[Federal Register Volume 85, Number 197 (Friday, October 9, 2020)]
[Notices]
[Pages 64189-64194]
[FR Doc No: 2020-22378]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90093; File No. SR-CBOE-2020-088]

Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Update Its Fees Schedule in Connection With the Exchange's Plans To
List and Trade Options on the S&P 500 ESG Index (``SPESG'')

October 5, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on September 23, 2020, Cboe Exchange, Inc. (the ``Exchange'' or
``Cboe Options'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Cboe Exchange, Inc. (the ``Exchange'' or ``Cboe Options'') proposes
to update its Fees Schedule in connection with the Exchange's plans to
list and trade options on the S&P 500 ESG Index (``SPESG''). The text
of the proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule in connection with
its plans to list and trade SPESG, effective September 21, 2020.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes on
September 18, 2020 (SR-CBOE-2020-087). On September 23, 2020, the
Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------

    By way of background, the S&P 500 ESG Index is a broad-based,
market-capitalization-weighted index that is designed to measure the
performance of securities meeting sustainability criteria, while
maintaining similar overall industry group weights as the S&P 500. Each
constituent of a S&P 500 ESG Index is a constituent of the S&P 500
Index. S&P Dow Jones Indices' (``S&P DJI'') assigns constituents to a
S&P 500 ESG Index based on S&P DJI ESG Scores and other environmental,
social and governance (``ESG'') data to select companies, targeting 75%
of the market capitalization of each global industry classification
standard (``GICS'') industry group within the S&P 500. Because of the
relation between the S&P 500 ESG Index and the S&P 500, which will
likely result in market participants' investment and hedging strategies
consisting of options over both, the Exchange will allow the same
monthly expirations, settlement and exercise style, Market-Maker
appointment weights, as the other options on the S&P 500 (``SPX'').\4\
The Exchange now proposes to amend its Fees Schedule to accommodate the
planned listing and trading of SPESG. The proposed changes amend the
Fees Schedule so that the majority of the existing transactions fees
and programs currently applicable to trading in SPX will also apply to
trading in SPESG.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Release No. 89749 (September 2,
2020), 85 FR 55723 (September 9, 2020) (SR-CBOE-2020-080), which
amends certain Exchange Rules in connection with the Exchange's
plans to list and trade S&P 500 ESG Index options.
---------------------------------------------------------------------------

    The proposed rule change adds SPESG to the list of products in
Underlying Symbol List A in footnote 34 of the Fees Schedule, which
currently includes SPX (and SPX Weeklys (``SPXW'')). Underlying Symbol
List A represents a specific set of proprietary products \5\ that are
collectively included or excluded from a variety of programs,
qualification calculations and transaction fees as a

result of the considerable resources the Exchange expends developing
and maintaining its proprietary, exclusively listed products. Like SPX
and the other products currently represented by ``Underlying Symbol
List A,'' SPESG options are not listed on any other exchange. As such,
the Exchange proposes to add SPESG to the products that make up
Underlying Symbol List A. Therefore, by their inclusion in Underlying
Symbol List A, transactions in SPESG are excluded from the Liquidity
Provider Sliding Scale \6\ (as proposed and discussed below, SPESG
transactions are included in the SPX Liquidity Provider Sliding Scale),
Volume Incentive Program (``VIP''),\7\ Break-Up Credits applicable to
Customer Agency Orders in AIM and SAM,\8\ the Marketing Fee,\9\ the
Clearing Trading Permit Holder Fee Cap (``Fee Cap''),\10\ the Clearing
Trading Permit Holder Proprietary and/or their Non-Trading Permit
Holder Affiliates transaction fees for all non-facilitation business
executed in AIM or open outcry, or as a QCC or FLEX transaction,\11\
the AIM Responder Fee,\12\ exemption from fees for facilitation
orders,\13\ the AIM Contra Execution Fee,\14\ the Order Router Subsidy
(``ORS'') and Complex Order Router Subsidy (``CORS'') Programs,\15\ and
the per contract per side surcharge for noncustomer complex order
executions that remove liquidity from the COB and auction response in
the complex order auction and AIM.\16\ Also, by including SPESG in
Underlying Symbol List A, the FLEX Surcharge Fee \17\ of $0.10 (capped
at $250 per trade) applies to all FLEX transactions in SPESG, and
transactions in SPESG are eligible for reduced rates under the Clearing
Trading Permit Holder Proprietary Products Sliding Scale.\18\
---------------------------------------------------------------------------

    \5\ See Cboe Options Fees Schedule, Footnote 34, Underlying
Symbol List A currently includes: OEX, XEO, RUT, RLG, RLV, RUI,
UKXM, SPX (includes SPXW) and VIX.
    \6\ See Cboe Options Fees Schedule, Liquidity Provider Sliding
Scale table and footnote 10.
    \7\ See Cboe Options Fees Schedule, Volume Incentive Program
(VIP) table and Footnote 36.
    \8\ See Cboe Options Fees Schedule.
    \9\ See Cboe Options Fees Schedule, Marketing Fees table.
    \10\ See Cboe Options Fees Schedule, Clearing Trading Permit
Holder Fee Cap table and footnotes 11 and 22.
    \11\ See Cboe Options Fees Schedule, Footnote 22.
    \12\ See Cboe Options Fees Schedule, Footnote 20.
    \13\ See Cboe Options Fees Schedule, Footnote 11.
    \14\ See Cboe Options Fees Schedule, Footnote 18.
    \15\ See Cboe Options Fees Schedule, Order Router Subsidy
Program and Complex Order Router Subsidy Program table and Footnotes
29 and 30.
    \16\ See Cboe Options Fees Schedule, Footnote 35.
    \17\ See Cboe Options Fees Schedule, Footnote 17. The Exchange
also notes that the proposed rule change updates an existing error
within the FLEX Surcharge Fee line by correcting the spelling of
``except''.
    \18\ See Cboe Options Fees Schedule, Cboe Options Clearing
Trading Permit Holder Proprietary Products Sliding Scale table and
footnote 11.
---------------------------------------------------------------------------

