRM
Policy that when the collateral type will be subject to haircuts, such
haircuts will be expressed as percentages, as is consistent with
current OCC practice.
    In addition, OCC proposes to make clarifying, conforming and other
non-substantive changes to the CRM Policy. The proposed changes
discussed below would not substantively alter the meaning of the
revised provisions or the substance or requirements of the CRM Policy
as they relate to OCC's core clearance, settlement, and risk management
activities. The following conforming revisions are intended to align
the text of the CRM Policy with existing provisions of the Rulebook,
By-Laws or other documents, as applicable, and to update the titles of
documents referenced in the CRM Policy:
     In the section to be renamed as Policy Content, and again
in the subsequent Margin section, OCC proposes to insert references to
Rule 610. Rule 610 establishes the rules around deposits in lieu of
margin,

which are a form of margin collateral. These changes would ensure
alignment between the text of the CRM Policy and the Rulebook with
respect to acceptable forms of margin collateral. In the amended Policy
Content section, OCC also proposes to add that Clearing Fund collateral
can be used to meet OCC liquidity needs for settlement. This change is
also consistent with existing practice, as codified in OCC Rule
1006(f).
     OCC would revise two references to chapter 2 of the
``STANS Margin Methodology document'' to instead refer to the ``STANS
Methodology Description,'' which replaced the legacy STANS Margin
Methodology as the description of the STANS Methodology filed with the
Commission.\18\
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    \18\ See Exchange Act Release No. 91079 (Feb. 8, 2021), 86 FR
9410 (Feb. 12, 2021) (SR-OCC-2020-016) (approving the establishment
of the STANS Methodology Description).
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    The following clarifying revisions are intended to restate existing
provisions for improved clarity and accuracy:
     In the Purpose section, OCC proposes to replace collateral
that ``OCC has determined exhibits low credit, market and liquidity
risks'' with collateral that ``is of low risk based on credit, market,
and liquidity characteristics.'' These revisions would not alter
currently existing standards or practices but more clearly state what
OCC's definition of high quality collateral is based on.
     In the Margin section, OCC proposes to replace ``price''
with ``value'' in reference to the liquidation of margin assets at a
price that reasonably approximates the value given to the asset as a
collateral deposit, which would be consistent with the term ``value''
that is used later in the sentence.
     In the Risk Considerations section, OCC proposes to insert
the word ``collateral'' after ``margin'' to align with the term
``Clearing Fund collateral'' used immediately thereafter. In light of
this alignment, OCC also proposes to insert ``or both'' to make clear
that the Credit and Liquidity Risk Working Group (``CLRWG'') \19\
determines which assets are considered acceptable for each category of
collateral, or both categories, as applicable.
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    \19\ CLRWG is a cross-functional group responsible for assisting
OCC's Management Committee in overseeing and governing OCC's credit
and liquidity risk management activities and currently consists of
representatives from Financial Risk Management--including Credit
Risk Management and Stress Testing and Liquidity Risk Management--
Corporate Risk Management, Treasury, and Operations.
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     In the Sovereign Credit Risk section, OCC proposes to
delete ``particular'' as a qualifier preceding ``foreign sovereign's
debt.'' The qualifier is unnecessary as OCC reviews each form of
collateral prior to accepting it as collateral, so the revision does
not substantively alter the meaning of the provision.
     In the Valuations section, OCC proposes to restate how the
haircut determination and review process informs OCC's approach to
addressing procyclicality. The current policy states that such process
also ``protects against potential pro-cyclical concerns'' by
considering stressed market conditions. OCC proposes to delete
``potential'' and instead state that the process ``shall also protect
against pro-cyclical concerns'' by considering stressed market
conditions. The revisions would not substantively alter existing
processes but make more definitive OCC's intent to address pro-
cyclicality through its existing haircut determination and review
process. OCC proposes to remove ``in order'' from the same sentence as
it is a redundant statement of OCC's purpose, which is adequately
reflected in the statement.
     The Haircuts section provides that changes to applicable
haircut rates shall be made in accordance with applicable authority
under Rule 604. OCC proposes to delete ``applicable authority under''
Rule 604 as it is redundant in the context of this sentence.
     The Collateral Re-hypothecation and Substitution section
refers to ``Clearing Fund securities.'' OCC proposes to revise the
reference to ``Clearing Fund collateral'' for greater consistency with
the section header and discussion in the preceding sentence, which
refers to rehypothecation of ``margin collateral.''
    Finally, OCC proposes to make typographical and administrative
changes to the CRM Policy intended to correct spelling, capitalization,
punctuation and grammar, remove unnecessary verbiage, and conform the
CRM Policy's format to OCC's latest policy template.
2. Margin Policy
    OCC proposes the following changes to the Margin Policy identified
through its annual reviews of the policy.
    In the Purpose section of the Margin Policy, OCC proposes to delete
``assure performance'' of Clearing Members as a stated purpose for
collecting margin. The act of collecting margin recognizes that no
counterparty's performance can be fully assured. The proposed revisions
would merely clarify the discussion in the Margin Policy without any
impact on the substance or requirements of OCC's margin collection
practices or Clearing Member obligations.
    OCC proposes to insert an Applicability and Scope section, which,
similar to the change to the CRM Policy discussed above, would identify
the primary OCC business units that support OCC's approach to managing
margin and credit exposure presented by its Clearing Members, including
but not limited to P&M, Collateral Services, and QRM.
    In the Net/Gross Margining Accounts section, OCC proposes to revise
the discussion of net and gross margining to focus on OCC's calculation
of margin rather than OCC's approach to liquidating positions in the
event of a default. The current text provides that two approaches under
applicable regulations to liquidating a Clearing Member's positions
include the immediate liquidation of positions that are margined on a
net omnibus basis and the porting of customer positions that are
margined on a gross basis. OCC believes it would be more appropriate to
frame this discussion in the Margin Policy in terms of margin
calculation considerations rather than position liquidation
considerations, which are covered in other OCC policies and
procedures.\20\ Accordingly, OCC proposes to restate this section in
terms of two approaches under applicable regulations for calculating
margin, which include margining positions on a net omnibus basis and
margining positions on a gross individual customer basis. The proposed
revision would more accurately reflect the nature of the applicable
regulatory provision while more clearly stating OCC's approach to
margin calculation in a manner that is consistent with its current
operations and margin calculation processes. At the same time, OCC
proposes to state in the Margin Policy that it calculates margin on a
customer gross basis for select accounts, which facilitates the porting
of futures Customer accounts in accordance with OCC's Rules or By-Laws.
The gross margin calculation is consistent with OCC's current practice
for customer segregated futures positions in accordance with U.S.
Commodity Futures Trading Commission (``CFTC'') Regulation
39.13(g)(8)(i)(A),\21\ which applies to OCC by virtue of its
registration as a derivatives clearing organization (``DCO''). Lastly,
OCC proposes to delete

