Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Allocations Processing, 4951-4953 [E6-1085]
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Federal Register / Vol. 71, No. 19 / Monday, January 30, 2006 / Notices
Number SR–ISE–2005–50 and should be
submitted by February 21, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Nancy M. Morris,
Secretary.
[FR Doc. E6–1087 Filed 1–27–06; 8:45 am]
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53151; File No. SR–OCC–
2005–21]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change Relating to
Allocations Processing
January 19, 2006.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
December 13, 2004, The Options
Clearing Corporation (‘‘OCC’’) 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 primarily by OCC.
OCC filed the proposed rule change
pursuant to section 19(b)(3)(A) of the
Act 2 whereby the proposal was effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
cprice-sewell on PROD1PC66 with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change adopts new
Rule 405, Allocations, to govern the
processing of post-trade allocation
instructions for commodity contracts
that are subject to the exclusive
jurisdiction of the Commodity Futures
Trading Commission (‘‘CFTC’’) that are
submitted by clearing members through
a new system OCC plans to install in
January 2006. The rule change also
makes conforming by-law and rule
changes, including the addition of
certain new definitions.
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
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78s(b)(3)(A)(ii).
1 15
VerDate Aug<31>2005
14:07 Jan 27, 2006
Jkt 208001
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 such statements.3
OCC’s new allocation system will
permit the allocation of positions in
securities options, security futures,
commodity futures, and options on
futures. In order to permit use of the
allocation system, when installed, for
commodity contracts cleared by OCC
that are subject to the exclusive
jurisdiction of the CFTC, OCC is filing
the proposed rule change under section
19(b)(3)(A) for immediate effectiveness.
However, new Rule 405 includes
Interpretation and Policy .02 which
states that the system may not be used
for securities options or security futures
until the Commission has issued an
approval order with respect to Rule 405.
OCC filed a separate proposed rule
change under section 19(b)(2), File No.
SR–OCC–2005–22, that would adopt
Rule 405 for use in allocating positions
in contracts subject to the Commission’s
jurisdiction.4
OCC plans to provide clearing
members with a centralized system for
processing allocation or ‘‘give-up’’
instructions across all exchanges for
which OCC provides clearing services.
Allocations are post-trade instructions
entered by one clearing member (i.e., an
authorized ‘‘executing’’ or ‘‘giving-up’’
clearing member) that direct a
transaction or position to the account of
another clearing member (i.e., the
‘‘carrying’’ or ‘‘given-up’’ clearing
member). OCC’s centralized system will
enhance OCC’s service offerings and
will provide efficiencies to clearing
members.
Post-trade allocations of securities
options are currently processed through
OCC’s Clearing Member Trade
Assignment (‘‘CMTA’’) functionality,
which normally causes a transaction to
automatically be moved into an account
of the carrying clearing member so long
as the executing and carrying clearing
members have an effective CMTA
arrangement registered with OCC for the
exchange submitting the matching trade
3 The Commission has modified parts of these
statements.
4 If the Commission approves proposed rule
change SR–OCC–2005–22, OCC would delete
Interpretation and Policy .02.
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
4951
information for that transaction.5 Once
Rule 405 is approved by the
Commission for purposes of allocating
positions in securities options, clearing
members will be able to elect either to
continue to use the existing CMTA
system or to use the new allocation
system for securities options.
For most commodity futures cleared
through OCC, post-trade allocations are
currently processed through The
Clearing Corporation’s (‘‘CCorp’’) ‘‘giveup’’ system, which requires the givenup clearing member to affirmatively
accept a transaction.6 OCC’s allocation
system will enable clearing members to
process futures ‘‘give-ups’’ without
going through the CCorp system.
New Rule 405 will govern the
processing of allocation instructions and
will operate as follows. Transactions
will first clear in the designated account
of the giving-up clearing member.
Instructions to allocate positions may be
submitted either through an exchange’s
system for providing matching trade
information to OCC or through OCC’s
clearing system, ENCORE. In either
case, if the given-up and giving-up
clearing members are parties to an
allocation agreement that has been
registered with OCC, OCC will
automatically allocate the positions
resulting from an allocation instruction
to a designated account of the given-up
clearing member without further action
by the clearing members.7 If the clearing
members are not parties to a registered
allocation agreement, OCC will not
effect the allocation instruction until the
given-up clearing member gives OCC
notice of its affirmative acceptance of
the allocated positions. (In contrast, the
CMTA system does not allow for
acceptance of allocated positions
without a registered CMTA agreement.)
If the given-up clearing member does
not give OCC notice of such acceptance
by an OCC-specified deadline, the
allocation instruction will not be
processed, and the positions will remain
in the account of the giving-up clearing
member, which will remain obligated
on those positions.