    The proposed rule change also adopts the following transaction fees
and adds SPESG to the description of the existing fees for various
orders in SPX, including:
     Non-Customer, Non-Market-Maker, Non-Firm orders in SPX
(yielding fee code ``BT'') and are assessed a standard fee of $0.42;
     Customer, Premium orders for less than $1.00 in SPX
(yielding fee code ``CS'') and are assessed a standard fee of $0.36;
     Customer Premium orders for greater than or equal to $1.00
in SPX (yielding fee code ``CT'') and are assessed a standard fee of
$0.45;
     Market-Maker orders in SPX (yielding fee code ``MS'') and
are assessed a standard fee of $0.28; and
     Firm orders in Underlying Symbol List A, under which SPX
is currently listed and to which the Exchange proposes to add SPESG as
discussed above, (yielding fee code ``FH'') and are assessed a standard
fee of $0.26.
    The proposed rule change also adds SPESG to the existing surcharges
assessed on transactions in SPX, including:
     The Execution Surcharge of $0.21;
     the AIM Response Surcharge Fee of $0.05;
     the AIM Contra Surcharge Fee of $0.10; and
     the AIM Agency/Primary Surcharge Fee of $.10.
    The Exchange does not at this time propose to assess the Index
License fee on transactions in SPESG in order to promote and encourage
trading of SPESG once listed. The Exchange notes that Index License
fees are likewise currently waived for options in other classes in
order to continue to promote their trading and growth.\19\ Where the
proposed rule change adds SPESG to the existing transactions fees and
surcharges in place for SPX, as listed above, the proposed change also
updates footnotes 12 and 21, appended to such transactions and
surcharges, to reflect the inclusion of SPESG. Specifically, footnote
12 provides for pricing changes if the Exchange is operating in an all-
electronic environment and, within the footnote, the proposed rule
updates: Item (3), to provide that SPX and SPESG, and SPXW Execution
Surcharges will be waived, where applicable, for SPX/SPXW and SPESG
orders executed via AIM and for SPX/SPXW Related Future Cross (``RFC'')
orders; item (4), to provide that the AIM Agency/Primary Surcharge for
SPX/SPXW, SPESG and VIX and RFC Execution Surcharge for SPX/SPXW and
VIX will apply to all SPX/SPXW, SPESG and VIX AIM Agency/Primary orders
and all SPX/SPXW and VIX RFC initiating orders, respectively, when the
Exchange operates in a screen-based only environment and such fee will
be invoiced to the executing Trading Permit Holder; and item (9), to
provide that the AIM Contra Surcharge and AIM Response Surcharge will
apply to all SPX/SPXW and SPESG AIM Contra and AIM Response/Priority
Response orders, respectively, when the Exchange operates in a screen-
based only environment.\20\ Additionally, in the event the Exchange
operates in a screen-based only environment, AIM may be available for
SPX/SPXW and SPESG during Regular Trading Hours The Exchange notes that
RFC orders are limited to SPX/SPXW and VIX, therefore, the proposed
rule change to item (4) in footnote 12 makes it clear that RFC
Execution Surcharges will continue to apply to SPX/SPXW and VIX while
the Execution Surcharges will apply to SPX/SPXW, SPESG and VIX. The
proposed rule change updates footnote 21 to include SPESG, where
applicable, and provides that all electronic executions in SPX, SPXW
and SPESG shall be assessed the SPX, SPXW and SPESG Execution
Surcharge, respectively, except that this fee shall not apply to: (i)
Orders in SPX or SPXW options in the SPX electronic book for those SPX
or SPXW options that are executed during opening rotation on the final
settlement date of VIX options and futures which have the expiration
that are used in the VIX settlement calculation and (ii) orders
executed in SPX, SPXW and SPESG by a floor broker using a PAR terminal.
The Exchange notes that SPESG will not be included in the VIX
settlement (therefore item (i) within footnote 21 does not apply) and
that SPESG

executed from PAR will be treated the same as SPX/SPXW.
---------------------------------------------------------------------------

    \19\ See e.g. Securities Exchange Act Release No. 87953 (January
13, 2020), 85 FR 3091 (January 17, 2020) (SR-CBOE-2020-001), which
waived permanently the Index License fees for transactions in Sector
Index options to continue to encourage their growth and trading.
    \20\ The Exchange notes that it the proposed rule change does
not add SPESG to item (5), in connection with the SPX/SPXW, VIX and
RUT Tier Appointment Fee, because, the Exchange wishes to encourage
trading and participation in the new SPESG market and believes that
not assessing the appointment fees at this time for those
participants that elect to support the new product is a reasonable
means by which to do so. The Exchange notes that, at a future date,
and as the SPESG market develops, it may look to assess such fees
for SPESG.
---------------------------------------------------------------------------

    Likewise, the proposed rule change also includes SPESG, along with
SPX (and SPXW),\21\ in the Floor Brokerage Fees table, which assesses
volume executed in open outcry. The proposed rule change also updates
footnote 24, which accompanies the Floor Brokerage Fees table, to
reflect the addition of SPESG. Footnote 24 provides for fee changes
when the Exchange is operating in a modified state due to COVID-19 and
the proposed rule change updates item (2) within the footnote to
provide that SPX/SPXW and SPESG Floor Brokerage Fees will be assessed
the rate of $0.05 per contract for non-crossed orders and $0.03 per
contract for crossed orders. The Exchange notes that the proposed
changes to footnotes 12, 21 and 24 do not alter the application of any
of the existing fees but merely adds SPESG, where applicable, to
reflect its inclusion in the relevant fee tables.
---------------------------------------------------------------------------

    \21\ The proposed rule change also updates ``SPX Index Options''
to instead read ``SPX/SPXW'' to provide additional clarity within
the Floor Brokerage Fees table.
---------------------------------------------------------------------------

    The proposed rule change also adds SPESG to the SPX Liquidity
Provider Sliding Scale \22\ and the Floor Brokerage Fees Discount
Scale. The SPX Liquidity Provider Sliding Scale provides incremental
incentives for Market-Makers to reach the highest tier level and
provides progressively lower rates if increased volume thresholds in
SPX (including SPXW) options are attained during a month and, likewise,
the Floor Brokerage Fees Discount Scale provides discounted floor
brokerage fees if floor brokers meet certain volume thresholds in SPX
(as well as other proprietary products) during a given month. The
proposed rule change extends the same opportunities currently provided
to Trading Permit Holders for transactions in SPX to transactions in
SPESG options in order to encourage trading in such options.
---------------------------------------------------------------------------

    \22\ The proposed rule change also updates the title of the
table to ``SPX/SPXW and SPESG Liquidity Provider Sliding Scale'' to
provide additional clarity regarding the products eligible under the
table.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Expiring, 7 days or less   Near term, 8 days to 60    Mid term, 61 days to 270    Long term, 271 days or
                                             ---------------------------            days                       days                     greater
                Premium level                                           --------------------------------------------------------------------------------
                                                   Width         Size         Width         Size         Width         Size         Width         Size
--------------------------------------------------------------------------------------------------------------------------------------------------------
$0.00-$5.00.................................           $0.50         10           $0.40         25           $0.60         15           $1.00         10
$5.01-$15.00................................            2.00          7            1.60         18            2.40         11            4.00          7
15.01-50.00.................................            5.00          5            4.00         13            6.00          8           10.00          5
50.01-100.00................................           10.00          3            8.00          8           12.00          5           20.00          3
100.01-200.00...............................           20.00          2           16.00          5           24.00          3           40.00          2
Greater than 200.00.........................           30.00          1           24.00          3           36.00          1           60.00          1
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The above heightened quoting standards in the table above are
substantively identical to the heightened quoting standards for the GTH
SPX/SPXW LMM Incentive Program. The Exchange notes that, unlike the
SPX/SPXW LMM Incentive Program, an LMM in SPESG may meet the heightened
quoting standard in RTH in 60% of the series. Like with the GTH SPX/
SPXW Incentive Program, LMMs in SPESG are not obligated to satisfy the
heightened quoting standards described in the table above, but instead
are eligible to receive the rebate if they satisfy the heightened
requirements. The heightened requirements are designed to incentivize
LMMs to provide significant liquidity in SPESG during the trading day
upon their listing and trading on the Exchange. The Exchange may also
consider other exceptions to this quoting standard based on
demonstrated legal or regulatory requirements or other mitigating
circumstances.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\23\ Specifically, the
Exchange believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\24\ which requires that Exchange rules provide for
the equitable allocation of reasonable dues, fees, and other charges
among its Trading Permit Holders and other persons using its
facilities. Additionally, the Exchange believes the proposed rule
change is consistent with the Section 6(b)(5) \25\ requirement that the
rules of an exchange not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(4).
    \25\ Id.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable and equitable to add
SPESG to Underlying Symbol List A, thus including SPESG transactions
in, or excluding transactions from, certain programs, qualification
calculations and transactions fees currently applicable to SPX (along
with other proprietary products in Underlying Symbol List A), and to
assess the same transaction and surcharge fees, as well as incentive
scale tables (i.e. Clearing Trading Permit Holder Proprietary Products,
SPX Liquidity Provider and Floor Brokerage Discount sliding scales),
for SPESG that currently apply to SPX options, because of the relation
between the S&P 500 ESG Index and the S&P 500 Index, wherein each
constituent of a S&P 500 ESG Index is a constituent of the S&P 500
Index. The Exchange notes that the proposed rule change does not alter
any of the existing program rates or transaction fees, but instead,
proposes to assess those rates and fees for transactions in SPESG
options in the same way the Exchange currently assesses them for
transactions in SPX options. The Exchange also believes that it is
reasonable and equitable not to assess the Index License fee on
transactions in SPESG because SPESG is a new product and the Exchange
wishes to promote and encourage trading of SPESG once listed. The
Exchange notes the Index License fees are likewise currently waived for
options in other classes in order to continue to promote their trading
and growth.\26\
---------------------------------------------------------------------------

