Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 to Update Its By-Laws and Rules Pertaining to the Settlement of Exercised Cross-Rate Foreign Currency Options, 36993-36994 [E5-3330]

Download as PDF Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has become effective upon filing pursuant to Section 19(b)(3)(A) of the Act 4 and Rule 19b-4(f) 5 thereunder because it does not significantly affect the respective rights or obligations of the clearing agency or persons using the service and does not adversely affect the safeguarding of securities or funds in the custody or control of NSCC or for which it is responsible. At any time within sixty days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml) or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NSCC–2005–06 on the subject line. Paper comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549–9303. All submissions should refer to File Number SR–NSCC–2005–06. 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 (http://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, 100 F Street, NE, Washington, DC 20549. Copies of such filings also will be available for inspection and copying at the principal office of NSCC and on NSCC’s Web site at http:// www.nscc.com. 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–NSCC– 2005–06 and should be submitted on or before July 18, 2005. For the Commission by the Division of Market Regulation, pursuant to delegated authority.6 Jill M. Peterson, Assistant Secretary. [FR Doc. E5–3328 Filed 6–24–05; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–51861 No. SR–OCC–2005– 07] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 to Update Its ByLaws and Rules Pertaining to the Settlement of Exercised Cross-Rate Foreign Currency Options June 16, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on May 13, 2005, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) and on June 14, 2005, amended 2 the proposed rule change 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 rule change from interested parties. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The rule change updates OCC’s ByLaws and Rules pertaining to the 6 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 The amendment corrected an erroneous crossreference in the proposed rule. 36993 settlement of exercised cross-rate foreign currency options (‘‘Cross-Rate Options’’) in connection with the recent installation of that portion of OCC’s ENCORE clearing system that processes those settlements. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, OCC 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. OCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.3 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The purpose of the proposed rule change is to update OCC’s By-Laws and Rules pertaining to the settlement of Cross-Rate Options in connection with the recent installation of OCC’s ENCORE clearing system that processes those settlements. The installation, which occurred in April, 2005, converted existing Cross-Rate Options processing to the ENCORE technology with only a few variations. OCC also wishes to update its Rules by eliminating detail that is more appropriately included in operational procedures than in OCC’s rulebook and by making a few other changes described below to reflect OCC’s experience and certain developments since the Cross-Rate Options rules initially were adopted. As proposed to be amended, these provisions of the ByLaws and Rules apply equally to processing under both ENCORE and its predecessor system. Overview of the Exercise Settlement Process for Cross-Rate Options As set forth in revised Rules 2105 and 2106, following the assignment of exercise notices with respect to CrossRate Options, the gross settlement obligations for each currency arising from obligations to pay and rights to receive trading currencies and underlying currencies are calculated for all accounts with a particular clearing number. Those gross amounts are netted down to a single pay or collect amount for each currency for all such accounts. 1 15 4 15 5 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). VerDate jul<14>2003 18:11 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 3 The Commission has modified the text of the summaries prepared by OCC. E:\FR\FM\27JNN1.SGM 27JNN1 36994 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Notices In the event that two or more settlements in a currency arising from different exercise/assignment dates settle on the same date, those settlements are also netted. If such processing nets out all settlement obligations for a currency then such obligations are deemed discharged. Settlement obligations arising from multiple clearing numbers controlled by the same clearing member are not netted against each other. To the extent a settlement obligation remains, OCC makes available to each clearing member that is obligated to pay a currency (‘‘Paying Clearing Member’’) and each clearing member that is entitled to receive a currency payment (‘‘Collecting Clearing Member’’) a report showing the net amount of the currency they are obligated to pay or entitled to receive. On the exercise settlement date, OCC drafts the bank account of each Paying Clearing Member in the amount of the foreign currency there are obligated to pay (‘‘Payment Amount’’) and then pays the Payment Amount to each Collecting Clearing Member in such amounts as they are entitled to receive. Description of the Specific Rule Changes The principal changes are to Rules 2105 through 2107. Rules 2105 and 2106 have been substantially redrafted to provide for the settlement process described above. Rule 2107, which described an alternate settlement procedure known as Delivery versus Payment (‘‘DVP’’), is removed because there are no systems or banking mechanisms to support DVP settlements for Cross-Rate Options. Rule 2104(b) is being amended to grant the Chairman, Management Vice Chairman, President, and any delegate of such officers the authority to advance or postpone the settlement date for exercises of Cross-Rate Options. This change is being implemented because it may be impractical to convene a Board meeting in time to take action on the day that unusual conditions arise and because OCC needs the flexibility to respond quickly to events affecting the exercise settlement date for Cross-Rate Options.4 Certain non-substantive changes are made to Rules 602(f)(2), 2102, 2108–10, and 2112 and to Article XX, Section 1 4 Similar changes were recently implemented to Rule 903(b) (‘‘Obligations to Deliver’’) and Rule 1604(b) (‘‘Exercise Settlement Date for Foreign Currency Options’’). Securities Exchange Act Release Nos. 34–47629 (Apr. 3, 2003), 68 FR 17715 (Apr. 10, 2003) [File No. SR–OCC–2002–21] and 34–49987 (July 8, 2004), 69 FR 42490 (July 15, 2004) [File No. SR–OCC–2004–07]. VerDate jul<14>2003 18:11 Jun 24, 2005 Jkt 205001 of the By-laws to correct crossreferences and to conform to terminology used elsewhere in the revised rules. OCC believes the rule change is consistent with Section 17A of the Act,5 as amended, because the changes are designed to promote the prompt and accurate clearance and settlement of transactions in and exercises of crossrate foreign currency options and to assure safeguarding of securities and funds in the custody and control of OCC. (B) Self-Regulatory Organization’s Statement on Burden on Competition OCC does not believe that the proposed rule change would impose any burden on competition. (C) Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were not and are not intended to be solicited with respect to the proposed rule change and none have been received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has become effective upon filing pursuant to Section 19(b)(3)(A) of the Act 6 and Rule 19b–4(f)(4) 7 thereunder because it does not adversely affect the safeguarding of securities or funds in the custody or control of OCC or for which it is responsible and does not significantly affect the respective rights or obligations of the clearing agency or persons using the service. At any time within sixty days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: PO 00000 U.S.C. 78q–1. U.S.C. 78s(b)(3)(A). 7 17 CFR 240.19b–4(f)(4). Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml) or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–OCC–2005–07 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549–9303. All submissions should refer to File Number SR–OCC–2005–07. 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 (http://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, 100 F Street, NE, Washington, DC 20549. Copies of such filings also will be available for inspection and copying at the principal office of OCC and on OCC’s Web site at http:// www.optionsclearing.com. 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–OCC–2005–07 and should be submitted on or before July 18, 2005. For the Commission by the Division of Market Regulation, pursuant to delegated authority.8 Jill M. Peterson, Assistant Secretary. [FR Doc. E5–3330 Filed 6–24–05; 8:45 am] BILLING CODE 8010–01–P 5 15 6 15 Frm 00079 Fmt 4703 Sfmt 4703 8 17 E:\FR\FM\27JNN1.SGM CFR 200.30–3(a)(12). 27JNN1