A given-up clearing member will be
responsible for appropriately allocated
positions. Given-up positions are moved
to the given-up clearing member’s
account at the premium price in the
case of options or at the contract price
in the case of futures at which the
positions were established by the
executing clearing member. Positions
5 See
OCC Rule 403.
OCC Rule 404.
7 Unlike CMTAs, clearing members will not be
required to register their allocation arrangement by
exchange.
6 See
E:\FR\FM\30JAN1.SGM
30JAN1
4952
Federal Register / Vol. 71, No. 19 / Monday, January 30, 2006 / Notices
cprice-sewell on PROD1PC66 with NOTICES
that are allocated on an intraday basis
will not be reflected in position reports
until the following business day.
However, OCC will take those positions
into account in processing any intraday
settlements authorized by its By-laws
and Rules, including intraday margin
settlements. A given-up clearing
member may enter an instruction to
reverse an allocation that was accepted
in error. If the given-up and giving-up
clearing members are parties to a
registered allocation agreement, the
reversing instruction will be
automatically processed. If the clearing
members are not parties to a registered
allocation agreement, the reversing
instruction must be affirmatively
accepted by the original giving-up
clearing member.
Allocation instructions may be for a
single position (i.e., a position in a given
series established at a single price) or for
a group of positions (i.e., positions in
the same series established at different
prices). Allocation instructions for
grouped positions must be submitted
through ENCORE. For single positions,
the instruction must identify the
contract quantity, series, and price as
specified in the matching trade
information. For grouped positions, the
allocation instruction must provide the
same information, but the price may be
an average price if not prohibited under
exchange rules and applicable law.8 For
the convenience of clearing members,
OCC’s system will produce a suggested
average price for grouped allocations
that clearing members may adopt for
purposes of processing the instruction.
Registration of allocation agreements
may be terminated either by mutual
agreement or unilaterally. Mutually
terminated registrations will be effected
immediately in OCC’s system.
Unilaterally terminated registrations
will be terminated in OCC’s system
effective as of 8 a.m. CST the business
day after the termination notice is
received by OCC and the other clearing
member. These are the same standards
currently applied to terminating CMTA
arrangements under OCC Rule 403.
Following termination of registration of
an allocation agreement, an allocated
position may be allocated to a given-up
8 Average pricing is permitted under the
Commodity Exchange Act in certain circumstances.
In those circumstances, a clearing member may
instruct OCC to use the average price in clearing
and settling the trades. Clearing members have
requested that OCC provide functionality that
would also permit positions in securities options
and security futures to be allocated at an average
price. Accordingly, OCC has developed its
allocation system to accommodate the use of such
prices for security options and futures, provided
that such use does not violate exchange rules or
applicable law.
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14:07 Jan 27, 2006
Jkt 208001
clearing member only upon its
affirmative acceptance.
Other changes made to OCC’s By-laws
and Rules reflect the adoption of Rule
405, including the addition of Given-Up
Clearing Member and Giving-Up
Clearing Member as defined terms in
Article I, section 1.
OCC believes that the proposed rule
change is consistent with section 17A of
the Act because it is designed to ensure
that positions resulting from exchange
transactions are carried in the
appropriate clearing member account,
which is the account of the clearing
broker for the investor for whom such
transactions were executed and thereby
promotes the prompt and accurate
clearance and settlement of transactions
in derivative contracts, fosters
cooperation and coordination with
persons engaged in the clearance and
settlement of such transactions, removes
impediments to and perfects a
mechanism of a national system for the
prompt and accurate clearance and
settlement of such transactions, and, in
general, protects investors and the
public interest. The proposed rule
change is not inconsistent with the
existing rules of OCC, including any
other rules proposed to be amended.
(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 pursuant to section
19(b)(3)(A)(iii) of the Act 9 and Rule
19b–4(f)(4) 10 thereunder because it
effects a change in an existing service of
a registered clearing agency that (i) does
not adversely affect the safeguarding of
securities or funds in the custody or
control of the clearing agency or for
which it is responsible; and (ii) does not
significantly affect the respective rights
or obligations of the clearing agency or
persons using the service. At any time
within 60 days of the filing of the
proposed rule change, the Commission
9 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(4).
10 17
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
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.
VI. 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 (https://www.sec.gov/
rules/sro.shtml) or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–OCC–2005–21 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–9303.
