Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving a Proposed Rule Change Relating to Clearing Member Trade Assignment Processing, 12934-12935 [E5-1143]

Download as PDF 12934 Federal Register / Vol. 70, No. 50 / Wednesday, March 16, 2005 / Notices now in force, but that might be below the continued listing standards proposed herein, the proposed 30-day measurement period prior to effectiveness would allow the Exchange sufficient time to provide early warnings to any issuer that would potentially be below compliance at the end of that period. If, at the end of the 30-trading-day measurement period, an issuer is below the increased requirements set forth above, the Exchange would formally notify the issuer of such non-compliance and provide it with an opportunity to present a business plan within 45 days of that notification advising the Exchange of definitive action the issuer would take to bring it into conformity with the increased requirements within an 18-month period. Finally, the Exchange is proposing minor technical and conforming changes to Sections 102.02C, 103.01B, 802.01A, 802.01B, and 802.01C of the Listed Company Manual. 2. Statutory Basis The Exchange believes that the proposed rule change satisfies the requirement under Section 6(b)(5) of the Act 21 that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The NYSE does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The NYSE did not solicit or receive written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding, or 21 15 U.S.C. 78f(b)(5). VerDate jul<14>2003 16:45 Mar 15, 2005 Jkt 205001 (ii) as to which the Exchange consents, the Commission will: (A) By order approve such proposed rule change; or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.22 J. Lynn Taylor, Assistant Secretary. [FR Doc. E5–1132 Filed 3–15–05; 8:45 am] BILLING CODE 8010–01–P IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSE–2004–20 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549–0609. All submissions should refer to File Number SR–NYSE–2004– 20. This file number should be included on the subject line if e-mail 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 Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSE– 2004–20 and should be submitted on or before April 6, 2005. PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51350; File No. SR-OCC– 2004–19] Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving a Proposed Rule Change Relating to Clearing Member Trade Assignment Processing March 9, 2005. On November 1, 2004, the Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change (File No. SROCC–2004–19) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934.1 Notice of the proposal was published in the Federal Register on February 7, 2005.2 No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change. I. Description The proposed rule change will add new clearing member trade assignment (‘‘CMTA’’) processing requirements to OCC’s By-Laws and Rules. Specifically, OCC will modify Article I (‘‘Definitions’’) of its By-Laws and Rules 401 and 403 to require clearing members that are parties to a CMTA arrangement involving CMTA customers to register with OCC certain customer identifiers that the clearing members use to process the CMTA transactions. The new rules will provide that an exchange transaction executed on behalf of a CMTA customer that is to be transferred by CMTA processing for clearance and settlement will be identified by a special indicator called a Customer CMTA Indicator in the matching trade information submitted with respect to that transaction.3 For each transaction marked with the 22 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 51120 (Feb. 1, 2005), 70 FR 6486. 3 The same indicator will be used by all options exchanges. OCC made various system changes to process this indicator and other information to be supplied with respect to CMTA customers’ transactions. Matching trade information submitted by the options exchanges will need to include this information that requires changes to the exchanges’ systems. 1 15 E:\FR\FM\16MRN1.SGM 16MRN1 Federal Register / Vol. 70, No. 50 / Wednesday, March 16, 2005 / Notices Customer CMTA Indicator, the matching trade information will also contain a ‘‘CMTA Customer Identifier,’’ which provides identification information about the CMTA customer on whose behalf a transaction was executed, and an ‘‘IB Identifier,’’ which provides identification information about the introducing broker that executed or arranged for the execution of such transaction.4 If a transaction is marked with the CMTA Indicator, OCC’s systems will verify against a database of registered identifiers that the CMTA Customer Identifier and the IB Identifier supplied as a part of the trade information match registered identifiers for purposes of the CMTA arrangement between the carrying clearing member and executing clearing member. This verification step will be in addition to the other verifications performed by OCC’s systems for CMTA processing. If a transaction is marked with a Customer CMTA Indicator but either the CMTA Customer Identifier or the IB Identifier is incomplete, inaccurate, or missing, OCC’s