Self-Regulatory Organizations; National Securities Clearing Corporation; Order Granting Accelerated Approval of a Proposed Rule Change To Establish a Confirmation and Matching Service for Over-the-Counter U.S. Equity Options Transactions, 33570-33571 [E5-2932]
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<![CDATA[
33570
Federal Register / Vol. 70, No. 109 / Wednesday, June 8, 2005 / Notices
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
No. SR–ISE–2005–24 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Jonathan G. Katz, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE,
Washington, DC 20549–0609.
All submissions should refer to File
Number SR–ISE–2005–24. 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 Commissions
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
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the ISE. 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–ISE–2005–24 and should be
submitted by June 29, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.10
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2937 Filed 6–7–05; 8:45 am]
BILLING CODE 8010–01–P
10 17
CFR 200.30–3(a)(12).
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18:08 Jun 07, 2005
Jkt 205001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51745; File No. SR–NSCC–
2005–04]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Order Granting
Accelerated Approval of a Proposed
Rule Change To Establish a
Confirmation and Matching Service for
Over-the-Counter U.S. Equity Options
Transactions
May 26, 2005.
I. Introduction
On April 29, 2005, the National
Securities Clearing Corporation
(‘‘NSCC’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
proposed rule change File No. SR–
NSCC–2005–04 pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’).1 Notice of the proposal
was published in the Federal Register
on May 10, 2005.2 The comment period
ended on May 25, 2005. No comment
letters were received. For the reasons
discussed below, the Commission is
granting accelerated approval of the
proposed rule change.
II. Description
NSCC is permanently adding
Addendum M to its Rules and
Procedures to establish a confirmation
and matching service for over-thecounter (‘‘OTC’’) U.S. equity options
transactions. The service is called the
Equity Options Service.3
Currently, confirmation of trade
details among dealers and the dealers’
buy-side customers in the OTC equity
options market is supported largely by
faxes and telephone communications. It
is widely acknowledged by the industry
that this current operational
infrastructure, which depends upon
nonstandardized, manual processing,
results in excessive processing costs,
delays, and errors. The industry is
seeking to reduce the attendant
operational risks associated with OTC
equity options processing by automating
and standardizing the trade
confirmation process for OTC equity
options.
U.S.C. 78s(b)(1).
Exchange Act Release No. 51649 (May
3, 2005), 70 FR 24666.
3 The Commission approved NSCC’s Equity
Options Service on a temporary basis through May
31, 2005, so that NSCC could evaluate the
operations of the service and report its findings to
the Commission. Securities Exchange Act Release
No. 50652 (November 17, 2004), 69 FR 67377.
NSCC staff has communicated its findings to
Commission staff during various meetings and
conversations.
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2 Securities
Frm 00130
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Sfmt 4703
In response to similar conditions
prevailing in the credit default swaps
industry, The Depository Trust &
Clearing Corporation (‘‘DTCC’’), the
corporate parent of NSCC, created a
subsidiary, DTCC Deriv/SERV LLC
(‘‘Deriv/SERV’’), in 2003. Deriv/SERV
currently offers a confirmation and
matching service for OTC credit default
swaps transactions and the associated
cash flows. This service is now used by
approximately 75 entities, which
includes all of the largest OTC credit
default swaps dealers.
Deriv/SERV has developed a
confirmation and matching service for
OTC equity options transactions and the
associated cash flows (‘‘Deriv/SERV
Equity Options Service’’). The Deriv/
SERV Equity Options Service provides
for confirmation and matching either
between two OTC equity options dealers
or between an OTC equity options
dealer and its buy-side customer. Where
either the buyer or the seller of an OTC
equity option is a U.S. person and the
OTC equity option is issued by a U.S.
issuer (‘‘U.S. Equity Option
Transaction’’), NSCC provides
confirmation and matching services
through its Equity Options Service to
Deriv/SERV pursuant to a service
agreement between NSCC and Deriv/
SERV (‘‘Service Agreement’’).4 In
connection with the NSCC Equity
Options Service, Deriv/SERV has
become a Data Services Only Member of
NSCC.5
The Deriv/SERV Equity Options
Service is operated pursuant to the
operating procedures of Deriv/SERV
(‘‘Deriv/SERV Operating Procedures’’).
U.S. Equity Option Transactions are also
subject to Addendum M of NSCC’s
Rules and Procedures. Therefore, each
user of the Deriv/SERV Equity Options
Service enters into an agreement with
Deriv/SERV obligating the user to abide
by the terms of the Deriv/SERV
Operating Procedures and obligating
them to abide by Addendum M for any
U.S. Equity Option Transactions.