All submissions should refer to File
Number SR–OCC–2005–21. 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, 100 F Street, NE., Washington,
DC 20549. Copies of such filing also will
be available for inspection and copying
at the principal office of OCC and on
OCC’s Web site at https://
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–2005–21 and should
E:\FR\FM\30JAN1.SGM
30JAN1
Federal Register / Vol. 71, No. 19 / Monday, January 30, 2006 / Notices
be submitted on or before February 21,
2006.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.11
Nancy M. Morris,
Secretary.
[FR Doc. E6–1085 Filed 1–27–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53150; File No. SR–OCC–
2005–22]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of a Proposed Rule Change
Relating to Allocations Processing
January 19, 2006.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
December 13, 2004, The Options
Clearing Corporation (‘‘OCC’’) 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 primarily by OCC.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change would
amend Rule 405, Allocations, so that it
would apply to allocations of positions
in contracts subject to the Commission’s
jurisdiction.
cprice-sewell on PROD1PC66 with NOTICES
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 such statements.2
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 The Commission has modified parts of these
statements.
1 15
VerDate Aug<31>2005
14:07 Jan 27, 2006
Jkt 208001
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In January 2006 OCC plans to install
a new system to process post-trade
allocation instructions by clearing
members. In order to accommodate the
immediate use of the allocation system
for commodity contracts cleared by OCC
that are subject to the exclusive
jurisdiction of the CFTC, OCC adopted
Rule 405 by submitting File No. SR–
OCC–2005–21 for immediate
effectiveness pursuant to section
19(b)(3)(A) of the Act.3 However,
Interpretation and Policy .02 to Rule 405
provides that the system may not be
used for securities options or security
futures until the Commission issues an
approval order with respect to Rule 405.
OCC submitted the proposed rule
change for purposes of adopting Rule
405 for use in allocating positions in
contracts which are subject to the
Commission’s jurisdiction.4 This rule
change is being filed pursuant to section
19(b)(2) for approval by the
Commission.
The new allocation system and Rule
405 provide clearing members with a
centralized system for processing
allocation or ‘‘give-up’’ instructions
across all exchanges for which OCC
provides clearing services. Allocations
are post-trade instructions entered by
one clearing member (i.e., an authorized
‘‘executing’’ or ‘‘giving-up’’ clearing
member) that direct a transaction or
position to the account of another
clearing member (i.e., the ‘‘carrying’’ or
‘‘given-up’’ clearing member). OCC’s
centralized system will enhance OCC’s
service offerings and will provide
efficiencies to clearing members.
Post-trade allocations of securities
options are currently processed through
OCC’s Clearing Member Trade
Assignment (‘‘CMTA’’) functionality,
which normally causes a transaction to
automatically be moved into an account
of the carrying clearing member so long
as the executing and carrying clearing
members have an effective CMTA
arrangement registered with OCC for the
exchange submitting the matching trade
information for that transaction.5 Once
Rule 405 is approved by the
Commission for purposes of allocating
positions in securities options, clearing
members will be able to elect either to
3 The notice of filing and immediate effectiveness
of File No. SR–OCC–2005–21 will be published in
the Federal Register at approximately the same
time as the notice for this proposed rule change.
4 OCC proposes to delete Interpretation and
Policy .02 to Rule 405 in this filing.
5 See OCC Rule 403.
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
4953
continue to use the existing CMTA
system or to use the new allocation
system for securities options.
For most commodity futures cleared
through OCC, post-trade allocations are
currently processed through The
Clearing Corporation’s (‘‘CCorp’’) ‘‘giveup’’ system, which requires the givenup clearing member to affirmatively
accept a transaction.6 OCC’s allocation
system will enable clearing members to
process commodity futures ‘‘give-ups’’
without going through the CCorp
system.
Rule 405 currently governs the
processing of allocation instructions for
contracts subject to the exclusive
jurisdiction of the CFTC. As amended
by the proposed rule change, Rule 405
would operate in the same fashion for
contracts subject to the Commission’s
jurisdiction. Transactions will first clear
in the designated account of the givingup clearing member. Instructions to
allocate positions may be submitted
either through an exchange’s system for
providing matching trade information to
OCC or through OCC’s clearing system,
ENCORE. In either case, if the given-up
and giving-up clearing members are
parties to an allocation agreement that
has been registered with OCC, OCC will
automatically allocate the positions
resulting from an allocation instruction
to a designated account of the given-up
clearing member without further action
by the clearing members.7 If the clearing
members are not parties to a registered
allocation agreement, OCC will not
effect the allocation instruction until the
given-up clearing member gives OCC
notice of its affirmative acceptance of
the allocated positions. (In contrast, the
CMTA system does not allow for
acceptance of allocated positions
without a registered CMTA agreement.)