systems will treat the transaction as a failed CMTA and will cause the transaction to be cleared in the executing clearing member’s designated or default account in accordance with OCC Rule 403. Under the terms of a model agreement, which was developed by a working group of clearing members, options exchanges, and OCC, the firms will identify each CMTA covered customer. Each clearing member will then assign identifiers to their CMTA customers and introducing brokers. One clearing member will then register the assigned identifiers with OCC. OCC’s systems will require the other clearing member to approve the identifiers before they are submitted to OCC for registration. Identifiers will be effectively registered when they are accepted by OCC’s systems, subject to OCC’s right to reject an already registered identifier.5 OCC will retain the right to specify criteria applicable to the characters used to form identifiers for systemic reasons. II. Discussion Section 17A(b)(3)(F) of the Act 6 requires that the rules of a clearing agency be designed to promote the 4 If the ‘‘introducing broker’’ is also the ‘‘executing clearing member,’’ a separate IB Identifier will still be required. 5 Carrying and executing clearing members will be responsible to update their respective registrations of CMTA Customer Identifiers and IB Identifiers including registering any changes or deletions with respect thereto. 6 15 U.S.C. 78q–1(b)(3)(F). VerDate jul<14>2003 16:45 Mar 15, 2005 Jkt 205001 prompt and accurate clearance and settlement of securities transactions. The Commission finds that the proposed rule change is consistent with OCC’s obligations under Section 17A(b)(3)(F) because including identifying information about the CMTA customer and introducing broker to a transaction will make CMTA processing more transparent and should increase the regulatory and legal certainties with respect thereto. Specifically, the amendment to CTMA processing should better enable OCC members to make sure that transactions are properly sent to their accounts for clearing. III. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of Section 17A of the Act 7 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (File No. SR– OCC–2004–19) be, and hereby is, approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority.8 J. Lynn Taylor, Assistant Secretary. [FR Doc. E5–1143 Filed 3–15–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51352; File No. SR–Phlx– 2005–03] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto by the Philadelphia Stock Exchange, Inc. Relating to System Changes to the Exchange’s Automated Options Market (AUTOM) System March 9, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 10, 2005, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. PO 00000 7 15 U.S.C. 78q–1. CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 8 17 Frm 00100 Fmt 4703 Sfmt 4703 12935 On March 9, 2005, the Exchange filed Amendment No. 1 to the proposed rule change.3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend certain Exchange rules relating to system changes to the Philadelphia Stock Exchange Automated Options Market (‘‘AUTOM’’) System.4 The text of the proposed rule change is included below. Italics indicate new text; brackets indicate deletions. Rule 1080. Philadelphia Stock Exchange Automated Options Market (AUTOM) and Automatic Execution System (AUTO–X) (a)–(b) No change. (c) AUTO–X. * * * * * (i)–(iii) No change. (iv) Except as otherwise provided in this Rule, in the following circumstances, an order otherwise eligible for automatic execution will instead be manually handled by the specialist: (A) The Exchange’s disseminated market is crossed (i.e., 2[¥1/8].10 bid, 2 offer), or crosses the disseminated market of another options exchange; (B) The AUTOM System is not open for trading when the order is received (which is known as a pre-market order); (C) The disseminated market is produced during an opening or other rotation; (D) When the specialist posts a bid or offer that is better than the specialist’s own bid or offer (except with respect to orders eligible for ‘‘Book Sweep’’ as described in Rule 1080(c)(iii) above, and ‘‘Book Match’’ as described in Rule 1080(g)(ii) below); (E) If the Exchange’s bid or offer is not the NBBO; 3 See Form 19b-4 dated March 8, 2005 (‘‘Amendment No. 1’’). In Amendment No. 1, the Exchange clarified the proposed new functionality of the AUTOM System. Amendment No. 1 replaced the original filing in its entirety. 4 AUTOM is the Exchange’s electronic order delivery, routing, execution and reporting system, which provides for the automatic entry and routing of equity option and index option orders to the Exchange trading floor. Orders delivered through AUTOM may be executed manually, or certain orders are eligible for AUTOM’s automatic execution features, AUTO–X, Book Sweep and Book Match. Equity option and index option specialists are required by the Exchange to participate in AUTOM and its features and enhancements. Option orders entered by Exchange members into AUTOM are routed to the appropriate specialist limit order book on the Exchange trading floor. See Exchange Rule 1080. E:\FR\FM\16MRN1.SGM 16MRN1