    \26\ See supra note 17.
---------------------------------------------------------------------------

    In addition to this, the Exchange believes that it is reasonable to
extend the existing opportunities under the SPX Liquidity Provider
Sliding Scale and the Floor Brokerage Fees Discount Scale to Market-
Makers and/or floor brokers, respectively, for SPESG so they may have
opportunities to receive a discount by achieving various levels of
volume in SPESG. The Exchange believes the programs are reasonably
designed to encourage such participants to increase their submission of
liquidity in SPESG, both electronically and in open outcry. This
increase in the

Exchange's hybrid liquidity pool may bring greater trading activity,
execution opportunities, pricing transparency and discovery to the
SPESG market, both electronically and on the trading floor, to the
benefit of all market participants. Similarly, the Exchange believes it
is reasonable to extend the existing opportunity under the Clearing
Trading Permit Holder Proprietary Products Sliding Scale (by nature of
the proposed addition of SPESG to Underlying Symbol List A) for
Clearing Trading Permit Holders to receive reduced fees in their
transactions in SPESG, because it applies to all other Underlying
Symbol List A products, including SPX and because it is reasonably
designed to incentivize Clearing Trading Permit Holders to increase
their overall volume, which may increase liquidity, in turn may provide
greater trading activity, execution opportunities, pricing transparency
and discovery for those options markets, thereby benefitting all market
participants.
    The Exchange believes that the proposed RTH SPESG LMM Incentive
Program is reasonable and equitable because the amended heightened
quoting standards and rebate amount for meeting the heightened quoting
standards in SPESG series are reasonably designed to incentivize an
appointed LMM to meet the RTH quoting standards for SPESG, thereby
providing liquid and active markets, which facilitates tighter spreads,
increased trading opportunities, and overall enhanced market quality to
the benefit of all market participants, particularly in a newly listed
and traded product on the Exchange during the trading day. The Exchange
believes that the proposed heightened quoting standards in SPESG are
reasonable in that they are substantially identical to the heightened
quoting standards currently in place for GTH SPX/SPXW LMMs. While the
proposed percentage of the series (60% of SPESG series) that an LMM
must meet the proposed heightened quoting requirements is less than the
percentage of the series that an LMM must meet the heightened quoting
requirements in SPX and/or SPXW (85% of each series) is reasonable
given the new market ecosystem for SPESG as compared to that of SPX/
SPXW. The established SPX/SPXW market contains deep pools of liquidity
and is highly active, which, in turn, assists LMMs in SPX/SPXW to more
easily offset risk and hedge, as needed. Because the SPESG market is
still new and not yet as robust as that of SPX/SPXW, it may pose more
difficulty for LMMs in SPESG to offset risk and hedge, thus more
difficulty in achieving the heightened quoting requirement. Therefore,
the Exchange believes the proposed percentage of the series is
reasonably commensurate with the potentially higher risk, and challenge
in achieving the heightened quoting requirements, LMMs would have to
take on in the new SPESG market. Moreover, the Exchange believes that
the proposed monthly rebate pool of $50,000 split between LMMs that
meet the heightened quoting standards in SPESG in a month, as proposed,
is reasonable and equitable as it that falls within a comparable realm
of rebates offered for other, similar LMM incentive programs for
similar products,\27\ and such similar LMM incentive programs have
prior had similar compensation pools in place.\28\ If, for example, two
LMMs were to meet the proposed heightened quoting requirements, they
would each receive $25,000, which is comparable to the $20,000
available to SPX/SPXW LMMs that meet the heightened quoting
requirements in both series pursuant to the GTH SPX/SPXW LMM Incentive
Program. In addition to this, the Exchange believes that it is
reasonable to offer $50,000 as the entirety of the compensation pool,
as it is designed to encourage substantial liquidity during RTH in a
newly listed and traded product by providing a large enough pool for
which multiple LMMs may compete, and receive meaningful incentive in a
pro-rata share. While the Exchange has no way of predicting with
certainty how the proposed rule change would impact LMM trading
activity, it anticipates that at least two LMMs will be able to
reasonably compete for and reach the heightened quoting requirements.
The Exchange further notes that, if one LMM were to achieve the
heightened quoting requirements in a month, it believes that $50,000 is
a reasonable incentive given the risks and level of difficulty posed by
the newly developing SPESG market as described above.
---------------------------------------------------------------------------

    \27\ See Cboe Options Fees Schedule, GTH SPX/SPXW LMM Incentive
Program, which provides a monthly rebate in the amount of $10,000
per each series (for an opportunity to receive $20,000 in total) for
reaching the heightened quoting requirements.
    \28\ See Securities Exchange Release No. 87265 (October 9,
2019), 84 FR 87265 (October 16, 2019) (SR-CBOE-2019-083).
---------------------------------------------------------------------------

    The Exchange believes that it is equitable and not unfairly
discriminatory to assess lower fees for certain market participants
transacting in SPESG because the current Clearing Trading Permit Holder
Proprietary Products, SPX and SPESG (as proposed) Sliding, and Floor
Brokerage Fees Discount scales already provide the same for such
transactions in SPX. Moreover, the Exchange believes that it is
equitable and not unfairly discriminatory to assess lower fees for
Clearing Trading Permit Holders transacting in SPESG because it will
apply to all Clearing Trading Permit Holders uniformly, as it currently
does for transactions in all proprietary products within Underlying
Symbol List A. The Exchange also believes offering discounts to
Clearing Trading Permit Holders is equitable and not unfairly
discriminatory because Clearing Trading Permit Holders must take on
certain obligations and responsibilities, such as clearing and
membership with the Options Clearing Corporation, as well as
significant regulatory burdens and financial obligations, that other
market participants are not required to undertake. Similarly, assessing
lower fees for Market-Makers in SPESG pursuant to the SPX/SPXW and
SPESG (as proposed) Liquidity Provider Sliding Scale, as compared to
other market participants, is equitable and not unfairly discriminatory
because Market-Makers, unlike other market participants, take on a
number of obligations, including quoting obligations, that other market
participants do not have. The Exchange notes that it provides Market-
Maker-specific incentives in a number of places within the Fees
Schedule.\29\ Further, these lower fees offered to Market-Makers are
intended to incent Market-Makers to quote and trade more on the
Exchange, thereby providing more trading opportunities for all market
participants. Additionally, the proposed fee for Market-Makers applies
equally to all Market-Makers, meaning that all Market-Makers in SPESG
are subject to the SPX/SPXW and SPESG Liquidity Provider Sliding Scale.
Likewise, the Exchange believes providing discounts for Floor Brokers'
transactions in SPESG is equitable and not unfairly discriminatory
because it applies equally to all Floor Brokers, which function to
bring necessary liquidity to the Exchange's trading floor thus
maintaining a robust hybrid market on the Exchange to the benefit of
all market participants.
---------------------------------------------------------------------------

    \29\ See e.g., Cboe Options Fees Schedule, Liquidity Provider
Sliding Scale table, GTH VIX/VIXW LMM Incentive Program, and GTH
SPX/SPXW Incentive Program.
---------------------------------------------------------------------------