Pursuant to the Service Agreement,
NSCC has the right to require Deriv/
SERV to cause Deriv/SERV’s users to
abide by the terms of Addendum M. In
addition, pursuant to the Service
Agreement, NSCC and Deriv/SERV have
agreed that should the Commission
request that NSCC provide to the
Commission any information relating to
4 DTC has represented that the continued
processing of Deriv/SERV’s transactions will not be
a strain on the capacity of DTC’s systems. The host
computer and other automated facilities associated
with the NSCC Equity Options Service are provided
by DTC pursuant to service agreements between
NSCC and DTCC and between DTCC and DTC.
5 NSCC Rules and Procedures, Rule 31.
E:\FR\FM\08JNN1.SGM
08JNN1
Federal Register / Vol. 70, No. 109 / Wednesday, June 8, 2005 / Notices
the NSCC Equity Options Service,
Deriv/SERV will provide any such
information in its possession to NSCC
so that NSCC may provide such
information to the Commission.
NSCC is responsible neither for the
content of the messages transmitted
through the NSCC Equity Options
Service nor for any errors, omissions, or
delays that may occur relating to the
NSCC Equity Options Service in the
absence of gross negligence on NSCC’s
part. Both the Service Agreement and
the Deriv/SERV Operating Procedures
provide that NSCC has no liability in
connection with the NSCC Equity
Options Service in the absence of gross
negligence on NSCC’s part. The NSCC
Equity Options Service does not involve
netting or money settlement through the
facilities of NSCC, and it is a
nonguaranteed service of NSCC.6
Deriv/SERV will charge its users fees
in connection with the Deriv/SERV
Equity Options Service and pursuant to
the Service Agreement will make
payments to NSCC for the services that
NSCC provides. NSCC will file
proposed rule changes under Section
19(b) of the Act for fees that NSCC
charges to Deriv/SERV for the NSCC
Equity Options Service and for any
changes made by NSCC to the Equity
Options Service.
III. Discussion
Section 17A(b)(3)(F) of the Act
requires that the rules of a clearing
agency be designed to promote the
prompt and accurate clearance and
settlement of securities transactions.7
The Commission finds the proposed
rule change to be consistent with
Section 17A(b)(3)(F) of the Act because
the NSCC Equity Options Service
should provide for the prompt and
accurate clearance and settlement of
U.S. OTC equity option transactions by
facilitating the transmission of
automated, standardized information on
a centralized communications platform.
This should reduce processing errors,
delays, and risks that are typically
associated with manual processes.
NSCC has requested that the
Commission approve the proposed rule
change prior to the thirtieth day after
6 The NSCC Equity Options Service is a
nonguaranteed service limited to the matching and
communication of information and does not involve
settlement of securities transactions or funds
through the facilities of NSCC. In its Matching
Release, the Commission concluded that matching
(i.e., the ‘‘comparison of data respecting the terms
of settlement of securities transactions’’) constitutes
a clearing agency function within the meaning of
Section 3(a)(23)(A) of the Exchange Act. Securities
Exchange Act Release No. 39829 (April 6, 1998), 63
FR 17943 [File No. S7–10–98].
7 15 U.S.C. 78q–1(b)(3)(F).
VerDate jul<14>2003
18:08 Jun 07, 2005
Jkt 205001
the date of publication of notice of the
filing. The Commission finds good
cause for approving the proposed rule
change prior to the thirtieth day after
the date of publication of the notice of
the filing because the Commission’s
current approval of NSCC’s Equity
Options Service expires May 31, 2005.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and in
particular Section 17A of the Act 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–
NSCC–2005–04) be and hereby is
approved on an accelerated basis.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.8
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–2932 Filed 6–7–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51747; File No. SR–NYSE–
2005–26]
Self-Regulatory Organizations; New
York Stock Exchange, Inc.; Notice of
Filing of Proposed Rule Change and
Amendment No. 1 Thereto to Extend
the Closing Time of Crossing Session
II and to Amend its Crossing Sessions
III and IV to Eliminate the Share Size
Restriction and the Process by Which
an Order is Executed if There is No
Execution Prior to 4 p.m.