a statement from this section indicating that the methodology used to
liquidate a customer account directly influences the manner in which
OCC margins the account. Liquidation methodology is but one of numerous
factors (e.g., position risk, concentration of positions, correlations
and offsets, and regulatory standards) influencing the manner in which
an account is margined. Each of the above revisions would be consistent
with OCC's current operations and margin calculation processes.
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    \20\ OCC's Default Management Policy outlines the steps that OCC
may take in the event of a Clearing Member's suspension, including
the close-out of positions. See Exchange Act Release No. 82310 (Dec.
13, 2017), 82 FR 60265 (Dec. 19, 2017) (SR-OCC-2017-010).
    \21\ See 17 CFR 39.13(g)(8)(i)(A).
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    In the same section, OCC proposes to revise how it describes its
approach to liquidating and/or porting a suspended Clearing Member's
accounts. The Margin Policy currently provides that OCC's primary
approach with respect to the positions of a suspended Clearing Member
shall be immediate liquidation of net omnibus positions and porting of
futures customer positions margined on a gross basis. The Margin Policy
further specifies that accounts utilizing a net margining approach
shall be liquidated on a net omnibus basis either through market
transactions or an auction format. As above, OCC proposes to reframe
the discussion in the Margin Policy to focus on the calculation of
margin rather than considerations around liquidating positions, by
noting instead that the calculation of margin on a net basis is
consistent with OCC's primary approach for liquidating a Clearing
Member's positions. In light of this revised focus on margin
calculation rather than liquidation, OCC proposes to delete the
statement regarding how net margin accounts will be liquidated. The
proposed changes are intended to clarify the relationship between OCC's
margin calculation approach and its decisions to port or liquidate
positions in a default scenario, in accordance with applicable
regulations and OCC's existing Rules.\22\
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    \22\ See OCC Rule 1106(c) (providing that OCC shall close open
futures positions of a suspended Clearing Member in the most orderly
manner practicable).
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    The same section provides that gross margining of accounts ``shall
permit'' OCC to port individual customer accounts and associated margin
to a solvent futures commission merchant (``FCM''). This text could be
read to imply that gross margining ensures that OCC will be able to
port individual customer accounts and associated margin in all cases,
which cannot be guaranteed in advance. Accordingly, OCC proposes to
revise this statement to instead focus on the effect of gross margining
on OCC's decision-making by clarifying that gross margining permits OCC
to ``identify'' individual customer positions and margin deposits,
which facilitates porting along with associated margin deposits. As
provided in OCC Rule 1106 and implied by the proposed revision to this
statement, and to further ensure that OCC retains an appropriate and
necessary degree of flexibility to manage risk arising from a Clearing
Member default, OCC further proposes to state that utilizing gross
margining would not preclude OCC from liquidating those positions on a
net basis. Each of these proposed revisions would align the discussion
in the Margin Policy to be consistent with OCC's currently contemplated
approach to porting considerations as reflected in the Rules, and other
policies and procedures governing OCC's default management process, and
would not alter the substance or requirements of the Margin Policy as
they relate to OCC's core clearance, settlement, and risk management
activities.
    In the Segregated Futures Customer Gross Margining section, the
Margin Policy provides that OCC margins customer segregated futures
accounts on a gross margin basis to facilitate the porting of futures
customers in the event of an FCM default. As noted above, the
requirement to collect gross margin for customer futures accounts is
established at CFTC Regulation 39.13(g)(8)(i)(A),\23\ which applies to
OCC by virtue of its registration as a DCO. This is a requirement that
applies to OCC by operation of law and does not need to be restated in
the Margin Policy.\24\ Lastly, the statement could be interpreted to be
contradictory to a later statement in the same section that OCC will
require the larger of the gross or net margin requirement calculated
for the account. For these reasons, OCC proposes to delete the
statement in its entirety.
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    \23\ 17 CFR 39.13(g)(8)(i)(A).
    \24\ Because this margin calculation requirement is codified in
a regulation it would be potentially confusing to continue stating
that OCC margins customer futures accounts on a gross basis ``to
facilitate the porting of customers.'' While this may be the
intended outcome of the gross margin minimum requirement, it is more
accurate that OCC collects the required amount primarily to meet its
risk management obligations in accordance with applicable
regulations.
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    In the Stock Loan Positions section, OCC proposes to revise its
discussion of add-on charges for stock loan positions to enhance
clarity. The Margin Policy currently provides that OCC will include
add-on margin charges as needed based on pricing and corporate action
conventions. Because there are not different conventions to how
corporate actions are applied to stock loan contracts, OCC proposes to
instead provide that add-on margin charges will be included based on
pricing conventions and corporate action entitlements of the applicable
stock loan program. OCC would remove the phrase ``as needed'' from the
current text since the relevant add-on margin charges are driven by the
pricing conventions and cash entitlements of the program, making that
phrase redundant in the context. The proposed revisions would update
and clarify the description of OCC's approach to add-on charges in the
Margin Policy without impacting current OCC operations. In addition,
OCC would change an ``i.e.,'' to ``e.g.,'' in the same section because
the subsequent list of risk calculations is non-exhaustive.
    In the Cross-Margin section, OCC proposes to expressly state that
margin requirements for cross-margin accounts shall be calculated in
accordance with OCC's margin methodology, while taking into account any
provisions of the applicable cross-margin agreement. The revised text
would conform with what is reflected in OCC Rule 704(a), which provides
that margin in respect of cross-margin accounts shall be determined by
OCC in accordance with that rule and the relevant cross-margin
agreement. In a footnote to the same section, OCC notes that the
establishment, implementation, maintenance and review of cross-margin
agreements is governed by the rule-filed Third-Party Risk Management
Framework \25\ and a list of underlying procedures that support that
Framework. OCC proposes to streamline this footnote by instead cross-
referencing the ``Third-Party Risk Management Framework and underlying
procedures.'' Reference to each of the underlying procedures was not
intended to be a rule per se, and eliminating this information from the
Margin Policy would encourage OCC staff to use OCC's internal system of
record to identify the procedures that are related to the specific
purpose or function that they are performing instead of relying on a
list that may be outdated or underinclusive.
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    \25\ See Exchange Act Release No. 90797 (Dec. 23, 2020), 85 FR
86592, 86593 (Dec. 30, 2020) (SR-OCC-2020-014) (``The [Third-Party
Risk Management Framework] describes OCC's framework for managing
risk throughout the relationship lifecycle (i.e., at on-boarding,
monitoring and off-boarding) for Clearing Members, Financial
Institutions, and vendors.'').
---------------------------------------------------------------------------