If the given-up clearing member does
not give OCC notice of such acceptance
by an OCC-specified deadline, the
allocation instruction will not be
processed, and the positions will remain
in the account of the giving-up clearing
member, which will remain obligated
on those positions.
A given-up clearing member will be
responsible for appropriately allocated
positions. Given-up positions are moved
to the given-up clearing member’s
account at the premium price in the
case of options or at the contract price
in the case of futures at which the
positions were established by the
executing clearing member. Positions
that are allocated on an intraday basis
6 See
OCC Rule 404.
CMTAs, clearing members will not be
required to register their allocation arrangement by
exchange.
7 Unlike
E:\FR\FM\30JAN1.SGM
30JAN1
]]>Agencies
[Federal Register Volume 71, Number 19 (Monday, January 30, 2006)]
[Notices]
[Pages 4951-4953]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-1085]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53151; File No. SR-OCC-2005-21]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Allocations Processing
January 19, 2006.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on December 13, 2004, The
Options Clearing Corporation (``OCC'') 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
primarily by OCC. OCC filed the proposed rule change pursuant to
section 19(b)(3)(A) of the Act \2\ whereby the proposal was effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change adopts new Rule 405, Allocations, to
govern the processing of post-trade allocation instructions for
commodity contracts that are subject to the exclusive jurisdiction of
the Commodity Futures Trading Commission (``CFTC'') that are submitted
by clearing members through a new system OCC plans to install in
January 2006. The rule change also makes conforming by-law and rule
changes, including the addition of certain new definitions.
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 such
statements.\3\
---------------------------------------------------------------------------
\3\ The Commission has modified parts of these statements.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
OCC's new allocation system will permit the allocation of positions
in securities options, security futures, commodity futures, and options
on futures. In order to permit use of the allocation system, when
installed, for commodity contracts cleared by OCC that are subject to
the exclusive jurisdiction of the CFTC, OCC is filing the proposed rule
change under section 19(b)(3)(A) for immediate effectiveness. However,
new Rule 405 includes Interpretation and Policy .02 which states that
the system may not be used for securities options or security futures
until the Commission has issued an approval order with respect to Rule
405. OCC filed a separate proposed rule change under section 19(b)(2),
File No. SR-OCC-2005-22, that would adopt Rule 405 for use in
allocating positions in contracts subject to the Commission's
jurisdiction.\4\
---------------------------------------------------------------------------
\4\ If the Commission approves proposed rule change SR-OCC-2005-
22, OCC would delete Interpretation and Policy .02.
---------------------------------------------------------------------------
OCC plans to provide clearing members with a centralized system for
processing allocation or ``give-up'' instructions across all exchanges
for which OCC provides clearing services. Allocations are post-trade
instructions entered by one clearing member (i.e., an authorized
``executing'' or ``giving-up'' clearing member) that direct a
transaction or position to the account of another clearing member
(i.e., the ``carrying'' or ``given-up'' clearing member). OCC's
centralized system will enhance OCC's service offerings and will
provide efficiencies to clearing members.
Post-trade allocations of securities options are currently
processed through OCC's Clearing Member Trade Assignment (``CMTA'')
functionality, which normally causes a transaction to automatically be
moved into an account of the carrying clearing member so long as the
executing and carrying clearing members have an effective CMTA
arrangement registered with OCC for the exchange submitting the
matching trade information for that transaction.\5\ Once Rule 405 is
approved by the Commission for purposes of allocating positions in
securities options, clearing members will be able to elect either to
continue to use the existing CMTA system or to use the new allocation
system for securities options.
---------------------------------------------------------------------------
\5\ See OCC Rule 403.
---------------------------------------------------------------------------
For most commodity futures cleared through OCC, post-trade
allocations are currently processed through The Clearing Corporation's
(``CCorp'') ``give-up'' system, which requires the given-up clearing
member to affirmatively accept a transaction.\6\ OCC's allocation
system will enable clearing members to process futures ``give-ups''
without going through the CCorp system.
---------------------------------------------------------------------------
\6\ See OCC Rule 404.
---------------------------------------------------------------------------
New Rule 405 will govern the processing of allocation instructions
and will operate as follows. Transactions will first clear in the
designated account of the giving-up clearing member. Instructions to
allocate positions may be submitted either through an exchange's system
for providing matching trade information to OCC or through OCC's
clearing system, ENCORE. In either case, if the given-up and giving-up
clearing members are parties to an allocation agreement that has been
registered with OCC, OCC will automatically allocate the positions
resulting from an allocation instruction to a designated account of the
given-up clearing member without further action by the clearing
members.\7\ If the clearing members are not parties to a registered
allocation agreement, OCC will not effect the allocation instruction
until the given-up clearing member gives OCC notice of its affirmative
acceptance of the allocated positions. (In contrast, the CMTA system
does not allow for acceptance of allocated positions without a
registered CMTA agreement.) If the given-up clearing member does not
give OCC notice of such acceptance by an OCC-specified deadline, the
allocation instruction will not be processed, and the positions will
remain in the account of the giving-up clearing member, which will
remain obligated on those positions.