    Finally, the Exchange believes it is equitable and not unfairly
discriminatory to offer the financial incentive to SPESG LMMs pursuant
to the proposed RTH SPESG LMM Incentive Program, because it will

benefit all market participants trading SPESG during RTH by encouraging
the LMMs to satisfy the heightened quoting standard, which incentivizes
continuous increased liquidity and thereby may provide more trading
opportunities and tighter spreads. Indeed, the Exchange notes that its
LMMs serve a crucial role in providing quotes and the opportunity for
market participants to trade SPESG, which can lead to increased volume,
providing for robust markets. The Exchange ultimately wishes to
sufficiently incentivize LMMs to provide liquid and active markets in
the newly listed and traded SPESG during the trading day to encourage
liquidity, thereby protecting investors and the public interest. The
Exchange also notes that an LMM may have added costs each month that it
needs to undertake in order to satisfy that heightened quoting standard
(e.g., having to purchase additional logical connectivity). The
Exchange believes the proposed program is equitable and not unfairly
discriminatory because similar programs currently exist for LMMs in
VIX/VIXW and SPX/SPXW, and the proposed program will equally apply to
any TPH that is appointed as a SPESG LMM. Additionally, if an LMM does
not satisfy the heightened quoting standard in SPESG for any given
month, then it simply will not receive the offered payment for that
month.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Specifically, the Exchange
believes the proposed rule change does impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because it uniformly includes transactions in SPESG
in, or excludes transactions in SPESG from, certain programs,
qualification calculations and transactions fees, as well as uniformly
assesses transaction and surcharge fees, for all qualifying Trading
Permit Holders' transactions in SPESG, as it currently does for related
SPX options. Moreover, the Exchange does not believe that the proposed
rule change will impose any burden on intramarket competition that is
not necessary or appropriate in furtherance of the purposes of the Act
because, while different fees and rebates are assessed to different
market participants in some circumstances, these different market
participants have different obligations and different circumstances.
For example, Clearing TPHs have clearing obligations that other market
participants do not have. Market-Makers have quoting obligations that
other market participants do not have. Further, the Exchange current
fees and rebates are intended to encourage market participants to bring
increased volume to the Exchange, to the benefit of all market
participants. The Exchange also does not believe that the proposed LMM
incentive program for SPESG would impose any burden on intramarket
competition because it applies to all LMMs appointed to SPESG in a
uniform manner, in the same way similar programs apply to LMMs in VIX/
VIXW and SPX/SPXW today. To the extent these LMMs receive a benefit
that other market participants do not, as stated, LMMs have different
obligations and are held to different standards. For example, LMMs play
a crucial role in providing active and liquid markets in their
appointed products, especially in the newly developing SPESG market,
thereby providing a robust market which benefits all market
participants. Such Market-Makers also have obligations and regulatory
requirements that other participants do not have.
    The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act because the
propose fees assessed and discount apply to an Exchange proprietary
product, SPESG, which will be listed and traded exclusively on the
Exchange on September 21, 2020.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the
proposed rule change.

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 \30\ and paragraph (f) of Rule 19b-4 \31\
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. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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 NumberSR-CBOE-2020-088 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-CBOE-2020-088. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CBOE-2020-088 and should be submitted on
or before October 30, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22378 Filed 10-8-20; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 24 (Wednesday, February 5, 2014)]
[Notices]
[Pages 6891-6892]
[FR Doc No: 2014-02427]

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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice Of Filings 1

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

    Docket Numbers: ER10-1818-004; ER10-1819-005; ER10-1820-007; ER10-
1817-005.
    Applicants: Public Service Company of Colorado, Northern States
Power Company, a Minnesota corporation, Northern States Power Company,
a Wisconsin corporation, Southwestern Public Service Company.
    Description: Supplement to June 28, 2013 Triennial Market Power
Analysis of Public Service Company of Colorado for the Northwest
Region.
    Filed Date: 1/29/14.
    Accession Number: 20140129-5034.
    Comments Due: 5 p.m. ET 2/19/14.

    Docket Numbers: ER10-1827-003; ER10-1825-003.
    Applicants: Cleco Power LLC, Cleco Evangeline LLC.
    Description: Notice of Non-Material Change in Status of the Cleco
Companies.
    Filed Date: 1/29/14.
    Accession Number: 20140129-5067.
    Comments Due: 5 p.m. ET 2/19/14.

    Docket Numbers: ER12-2068-006.
    Applicants: Blue Sky East, LLC.
    Description: Amendment to December 18, 2013 Order No. 784
Compliance Filing to be effective 12/19/2013.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5228.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER12-2265-002.
    Applicants: Canandaigua Power Partners, LLC.
    Description: Amendment to December 18, 2013 Order No. 784
Compliance Filing to be effective 12/19/2013.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5227.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER14-703-001.
    Applicants: Entergy Services, Inc.
    Description: EES LBA Agreement Refile--Tenaska 1-29-2014 to be
effective 12/31/9998.
    Filed Date: 1/29/14.
    Accession Number: 20140129-5008.
    Comments Due: 5 p.m. ET 2/19/14.

    Docket Numbers: ER14-1169-000.
    Applicants: Constellation Power Source Generation, LLC.
    Description: Notice of Succession to be effective 1/1/2014.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5177.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER14-1170-000.
    Applicants: Southwest Power Pool, Inc.
    Description: 1518R5 Arkansas Electric Cooperative Corp NITSA NOA to
be effective 1/1/2014.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5183.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER14-1171-000.
    Applicants: Southwest Power Pool, Inc.
    Description: 2198R14 Kansas Power Pool NITSA NOA to be effective 1/
1/2014.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5201.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER14-1173-000.
    Applicants: Duke Energy Carolinas, LLC.
    Description: NCEMC NITSA revisions OATT SA No. 210 to be effective
1/1/2014.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5229.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER14-1174-000.
    Applicants: Southwest Power Pool, Inc.
    Description: Submission of Unexecuted Non-Firm PTP Transmission
Service Agreement No. 2794 to be effective 1/29/2014.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5231.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER14-1176-000.
    Applicants: Southwest Power Pool, Inc.
    Description: 2655 Kansas Municipal Energy Agency NITSA NOA to be
effective 1/1/2014.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5255.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER14-1177-000.
    Applicants: Southwest Power Pool, Inc.
    Description: 2656 Kansas Municipal Energy Agency NITSA NOA to be
effective 1/1/2014.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5260.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER14-1178-000.
    Applicants: Southwest Power Pool, Inc.
    Description: 2657 Kansas Municipal Energy Agency NITSA NOA to be
effective 1/1/2014.
    Filed Date: 1/28/14.
    Accession Number: 20140128-5261.
    Comments Due: 5 p.m. ET 2/18/14.

    Docket Numbers: ER14-1179-000.
    Applicants: Midcontinent Independent System Operator, Inc., Alliant
Energy Corporate Services, Inc.
    Description: 2014-01-29--SA 2631 IPL-Stanhope DAF Agreement to be
effective 1/1/2014.
    Filed Date: 1/29/14.
    Accession Number: 20140129-5007.
    Comments Due: 5 p.m. ET 2/19/14.

    Docket Numbers: ER14-1180-000.
    Applicants: Cleco Power LLC.
    Description: Cleco Power Comp Filing to be effective 1/30/2014.
    Filed Date: 1/29/14.
    Accession Number: 20140129-5056.
    Comments Due: 5 p.m. ET 2/19/14.
    Take notice that the Commission received the following land
acquisition reports:

    Docket Numbers: LA13-4-000.
    Applicants: Flat Rock Windpower LLC, Flat Rock Windpower II, LLC,
Marble River, LLC, and Sustaining Power Solutions LLC.
    Description: Quarterly Land Acquisition Report of Flat Rock
Windpower LLC, et al.
    Filed Date: 1/29/14.
    Accession Number: 20140129-5065.
    Comments Due: 5 p.m. ET 2/19/14.

    The filings are accessible in the Commission's eLibrary system by
clicking on the links or querying the docket number.
    Any person desiring to intervene or protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's

Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern
time on the specified comment date. Protests may be considered, but
intervention is necessary to become a party to the proceeding.
    eFiling is encouraged. More detailed information relating to filing
requirements, interventions, protests, service, and qualifying
facilities filings can be found at: http://www.ferc.gov/docs-filing/efiling/filing-req.pdf. For other information, call<PHONE_NUMBER>
(toll free). For TTY, call<PHONE_NUMBER>.