    In the Collateral section, the Margin Policy states that margin
deposits are due on ``the morning'' following the trade date. OCC
proposes to amend reference to the generally applicable deadline, which
could vary in certain circumstances (e.g., with respect to trades that
clear on dates preceding a

weekend or a bank holiday or where OCC issues an intra-day margin
call). The reference would be updated to the ``morning of the business
day'' following the trade date, as provided by OCC Rule 601(a). The
reference would be further updated to provide that with respect to
intraday margin calls, margin deposits are due at such other time as
provided by OCC Rule 609 and the section of the CRM Policy that
addresses intra-day margin calls. The proposed revisions would update
and clarify the description of OCC's practices in the Margin Policy to
better reflect a wider range of circumstances than are currently
contemplated therein, and would not entail any changes to current OCC
operations or margin collection practices.
    The Collateral in Margins section provides that OCC shall promote
incentives to hedge by including certain forms of margin within the
STANS margin calculation, as specified in referenced rules approved by
the Commission pursuant to section 19(b) of the Exchange Act.\26\ OCC
proposes to delete extraneous information regarding the content of
OCC's rules, including that OCC's rules include scenarios that could
impact Clearing Member exposures as a result of the collateral
deposited. This information is implied by the beginning of the
sentence, which explains that OCC intends to achieve the desired result
by including margin collateral as specified in the referenced
documents, and need not be duplicated in the Margin Policy.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    The same section currently requires QRM to perform an analysis, in
accordance with referenced procedures, to confirm that risk
interactions between derivative and cash market positions are being
appropriately recognized. OCC proposes to update the reference to
conform to the current name of the referenced procedures. In addition,
to remove potential ambiguity regarding the scope of the required
analysis, OCC proposes to specify that the analyses performed by QRM in
accordance with the referenced procedures should confirm that the STANS
margin model is effectively modeling the risk interactions. This
addition would clarify that the Margin Policy requires QRM's analyses
to confirm the effectiveness of STANS' modeling of the risk
interactions, but does not establish a requirement that QRM separately
confirm the appropriate recognition of risk interactions between
derivative and cash markets outside of the STANS margin model. The
scope of QRM's obligation to confirm that risk interactions are being
appropriately recognized in STANS is reasonably and fairly implied in
the context of the paragraph, which discusses collateral that is
included in STANS margin calculations, but OCC proposes to add
specificity to enhance clarity regarding QRM's obligations.
    In the Risk Factors section, OCC proposes to change the description
of its evaluation of the appropriateness of risk factors considered
within its models to strike ``on an ongoing basis'' and replace it with
``on a regular basis.'' That section lists several types of periodic
reviews designed to achieve this aim, including reviews of Exchange
proposals to list new products pursuant to referenced procedures, FRM's
daily backtesting, monthly reporting of such backtesting results to the
Model Risk Working Group (``MRWG''),\27\ and QRM's review of OCC's
margin methodology in accordance with referenced procedures to
reasonably ensure that the margin methodology incorporates all
significant risk factors and supports the robustness of OCC's margin
resources, which QRM performs monthly or more frequently as required by
regulations applicable to OCC.\28\ In addition, as discussed elsewhere
in the Margin Policy, OCC's Model Risk Management business unit
performs an annual review of the overall performance of the STANS
margin methodology and its associated models. The periodicity of such
reviews is discussed elsewhere in the Margin Policy. This revised text
would be consistent with similar revisions noted above,\29\ as well as
the timeline for periodic reviews of risk model performance conducted
under applicable policies and procedures. The proposed rule change
would not entail a change to current OCC operations.
---------------------------------------------------------------------------

    \27\ The MRWG is a cross-functional group responsible for
assisting OCC's Management Committee in overseeing and governing
OCC's model-related risk issues and currently consists of
representatives from FRM, including QRM, and from Corporate Risk
Management, including Model Risk Management.
    \28\ See 17 CFR 240.17Ad-22(e)(6)(vi)(C) (requiring a clearing
agency to conduct sensitivity analysis of its margin model and a
review of its parameters and assumptions for backtesting more
frequently than monthly during periods of time when the products
cleared or markets served display high volatility or become less
liquid, or when the size or concentration of positions held by the
covered clearing agency's participants increases or decreases
significantly).
    \29\ See supra notes 14-15 and accompanying text.
---------------------------------------------------------------------------

    The same paragraph also provides that FRM shall continually
evaluate the effectiveness of specified risk models. OCC proposes to
delete the modifier ``continually'' as it could be read to create an
expectation that OCC conducts 24/7 evaluations of its models. The
revisions would only change the description of OCC's practices in the
Margin Policy to enhance consistency with regard to its current model
performance review process and would not impact OCC operations.
    In the same section, OCC proposes to delete text indicating that
QRM is responsible for reasonably ensuring that margin methodologies
incentivize Clearing Members to be aware of their own risks and
mitigate their exposures. One of QRM's primary responsibilities, as
discussed above, is to establish, implement, maintain and review margin
methodologies to reasonably ensure that they incorporate all
significant risk factors and support the robustness of OCC's margin
resources. The measure of any incentive effect from OCC's margin
methodology on Clearing Members' awareness of risk or mitigation of
exposures is inherently qualitative and falls outside of QRM's ordinary
remit. OCC further believes that well-designed margin methodologies
would naturally support the creation of incentives at each Clearing
Member to be aware of and mitigate their risks. Accordingly, OCC
proposes to remove QRM's responsibility to monitor indirect and
qualitative effects of the methodology at third-party Clearing Members
while retaining that team's primary responsibilities with respect to
quantitative aspects of margin model design, implementation, monitoring
and review processes.
    The Market Data and Pricing Considerations section provides that
P&M shall transmit pricing data to both OCC's primary and back-up data
centers, pursuant to a referenced procedure. OCC proposes to delete
this operational detail with respect to OCC's current data
infrastructure from the Margin Policy. Changes in OCC's data
infrastructure could render that statement inaccurate and the reference
to OCC's current primary and back-up data centers is not intended to be
a rule per se.\30\ In any event, the statement about transmission of
data is reasonably and fairly implied by the existing text of the
section, which provides that P&M shall review the quality and
completeness of market data ``prior to distribution [to] downstream
systems and external consumers.''
---------------------------------------------------------------------------

    \30\ See Exchange Act Release No. 96113 (Oct. 20, 2022), 87 FR
64824 (Oct. 26, 2022) (SR-OCC-2021-802) (SEC notice of no objection
to OCC's proposed adoption of cloud infrastructure for OCC's new
clearing, risk management, and data management applications).
---------------------------------------------------------------------------

    The same section also provides that OCC shall rely upon real-time
market data in order to continually evaluate the value of Clearing
Member portfolios.