Agencies

[Federal Register Volume 70, Number 122 (Monday, June 27, 2005)]
[Notices]
[Pages 36993-36994]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-3330]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51861 No. SR-OCC-2005-07]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 to Update Its By-Laws and Rules Pertaining to the 
Settlement of Exercised Cross-Rate Foreign Currency Options

June 16, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 13, 2005, The Options 
Clearing Corporation (``OCC'') filed with the Securities and Exchange 
Commission (``Commission'') and on June 14, 2005, amended \2\ the 
proposed rule change 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 rule change from interested 
parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ The amendment corrected an erroneous cross-reference in the 
proposed rule.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The rule change updates OCC's By-Laws and Rules pertaining to the 
settlement of exercised cross-rate foreign currency options (``Cross-
Rate Options'') in connection with the recent installation of that 
portion of OCC's ENCORE clearing system that processes those 
settlements.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, OCC 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. OCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\3\
---------------------------------------------------------------------------

    \3\ The Commission has modified the text of the summaries 
prepared by OCC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to update OCC's By-Laws 
and Rules pertaining to the settlement of Cross-Rate Options in 
connection with the recent installation of OCC's ENCORE clearing system 
that processes those settlements. The installation, which occurred in 
April, 2005, converted existing Cross-Rate Options processing to the 
ENCORE technology with only a few variations. OCC also wishes to update 
its Rules by eliminating detail that is more appropriately included in 
operational procedures than in OCC's rulebook and by making a few other 
changes described below to reflect OCC's experience and certain 
developments since the Cross-Rate Options rules initially were adopted. 
As proposed to be amended, these provisions of the By-Laws and Rules 
apply equally to processing under both ENCORE and its predecessor 
system.
Overview of the Exercise Settlement Process for Cross-Rate Options
    As set forth in revised Rules 2105 and 2106, following the 
assignment of exercise notices with respect to Cross-Rate Options, the 
gross settlement obligations for each currency arising from obligations 
to pay and rights to receive trading currencies and underlying 
currencies are calculated for all accounts with a particular clearing 
number. Those gross amounts are netted down to a single pay or collect 
amount for each currency for all such accounts.