    Dated: January 29, 2014.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2014-02427 Filed 2-4-14; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 88, Number 48 (Monday, March 13, 2023)]
[Notices]
[Page 15390]
[FR Doc No: 2023-05087]

=======================================================================
-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

[FRL-10591-01-R6]

Notice of Proposed Administrative Settlement Agreement and Order
on Consent Cashout Settlement for Ability To Pay Peripheral Parties

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of proposed settlement; request for public comment.

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

SUMMARY: In accordance with the Comprehensive Environmental Response,
Compensation, and Liability Act (``CERCLA''), notice is hereby given
that a proposed CERCLA Section 122(h)(1) Cashout Settlement Agreement
for Ability to Pay Peripheral Parties (``Proposed Agreement'')
associated with the Donna Reservoir and Canal Superfund Site in Donna,
Hidalgo County, Texas (``Site'') was executed by the Environmental
Protection Agency (``EPA'') and is now subject to public comment, after
which EPA may modify or withdraw its consent if comments received
disclose facts or considerations that indicate that the Proposed
Agreement is inappropriate, improper, or inadequate. The Proposed
Agreement would resolve potential EPA claims under section 107(a) of
CERCLA, against Donna Irrigation District #1 (``Settling Party'') for
EPA response costs at the Donna Reservoir and Canal Superfund Site
located in Donna, Texas. The settlement is $100,000 and was based on an
Ability to Pay Analysis, which concluded the settling party shall make
payment for EPA response costs.
    For thirty (30) days following the date of publication of this
notice, EPA will receive electronic comments relating to the Proposed
Agreement. EPA's response to any comments received will be available
for public inspection by request. Please see the ADDRESSES section of
this notice for special instructions in effect due to impacts related
to the COVID-19 pandemic.

DATES: Comments must be received on or before April 12, 2023.

ADDRESSES: As a result of impacts related to the COVID-19 pandemic,
requests for documents and submission of comments must be via
electronic mail except as provided below. The Proposed Agreement and
additional background information relating to the Proposed Agreement
are available for public inspection upon request by contacting EPA
Assistant Regional Counsel Matthew Miller at [email protected].
Comments must be submitted via electronic mail to this same email
address and should reference the ``Donna Reservoir and Canal''
Superfund Site, Proposed Settlement Agreement'' and ``EPA CERCLA Docket
No. 06-01-23''. Persons without access to electronic mail may call Mr.
Miller at<PHONE_NUMBER> to make alternative arrangements.

FOR FURTHER INFORMATION CONTACT: Matthew Miller at EPA by phone (214)
665-6406 or email at: [email protected].

Earthea Nance,
Regional Administrator, Region 6.
[FR Doc. 2023-05087 Filed 3-10-23; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register: December 20, 2005 (Volume 70, Number 243)]
[Notices]
[Page 75512-75513]
[DOCID:fr20de05-92]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52950; File No. SR-CBOE-2004-53]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Approving a Proposed Rule Change and Partial
Amendment No. 1 Relating to Margin Requirements for Complex Options
Spreads

December 14, 2005.

I. Introduction

    On July 30, 2004, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or the ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change related to margin
requirements for complex options spreads under Section 19(b)(1) of the
Securities Exchange Act of 1934 (the ``Act'') \1\ and Rule 19b-4.\2\ On
August 23, 2005, the Exchange filed a partial amendment to its proposed
rule change.\3\ The proposed rule change, as amended, was published in
the Federal Register on November 14, 2005.\4\ The Commission received
no comments on the proposal.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR240.19b-4.
    \3\ SR-CBOE-2004-53: Amendment No. 1. CBOE, in coordination with
the New York Stock Exchange, Inc. (``NYSE''), filed the partial
amendment to conform the complex spreads strategies to which its
rule amendments apply to those of the NYSE.
    \4\ See Securities Exchange Act Release No. 52739 (Nov. 4,
2005); 70 FR 69173 (Nov. 14, 2005).
---------------------------------------------------------------------------

II. Description

    The CBOE has proposed to incorporate the provisions of a Regulatory
Circular (RG03-066--Margin Requirements for Certain Complex Spreads,
dated August 13, 2003) (the ``Circular'') into the Exchange's margin
rules (Chapter 12). The Circular presents an interpretation of current
margin requirements that allows the Exchange to derive, and put into
effect, margin requirements for certain complex option spreads. The
Commission approved the Circular on a one-year pilot basis.\5\ The
Commission granted two extensions of the pilot period.\6\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 48306 (Aug. 8,
2003), 68 FR 48974 (Aug. 15, 2003) (approving SR-CBOE-2003-24).
    \6\ See Securities Exchange Act Release No. 50164 (Aug. 6,
2004), 69 FR 50405 (Aug. 16, 2004) and Securities Exchange Act
Release No. 51407 (Mar. 22, 2005), 70 FR 15669 (Mar. 28, 2005).
---------------------------------------------------------------------------

    The Exchange has proposed to add definitions of a ``long condor
spread,'' ``short iron butterfly spread'' and ``short iron condor
spread'' to Rule 12.3(a). These definitions cover six of the seven
strategies identified in the Circular. Each definition covers two
strategies identified in the Circular because each definition provides
for a base strategy, in which all options expire at the same time, and
a calendar spread strategy, in which a long option may expire after the
other options expire concurrently.
    The Exchange has proposed a revision to its current definition of a
butterfly spread to provide for the remaining strategy, a calendar
spread version of the long butterfly spread. These revisions consist of
(1) splitting the current butterfly spread definition into two
definitions, one for the long butterfly spread and one for the short
butterfly spread, (2) fashioning the two definitions so that they are
consistent with the style and format of the new definitions referred to
in the prior paragraph, and (3) providing for a calendar spread version
in the long butterfly spread definition.
    In the Circular, call options were utilized to construct three of
the seven strategy examples. Each of these three strategies has a
parallel application with put options. For brevity, the put option
versions were not specifically identified in the Circular, but the
Circular was intended to apply to the put option counterpart of each of
the strategies demonstrated with call options. Both the put and call
option versions are provided for in the newly proposed rule
definitions. The remaining four complex spread strategies originally
identified in the Circular involved both call options and put options
(that is, ``iron'' strategies). Each of these four strategies has a
reciprocal configuration (that is, the call options can precede the put
options in ascending sequence of exercise prices). However, there is no
need to address the reciprocal variations because there is no benefit
from a margin requirement standpoint of including them in the iron
strategy definitions.
    According to the Exchange, each of the complex spreads identified
in the proposed rule can be derived by combining and netting two or
more option spreads (that is, the butterfly spread, the box spread and
the time spread) that already are identified in the margin rules and
ascribed a margin requirement. Furthermore, the sum of the margin
required on the basic option spreads that can be combined and netted to
form a complex spread covers the maximum risk of the complex spread
and, as in the Circular, is the margin requirement specified in the
proposed rules. Each of the subject complex spread strategies has a
known and limited risk when configured as specified in the proposed
definitions. The Exchange has proposed to revise current Rule
12.3(c)(5)(C)(6) to provide a margin requirement for each of the long
condor spread, short iron butterfly spread and short iron condor
spread.
    The Exchange noted that the proposed rule prohibits European style
options in the case of the calendar version of a complex spread and
requires that the interval between each option series be equal in the
case of all complex spread strategies. Unlike the Circular, the
proposed rules would not limit complex spreads to a margin account. The
Exchange also has proposed a revision to Rule 12.3(e)--Customer Cash
Account--Spreads, that adds the long condor spread, short iron
butterfly spread and short iron condor spread as strategies permitted
to be established and carried in a cash account, provided they are
composed of cash-settled, European style options that all expire at the
same time.
    The Exchange noted that it has received no negative comments
concerning the Circular since it was issued. Moreover, the Exchange is
not aware of any negative consequences as a result of applying the
margin requirements permitted by the Circular.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change, as amended, is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\7\ In particular, the Commission believes that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\8\
which requires that the rules of the exchange be designed, among other
things, to remove impediments to and perfect the mechanisms of a free
and open market, and, in general, to protect investors and the public
interest. The Commission finds that amending the rules to permit
complex option spread strategies that are the net result of combining
two or

more spread strategies that are currently recognized in the Exchange's
margin rules is consistent with the requirements of Section 6(b)(5)
because the amendments will allow the Exchange to set levels of margin
that more precisely represent the actual net risk of the option
positions in the account and enable customers to implement these
strategies more efficiently.
---------------------------------------------------------------------------

    \7\ In approving this proposal rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (File No. SR-CBOE-2004-53), as
amended, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7522 Filed 12-19-05; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register Volume 87, Number 36 (Wednesday, February 23, 2022)]
[Notices]
[Pages 10262-10265]
[FR Doc No: 2022-03824]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94270; File No. SR-OCC-2021-803]

Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of No Objection to Advance Notice Concerning The Options
Clearing Corporation's Cash and Investment Management

February 17, 2022.