OCC proposes to remove the ``real-time'' qualifier for enhanced
accuracy because other market data beyond real-time data is also
relevant to OCC's evaluation process. The proposed rule change would
clarify that OCC may use intraday data. As above, the statement that
OCC ``continually'' evaluates the value of portfolios could be read to
imply that OCC values portfolios on a 24/7 basis. OCC proposes to
revise this statement to say that it evaluates portfolios ``during
market hours,'' which OCC believes to be consistent with its regulatory
and risk management obligations. These revisions are for clarification
only and would not entail any changes to current OCC operations.
    The following paragraph in the same section provides that P&M shall
systemically process and manually validate referenced settlement values
in accordance with a referenced procedure. OCC proposes to delete
``systemically'' with regard to processing and ``manually'' with regard
to validations in order to provide OCC with an appropriate degree of
flexibility in determining how it shall process and validate the
referenced values. Operational details regarding the conduct of such
processes and validations are contemplated in the referenced procedure.
OCC believes it is unnecessary to duplicate those operational terms in
the Margin Policy as doing so creates the risk of inaccuracy in the
Margin Policy should the relevant processes be amended in the future in
accordance with applicable governance requirements. The proposed
revisions would remove from the Margin Policy constraints on the
mechanical processes OCC could use to process and validate referenced
settlement values, but would not significantly impact OCC's core
clearance, settlement or risk management activities.
    In the Recalibration section, OCC proposes to update the discussion
of the recalibration process for STANS econometric models to reflect
its automation. The revised text would provide that recalibrations are
to be performed systemically as reflected in the current STANS
Methodology Description.\31\ P&M would retain responsibility for
monitoring outputs of the process and escalating issues and the stated
timeline for the processing would not need to change. The proposed
revisions would update the description of OCC's mechanical process for
recalibrations to reflect the automation of certain components, but
would not otherwise impact its overall method for recalibrations or
OCC's core clearance, settlement, and risk management activities.
---------------------------------------------------------------------------

    \31\ See Exchange Act Release No. 91079 (Feb. 8, 2021), 86 FR
9410 (Feb. 12, 2021) (SR-OCC-2020-016) (approving the establishment
of the STANS Methodology Description).
---------------------------------------------------------------------------

    In the same section, OCC proposes to add a footnote to explain that
synthetic futures represent an exception to the 10-year lookback period
for univariate parameters. This revision does not impact OCC's
operations as it merely conforms the discussion in the Margin Policy to
be consistent with what is reflected in the STANS Methodology
Description.\32\
---------------------------------------------------------------------------

    \32\ See id.
---------------------------------------------------------------------------

    The Stress Test Components section of the Margin Policy currently
provides that FRM is required to continually evaluate the portion of
stress losses that are not collected as margin against the Clearing
Member's net capital, in accordance with referenced procedures, and
require the Clearing Member to deposit additional margin, in accordance
with Rules 601 and 609, in an amount equal to the exposure in excess of
its net capital where FRM determines that the uncollateralized exposure
exceeds the Clearing Member's ability to absorb the loss based on its
current capitalization. For clarity, OCC proposes to add that OCC's
policy of calling for additional margin in such circumstances does not
preclude OCC from taking other protective measures under OCC's recently
amended Rule 307 if FRM determines a Clearing Member's uncollateralized
exposure presents elevated risk to OCC, including restrictions on
distributions under Rule 307A, restrictions on certain transactions,
positions and activities under Rule 307B, and additional operational,
personnel, financial resource and risk management requirements under
Rule 307C.\33\
---------------------------------------------------------------------------

    \33\ See Exchange Act Release No. 97439 (May 5, 2023), 88 FR
30373, 30376 (May 11, 2023) (SR-OCC-2023-002) (approving amendments
to OCC's membership standards).
---------------------------------------------------------------------------

    The SPAN section states that the System for Portfolio Analysis of
Risk (``SPAN'') \34\ is used to assess risk for a wide variety of
financial instruments, including futures, options, physicals, equities
or any combination thereof. OCC proposes to delete such informational
background on SPAN's capabilities as it is irrelevant to the discussion
of how OCC uses SPAN to calculate margin requirements, which is the
focus of this section, and OCC does not use SPAN to assess risk for all
the instruments listed in that sentence. OCC also proposes to relocate
a statement regarding OCC's use of SPAN to compute gross margin for all
segregated futures customers' accounts within the paragraph in order to
enhance clarity.
---------------------------------------------------------------------------

    \34\ SPAN is a methodology developed by the Chicago Mercantile
Exchange and used by many clearinghouses and exchanges around the
world to calculate margin requirements on futures and options on
futures.
---------------------------------------------------------------------------

    OCC also proposes to revise the Scan Ranges section of the Margin
Policy, which details certain functions related to the SPAN
methodology. While this section accurately describes OCC's use of scan
ranges to establish margin covered under SPAN, OCC also performs
recalibration of spread rates and other parameters under the SPAN
methodology. For completeness, OCC proposes to specify parameters in
addition to scan ranges that are used to calculate SPAN margin
requirements. These changes would align the text of the Margin Policy
with existing practices. OCC also proposes to delete the Scan Ranges
section header in light of the expanded scope of parameters addressed
thereunder. In the same section, OCC proposes to extend P&M's
recalibration responsibilities beyond scan ranges to include the
additional parameters. These changes are reasonably and fairly implied
by the SPAN section of the Margin Policy, which requires OCC to compute
gross margin for all segregated futures customers' accounts using SPAN.
    In the same section, OCC proposes to revise its description of
maintenance and initial margin calculations. These proposed changes are
descriptive only and would not substantively alter OCC's margin
calculation process or the ratio between the calculated amounts. This
section currently provides that minimum scan ranges used to satisfy the
initial speculator margin and spread rates shall exceed 110% of the 99%
VaR of the daily historical observations. To enhance clarity around its
initial and maintenance margin calculations and the ratio between the
two values and update terminology with the latest conventions, OCC
proposes to provide that the scan ranges established for the
calculation of maintenance margin shall exceed the 99% VaR of the daily
historical observations, and further provide that the scan ranges
established for heightened risk profile margin calculations shall be at
least 110% of that maintenance margin amount. These revisions only
change the description of the two rates and the ratio between them to
enhance clarity and are consistent with OCC's current calculation
practices for maintenance

and initial margin and the latest terminology used by the CFTC.\35\
---------------------------------------------------------------------------

    \35\ See Final Rule, Derivatives Clearing Organization General
Provisions and Core Principles (Dec. 20, 2019), 85 FR 4800 (Jan. 27,
2020) (amending CFTC Rule 39.13(g)(8)(ii)).
---------------------------------------------------------------------------

