Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change Relating to Submission of Exercise Notices for American Option Contracts Other Than at Expiration, 12762-12763 [E6-3482]
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Federal Register / Vol. 71, No. 48 / Monday, March 13, 2006 / Notices
effective pursuant to Section 19(b)(3)(A)
of the Act 9 and Rule 19b–4(f)(6)
thereunder.10
A proposed rule change filed under
Rule 19b–4(f)(6) 11 normally may not
become operative prior to 30 days after
the date of filing. However, Rule 19b–
4(f)(6)(iii) 12 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay, and designate the proposed rule
change immediately operative.13 The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest.14 The Exchange has
stated that the restated certificate of
incorporation as modified by this
proposed rule change must be filed with
the Secretary of State of the State of
New York before the closing of the
merger that is scheduled for March 7,
2006. The Commission notes that the
proposed modifications to the restated
certificate of incorporation are technical
changes that are non-substantive.
Accordingly, the Commission
designates that the proposed rule
change become operative immediately.
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.
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 (https://www.sec.gov/
rules/sro.shtml); or
9 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
11 Id.
12 17 CFR 240.19b–4(f)(6)(iii).
13 The Exchange also asked the Commission to
waive the five-business day pre-filing notice
requirement. See Rule 19b–4(f)(6)(iii), 17 CFR
240.19b–4(f)(6)(iii). The Commission is exercising
its authority to designate a shorter time and notes
that the Exchange provided the Commission with
one business day notice.
14 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSE–2006–15 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
20549–1090.
All submissions should refer to File
Number SR–NYSE–2006–15. 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
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the Exchange. 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–2006–15 and should
be submitted on or before April 3, 2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.15
Jill M. Peterson,
Assistant Secretary.
[FR Doc. E6–3484 Filed 3–10–06; 8:45 am]
BILLING CODE 8010–01–P
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10 17
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53425; File No. SR–OCC–
2005–19]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Approving Proposed Rule Change
Relating to Submission of Exercise
Notices for American Option Contracts
Other Than at Expiration
March 6, 2006.
I. Introduction
On December 12, 2005, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–OCC–2005–19 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 January 18, 2006.2
No comment letters were received. For
the reasons discussed below, the
Commission is approving the proposed
rule change.
II. Description
The purpose of the proposed rule
change is to modify OCC Rule 801,
which applies to the submission of
exercise notices for American-style
option contracts other than at
expiration, to delete specific references
to the times when such exercise notices
may be submitted and to instead
provide OCC with the authority to
prescribe the time frames for their
submission. Implementing this change
requires additional conforming changes
to Rule 801 as described herein.
Rule 801
Rule 801(a) permits a clearing
member desiring to exercise an
American-style equity or non-equity
option on a business day other than the
business day prior to its expiration to
submit an exercise notice to OCC
between 9 a.m. and 7 p.m. provided that
an exercise notice for an American-style
currency option must be submitted by
2:30 p.m.3 (All times are at Central
Time.) Exercise instructions submitted
with respect to equity and non-equity
options become irrevocable at 7 p.m.
and 2:30 p.m. in the case of currency
options unless the exercise instruction
has been modified or revoked by a
clearing member because of a bona fide
error by the clearing member or its
1 15
U.S.C. 78s(b)(1).
Exchange Act Release No. 53090
(January 10, 2006), 71 FR 2973.
3 Except for short dated options, an Americanstyle option may not be exercised on the business
day prior to its expiration date.
2 Securities
15 17
PO 00000
CFR 200.30–3(a)(12).
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Federal Register / Vol. 71, No. 48 / Monday, March 13, 2006 / Notices
customer in accordance with the
procedures prescribed by OCC.
Rule 801(b) allows the OCC Board of
Directors to designate with not less than
seven days’ prior written notice to nonequity securities clearing members a
cut-off time earlier than that specified in
Rule 801(a) as the deadline for
submitting exercise notices with respect
to American-style non-equity option
contracts and the time when such
exercise notices become irrevocable.
