Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Partial Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Partial Amendment No. 1, by The Options Clearing Corporation Concerning Methodology To Allocate Clearing Fund Deposit Requirements Among Its Clearing Members To Better Align the Allocation With the Sizing of the Clearing Fund so Stress Based Risk Is Fairly Allotted to Market Participants That Expose OCC to Such Stress Risk

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104359; File No. SR-OCC-2025-018]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Partial Amendment No. 1 and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Partial Amendment No. 1, by The Options Clearing Corporation Concerning Methodology To Allocate Clearing Fund Deposit Requirements Among Its Clearing Members To Better Align the Allocation With the Sizing of the Clearing Fund so Stress Based Risk Is Fairly Allotted to Market Participants That Expose OCC to Such Stress Risk</SUBJECT> <DATE>December 11, 2025.</DATE> <HD SOURCE="HD1">I. Introduction</HD> On September 26, 2025, the Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change SR-OCC-2025-018, pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”)  thereunder, to amend its allocation methodology for the Clearing Fund deposit requirements of its Clearing Members by realigning the allocation to correspond to the sizing of the Clearing Fund so that certain stress-based risk is proportionally allotted to market participants that expose OCC to such risk. <SU>3</SU> <FTREF/> The proposed rule change was published for public comment in the <E T="04">Federal Register</E> on October 1, 2025. <SU>4</SU> <FTREF/> On October 7, 2025, OCC amended SR-OCC-2025-018 to append an Exhibit 2 to documents filed as part of File No. SR-OCC-2025-018 on September 26, 2025 (hereinafter, together, defined as “Proposed Rule Change”). <SU>5</SU> <FTREF/> On November 3, 2025, pursuant to Section 19(b)(2) of the Exchange Act, <SU>6</SU> <FTREF/> the Commission designated a longer period within which to approve, disapprove, or institute proceedings to determine whether to approve or disapprove the Proposed Rule Change, until December 30, 2025. <SU>7</SU> <FTREF/> The Commission has received no comments regarding the Proposed Rule Change. The Commission is publishing this notice to solicit comments on Partial Amendment No. 1 from interested persons, and, for the reasons discussed below, is approving the Proposed Rule Change, as modified by Partial Amendment No. 1. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <FTNT> <SU>3</SU>   <E T="03">See</E> Notice of Filing <E T="03">infra</E> note 4, at 90 FR 47383. </FTNT> <FTNT> <SU>4</SU>   <E T="03">See</E> Securities Exchange Act Release No. 104111 (Sept. 26, 2025), 90 FR 47383 (Oct. 1, 2025) (File No. SR-OCC-2025-018) (“Notice of Filing”). </FTNT> <FTNT> <SU>5</SU>  Exhibit 2 consists of communication from OCC to its Clearing Members discussing, amongst other things, the proposed rule change in File No. SR-OCC-2025-018. This amendment does not change the purpose of or basis for SR-OCC-2025-018. </FTNT> <FTNT> <SU>6</SU>  15 U.S.C. 78s(b)(2). </FTNT> <FTNT> <SU>7</SU>   <E T="03">See</E> Securities Exchange Act Release No. 104173 (Nov. 3, 2025), 90 FR 51424 (Nov. 17, 2025) (File No. SR-OCC-2025-018). </FTNT> <HD SOURCE="HD1">II. Background</HD> OCC is a central counterparty (“CCP”), which means that, as part of its function as a clearing agency, it interposes itself as the buyer to every seller and the seller to every buyer for certain financial transactions. As the CCP for the listed options markets in the United States, <SU>8</SU> <FTREF/> as well as for certain futures and stock loans, OCC is exposed to various risks arising from providing clearance and settlement services to its Clearing Members. Because OCC is obligated to perform on the contracts it clears, one such risk that OCC is exposed to is credit risk, including the risk that OCC would not maintain sufficient financial resources to cover exposures if one of its Clearing Members defaults. <FTNT> <SU>8</SU>  OCC describes itself as “the sole clearing agency for standardized equity options listed on a national securities exchange registered with the Commission (`listed options').” <E T="03">See</E> Securities Exchange Act Release No. 96533 (Dec. 19, 2022), 87 FR 79015 (Dec. 23, 2022) (File No. SR-OCC-2022-012). </FTNT> Among the ways that OCC manages credit risk during a Clearing Member failure is by periodically collecting margin collateral from Clearing Members on an individual basis and, to the extent this margin collateral is insufficient to cover OCC's credit exposure in the event of a Clearing Member default, maintaining a Clearing Fund, which is a mutualized pool of financial resources to which each Clearing Member is required to contribute. OCC establishes the size of its Clearing Fund on a monthly basis, in part, at an amount determined by OCC to be sufficient to protect it against losses stemming from the default of