    In the same section, OCC proposes to add that inter-month spread
charges, in addition to SPAN scan ranges, incorporate a long-run
historical estimate or look to periods of heightened volatility to
guard against pro-cyclicality. The added reference to ``inter-month
spread charges'' is consistent with OCC's current process for
calculating margin requirements under SPAN. OCC also proposes to add
that the standard historical data look-back period used to establish
scan ranges shall be ``at least'' 500 business days, except as provided
in a referenced procedure. The addition of ``at least'' would be
clarifying and would not impact OCC's current approach to the SPAN
margin calculations. OCC also proposes to remove ``volatility'' from
the phrase ``long-run historical volatility estimate,'' which is only a
textual change and would not impact OCC's current approach to SPAN
margin calculations.
    In the same section, OCC also proposes to remove the parenthetical
example of unique risk characteristics attributable to particular
products. The single example provided is not exhaustive and the
referenced procedure includes additional detail regarding risk
characteristics. Duplicating this information in the Margin Policy is
unnecessary and creates the risk of inaccuracy in the Margin Policy
should the relevant processes be amended in the future in accordance
with applicable governance requirements.
    In the Intraday Margin Calls section, OCC proposes to change
references to a ``window'' for issuing margin calls to a ``standard
time for processing'', or similar term. This change would enhance the
clarity of the discussion in the Margin Policy by adopting uniform,
clear language to refer to margin calls issued during the standard
processing timeline, without impacting OCC operations associated with
issuing margin calls.
    In the Extended Trading Hours Margin Calls section, OCC proposes to
insert a reference to a ``standard time for processing'' an extended
trading hours margin call and provide that OCC will establish such
standard time in the referenced procedure. The use of the ``standard
time for processing'' term is intended to align with the adoption of
similar language in the immediately preceding Intraday Margin Calls
section, as discussed above. The establishment of the deadline in a
referenced procedure is consistent with and reasonably and fairly
implied by OCC Rule 601(a), which authorizes OCC to specify the time by
which Clearing Members are required to deposit margin with the
Corporation. The proposed revision would not impact the operations of
OCC as it relates to OCC's core clearance, settlement, and risk
management activities. In the same section OCC proposes to remove a
reference to the 9:00 a.m. CT deadline for OCC to issue an extended
trading hours margin call. Rule 601(a) authorizes OCC to specify the
time by which every Clearing Member shall be obligated to deposit
margin assets. OCC believes that reflecting such operational terms in
the Margin Policy creates the risk of inaccuracy in OCC's Margin
Policy, which is filed as a rule with the Commission, should the
specified deadline be amended or extended in accordance with applicable
governance requirements. Accordingly, OCC has determined to remove the
specific reference within OCC's internal Margin Policy and instead
refer to applicable procedures to establish the relevant timeline by
which the margin call must be issued. OCC's authority to amend or
extend the deadline to deposit margin is fairly and reasonably implied
by the text of Rule 601(a), and the proposed revisions would better
enable OCC to give effect to this authority.
    The Holiday Margin Calls section requires OCC to issue holiday
margin calls in specified amounts and circumstances. Currently, that
section provides that when an account is subject to both a holiday and
position risk margin call on the same day, OCC applies the larger of
the two. Subsequent to the addition of this provision to the Margin
Policy, OCC amended its rules to reflect Clearing Fund margin calls--
that is, margin calls for a Clearing Member Group when an estimate of
its Clearing Fund Draw \36\ exceeds 75% of the amount of the current
Clearing Fund.\37\ Pursuant to OCC's authority under OCC Rules 601(c)
\38\ and 609,\39\ it is OCC's practice to issue a Clearing Fund margin
call in situations where a Clearing Member is subject to these other
types of margin calls and the Clearing Fund margin call is the largest
of the three. OCC proposes to update the Margin Policy to reflect this
practice. Specifying Clearing Fund calls as an additional category of
margin call would align the discussion in the Margin Policy with the
types of calls OCC issues today and would not entail a change to
current OCC operations or margin collection processes.
---------------------------------------------------------------------------

    \36\ The term ``Clearing Fund Draw'' refers to an estimated
stress loss exposure in excess of margin requirements.
    \37\ See Exchange Act Release No. 83735 (July 27, 2018), 83 FR
37855 (Aug. 2, 2018) (SR-OCC-2018-008) (amending Rule 609 related to
intra-day margin).
    \38\ See OCC Rule 601(c) (``Notwithstanding any other provision
of this Rule 601, [OCC] may fix the margin requirement for any
account or any class of cleared contracts at such amount as it deems
necessary or appropriate under the circumstances to protect the
respective interests of Clearing Members, [OCC], and the public.'')
    \39\ See OCC Rule 609 (``The Corporation may require the deposit
of additional margin (`intra-day margin') by any Clearing Member in
any account at any time during any business day to . . . protect
[OCC], other Clearing Members or the general public.'').
---------------------------------------------------------------------------

    The Review of Margin Methodology section outlines Model Risk
Management's responsibilities for evaluating the overall performance of
STANS at least annually, in accordance with referenced policies and
procedures, and for reporting its findings to the Risk Committee, which
is tasked with reviewing the adequacy of OCC's margin and clearing fund
methodology, including the STANS margin methodology, at least once
every twelve months. OCC proposes to delete a duplicative reference in
the Margin Policy regarding Model Risk Management's obligation to
produce an annual report of the STANS margin methodology, which is
fairly and reasonably implied in the preceding sentence as well as the
Risk Committee Charter.\40\ OCC also proposes to delete references to
Model Risk Management's obligations to present its validation findings
and annual report of the STANS margin methodology to the Risk
Committee. Model Risk Management is the primary group responsible for
ensuring the completion of the annual validation, which it conducts in
accordance with applicable procedures, and reporting of its findings.
Because the requirement to validate STANS is established in OCC's rules
and applicable procedures establish how Model Risk Management plans and
conducts its validation and reports any findings to the Risk Committee,
OCC believes it is unnecessary to duplicate such details in the Margin
Policy as doing so creates the risk of inaccuracy

in the Margin Policy should the relevant requirements or processes be
amended in the future in accordance with applicable governance
requirements.
---------------------------------------------------------------------------

    \40\ See OCC Risk Committee Charter, available at https://www.theocc.com/company-information/documents-and-archives/board-charters (last revised May 26, 2022).
---------------------------------------------------------------------------