Subject to specified exceptions and
conditions, Rule 801(e) grants certain
OCC employees 4 the discretion to
permit a clearing member to file, revoke,
or modify any exercise notice submitted
in accordance with Rule 801(a) after the
7 p.m. deadline for the purpose of
correcting a bona fide error. One
condition is that the requesting clearing
member is liable to OCC for a late filing
fee in escalating increments and time
segments. The late filing fee is as
follows:
• $2,000 for any request accepted
between 7 p.m. and 8 p.m.;
• $5,000 for any request accepted
between 8:01 p.m. and the start of
critical processing provided that the
request does not materially affect the
start of critical processing; and
• $20,000 per line item listed on any
exercise notice accepted for filing after
the start of critical processing with 50%
of the fee to be distributed to the
assigned clearing member or clearing
members on a pro rata basis if more than
one clearing member is assigned.
wwhite on PROD1PC61 with NOTICES
Changes to Rule 801
The operational and processing
efficiencies gained from real-time trade
submission have prompted the OCC
Roundtable 5 to propose that OCC
advance the 7 p.m. cut-off time for
submission of post-trade instructions,
including exercise notices, by clearing
members on regular business days. The
Roundtable believes that an earlier
deadline for filing such instructions
would further straight-through
processing goals by permitting OCC to
move forward the times when it initiates
nightly processing and distributes data
to members.
Although current discussions have
centered on a post-trade submission cutoff time of 6:30 p.m., the Roundtable has
4 Those employees are OCC’s Chairman,
Management Vice Chairman, President, or a
designee of such officer.
5 The OCC Roundtable is an OCC-sponsored
advisory group comprised of representatives from
OCC, a cross-section of clearing members,
participant exchanges, and industry service
bureaus. The Roundtable considers operational
improvements that may be made to increase
efficiencies and to lower costs in the options
industry.
VerDate Aug<31>2005
17:58 Mar 10, 2006
Jkt 208001
not yet reached a consensus on a
recommended time.6 Notwithstanding
that additional discussions are required
to determine a new deadline, the
Roundtable has asked OCC to amend
Rule 801 to eliminate the requirement
that exercise notices with respect to
most American-style options be
submitted between 9 a.m. and 7 p.m. on
a business day. In response to the
Roundtable’s request and consistent
with other OCC rules, OCC will amend
Rule 801 to permit OCC to specify the
times when such exercise notices may
be submitted.7 (Such times will be
specified in OCC’s operations manual.)
The amendment will allow OCC to
promptly implement the new deadline
for post-trade instructions once it is
determined and will give OCC greater
flexibility in responding to future
operational and technology
developments. OCC will also make the
following conforming changes to Rule
801.
• Amend Rule 801(a) to eliminate the
mandated 2:30 p.m. deadline for filing
exercise notices with respect to
currency options. The deadline will
instead be a time specified by OCC (in
its operations manual). While there are
no current plans to advance this
deadline, the language of the rule will
be changed for consistency and future
flexibility.
• Amend Rule 801(a) to provide that
the prescribed deadlines for submitting
exercise notices may be changed with
not less than 30 days’ prior written
notice to affected clearing members.
This will ensure that clearing members
have sufficient time to adjust their
procedures for submitting exercise
notices.
• Delete Rule 801(b) which authorizes
the Board to advance the deadline for
submitting exercise notices for
American-style non-equity options. The
subject matter of Rule 801(b) will be
covered by the changes to Rule 801(a).
• Amend Rule 801(e) to restructure
portions of the fee schedule for
submitting late requests to file, revoke,
or modify exercise notices. The $2,000
filing fee will be eliminated. The $5,000
filing fee will be applied to all requests
accepted after the deadline specified
pursuant to Rule 801(a) but before the
start of critical processing. No change
6 An analysis by OCC staff determined that
submission of files containing exercise instructions
after 6:30 p.m. occurred seven times during the
period April 1–December 31, 2005. E-mail from
Jean M. Cawley, First Vice President and Deputy
General Counsel, dated January 11, 2006.
7 Under Rule 805, OCC already has the authority
to prescribe deadlines for the submission of
exercise instructions for purposes of expiration date
processing.
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
12763
will be made to the filing fee for
requests accepted after the start of
critical processing. These proposed
changes will align the filing fee
schedule under Rule 801 with the filing
fee schedule for supplementary exercise
notices filed under Rule 805 (which
applies to expiration date processing).