May 26, 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 April 8,
2005, the New York Stock Exchange,
Inc. (‘‘NYSE’’ or ‘‘Exchange’’) submitted
to 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 NYSE. On
May 19, 2005, NYSE filed Amendment
No. 1 to the proposed rule change.3 The
Commission is publishing this notice to
solicit comments on the proposed rule
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 1 made clarifying changes to
the Purpose section of the filing.
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8 17
1 15
Frm 00131
Fmt 4703
Sfmt 4703
33571
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The NYSE proposes to amend its OffHours Trading Facility (‘‘OHTF’’)—
Crossing Sessions II, III, and IV, in
particular. The Exchange proposes to
extend the closing time of Crossing
Session II from 6:15 p.m. to 6:30 p.m.
The NYSE also proposes to amend rules
governing Crossing Sessions III and IV
to eliminate the 10,000 share size
restriction and the process by which an
order is executed if there is no
execution prior to 4 p.m. The text of the
proposed rule change is available on the
NYSE’s Web site (https://www.nyse.com),
at the NYSE’s principal office, 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
NYSE 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
Background
The Exchange’s OHTF consists of four
sessions. Crossing Session I permits the
execution, at the Exchange’s closing
price, of single-stock, single-sided
closing price orders and crosses of
single-stock, closing price buy and sell
orders. Crossing Session II provides an
opportunity for members and member
organizations to cross program trading
orders in NYSE-listed securities on the
Exchange between 4 p.m. and 6:15 p.m.,
based on the aggregate price of the
program. Matched buy and sell orders
for a minimum of 15 NYSE-listed stocks
that have a minimum dollar value of $1
million may be transmitted to the
Exchange for execution in Crossing
Session II. These orders are transmitted
via the Exchange’s Electronic Filing
Platform, detailing the total number of
stocks, total number of shares, and total
dollar value.
E:\FR\FM\08JNN1.SGM
08JNN1
]]>Agencies
[Federal Register Volume 70, Number 109 (Wednesday, June 8, 2005)]
[Notices]
[Pages 33570-33571]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-2932]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51745; File No. SR-NSCC-2005-04]
Self-Regulatory Organizations; National Securities Clearing
Corporation; Order Granting Accelerated Approval of a Proposed Rule
Change To Establish a Confirmation and Matching Service for Over-the-
Counter U.S. Equity Options Transactions
May 26, 2005.
I. Introduction
On April 29, 2005, the National Securities Clearing Corporation
(``NSCC'') filed with the Securities and Exchange Commission
(``Commission'') proposed rule change File No. SR-NSCC-2005-04 pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'').\1\ Notice of the proposal was published in the Federal
Register on May 10, 2005.\2\ The comment period ended on May 25, 2005.
No comment letters were received. For the reasons discussed below, the
Commission is granting accelerated approval of the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 51649 (May 3, 2005), 70
FR 24666.
---------------------------------------------------------------------------
II. Description
NSCC is permanently adding Addendum M to its Rules and Procedures
to establish a confirmation and matching service for over-the-counter
(``OTC'') U.S. equity options transactions. The service is called the
Equity Options Service.\3\
---------------------------------------------------------------------------
\3\ The Commission approved NSCC's Equity Options Service on a
temporary basis through May 31, 2005, so that NSCC could evaluate
the operations of the service and report its findings to the
Commission. Securities Exchange Act Release No. 50652 (November 17,
2004), 69 FR 67377. NSCC staff has communicated its findings to
Commission staff during various meetings and conversations.
---------------------------------------------------------------------------
Currently, confirmation of trade details among dealers and the
dealers' buy-side customers in the OTC equity options market is
supported largely by faxes and telephone communications. It is widely
acknowledged by the industry that this current operational
infrastructure, which depends upon nonstandardized, manual processing,
results in excessive processing costs, delays, and errors. The industry
is seeking to reduce the attendant operational risks associated with
OTC equity options processing by automating and standardizing the trade
confirmation process for OTC equity options.
In response to similar conditions prevailing in the credit default
swaps industry, The Depository Trust & Clearing Corporation (``DTCC''),
the corporate parent of NSCC, created a subsidiary, DTCC Deriv/SERV LLC
(``Deriv/SERV''), in 2003. Deriv/SERV currently offers a confirmation
and matching service for OTC credit default swaps transactions and the
associated cash flows. This service is now used by approximately 75
entities, which includes all of the largest OTC credit default swaps
dealers.