    Like the changes to the CRM Policy discussed above, OCC proposes to
make clarifying, conforming and other non-substantive changes to the
Margin Policy. The proposed changes discussed below would not
substantively alter the meaning of the revised provisions or the
substance or requirements of the Margin Policy as they relate to OCC's
core clearance, settlement, and risk management activities. The
following conforming revisions are intended to align the text of the
Margin Policy with existing provisions of the Rulebook, By-Laws or
other documents, as applicable, and to update the titles of documents
referenced in the Margin Policy:
     The STANS section describes STANS as modeling the
volatility of individual products and the correlation amongst products.
OCC proposes to replace references to ``products'' in this sentence
with references to ``risk factors.'' These proposed revisions would
align references in the Margin Policy and the STANS Methodology
Description without impacting OCC's operations or risk management
activities.
     The Recalibration section provides that recalibrations
will incorporate a long-run historical volatility estimate, which
serves as a floor during periods of low market volatility to reduce
pro-cyclicality in OCC's margin estimates. OCC proposes to replace
``reduce'' with ``control,'' to more affirmatively state OCC's intent
in adopting volatility floors.
     The Margin Policy currently contains references to certain
related policies, procedures and other documents that OCC maintains in
support of the Margin Policy. These documents are reviewed and updated
on a periodic basis, which at times may result in the consolidation of
certain related policies, procedures and documents or changes in their
names. OCC proposes to revise the Margin Policy to update internal
policy and procedure names to reflect any changes resulting from these
periodic reviews to ensure the accuracy, consistency, and clarity of
the Margin Policy. The proposed changes are administrative in nature
and are not intended to change the substance of the Margin Policy.
    The following clarifying revisions are intended to restate existing
provisions for improved clarity and accuracy:
     In the Segregated Futures Customer Gross Margining
section, OCC proposes to insert ``for these accounts'' to clarify that
OCC will effect gross margining for customer segregated futures
accounts. The revision is only intended to clarify the applicability of
the statement.
     In the Collateral in Margins section, OCC proposes to
revise ``certain forms of margin'' within the STANS margin calculation
to ``certain forms of collateral'' instead. This change is to enhance
clarity in the description of OCC's operations but does not change the
meaning of the provision or OCC's operations. The same section provides
that OCC's Management Committee shall be ultimately responsible for
determining which types of collateral are included in STANS margin
calculations. OCC proposes to remove ``ultimately'' to enhance clarity,
as the Management Committee's authority to make such determinations
derives from the Board, which implies that the Board has ``ultimate''
responsibility for such decisions. OCC also proposes to change a
reference to ``exchange traded fund[s]'' in a parenthetical providing
examples of deposits of collateral eligible for inclusion in STANS to
``exchange traded product[s]'' because collateral-in-margin treatment
also extends to exchange traded notes.
     In the Market Data and Pricing Considerations section, the
Margin Policy establishes that P&M shall reasonably ensure that
measures are taken to review the quality and completeness of market
data prior to its distribution. OCC proposes to remove the qualifying
language and establish that P&M is responsible for reviewing the
quality and completeness of market data, as opposed to reasonably
ensuring that measures are taken to review the data, prior to its
distribution. This deletion would clarify P&M's obligation for
reviewing market data quality and completeness before it is distributed
to downstream systems and external consumers. The proposed revision
would add clarity to the Margin Policy and better ensure the integrity
of market data at the critical stage prior to its downstream or
external consumption.
     In the Recalibration section, the Margin Policy provides
that where P&M has ``reasonable grounds for believing (e.g., with a
newly created passive ETF tracking a longstanding index) that a
suitable proxy exists,'' such proxy may be used in place of the default
distribution pursuant to the referenced procedure. OCC proposes to
restate this section for additional clarity. The revised text would
state that where P&M has ``reasonable grounds for assigning a suitable
proxy (e.g., a newly created passive ETF tracking a longstanding
index),'' such proxy may be used in place of the default distribution
pursuant to the referenced procedure. These revisions would more
clearly state P&M's obligations as well as the circumstances in which
P&M may exercise its discretion. In addition, OCC would amend a
reference to the Model Risk Management business unit (formerly known as
the Model Validation Group or ``MVG'') to reflect the current name of
that department, consistent with changes that OCC made to other such
references in a prior rule filing.\41\
---------------------------------------------------------------------------

    \41\ See Exchange Act Release No. 95842 (Sept. 20, 2022), 87 FR
58409, 58419 (Sept. 26, 2022) (SR-OCC-2022-010) (proposing
conforming changes to OCC's risk management policies regarding the
name of OCC's Model Risk Management business unit).
---------------------------------------------------------------------------

     In the Add-on Charges section, the Margin Policy states
that in some instances, exposures that may be modeled outside of STANS
through the use of add-on charges may not require sophisticated models
to be derived. OCC proposes to remove ``in some instances'' as it is
implied by the beginning of the sentence, which states that these
exposures ``may'' not require sophisticated models to be derived, as
well as language in the next sentence referring to ``other instances.''
In addition, the Margin Policy states that consistent with the
referenced procedure, MRWG has the discretion to recommend approval of
add-on margin charges to the Management Committee. OCC proposes to
delete the reference to MRWG's discretion as it is implied by the
language that MRWG ``may'' recommend approval.
     In the Margin Monitoring section, OCC proposes to clarify
that FRM conducts the backtests that are designed by QRM. This division
of labor is implied in the preceding statements of that section and is
appropriately reflected in the relevant procedures.
    Finally, OCC proposes to make typographical and administrative
changes to the Margin Policy intended to correct spelling, punctuation
and grammar and remove unnecessary verbiage in the Margin Policy.
(2) Statutory Basis
    OCC believes the proposed rule change is consistent with Section
17A of the Act \42\ and the rules thereunder applicable to OCC by
improving the accuracy, clarity, and consistency of the OCC Policies so
that they remain reasonably designed to achieve the standards and
requirements thereunder. Section 17A(b)(3)(F) of the Act \43\ requires,
among other things, that the rules of a clearing agency be designed to
promote the prompt and accurate clearance and settlement of securities

transactions and, to the extent applicable, derivative agreements,
contracts, and transactions and to assure the safeguarding of
securities and funds which are in the custody or control of the
clearing or agency or for which it is responsible. In turn, Exchange
Act Rule 17Ad-22(e)(1) through (3) require OCC to maintain written
policies and procedures reasonably designed to, among other things:
---------------------------------------------------------------------------

    \42\ 15 U.S.C. 78q-1.
    \43\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

     ensure a well-founded, clear, transparent, and enforceable
legal basis for each aspect of OCC's activities; \44\
---------------------------------------------------------------------------

    \44\ 17 CFR 240.17Ad-22(e)(1).
---------------------------------------------------------------------------

     provide for governance arrangements that are clear and
transparent and specify clear and direct lines of responsibility; \45\
and
---------------------------------------------------------------------------

    \45\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------

     maintain a risk management framework that includes
policies, procedures and systems that are designed to manage risks and
which are subject to periodic review and annual approval by the
Board.\46\
---------------------------------------------------------------------------

    \46\ 17 CFR 240.17Ad-22(e)(3).
---------------------------------------------------------------------------

    OCC believes that the proposed changes, which are intended to
better reflect current practices, remove extraneous information, and
make other non-substantive, clarifying and administrative changes to
the text of those policies, are consistent with the Exchange Act and
these requirements for the following reasons.
1. Update Descriptions To Better Align With Current Practices
    The proposed rule changes are designed to align the text of the OCC
Policies with current practices and to otherwise enhance accuracy,
clarity and consistency in the documents. The OCC Policies, including
descriptions of practices and processes therein, are subject to
periodic review. The proposed rule change would apply recommendations
made as part of OCC's annual review of the OCC Policies and which are
intended to ensure the OCC Policies maintain accurate descriptions of
OCC practices and operations. These changes are primarily clarifying in
nature and would not significantly alter the substance or requirements
of the OCC Policies as they relate to core clearing, settlement or risk
management activities. OCC believes improving the clarity of the
descriptions in the OCC Policies, which are central to OCC's clearance
and settlement activities, will, in turn, promote the accurate
clearance and settlement of securities transactions and the
safeguarding of securities and funds, in accordance with Section
17A(b)(3)(F) of the Exchange Act.\47\
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The proposed rule change would also update descriptions of
processes and governance requirements in the OCC Policies to align with
current practices and requirements. OCC believes these proposed
revisions would thus support clarity in OCC's governance arrangements
and better ensure that OCC's lines of responsibility are clear and
direct, in accordance with Exchange Act Rule 17Ad-22(e)(2).\48\
---------------------------------------------------------------------------