---------------------------------------------------------------------------
\7\ Unlike CMTAs, clearing members will not be required to
register their allocation arrangement by exchange.
---------------------------------------------------------------------------
A given-up clearing member will be responsible for appropriately
allocated positions. Given-up positions are moved to the given-up
clearing member's account at the premium price in the case of options
or at the contract price in the case of futures at which the positions
were established by the executing clearing member. Positions
[[Page 4952]]
that are allocated on an intraday basis will not be reflected in
position reports until the following business day. However, OCC will
take those positions into account in processing any intraday
settlements authorized by its By-laws and Rules, including intraday
margin settlements. A given-up clearing member may enter an instruction
to reverse an allocation that was accepted in error. If the given-up
and giving-up clearing members are parties to a registered allocation
agreement, the reversing instruction will be automatically processed.
If the clearing members are not parties to a registered allocation
agreement, the reversing instruction must be affirmatively accepted by
the original giving-up clearing member.
Allocation instructions may be for a single position (i.e., a
position in a given series established at a single price) or for a
group of positions (i.e., positions in the same series established at
different prices). Allocation instructions for grouped positions must
be submitted through ENCORE. For single positions, the instruction must
identify the contract quantity, series, and price as specified in the
matching trade information. For grouped positions, the allocation
instruction must provide the same information, but the price may be an
average price if not prohibited under exchange rules and applicable
law.\8\ For the convenience of clearing members, OCC's system will
produce a suggested average price for grouped allocations that clearing
members may adopt for purposes of processing the instruction.
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\8\ Average pricing is permitted under the Commodity Exchange
Act in certain circumstances. In those circumstances, a clearing
member may instruct OCC to use the average price in clearing and
settling the trades. Clearing members have requested that OCC
provide functionality that would also permit positions in securities
options and security futures to be allocated at an average price.
Accordingly, OCC has developed its allocation system to accommodate
the use of such prices for security options and futures, provided
that such use does not violate exchange rules or applicable law.
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Registration of allocation agreements may be terminated either by
mutual agreement or unilaterally. Mutually terminated registrations
will be effected immediately in OCC's system. Unilaterally terminated
registrations will be terminated in OCC's system effective as of 8 a.m.
CST the business day after the termination notice is received by OCC
and the other clearing member. These are the same standards currently
applied to terminating CMTA arrangements under OCC Rule 403. Following
termination of registration of an allocation agreement, an allocated
position may be allocated to a given-up clearing member only upon its
affirmative acceptance.
Other changes made to OCC's By-laws and Rules reflect the adoption
of Rule 405, including the addition of Given-Up Clearing Member and
Giving-Up Clearing Member as defined terms in Article I, section 1.
OCC believes that the proposed rule change is consistent with
section 17A of the Act because it is designed to ensure that positions
resulting from exchange transactions are carried in the appropriate
clearing member account, which is the account of the clearing broker
for the investor for whom such transactions were executed and thereby
promotes the prompt and accurate clearance and settlement of
transactions in derivative contracts, fosters cooperation and
coordination with persons engaged in the clearance and settlement of
such transactions, removes impediments to and perfects a mechanism of a
national system for the prompt and accurate clearance and settlement of
such transactions, and, in general, protects investors and the public
interest. The proposed rule change is not inconsistent with the
existing rules of OCC, including any other rules proposed to be
amended.
(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 pursuant to
section 19(b)(3)(A)(iii) of the Act \9\ and Rule 19b-4(f)(4) \10\
thereunder because it effects a change in an existing service of a
registered clearing agency that (i) does not adversely affect the
safeguarding of securities or funds in the custody or control of the
clearing agency or for which it is responsible; and (ii) does not
significantly affect the respective rights or obligations of the
clearing agency or persons using the service. At any time within 60
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.
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(4).
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VI. 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 (https://
www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-OCC-2005-21 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-OCC-2005-21. 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, 100 F Street,
NE., Washington, DC 20549. Copies of such filing also will be available
for inspection and copying at the principal office of OCC and on OCC's
Web site at https://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-2005-21
and should
[[Page 4953]]
be submitted on or before February 21, 2006.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-1085 Filed 1-27-06; 8:45 am]
BILLING CODE 8010-01-P