Agencies

[Federal Register Volume 70, Number 50 (Wednesday, March 16, 2005)]
[Notices]
[Pages 12934-12935]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1143]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51350; File No. SR-OCC-2004-19]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving a Proposed Rule Change Relating to Clearing Member 
Trade Assignment Processing

March 9, 2005.
    On November 1, 2004, the Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change (File No. SR-OCC-2004-19) pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934.\1\ Notice of the 
proposal was published in the Federal Register on February 7, 2005.\2\ 
No comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 51120 (Feb. 1, 2005), 70 
FR 6486.
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I. Description

    The proposed rule change will add new clearing member trade 
assignment (``CMTA'') processing requirements to OCC's By-Laws and 
Rules. Specifically, OCC will modify Article I (``Definitions'') of its 
By-Laws and Rules 401 and 403 to require clearing members that are 
parties to a CMTA arrangement involving CMTA customers to register with 
OCC certain customer identifiers that the clearing members use to 
process the CMTA transactions. The new rules will provide that an 
exchange transaction executed on behalf of a CMTA customer that is to 
be transferred by CMTA processing for clearance and settlement will be 
identified by a special indicator called a Customer CMTA Indicator in 
the matching trade information submitted with respect to that 
transaction.\3\ For each transaction marked with the

[[Page 12935]]

Customer CMTA Indicator, the matching trade information will also 
contain a ``CMTA Customer Identifier,'' which provides identification 
information about the CMTA customer on whose behalf a transaction was 
executed, and an ``IB Identifier,'' which provides identification 
information about the introducing broker that executed or arranged for 
the execution of such transaction.\4\
---------------------------------------------------------------------------

    \3\ The same indicator will be used by all options exchanges. 
OCC made various system changes to process this indicator and other 
information to be supplied with respect to CMTA customers' 
transactions. Matching trade information submitted by the options 
exchanges will need to include this information that requires 
changes to the exchanges' systems.
    \4\ If the ``introducing broker'' is also the ``executing 
clearing member,'' a separate IB Identifier will still be required.
---------------------------------------------------------------------------

    If a transaction is marked with the CMTA Indicator, OCC's systems 
will verify against a database of registered identifiers that the CMTA 
Customer Identifier and the IB Identifier supplied as a part of the 
trade information match registered identifiers for purposes of the CMTA 
arrangement between the carrying clearing member and executing clearing 
member. This verification step will be in addition to the other 
verifications performed by OCC's systems for CMTA processing. If a 
transaction is marked with a Customer CMTA Indicator but either the 
CMTA Customer Identifier or the IB Identifier is incomplete, 
inaccurate, or missing, OCC's systems will treat the transaction as a 
failed CMTA and will cause the transaction to be cleared in the 
executing clearing member's designated or default account in accordance 
with OCC Rule 403.
    Under the terms of a model agreement, which was developed by a 
working group of clearing members, options exchanges, and OCC, the 
firms will identify each CMTA covered customer. Each clearing member 
will then assign identifiers to their CMTA customers and introducing 
brokers. One clearing member will then register the assigned 
identifiers with OCC. OCC's systems will require the other clearing 
member to approve the identifiers before they are submitted to OCC for 
registration. Identifiers will be effectively registered when they are 
accepted by OCC's systems, subject to OCC's right to reject an already 
registered identifier.\5\ OCC will retain the right to specify criteria 
applicable to the characters used to form identifiers for systemic 
reasons.
---------------------------------------------------------------------------

    \5\ Carrying and executing clearing members will be responsible 
to update their respective registrations of CMTA Customer 
Identifiers and IB Identifiers including registering any changes or 
deletions with respect thereto.
---------------------------------------------------------------------------

II. Discussion

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. The Commission 
finds that the proposed rule change is consistent with OCC's 
obligations under Section 17A(b)(3)(F) because including identifying 
information about the CMTA customer and introducing broker to a 
transaction will make CMTA processing more transparent and should 
increase the regulatory and legal certainties with respect thereto. 
Specifically, the amendment to CTMA processing should better enable OCC 
members to make sure that transactions are properly sent to their 
accounts for clearing.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \7\ and the 
rules and regulations thereunder.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2004-19) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-1143 Filed 3-15-05; 8:45 am]
BILLING CODE 8010-01-P
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