I. Introduction

    On December 23, 2021, the Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'')
advance notice SR-OCC-2021-803 (``Advance Notice'') pursuant to Section
806(e)(1) of Title VIII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, entitled Payment, Clearing and Settlement
Supervision Act of 2010 (``Clearing Supervision Act'') \1\ and Rule
19b-4(n)(1)(i) \2\ under the Securities Exchange Act of 1934
(``Exchange Act'') \3\ to (i) adopt OCC's policy regarding cash and
related investments to its rules, and (ii) amend OCC's Rules governing
the use of Clearing Fund contributions to ensure access in the event of
the failure of an investment counterparty with whom OCC has invested
cash collateral.\4\ The Advance Notice was published for public comment
in the Federal Register on January 12, 2022,\5\ and the Commission has
received no comments regarding the substance of the changes proposed in
the Advance Notice.\6\ The Commission is hereby providing notice of no
objection to the Advance Notice.
---------------------------------------------------------------------------

    \1\ 12 U.S.C. 5465(e)(1).
    \2\ 17 CFR 240.19b-4(n)(1)(i).
    \3\ 15 U.S.C. 78a et seq.
    \4\ See Notice of Filing infra note 5, at 87 FR 1814.
    \5\ Securities Exchange Act Release No. 93915 (Jan. 6, 2022), 87
FR1814 (Jan. 12, 2022) (File No. SR-OCC-2021-803) (``Notice of
Filing''). On December 23, 2021, OCC also filed a related proposed
rule change (SR-OCC-2021-014) with the Commission pursuant to
Section 19(b)(1) of the Exchange Act and Rule 19b-4 thereunder
(``Proposed Rule Change''). 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b-
4, respectively. In the Proposed Rule Change, which was published in
the Federal Register on January 12, 2022, OCC seeks approval of
proposed changes to its rules necessary to implement the Advance
Notice. Securities Exchange Act Release No. 93916 (Jan. 6, 2022), 87
FR 1819 (Jan. 12, 2022) (File No. SR-OCC-2021-014). The comment
period for the related Proposed Rule Change filing closed on
February 2, 2022.
    \6\ A comment letter addressed market conduct generally;
however, additional discussion is unnecessary because the substance
of the letter does not bear on the basis for the Commission's
decision not to object to the proposal. Comments on the Advance
Notice are available at https://www.sec.gov/comments/sr-occ-2021-803/srocc2021803.htm. Since the proposal contained in the Advance
Notice was also filed as a proposed rule change, all public comments
received on the proposal are considered regardless of whether the
comments are submitted on the Proposed Rule Change or the Advance
Notice.
---------------------------------------------------------------------------

II. Background \7\
---------------------------------------------------------------------------

    \7\ Capitalized terms used but not defined herein have the
meanings specified in OCC's Rules and By-Laws, available at https://www.theocc.com/about/publications/bylaws.jsp.
---------------------------------------------------------------------------

    OCC is proposing to adopt a policy governing OCC's cash and
investment practices (the ``Cash and Investment Management Policy'' or
``Policy'') and amend its rules regarding access to Clearing Fund
contributions to address the failure of an investment counterparty to
return Clearing Member cash collateral, which would also allow OCC to
use such collateral to access its revolving credit facility.

A. Policy Regarding Cash and Related Investments

    OCC's current rules include provisions governing the management and
investment of OCC's own funds and cash deposited by Clearing Members.
Pursuant to its rules, OCC's Board of Directors (``Board'') may invest
funds in excess of the amount needed as working capital in Government
securities or such other securities or financial instruments.\8\
Further, OCC's Rules allow for the investment of cash deposited in
respect of a Clearing Member's margin requirements or Clearing Fund
contributions by OCC for its account in Government securities.\9\ OCC
proposes to add its Cash and Investment Management Policy to its
current investment related rules.\10\
---------------------------------------------------------------------------

    \8\ See By-Law Art. IX, Sec. 1.
    \9\ See OCC Rule 604(a); Rule 1006(c).
    \10\ See Notice of Filing, 87 FRat 1815.
---------------------------------------------------------------------------

    The proposed Cash and Investment Management Policy (i) outlines the
safeguarding standards for cash and related investments managed by OCC
to minimize credit and liquidity risk, and (2) provides guidelines for
investments permitted by OCC's rules as described above. With regard to
safeguarding cash, the Policy would allow OCC to hold OCC Cash \11\ and
Clearing Member Cash \12\ in demand deposit accounts with commercial
banks or in accounts at a Federal Reserve Bank. Consistent with OCC's
current rules, the Policy would require OCC to move all margin and
Clearing Fund cash related to a suspended Clearing Member into a
liquidating settlement account for use in meeting the obligations of
the Clearing Member.\13\ The Policy would also require that OCC employ
a bank account structure that segregates customer funds per applicable
regulatory

requirements \14\ and OCC's By-Laws and Rules.\15\
---------------------------------------------------------------------------

    \11\ Under the proposed Policy, OCC Cash would include working
capital related to future operating costs, inclusive of financial
resources held to meet liquidity and resiliency requirements,
proceeds from lines of credit, if any, maintained to support OCC's
working capital, and investments made with OCC Cash. OCC Cash would
also include OCC's Minimum Corporate Contribution. See Securities
Exchange Act Release No. 92038 (May 27, 2021), 86 FR 29861 (Jun. 3,
2021) (File No. SR-OCC-2021-003) (establishing a persistent minimum
level of OCC's own capital that it would contribute to default
losses or liquidity shortfalls prior to allocating a default loss to
the Clearing Fund contributions of non-defaulting Clearing Members).
OCC Cash would not include cash held in respect of OCC's pension
plan, post-retirement welfare plan, or other deferred compensation
plans.
    \12\ Under the proposed Policy, Clearing Member Cash would
include cash collateral deposited as margin or Clearing Fund
contributions, cash held in liquidating settlement accounts for
suspended Clearing Members pursuant to OCC's Rule 1104, and
investments made with Clearing Member Cash. Clearing Member Cash
would also include proceeds from OCC's syndicated credit facility
and liquidity facilities. See Securities Exchange Act Release No.
88971 (May 28, 2020), 85 FR 34257 (Jun. 3, 2020) (File No. SR-OCC-
2020-804) (discussing OCC's revolving credit facility); Securities
Exchange Act Release No. 89039 (Jun. 10, 2020), 85 FR 36444 (Jun.
16, 2020) (File No. SR-OCC-2020-803) (discussing OCC's non-bank
liquidity facility).
    \13\ See OCC Rule 1104.
    \14\ See 17 CFR 39.15 (requiring a derivatives clearing
organization to comply with the segregation requirements section 4d
of the Commodity Exchange Act).
    \15\ See OCC By-Laws Art. VI, Sec. 3(f) (providing for
maintenance of segregated futures accounts).
---------------------------------------------------------------------------

    With regard to investments, the Policy would provide that OCC's
investment strategy is to preserve principal and maintain adequate
liquidity. OCC outlines its specific investment in internal procedures,
but will publish its investment strategy in its Qualitative Disclosures
posted to OCC's public website.\16\ Under the proposed Policy, OCC will
invest only with counterparties that meet the financial and operational
standards outlined in OCC's procedures concerning its banking
relationships.\17\
---------------------------------------------------------------------------

