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2015 OCC Comment Letters

IRS and U.S. Treasury, December 17, 2015
Comments Regarding Code Sections 871(m) and 1441
In its role as the foundation for secure markets, OCC submitted a letter to the IRS and Treasury commenting on proposed regulations issued under Code sections 871(m) and 1441 relating to the exemption from withholding tax for dividend equivalents paid to qualified derivatives dealers (QDD). The letter requests that the concept of a QDD be modified so that it also applies when a Canadian clearing member is engaged in principal trading solely on behalf of the firm. The letter also requests clarification regarding an issue that could cause such members to face potential excessive withholding tax under the proposed regulations.

U.S. Senate and House of Representatives, November 19, 2015
OCC Comments on Recent Cyber Security Measures from Senate Bill
OCC, as an advocate for the listed options industry, joined a broad set of U.S. business organizations in sending a letter to key members of the U.S. Senate and House of Representatives regarding approval of recent cybersecurity measures in both houses that would implement a legal framework critical to encourage industry to voluntarily share cybersecurity information with the federal government. The letter asks the U.S. Congress, as they work to reconcile the two pieces of legislation, to remove Section 407 from the Senate bill. That section could provide the Department of Homeland Security with cybersecurity regulatory authority over critical infrastructure that is already regulated in this regard at the federal level by other agencies.

Bank of International Settlements and the European Commission, October 29, 2015
OCC Comments on Unintended Consequences of The Leverage Ratio
OCC joined other derivatives exchanges and clearing member firms in sending a letter to the Bank of International Settlements and the European Commission regarding a number of unintended consequences of the leverage ratio using the current exposure method (CEM). The letter says that without changes to the current CEM in the leverage calculation for exchange-traded derivative exposures, the application of the leverage ratio will result in vastly increased capital requirements for general clearing members as well as their underlying clients, which will fundamentally threaten these business models to the detriment of the liquidity and stability of European and global markets.

U.S. Department of Labor, September 24, 2015
Comments regarding ZRIN: 1210-ZA25 (the "BIC Exemption Proposal") and RIN 1210-AB32 (the "Fiduciary Proposal")
On behalf of the U.S. Securities Markets Coalition and TD Ameritrade, Inc., OCC submitted a comment letter to the Department of Labor to address the testimony given by Gary Katz, President and CEO of the International Securities Exchange. The comment letter requests a revision of the BIC Exemption Proposal to add exchange-traded options to the list of permissible asset types, to clarify that education or other support that does not rise to the level of a recommendation under FINRA rules would not cause firms to be consider fiduciaries under the Proposal, and to clarify that the process firms required to follow under FINRA and options exchange rules to allow customers to trade listed options would not cause such firms to be considered fiduciaries under the Proposal.

U.S. Department of Labor, August 13, 2015
U.S. Securities Markets Coalition Testifies before Department of Labor on Proposed Conflict of Interest Rule
Gary Katz, President and Chief Executive Officer of the International Securities Exchange, testified on August 13 before a U.S. Department of Labor hearing on behalf of the U.S. Securities Markets Coalition and the OCC on the department's proposed conflict of interest rule, saying that "the proposal would take away the current ability of individual investors to use listed options in their IRA accounts." Noting that individual investors are significant participants in the listed options market, Katz said that the Coalition is "deeply concerned about preserving the ability of these investors to trade options in their IRAs should they choose to do so."

U.S. Department of Labor, July 17, 2015
Comments regarding ZRIN: 1210-ZA25 (the "BIC Exemption Proposal") and RIN: 1210-AB32 (the "Fiduciary Proposal")
On behalf of the U.S. Securities Market Coalition, OCC submitted this letter addressing two related proposals issued by the U.S. Department of Labor: the "Fiduciary Proposal" and the "BIC Exemption Proposal." OCC and the Coalition said these proposals would take away the current ability of investors to use exchange-traded or listed options in IRA accounts. The letter noted that almost 25 percent of volume (and perhaps even more) on U.S. options exchanges is attributable to individual investors; that IRA account owners are increasingly using listed options in their accounts with the ultimate goal of increasing their retirement savings, and; approximately 15 percent of individual investor volume currently comes from IRA accounts. OCC and the Coalition offered recommendations to the DOL proposals.

Savings & Investment Working Group of the Senate Finance Committee, April 15, 2015
Comments of the U.S. Securities Markets Coalition Regarding Financial Products Tax Reform
OCC submitted this letter on behalf of the U.S. Securities Markets Coalition to Savings & Investment Working Group of the Senate Finance Committee expressing concerns regarding the proposal to mark to market exchange-traded options and associated investments in stock, and renewing the proposal for the adoption of a capital asset hedging regime that would achieve a clear reflection of income.

FSOC, March 9, 2015
OCC joins other SIFMUs in Supporting Prudent Risk Management and Transparency Standards for CCPs
OCC joins CME Group, DTCC and ICE in a letter to FSOC on the current strength of CCP regulation in the US. The joint letter responds to a letter from the bank advocacy group The Clearinghouse Association.

FRB, January 6, 2015
Letter on Listed Options Transactions
OCC submitted this letter on behalf of the U.S Securities Markets Coalition to the staff of the Federal Reserve Board (FRB) as a follow up to a meeting with the FRB staff on the impact of the risk weighted capital rules on the listed options market. In the letter, we provide details regarding typical trading practices in the listed options market. This information relates to our observation, discussed at the meeting, that the risk weighted capital rules may be particularly ill-suited when applied to the risk-limited trading strategies that characterize the listed options market. We then offer further thoughts in the letter regarding the potential for interpretive relief.