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Federal Register / Vol. 86, No. 209 / Tuesday, November 2, 2021 / Notices
Settlement Supervision Act of 2010
Clearing Supervision Act 1 and Rule 19b4n1i 2 under the Securities Exchange Act of 1934 Exchange Act or Act,3 notice is hereby given that on October 8, 2021, the Options Clearing Corporation OCC filed with the Securities and Exchange Commission SEC or Commission an advance notice as described in Items I, II and III below, which Items have been prepared primarily by OCC. The Commission is publishing this notice to solicit comments on the advance notice from interested persons and to extend the review period of the advance notice.
I. Clearing Agencys Statement of the Terms of Substance of the Advance Notice This advance notice is submitted in connection with a proposed adoption of Cloud infrastructure for OCCs new clearing, risk management, and data management applications with an ondemand network of configurable information technology resources running on virtual infrastructure hosted by a third party. The proposed changes are described in detail in Item II below.
All terms with initial capitalization not defined herein have the same meaning as set forth in OCCs By-Laws and Rules.4
II. Clearing Agencys Statement of the Purpose of, and Statutory Basis for, the Advance Notice In its filing with the Commission, OCC included statements concerning the purpose of and basis for the advance notice and discussed any comments it received on the advance notice. The text of these statements may be examined at the places specified in Item IV below.
OCC has prepared summaries, set forth in sections A and B below, of the most significant aspects of these statements.

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A Clearing Agencys Statement on Comments on the Advance Notice Received From Members, Participants or Others Written comments were not and are not intended to be solicited with respect to the advance notice and none have been received. OCC will notify the Commission of any written comments received by OCC.
1 12

U.S.C. 5465e1.
CFR 240.19b4n1i.
3 15 U.S.C. 78a et seq.
4 OCCs By-Laws and Rules can be found on OCCs public website: https www.theocc.com/
Company-Information/Documents-and-Archives/
By-Laws-and-Rules.
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B Advance Notices Filed Pursuant to Section 806e of the Payment, Clearing, and Settlement Supervision Act Description of the Proposed Change OCC is proposing to adopt an ondemand network of configurable information technology resources running on infrastructure Cloud or Cloud Infrastructure hosted by a third party Cloud Service Provider or CSP to support OCCs new core clearing, risk management, and data management applications. OCC will provision logically isolated sections of the Cloud Infrastructure that will provide it with the virtual equivalent of physical data center resources Virtual Private Cloud,5 including scalable resources that: i Handle various computationally intensive applications with load-balancing and resource management Compute; ii provide configurable storage Storage; and iii host network resources and services Network. Additionally, OCC will maintain an on-premises data center to enable OCC to support core clearing, risk management, and data management applications in the event of a multiregion outage of Compute, Storage, and Network services impacting OCC
operations at the CSP.
Background ENCORE, consisting of OCCs core clearing, risk management, and data management applications running in traditional data centers, was launched in 2000 and has operated as OCCs realtime processing engine receiving trade and post-trade data from a variety of sources on a transaction-by-transaction basis, maintaining clearing member positions, calculating margin and clearing fund requirements, and providing reporting to OCC staff, regulators, and clearing members. Two geographically diverse on-premises data centers located in Illinois and Texas house the Compute, Storage, and Network resources required to run all of these applications.6
5 The Virtual Private Cloud is the virtual equivalent of a traditional data center, albeit with the scalability benefits of the CSPs infrastructure.
The Virtual Private Cloud will provide OCC with a dedicated and secure space within the Cloud for OCC to operate.
6 OCC is not proposing changes to these services in connection with this Advance Notice. As appropriate, OCC will file proposals related to processing enhancements contemplated by the new core clearing, risk management, and data management applications separately. See, e.g., Securities Exchange Act Release No. 88654 Apr.
15, 2020, 85 FR 22197, 98 n.7 Apr. 21, 2020 File No. SROCC2020004 stating that a proposed rule change was designed to help facilitate the ability to run OCCs current clearing system, known as ENCORE, in parallel with a new clearing system on which OCC is working.

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As the platform running OCCs core applications for approximately twenty years, ENCORE has accommodated growth in average daily transaction volumes 7 and OCC has managed periods of extreme market volatility and stress, including during the 20072008
financial crisis and the COVID19
global pandemic of 202021, without incident. Nevertheless, as ENCORE was designed to operate in traditional onpremises data centers that require the acquisition and installation of additional hardware and systems software to accommodate scaled resources or new applications, the resiliency and scalability of the current infrastructure is less flexible than that offered by Cloud Infrastructure. OCCs objective is the retirement of ENCORE
and its replacement with a resilient solution that meets market participants needs and the regulatory expectations of a systemically important financial market utility SIFMU. Given advances in Cloud technology and information security since 2000, OCCs proposed adoption of Cloud Infrastructure will offer more resiliency, security, and scalability.
Proposed Changes Proposed Cloud Infrastructure. Cloud implementation will enable OCC to leverage the Compute, Storage, and Network capabilities of a CSP, supplemented with compatible thirdparty vendor solutions, to maintain a modular architecture with delineated domains that will result in i improved resiliency, ii enhanced security, and iii increased scalability for OCCs new core clearing, risk management, and data management applications.8
Additionally, OCC will maintain an onpremises data center to support core clearing, risk management, and data management services in the event of a multi-region outage at the CSP that impacts OCC operations.
i. Improved Resiliency As a SIFMU, OCC must ensure core applications on the Cloud Infrastructure have resiliency and recovery capabilities commensurate with OCCs 7 As of September 30, 2021, approximately 38,846,212 contracts per day were processed through the clearing and risk applications on ENCORE, an increase of over 34.6% of daily contract volume for the same date of the prior year, which itself represented approximately a 50%
increase of daily contract volume from the prior year.
8 OCC has separately submitted a request for confidential treatment to the Commission regarding a diagram that depicts the future state architecture following conclusion of the proposed Cloud Implementation, which OCC has provided in confidential Exhibit 3a to File No. SROCC2021
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