Deriv/SERV has developed a confirmation and matching service for
OTC equity options transactions and the associated cash flows (``Deriv/
SERV Equity Options Service''). The Deriv/SERV Equity Options Service
provides for confirmation and matching either between two OTC equity
options dealers or between an OTC equity options dealer and its buy-
side customer. Where either the buyer or the seller of an OTC equity
option is a U.S. person and the OTC equity option is issued by a U.S.
issuer (``U.S. Equity Option Transaction''), NSCC provides confirmation
and matching services through its Equity Options Service to Deriv/SERV
pursuant to a service agreement between NSCC and Deriv/SERV (``Service
Agreement'').\4\ In connection with the NSCC Equity Options Service,
Deriv/SERV has become a Data Services Only Member of NSCC.\5\
---------------------------------------------------------------------------
\4\ DTC has represented that the continued processing of Deriv/
SERV's transactions will not be a strain on the capacity of DTC's
systems. The host computer and other automated facilities associated
with the NSCC Equity Options Service are provided by DTC pursuant to
service agreements between NSCC and DTCC and between DTCC and DTC.
\5\ NSCC Rules and Procedures, Rule 31.
---------------------------------------------------------------------------
The Deriv/SERV Equity Options Service is operated pursuant to the
operating procedures of Deriv/SERV (``Deriv/SERV Operating
Procedures''). U.S. Equity Option Transactions are also subject to
Addendum M of NSCC's Rules and Procedures. Therefore, each user of the
Deriv/SERV Equity Options Service enters into an agreement with Deriv/
SERV obligating the user to abide by the terms of the Deriv/SERV
Operating Procedures and obligating them to abide by Addendum M for any
U.S. Equity Option Transactions. Pursuant to the Service Agreement,
NSCC has the right to require Deriv/SERV to cause Deriv/SERV's users to
abide by the terms of Addendum M. In addition, pursuant to the Service
Agreement, NSCC and Deriv/SERV have agreed that should the Commission
request that NSCC provide to the Commission any information relating to
[[Page 33571]]
the NSCC Equity Options Service, Deriv/SERV will provide any such
information in its possession to NSCC so that NSCC may provide such
information to the Commission.
NSCC is responsible neither for the content of the messages
transmitted through the NSCC Equity Options Service nor for any errors,
omissions, or delays that may occur relating to the NSCC Equity Options
Service in the absence of gross negligence on NSCC's part. Both the
Service Agreement and the Deriv/SERV Operating Procedures provide that
NSCC has no liability in connection with the NSCC Equity Options
Service in the absence of gross negligence on NSCC's part. The NSCC
Equity Options Service does not involve netting or money settlement
through the facilities of NSCC, and it is a nonguaranteed service of
NSCC.\6\
---------------------------------------------------------------------------
\6\ The NSCC Equity Options Service is a nonguaranteed service
limited to the matching and communication of information and does
not involve settlement of securities transactions or funds through
the facilities of NSCC. In its Matching Release, the Commission
concluded that matching (i.e., the ``comparison of data respecting
the terms of settlement of securities transactions'') constitutes a
clearing agency function within the meaning of Section 3(a)(23)(A)
of the Exchange Act. Securities Exchange Act Release No. 39829
(April 6, 1998), 63 FR 17943 [File No. S7-10-98].
---------------------------------------------------------------------------
Deriv/SERV will charge its users fees in connection with the Deriv/
SERV Equity Options Service and pursuant to the Service Agreement will
make payments to NSCC for the services that NSCC provides. NSCC will
file proposed rule changes under Section 19(b) of the Act for fees that
NSCC charges to Deriv/SERV for the NSCC Equity Options Service and for
any changes made by NSCC to the Equity Options Service.
III. Discussion
Section 17A(b)(3)(F) of the Act requires that the rules of a
clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions.\7\ The Commission
finds the proposed rule change to be consistent with Section
17A(b)(3)(F) of the Act because the NSCC Equity Options Service should
provide for the prompt and accurate clearance and settlement of U.S.
OTC equity option transactions by facilitating the transmission of
automated, standardized information on a centralized communications
platform. This should reduce processing errors, delays, and risks that
are typically associated with manual processes.
NSCC has requested that the Commission approve the proposed rule
change prior to the thirtieth day after the date of publication of
notice of the filing. The Commission finds good cause for approving the
proposed rule change prior to the thirtieth day after the date of
publication of the notice of the filing because the Commission's
current approval of NSCC's Equity Options Service expires May 31, 2005.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular Section 17A of the Act 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-NSCC-2005-04) be and hereby
is approved on an accelerated basis.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2932 Filed 6-7-05; 8:45 am]
BILLING CODE 8010-01-P