    \16\ OCC's Qualitative Disclosures are available at https://www.theocc.com/Risk-Management/PFMI-Disclosures.
    \17\ Additionally, OCC's Third-Party Risk Management Framework
describes the basis for evaluating financial institutions based on
financial resources and operational capacity, such as whether a
relationship is structured to allow prompt access to assets and
whether a custodian is a supervised and regulated institution that
adheres to generally accepted accounting practices, maintains
safekeeping procedures, and has controls that fully protect these
assets. See Securities Exchange Act Release No. 90797 (Dec. 23,
2021), 85 FR 86592, 86593 (Dec. 30, 2021) (File No. SR-OCC-2020-
014).
---------------------------------------------------------------------------

    The Policy would affirm OCC's current practice of not investing
Clearing Fund cash, which is instead maintained in accounts at a
Federal Reserve Bank or a commercial bank. The Policy would also limit
the investment of margin cash to instruments that provide liquidity to
OCC by the following business day. In contrast, the Policy would not
limit the investment of OCC cash in excess of 110 percent of its Target
Capital Requirement \18\ to overnight transactions. Further, the Policy
would require procedures to ensure that end-of-day margin cash balances
remain above the aggregate level of any Required Cash Deposits to
support OCC's management of liquidity risk.\19\ Under the Policy,
interest or gain received on investments will belong to OCC except as
otherwise provided for in OCC's rules.\20\
---------------------------------------------------------------------------

    \18\ OCC's Target Capital Requirement is the amount of
shareholders' equity recommended by OCC management and approved by
the Board to ensure compliance under both the Commission and
Commodity Futures Trading Commission rules and to keep such
additional amount the Board may approve for capital expenditures.
See OCC Rule 101(T)(1).
    \19\ Under its Liquidity Risk Management Framework, OCC may
require a Clearing Member Group to post cash collateral to
supplement OCC's Available Liquidity Resources when stressed
liquidity demands for that Clearing Member Group are above
established thresholds or until the settlement demand is met. See
Exchange Act Release No. 89014 (Jun. 4, 2020), 85 FR 35446, 35449
(Jun. 10, 2020) (File No. SR-OCC-2020-003).
    \20\ See e.g., Securities Exchange Act Release No. 82502 (Jan.
12, 2018), 82 FR 2825, 2826 (Jan. 19, 2018) (File No. SR-OCC-2017-
009) (stating that OCC would pass interest income earned on Clearing
Fund cash deposited at a Federal Reserve Bank through to its
Clearing Members).
---------------------------------------------------------------------------

B. Access to Clearing Fund Contributions

    OCC's current Rules define the conditions under which OCC may use
Clearing Fund assets to make good losses or expenses suffered by OCC or
by the Clearing Fund with regard to borrowings made by OCC.\21\ OCC's
rules also define the conditions under which OCC may borrow Clearing
Fund assets.\22\ OCC's Rules address OCC's authority to access Clearing
Fund assets related to the failure of a bank or clearing organization
to perform its obligations to OCC, but not the failure of an investment
counterparty. OCC proposes a series of changes to its Rules, described
below, to broaden OCC's authority to access Clearing Fund assets to
address the potential failure of an investment counterparty to meet its
obligations to OCC. Such changes would also align with modifications to
OCC's revolving credit facility.\23\
---------------------------------------------------------------------------

    \21\ See OCC Rule 1006(a) and (c).
    \22\ See OCC Rule 1006(f).
    \23\ See Notice of Filing, 87 Fed. Reg at1817. In anticipation
of the proposed changes, OCC modified the permitted uses set forth
in the credit agreement, implemented on June 21, 2021, to align with
the proposed changes to OCC Rule 1006. Id. OCC provided a summary of
the terms and conditions for the 2021 credit agreement in a
confidential Exhibit 3 to the Advance Notice. Id.
---------------------------------------------------------------------------

    OCC proposes to amend its Rules 1006(a) and (c) to add ``investment
counterparty'' to the list of counterparties whose failure to perform
any obligation to OCC when due because of its bankruptcy, insolvency,
receivership, suspension of operations, or any similar event that
causes OCC to sustain a loss. OCC also proposes to amend its Rule
1006(f) to authorize OCC to take possession of cash or securities
deposited by Clearing Members as contributions to the Clearing Fund and
securities in which OCC has invested Clearing Fund cash contributions
if OCC reasonably believes it necessary to borrow to meet its liquidity
needs for same day settlement as a result of the failure of an
investment counterparty. The proposed changes to Rules 1006(a), (c),
and (f) would limit access, however, to failures with respect to cash
invested under OCC's Rules 604(a) and 1002(c), which deal with margin
cash and Clearing Fund cash contributions, respectively.
    OCC is also proposing to restate and reorganize Rule 1006(f), which
currently consists of a single paragraph, into four subparagraphs with
the following headings: (1) Conditions; (2) Uses; (3) Term; Clearing
Fund Charge; and (4) Substitution Requests. To eliminate a potential
inconsistency with Rule 1006(c), OCC would revise the condition
triggering OCC's access to the Clearing Fund from failure ``to achieve
daily settlement'' to failure ``to perform any obligation to the
Corporation when due.'' The proposed changes to 1006(f) also include
the removal of a gendered pronoun and other administrative changes.

III. Discussion and Notice of No Objection

    Although the Clearing Supervision Act does not specify a standard
of review for an advance notice, the stated purpose of the Clearing
Supervision Act is instructive: To mitigate systemic risk in the
financial system and promote financial stability by, among other
things, promoting uniform risk management standards for SIFMUs and
strengthening the liquidity of SIFMUs.\24\
---------------------------------------------------------------------------

    \24\ See 12 U.S.C. 5461(b).
---------------------------------------------------------------------------

    Section 805(a)(2) of the Clearing Supervision Act authorizes the
Commission to prescribe regulations containing risk management
standards for the payment, clearing, and settlement activities of
designated clearing entities engaged in designated activities for which
the Commission is the supervisory agency.\25\ Section 805(b) of the
Clearing Supervision Act provides the following objectives and
principles for the Commission's risk management standards prescribed
under Section 805(a): \26\
---------------------------------------------------------------------------

    \25\ 12 U.S.C. 5464(a)(2).
    \26\ 12 U.S.C. 5464(b).
---------------------------------------------------------------------------

     To promote robust risk management;
     to promote safety and soundness;
     to reduce systemic risks; and
     to support the stability of the broader financial system.
    Section 805(c) provides, in addition, that the Commission's risk
management standards may address such areas as risk management and
default policies and procedures, among other areas.\27\
---------------------------------------------------------------------------

    \27\ 12 U.S.C. 5464(c).
---------------------------------------------------------------------------

    The Commission has adopted risk management standards under Section
805(a)(2) of the Clearing Supervision Act and Section 17A of the
Exchange Act (the ``Clearing Agency Rules'').\28\ The Clearing Agency
Rules require,

among other things, each covered clearing agency to establish,
implement, maintain, and enforce written policies and procedures that
are reasonably designed to meet certain minimum requirements for its
operations and risk management practices on an ongoing basis.\29\ As
such, it is appropriate for the Commission to review advance notices
against the Clearing Agency Rules and the objectives and principles of
these risk management standards as described in Section 805(b) of the
Clearing Supervision Act. As discussed below, the Commission believes
the changes proposed in the Advance Notice are consistent with the
objectives and principles described in Section 805(b) of the Clearing
Supervision Act,\30\ and in the Clearing Agency Rules, in particular
Rules 17Ad-22(e)(13) and (16).\31\
---------------------------------------------------------------------------