the two Clearing Member Groups that would potentially cause the largest aggregate credit exposure for OCC under stress test scenarios that represent extreme but plausible market conditions. <SU>9</SU> <FTREF/> Each Clearing Member's proportionate contribution to the Clearing Fund is a function of that member's proportionate share of total risk, <SU>10</SU> <FTREF/> open interest, and volume. <SU>11</SU> <FTREF/> OCC currently uses a one-month lookback when calculating a member's proportionate share of the Clearing Fund. <SU>12</SU> <FTREF/> <FTNT> <SU>9</SU>  OCC Rule 1001(a). OCC determines the size of its Clearing Fund based on the daily output of stress tests conducted using a range of foreseeable scenarios that utilize standard pre-determined parameters and assumptions, including: (1) relevant peak historic price volatilities; (2) shifts in other market factors including, as appropriate, priced determinants and yield curves; (3) the default of one or multiple members; (4) forward-looking stress scenarios. <E T="03">See</E> Notice of Filing, 90 FR at 47384. </FTNT> <FTNT> <SU>10</SU>  Total risk in this context refers to a member's proportionate share of margin posted to OCC. See OCC Rule 1003(b)(i). </FTNT> <FTNT> <SU>11</SU>  OCC Rule 1003(a). The proportionate requirements are determined over and above the contribution of $500,000 per Clearing Member. <E T="03">See id.</E> </FTNT> <FTNT> <SU>12</SU>   <E T="03">See</E> Notice of Filing, 90 FR at 47386. </FTNT> Although the current Clearing Fund allocation methodology contemplates risk as a function of margin, it does not include a component that takes into account the same stressed losses used to size the Clearing Fund when determining each Clearing Member's required Clearing Fund deposit. OCC states that the lack of such a stress loss component creates an inconsistency between the sizing and allocation across the membership. <SU>13</SU> <FTREF/> To address this inconsistency, OCC proposes to include such a component in the allocation methodology, allowing OCC to distribute individual Clearing Fund requirements based on the directional stressed risk that Clearing Members present to OCC. <FTNT> <SU>13</SU>  Notice of Filing, at 47384. </FTNT> Specifically, OCC proposes to modify OCC's allocation weighting formula for allocating Clearing Fund Contribution requirements by (a) introducing a 70 percent Clearing Fund risk-based shortfall allocation based on stress loss in excess of margin (the “shortfall”); and (b) changing the weighting percentages by reducing the margin allocation from 70 percent to 15 percent and open interest to zero percent. These changes would result in a new weighting scheme of 70 percent shortfall, 15 percent margin, and 15 percent cleared volume. As part of the change to allocation weighting, OCC also proposes to extend the lookback period from one month to three months of data to align with parameters OCC uses when sizing the Clearing Fund. Secondly, OCC proposes to adopt rules that would authorize OCC to hold allocation weights constant month-over-month in light of volatile market conditions. Finally, OCC proposes to make clarifying and conforming changes to the Clearing Fund Methodology Policy (“Policy”), and Comprehensive Stress Testing & Clearing Fund Methodology, and Liquidity Risk Management Description (“Methodology Description”). <HD SOURCE="HD2">A. Modifications to the Allocation Weighting Formula</HD> As noted above, OCC proposes to replace the current allocation weighting (70 percent total risk, 15 percent open interest, and 15 percent volume) with a new weighting that aligns more closely with OCC's Clearing Fund sizing methodology (70 percent shortfall, <SU>14</SU> <FTREF/> 15 percent margin, <SU>15</SU> <FTREF/> and 15 percent volume). Given the proposed weighting scheme, the proposed methodology would be driven primarily by a Clearing Member's proportionate share of shortfalls ( <E T="03">i.e.,</E> the estimated stress loss exposure in excess of margin requirements) and would use the same Clearing Fund sizing scenarios to calculate these shortfalls. <SU>16</SU> <FTREF/> OCC believes, based on its analysis of different allocation weightings, that this specific allocation scheme generates a balance between the various risks captured by each component and would align the Clearing Fund allocation with the exposure driving the size of the Clearing Fund. <SU>17</SU> <FTREF/> OCC also proposes to align the lookback period for all allocation-related measures with the parameters used to size the Clearing Fund by moving from a one-month lookback to a three-month lookback. <FTNT> <SU>14</SU>  As proposed, OCC would define “shortfall” to mean “an estimated stress loss exposure in excess of margin amounts aggregated across all accounts of a Clearing Member determined using the Corporation's margin methodology and such add-on charges as may be determined pursuant to ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 32k characters. 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