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.8
The Commission finds that OCC’s
proposed rule change is consistent with
this requirement because it enables OCC
to take advantage of operational and
processing efficiencies gained from realtime trade submission to move forward
the times for accepting submissions of
exercise notices. Earlier submission of
exercise notices permits OCC to move
forward the times when it initiates
nightly processing and distributes data
to its members. Moreover, by OCC
having more flexibility with respect to
designating time frames and deadlines
OCC will be able to keep such time
frames and deadlines in step with future
operational and technical advances.
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,9 that the
proposed rule change (File No. SR–
OCC–2005–19) be and hereby is
approved.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.10
Nancy M. Morris,
Secretary.
[FR Doc. E6–3482 Filed 3–10–06; 8:45 am]
BILLING CODE 8010–01–P
8 15
U.S.C. 78q–1(b)(3)(F).
U.S.C. 78s(b)(2).
10 17 CFR 200.30–3(a)(12).
9 15
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]]>Agencies
[Federal Register Volume 71, Number 48 (Monday, March 13, 2006)]
[Notices]
[Pages 12762-12763]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-3482]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53425; File No. SR-OCC-2005-19]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change Relating to Submission of Exercise
Notices for American Option Contracts Other Than at Expiration
March 6, 2006.
I. Introduction
On December 12, 2005, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'')
proposed rule change SR-OCC-2005-19 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 January 18, 2006.\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. 53090 (January 10,
2006), 71 FR 2973.
---------------------------------------------------------------------------
II. Description
The purpose of the proposed rule change is to modify OCC Rule 801,
which applies to the submission of exercise notices for American-style
option contracts other than at expiration, to delete specific
references to the times when such exercise notices may be submitted and
to instead provide OCC with the authority to prescribe the time frames
for their submission. Implementing this change requires additional
conforming changes to Rule 801 as described herein.
Rule 801
Rule 801(a) permits a clearing member desiring to exercise an
American-style equity or non-equity option on a business day other than
the business day prior to its expiration to submit an exercise notice
to OCC between 9 a.m. and 7 p.m. provided that an exercise notice for
an American-style currency option must be submitted by 2:30 p.m.\3\
(All times are at Central Time.) Exercise instructions submitted with
respect to equity and non-equity options become irrevocable at 7 p.m.
and 2:30 p.m. in the case of currency options unless the exercise
instruction has been modified or revoked by a clearing member because
of a bona fide error by the clearing member or its
[[Page 12763]]
customer in accordance with the procedures prescribed by OCC.
---------------------------------------------------------------------------
\3\ Except for short dated options, an American-style option may
not be exercised on the business day prior to its expiration date.
---------------------------------------------------------------------------
Rule 801(b) allows the OCC Board of Directors to designate with not
less than seven days' prior written notice to non-equity securities
clearing members a cut-off time earlier than that specified in Rule
801(a) as the deadline for submitting exercise notices with respect to
American-style non-equity option contracts and the time when such
exercise notices become irrevocable.
Subject to specified exceptions and conditions, Rule 801(e) grants
certain OCC employees \4\ the discretion to permit a clearing member to
file, revoke, or modify any exercise notice submitted in accordance
with Rule 801(a) after the 7 p.m. deadline for the purpose of
correcting a bona fide error. One condition is that the requesting
clearing member is liable to OCC for a late filing fee in escalating
increments and time segments. The late filing fee is as follows:
---------------------------------------------------------------------------
\4\ Those employees are OCC's Chairman, Management Vice
Chairman, President, or a designee of such officer.
---------------------------------------------------------------------------
$2,000 for any request accepted between 7 p.m. and 8 p.m.;
$5,000 for any request accepted between 8:01 p.m. and the
start of critical processing provided that the request does not
materially affect the start of critical processing; and
$20,000 per line item listed on any exercise notice
accepted for filing after the start of critical processing with 50% of
the fee to be distributed to the assigned clearing member or clearing
members on a pro rata basis if more than one clearing member is
assigned.