    \28\ 17 CFR 240.17Ad-22. See Securities Exchange Act Release No.
68080 (Oct. 22, 2012), 77 FR 66220 (Nov. 2, 2012) (S7-08-11). See
also Covered Clearing Agency Standards, 81 FR 70786. OCC is a
``covered clearing agency'' as defined in Rule 17Ad-22(a)(5).
    \29\ 17 CFR 240.17Ad-22.
    \30\ 12 U.S.C. 5464(b).
    \31\ 17 CFR 240.17Ad-22(e)(13) and 17 CFR 240.17Ad-22(e)(16).
---------------------------------------------------------------------------

A. Consistency With Section 805(b) of the Clearing Supervision Act

    The Commission believes that the proposal contained in OCC's
Advance Notice is consistent with the stated objectives and principles
of Section 805(b) of the Clearing Supervision Act. Specifically, as
discussed below, the Commission believes that the changes proposed in
the Advance Notice are consistent with promoting robust risk
management, promoting safety and soundness, reducing systemic risks,
and supporting the stability of the broader financial system.\32\
---------------------------------------------------------------------------

    \32\ 12 U.S.C. 5464(b).
---------------------------------------------------------------------------

    The Commission believes that the addition of the Cash and
Investment Management Policy to OCC's rules is consistent with the
promotion of robust risk management. As described above, the Policy
would build on OCC's current rules for managing cash and investments.
The Policy includes standards for safeguarding OCC Cash and Clearing
Fund Cash through the application of OCC's counterparty standards.
Further, the Policy includes limitations on the tenure of investments
to support OCC's liquidity risk management practices. The Commission
believes that adding the Policy to OCC's rules will support OCC's
management of risk with regard to the safeguarding of funds and
investments.
    The Commission also believes that the proposed changes to broaden
OCC's authority to access Clearing Fund contributions are consistent
with the promotion of safety and soundness. Ensuring that OCC has the
authority to access Clearing Fund contributions to contain losses and
shortfalls would reduce the likelihood that OCC would have insufficient
financial resources to address such losses and shortfalls, which in
turn would enhance the safety and soundness of OCC. Further, the
Commission believes that, to the extent the proposed changes are
consistent with promoting OCC's safety and soundness, they are also
consistent with supporting the stability of the broader financial
system. OCC has been designated as a SIFMU, in part, because its
failure or disruption could increase the risk of significant liquidity
or credit problems spreading among financial institutions or
markets.\33\ As noted above, the Commission believes that the proposed
changes would support OCC's ability to continue providing services to
the options markets by addressing losses and shortfalls arising out of
the default of a Clearing Member. OCC's continued operations would, in
turn, help support the stability of the financial system by reducing
the risk of significant liquidity or credit problems spreading among
market participants that rely on OCC's central role in the options
market.
---------------------------------------------------------------------------

    \33\ See Financial Stability Oversight Council (``FSOC'') 2012
Annual Report, Appendix A, https://home.treasury.gov/system/files/261/here.pdf (last visited Feb. 17, 2022).
---------------------------------------------------------------------------

    Accordingly, and for the reasons stated above, the Commission
believes the changes proposed in the Advance Notice are consistent with
Section 805(b) of the Clearing Supervision Act.\34\
---------------------------------------------------------------------------

    \34\ 12 U.S.C. 5464(b).
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(13) Under the Exchange Act

    Rule 17Ad-22(e)(13) under the Exchange Act requires, among other
things, that a covered clearing agency establish, implement, maintain,
and enforce written policies and procedures reasonably designed to
ensure the covered clearing agency has the authority to take timely
action to contain losses and liquidity demands and continue to meet its
obligations.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 240.17Ad-22(e)(13).
---------------------------------------------------------------------------

    As the Commission has observed previously, OCC relies on the
resources in its Clearing Fund to manage the potential losses arising
out of the default of a Clearing Member under extreme but plausible
market conditions.\36\ Similarly, OCC relies on such resources to
manage potential liquidity shortfalls arising out of the default of a
Clearing Member under extreme but plausible market conditions.\37\ In
the event of a Clearing Member default, OCC's inability to access the
defaulter's cash collateral due to the failure of an investment
counterparty could inhibit OCC's ability to contain losses and
liquidity demands unless it has access to the Clearing Fund
contributions of non-defaulting Clearing Members. Further, the
Commission believes that the proposed changes to restate and reorganize
Rule 1006(f) would provide clarity to such authority. As described
above, the proposed changes would increase OCC's authority to access
Clearing Fund contributions to address losses or shortfalls arising out
of the failure of an investment counterparty to perform with regard to
investments of margin cash or Clearing Fund cash and such changes would
align with the terms of OCC's revolving credit agreement.
---------------------------------------------------------------------------

    \36\ See Securities Exchange Act Release No. 87717 (Dec. 11,
2019), 84 FR 68985, 68987 (Dec. 17, 2019) (File No. SR-OCC-2019-
009).
    \37\ See Securities Exchange Act Release No. 89014 (Jun. 4,
2020), 85 FR 35446, 35450 (Jun. 10, 2020) (File No. SR-OCC-2020-003)
(stating that cash contributions to the Clearing fund serve as an
important source of liquidity and that non-cash contributions
provide a source of collateral necessary for OCC to access sources
of liquidity).
---------------------------------------------------------------------------

    The Commission believes, therefore, that the proposed changes to
broaden OCC's authority to access to Clearing Fund contributions are
consistent with Rule 17Ad-22(e)(13) under the Exchange Act.\38\
---------------------------------------------------------------------------

    \38\ 17 CFR 240.17Ad-22(e)(13).
---------------------------------------------------------------------------

C. Consistency With Rule 17Ad-22(e)(16) Under the Exchange Act

    Rule 17Ad-22(e)(16) under the Exchange Act requires that a covered
clearing agency establish, implement, maintain, and enforce written
policies and procedures reasonably designed to safeguard its own and
its participants' assets, minimize the risk of loss and delay in access
to these assets, and invest such assets in instruments with minimal
credit, market and liquidity risks.\39\ In adopting Rule 17Ad-
22(e)(16), the Commission provided guidance for consideration by
covered clearing agencies.\40\ Such guidance included the consideration
of whether a covered clearing agency's investment strategy is
consistent with its overall risk management strategy and fully
disclosed to participants.\41\
---------------------------------------------------------------------------

    \39\ 17 CFR 240.17Ad-22(e)(16).
    \40\ Covered Clearing Agency Standards, 81 FR at 70837.
    \41\ Id.
---------------------------------------------------------------------------

    The Commission believes that the proposed Cash and Investment
Management Policy would support and enhance OCC's current rules
regarding the investment of its and its participants' cash assets. As
described above, the Policy outlines safeguarding standards, such as
allowing OCC Cash and Clearing Member Cash to be

deposited only in a Federal Reserve Bank or in demand deposit accounts
with institutions that meet the standards set out in OCC's current risk
management strategy (e.g., OCC's Third Party Risk Management Framework)
to minimize the risk of loss or delay in access to such funds. The
Commission believes further that limiting the investment of cash to
Government Securities, and specifically limiting the investment of
Clearing Member Cash to instruments that provide liquidity to OCC by
the following business day, is consistent with investing in assets with
minimal credit, market and liquidity risks.\42\
---------------------------------------------------------------------------

    \42\ The Policy would allow OCC to invest its own cash in
longer-tenured instruments only where such cash is in excess of 110
percent of OCC's Target Capital Requirement.
---------------------------------------------------------------------------

    The Commission believes, therefore, that the addition of the Cash
and Investment Management Policy to OCC's rules is consistent with Rule
17Ad-22(e)(16) under the Exchange Act.\43\
---------------------------------------------------------------------------

    \43\ 17 CFR 240.17Ad-22(e)(16).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore noticed, pursuant to Section 806(e)(1)(I) of the
Clearing Supervision Act, that the Commission does not object to
Advance Notice (SR-OCC-2021-803) and that OCC is authorized to
implement the proposed change as of the date of this notice or the date
of an order by the Commission approving proposed rule change SR-OCC-
2021-014, whichever is later.

    By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03824 Filed 2-22-22; 8:45 am]
BILLING CODE 8011-01-P