[[Page 36994]]

In the event that two or more settlements in a currency arising from 
different exercise/assignment dates settle on the same date, those 
settlements are also netted. If such processing nets out all settlement 
obligations for a currency then such obligations are deemed discharged. 
Settlement obligations arising from multiple clearing numbers 
controlled by the same clearing member are not netted against each 
other.
    To the extent a settlement obligation remains, OCC makes available 
to each clearing member that is obligated to pay a currency (``Paying 
Clearing Member'') and each clearing member that is entitled to receive 
a currency payment (``Collecting Clearing Member'') a report showing 
the net amount of the currency they are obligated to pay or entitled to 
receive.
    On the exercise settlement date, OCC drafts the bank account of 
each Paying Clearing Member in the amount of the foreign currency there 
are obligated to pay (``Payment Amount'') and then pays the Payment 
Amount to each Collecting Clearing Member in such amounts as they are 
entitled to receive.
Description of the Specific Rule Changes
    The principal changes are to Rules 2105 through 2107. Rules 2105 
and 2106 have been substantially redrafted to provide for the 
settlement process described above. Rule 2107, which described an 
alternate settlement procedure known as Delivery versus Payment 
(``DVP''), is removed because there are no systems or banking 
mechanisms to support DVP settlements for Cross-Rate Options.
    Rule 2104(b) is being amended to grant the Chairman, Management 
Vice Chairman, President, and any delegate of such officers the 
authority to advance or postpone the settlement date for exercises of 
Cross-Rate Options. This change is being implemented because it may be 
impractical to convene a Board meeting in time to take action on the 
day that unusual conditions arise and because OCC needs the flexibility 
to respond quickly to events affecting the exercise settlement date for 
Cross-Rate Options.\4\
---------------------------------------------------------------------------

    \4\ Similar changes were recently implemented to Rule 903(b) 
(``Obligations to Deliver'') and Rule 1604(b) (``Exercise Settlement 
Date for Foreign Currency Options''). Securities Exchange Act 
Release Nos. 34-47629 (Apr. 3, 2003), 68 FR 17715 (Apr. 10, 2003) 
[File No. SR-OCC-2002-21] and 34-49987 (July 8, 2004), 69 FR 42490 
(July 15, 2004) [File No. SR-OCC-2004-07].
---------------------------------------------------------------------------

    Certain non-substantive changes are made to Rules 602(f)(2), 2102, 
2108-10, and 2112 and to Article XX, Section 1 of the By-laws to 
correct cross-references and to conform to terminology used elsewhere 
in the revised rules.
    OCC believes the rule change is consistent with Section 17A of the 
Act,\5\ as amended, because the changes are designed to promote the 
prompt and accurate clearance and settlement of transactions in and 
exercises of cross-rate foreign currency options and to assure 
safeguarding of securities and funds in the custody and control of OCC.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any 
burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    Written comments were not and are not intended to be solicited with 
respect to the proposed rule change and none have been received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(4) \7\ 
thereunder because it does not adversely affect the safeguarding of 
securities or funds in the custody or control of OCC or for which it is 
responsible and does not significantly affect the respective rights or 
obligations of the clearing agency or persons using the service. At any 
time within sixty days of the filing of the proposed rule change, the 
Commission may summarily abrogate such rule change if it appears to the 
Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml) or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-OCC-2005-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE, 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-OCC-2005-07. 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 (http://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, 100 F Street, 
NE, Washington, DC 20549. Copies of such filings also will be available 
for inspection and copying at the principal office of OCC and on OCC's 
Web site at http://www.optionsclearing.com. 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-OCC-2005-07 and should be submitted on 
or before July 18, 2005.

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

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

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3330 Filed 6-24-05; 8:45 am]
BILLING CODE 8010-01-P