Changes to Rule 801
The operational and processing efficiencies gained from real-time
trade submission have prompted the OCC Roundtable \5\ to propose that
OCC advance the 7 p.m. cut-off time for submission of post-trade
instructions, including exercise notices, by clearing members on
regular business days. The Roundtable believes that an earlier deadline
for filing such instructions would further straight-through processing
goals by permitting OCC to move forward the times when it initiates
nightly processing and distributes data to members.
---------------------------------------------------------------------------
\5\ The OCC Roundtable is an OCC-sponsored advisory group
comprised of representatives from OCC, a cross-section of clearing
members, participant exchanges, and industry service bureaus. The
Roundtable considers operational improvements that may be made to
increase efficiencies and to lower costs in the options industry.
---------------------------------------------------------------------------
Although current discussions have centered on a post-trade
submission cut-off time of 6:30 p.m., the Roundtable has not yet
reached a consensus on a recommended time.\6\ Notwithstanding that
additional discussions are required to determine a new deadline, the
Roundtable has asked OCC to amend Rule 801 to eliminate the requirement
that exercise notices with respect to most American-style options be
submitted between 9 a.m. and 7 p.m. on a business day. In response to
the Roundtable's request and consistent with other OCC rules, OCC will
amend Rule 801 to permit OCC to specify the times when such exercise
notices may be submitted.\7\ (Such times will be specified in OCC's
operations manual.) The amendment will allow OCC to promptly implement
the new deadline for post-trade instructions once it is determined and
will give OCC greater flexibility in responding to future operational
and technology developments. OCC will also make the following
conforming changes to Rule 801.
---------------------------------------------------------------------------
\6\ An analysis by OCC staff determined that submission of files
containing exercise instructions after 6:30 p.m. occurred seven
times during the period April 1-December 31, 2005. E-mail from Jean
M. Cawley, First Vice President and Deputy General Counsel, dated
January 11, 2006.
\7\ Under Rule 805, OCC already has the authority to prescribe
deadlines for the submission of exercise instructions for purposes
of expiration date processing.
---------------------------------------------------------------------------
Amend Rule 801(a) to eliminate the mandated 2:30 p.m.
deadline for filing exercise notices with respect to currency options.
The deadline will instead be a time specified by OCC (in its operations
manual). While there are no current plans to advance this deadline, the
language of the rule will be changed for consistency and future
flexibility.
Amend Rule 801(a) to provide that the prescribed deadlines
for submitting exercise notices may be changed with not less than 30
days' prior written notice to affected clearing members. This will
ensure that clearing members have sufficient time to adjust their
procedures for submitting exercise notices.
Delete Rule 801(b) which authorizes the Board to advance
the deadline for submitting exercise notices for American-style non-
equity options. The subject matter of Rule 801(b) will be covered by
the changes to Rule 801(a).
Amend Rule 801(e) to restructure portions of the fee
schedule for submitting late requests to file, revoke, or modify
exercise notices. The $2,000 filing fee will be eliminated. The $5,000
filing fee will be applied to all requests accepted after the deadline
specified pursuant to Rule 801(a) but before the start of critical
processing. No change will be made to the filing fee for requests
accepted after the start of critical processing. These proposed changes
will align the filing fee schedule under Rule 801 with the filing fee
schedule for supplementary exercise notices filed under Rule 805 (which
applies to expiration date processing).
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.\8\ The Commission
finds that OCC's proposed rule change is consistent with this
requirement because it enables OCC to take advantage of operational and
processing efficiencies gained from real-time trade submission to move
forward the times for accepting submissions of exercise notices.
Earlier submission of exercise notices permits OCC to move forward the
times when it initiates nightly processing and distributes data to its
members. Moreover, by OCC having more flexibility with respect to
designating time frames and deadlines OCC will be able to keep such
time frames and deadlines in step with future operational and technical
advances.
---------------------------------------------------------------------------
\8\ 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,\9\ that the proposed rule change (File No. SR-OCC-2005-19) be and
hereby is approved.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78s(b)(2).
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\10\
---------------------------------------------------------------------------
\10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Nancy M. Morris,
Secretary.
[FR Doc. E6-3482 Filed 3-10-06; 8:45 am]
BILLING CODE 8010-01-P