    \48\ 17 CFR 240.17Ad-22(e)(2).
---------------------------------------------------------------------------

    The proposed rule change would apply updates to the OCC Policies
that were recommended pursuant to annual reviews by the Board. The
proposed revisions would not significantly impact the practices
relating to OCC's core clearance, settlement, and risk management
activities. Accordingly, OCC believes the proposed rule changes would
support its obligation to maintain a sound risk management framework
that is subject to periodic review and annual approval by the Board in
accordance with 17Ad-22(e)(3).\49\
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    \49\ 17 CFR 240.17Ad-22(e)(3).
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2. Delete Extraneous Information
    The proposed rule change would remove extraneous information,
including certain provisions that are substantively duplicative of
provisions that are reasonably and fairly implied by other OCC rules or
that do not independently meet the criteria of rules, stated policies,
practices or interpretations. Certain provisions to be removed consist
of background information that does not establish an OCC requirement or
impact its practices. These proposed changes would enhance clarity by
deleting provisions from the OCC Policies that do not create OCC
obligations or substantively impact its practices or operations. Other
provisions to be removed consist of text that duplicates provisions
found in OCC's By-Laws and Rules or other documentation filed with the
Commission. OCC believes that it can avoid potential future confusion
by removing from the OCC Policies information that is appropriately
maintained in other documentation. Removing this information from the
OCC Policies will eliminate inconsistencies that could arise from
maintaining it in multiple places with different approval processes.
Accordingly, OCC believes that removal of these extraneous provisions
would facilitate the effective administration of OCC's policies and
procedures, which support the prompt and accurate clearance and
settlement of securities transactions and the safeguarding of
securities and funds, and thus is consistent with the requirements of
Section 17A(b)(3)(F) of the Exchange Act.\50\ OCC also believes that
removing these duplicative provisions from the OCC Policies would
enhance clarity around OCC's governance arrangements, better ensure
clear and direct lines of responsibility and prioritize efficient
governance processes for the relevant provisions, in accordance with
the requirements of Exchange Act Rule 17Ad-22(e)(2).\51\
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    \50\ 15 U.S.C. 78q-1(b)(3)(F).
    \51\ 17 CFR 240.17Ad-22(e)(2).
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3. Non-Substantive, Clarifying and Administrative Changes
    OCC proposes to make other non-substantive, clarifying and
administrative changes to the OCC Policies to enhance their accuracy,
clarity and consistency with other OCC rules. By correcting
typographical errors, updating references to documentation, and
conforming references with other documentation and descriptions, the
proposed revisions would help facilitate the administration of existing
rules that are intended to promote the prompt and accurate clearance
and settlement of securities and derivatives transactions, in
accordance with Section 17A(b)(3)(F) of the Exchange Act.\52\ In
addition, correcting errors, making clarifications and conforming
references and descriptions within the OCC Policies would improve their
clarity, in accordance with the requirements of Exchange Act Rule 17Ad-
22(e)(1).\53\
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    \52\ 15 U.S.C. 78q-1(b)(3)(F).
    \53\ 17 CFR 240.17Ad-22(e)(1).
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(B) Clearing Agency's Statement on Burden on Competition

    Section 17A(b)(3)(I) of the Act \54\ 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. The proposed rule change is intended to update
internal policies to better reflect OCC's current practices, remove
duplicative provisions that could result in overlap or inconsistencies
with other OCC documentation and to make other administrative updates
that would have no impact on Clearing Members or other market
participants. None of the proposed updates to the OCC Policies would
affect Clearing Members' access to OCC's services or impose any direct
burdens on Clearing Members.

Accordingly, 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.
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    \54\ 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 were not and are not intended to be solicited with
respect to the proposed rule change, and none have been received.

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

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \55\ and paragraph (f) of Rule 19b-4 \56\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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    \55\ 15 U.S.C. 78s(b)(3)(A).
    \56\ 17 CFR 240.19b-4(f).
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    The proposal shall not take effect until all regulatory actions
required with respect to the proposal are completed.\57\
---------------------------------------------------------------------------

    \57\ 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-2023-008 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-2023-008. 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 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-2023-008 and
should be submitted on or before January 10, 2024.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\58\
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    \58\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27912 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: May 14, 2010 (Volume 75, Number 93)]
[Notices]
[Page 27334-27335]
[DOCID:fr14my10-67]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings 1

May 7, 2010.
    Take notice that the Commission received the following electric
corporate filings:

    Docket Numbers: EC10-65-000.
    Applicants: Consolidated Edison Company of New York,
    Description: Section 203 Application of Consolidated Edison Company
of New York, Inc.
    Filed Date: 05/07/2010.
    Accession Number: 20100507-5075.
    Comment Date: 5 p.m. Eastern Time on Friday, May 28, 2010.

    Take notice that the Commission received the following electric
rate filings:

    Docket Numbers: ER10-1203-000.
    Applicants: PJM Interconnection, LLC.
    Description: PJM Interconnection, LLC submits revised tariff sheets
of the PJM Open Access Transmission Tariff.
    Filed Date: 05/07/2010.
    Accession Number: 20100507-0212.
    Comment Date: 5 p.m. Eastern Time on Friday, May 28, 2010.

    Docket Numbers: ER10-1204-000.
    Applicants: PJM Interconnection, LLC.
    Description: PJM Interconnection, LLC submits the executed
interconnection service agreement.
    Filed Date: 05/07/2010.
    Accession Number: 20100507-0213.
    Comment Date: 5 p.m. Eastern Time on Friday, May 28, 2010.

    Docket Numbers: ER10-1205-000.
    Applicants: FirstEnergy Generation Mansfield Unit 1.
    Description: FirstEnergy Generation Mansfield Unit 1 Corp. submits
tariff

filing per 35.12: Mansfield 1 BBR Power Sales Tariff to be effective 5/
6/2010.
    Filed Date: 05/07/2010.
    Accession Number: 20100507-5056.
    Comment Date: 5 p.m. Eastern Time on Friday, May 28, 2010.

    Docket Numbers: ER10-1206-000.
    Applicants: Koch Supply & Trading, LP.
    Description: Koch Supply & Trading, LP submits tariff filing per
35.12: Baseline Tariff Filing to be effective 5/7/2010.
    Filed Date: 05/07/2010.
    Accession Number: 20100507-5089.
    Comment Date: 5 p.m. Eastern Time on Friday, May 28, 2010.

    Any person desiring to intervene or to protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's Rules of Practice and Procedure (18 CFR 385.211 and
385.214) on or before 5 p.m. Eastern time on the specified comment
date. It is not necessary to separately intervene again in a subdocket
related to a compliance filing if you have previously intervened in the
same docket. Protests will be considered by the Commission in
determining the appropriate action to be taken, but will not serve to
make protestants parties to the proceeding. Anyone filing a motion to
intervene or protest must serve a copy of that document on the
Applicant. In reference to filings initiating a new proceeding,
interventions or protests submitted on or before the comment deadline
need not be served on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper, using the FERC Online links at http://
www.ferc.gov. To facilitate electronic service, persons with Internet
access who will eFile a document and/or be listed as a contact for an
intervenor must create and validate an eRegistration account using the
eRegistration link. Select the eFiling link to log on and submit the
intervention or protests.
    Persons unable to file electronically should submit an original and
14 copies of the intervention or protest to the Federal Energy
Regulatory Commission, 888 First St., NE., Washington, DC 20426.
    The filings in the above proceedings are accessible in the
Commission's eLibrary system by clicking on the appropriate link in the
above list. They are also available for review in the Commission's
Public Reference Room in Washington, DC. There is an eSubscription link
on the Web site that enables subscribers to receive e-mail notification
when a document is added to a subscribed dockets(s). For assistance
with any FERC Online service, please e-mail<EMAIL_ADDRESS>or call<PHONE_NUMBER> (toll free). For TTY, call<PHONE_NUMBER>.

Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2010-11536 Filed 5-13-10; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 87, Number 93 (Friday, May 13, 2022)]
[Notices]
[Page 29309]
[FR Doc No: 2022-10354]

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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OAR-2020-0667; FRL-9854-01-OMS]

Information Collection Request Submitted to OMB for Review and
Approval; Comment Request; NSPS for Petroleum Refineries for Which
Construction, Reconstruction, or Modification Commenced After May 14,
2007 (Renewal)

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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SUMMARY: The Environmental Protection Agency (EPA) has submitted an
information collection request (ICR), NSPS for Petroleum Refineries for
which Construction, Reconstruction, or Modification Commenced after May
14, 2007 (EPA ICR Number 2263.07, OMB Control Number 2060-0602), to the
Office of Management and Budget (OMB) for review and approval in
accordance with the Paperwork Reduction Act. This is a proposed
extension of the ICR, which is currently approved through May 31, 2022.
Public comments were previously requested, via the Federal Register, on
February 8, 2021, during a 60-day comment period. This notice allows
for an additional 30 days for public comments. A fuller description of
the ICR is given below, including its estimated burden and cost to the
public. An agency may neither conduct nor sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid OMB control number.

DATES: Additional comments may be submitted on or before June 13, 2022.

ADDRESSES: Submit your comments, referencing Docket ID Number EPA-HQ-
OAR-2020-0667, online using https://www.regulations.gov/ (our preferred
method), by email to [email protected], or by mail to: EPA Docket
Center, Environmental Protection Agency, Mail Code 28221T, 1200
Pennsylvania Ave. NW, Washington, DC 20460. EPA's policy is that all
comments received will be included in the public docket without change
including any personal information provided, unless the comment
includes profanity, threats, information claimed to be Confidential
Business Information (CBI), or other information whose disclosure is
restricted by statute.
    Submit written comments and recommendations to OMB for the proposed
information collection within 30 days of publication of this notice to
www.reginfo.gov/public/do/PRAMain. Find this particular information
collection by selecting ``Currently under 30-day Review--Open for
Public Comments'' or by using the search function.

FOR FURTHER INFORMATION CONTACT: Muntasir Ali, Sector Policies and
Program Division (D243-05), Office of Air Quality Planning and
Standards, U.S. Environmental Protection Agency, Research Triangle
Park, North Carolina, 27711; telephone number:<PHONE_NUMBER>; email
address: [email protected].

SUPPLEMENTARY INFORMATION: Supporting documents, which explain in
detail the information that the EPA will be collecting, are available
in the public docket for this ICR. The docket can be viewed online at
https://www.regulations.gov, or in person at the EPA Docket Center, WJC
West Building, Room 3334, 1301 Constitution Ave. NW, Washington, DC.
The telephone number for the Docket Center is<PHONE_NUMBER>. For
additional information about EPA's public docket, visit: http://www.epa.gov/dockets.
    Abstract: The New Source Performance Standards (NSPS) for Petroleum
Refineries for which Construction, Reconstruction, or Modification
Commenced after May 14, 2007 (40 CFR part 60 subpart Ja) apply to apply
to fluid catalytic cracking units (FCCU), fluid coking units (FCU),
delayed coking units, fuel gas combustion devices (FGCD), process
heaters, flares and sulfur recovery plants located at new and existing
petroleum refineries that are constructed, reconstructed, or modified
after May 14, 2007. This information is being collected to assure
compliance with 40 CFR part 60, subpart Ja.
    In general, all NSPS standards require initial notifications,
performance tests, and periodic reports by the owners/operators of the
affected facilities. They are also required to maintain records of the
occurrence and duration of any startup, shutdown, or malfunction in the
operation of an affected facility, or any period during which the
monitoring system is inoperative. These notifications, reports, and
records are essential in determining compliance, and are required of
all affected facilities subject to NSPS.
    Form Numbers: None.
    Respondents/affected entities: Petroleum refineries.
    Respondent's obligation to respond: Mandatory (40 CFR part 60,
subpart Ja).
    Estimated number of respondents: 129 (total).
    Frequency of response: Initially, semiannually.
    Total estimated burden: 431,000 hours (per year). Burden is defined
at 5 CFR 1320.3(b).
    Total estimated cost: $171,000,000 (per year), which includes
$120,000,000 in annualized capital/startup and/or operation &
maintenance costs.
    Changes in the Estimates: There is an increase in burden from the
most-recently approved ICR as currently identified in the OMB Inventory
of Approved Burdens. This increase is due primarily to an increase in
the number of facilities at existing petroleum refineries subject to
Subpart Ja. The petroleum refining industry has been decreasing in
size, but as facilities at refineries are either constructed, modified,
or reconstructed, they become newly subject to Subpart Ja. This ICR
adjusts the number of facilities at refineries to reflect those sources
constructed, modified, or reconstructed over the last three years.
Since these newly affected facilities are required to install
monitoring equipment to comply with the regulations, this has resulted
in increases in capital/startup costs, performance testing costs, and
operating and maintenance (O&M) costs, as well as for labor burden
associated with periodic testing.

Courtney Kerwin,
Director, Regulatory Support Division.
[FR Doc. 2022-10354 Filed 5-12-22; 8:45 am]
BILLING CODE 6560-50-P