Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of a Proposed Rule Change Relating to Allocations Processing, 13648-13649 [E6-3807]

Download as PDF 13648 Federal Register / Vol. 71, No. 51 / Thursday, March 16, 2006 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53455; File No. SR–OCC– 2005–22] Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of a Proposed Rule Change Relating to Allocations Processing March 8, 2006. wwhite on PROD1PC61 with NOTICES I. Introduction On December 13, 2005, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–OCC–2005–22 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 30, 2006.2 No comment letters were received. For the reasons discussed below, the Commission is granting approval of the proposed rule change. II. Description The proposed rule change relates to new Rule 405, ‘‘Allocations,’’ which governs the processing of post-trade allocation instructions by clearing members. OCC installed a new system to process post-trade allocation instructions in January 2006, and 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 Commodity Futures Trading Commission (‘‘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 OCC included Interpretation and Policy .02 to Rule 405 to provide that the new system could not be used for positions in contracts which are subject to the Commission’s jurisdiction (i.e., securities options or security futures) until the Commission issued an order approving the use of Rule 405 and the new system for processing post-trade allocations with respect to such positions. The purpose of the proposed rule change is to obtain such Commission approval and to delete Interpretation and Policy .02 to Rule 405. The new allocation system and Rule 405 provide clearing members with a centralized system for processing allocation or ‘‘give-up’’ instructions 1 15 U.S.C. 78s(b)(1). Exchange Act Release No. 53150 (January 19, 2006), 71 FR 4953. 3 Securities Exchange Act Release No. 53151 (January 19, 2006), 71 FR 4951 (January 30, 2006). 2 Securities VerDate Aug<31>2005 15:48 Mar 15, 2006 Jkt 208001 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 OCC to move a transaction or position to the account of another clearing member (i.e., the ‘‘carrying’’ or ‘‘given-up’’ clearing member). Post-trade allocations of securities options have been 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.4 Under the new allocation system, 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. Most post-trade allocations of commodity futures cleared through OCC have been processed through The Clearing Corporation’s (‘‘CCorp’’) ‘‘giveup’’ system, which requires the givenup clearing member to affirmatively accept a transaction.5 OCC’s new allocation system has enabled clearing members to process commodity futures ‘‘give-ups’’ without going through the CCorp system. New Rule 405 currently governs the processing of allocation instructions for contracts subject to the exclusive jurisdiction of the CFTC. As amended by this proposed rule change, Rule 405 will 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.6 If the clearing members are not parties to a registered allocation agreement, OCC will not 4 OCC Rule 403. Rule 404. 6 Unlike CMTAs, clearing members will not be required to register their allocation arrangement by exchange. 5 OCC PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 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 responsible for the 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 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.7 For 7 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 E:\FR\FM\16MRN1.SGM 16MRN1 Federal Register / Vol. 71, No. 51 / Thursday, March 16, 2006 / Notices proposed rule change (File No. SR– OCC–2005–22) be and hereby is approved. III. Discussion Section 17A(b)(3)(F) of the Act provides that the rules of a clearing agency should be designed to promote the prompt and accurate clearance and settlement of securities transactions. OCC’s rules permitting allocation of clearing member positions are designed to ensure that positions are carried in the appropriate clearing member account at OCC. The new allocation service offered under Rule 405 is designed to improve upon and add efficiencies to OCC’s existing CMTA functionality for allocating post-trade instructions by centralizing and further automating post-trade allocations. Although OCC designed the new allocation system to be an improvement upon its current system, clearing members may choose to continue using the CMTA functionality. Accordingly, because the proposed rule change is designed to enhance OCC’s service offerings and to provide efficiencies to clearing members, the Commission finds that the proposed rule change is designed to promote the prompt and accurate clearance and settlement of securities transactions. wwhite on PROD1PC61 with NOTICES 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 clearing member only upon its affirmative acceptance. March 9, 2006. 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 with the requirements of 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 allocation system to accommodate the use of such prices for security options and security futures, provided that such use does not violate exchange rules or applicable law. VerDate Aug<31>2005 15:48 Mar 15, 2006 Jkt 208001 For the Commission by the Division of Market Regulation, pursuant to delegated authority.8 Nancy M. Morris, Secretary. [FR Doc. E6–3807 Filed 3–15–06; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–53462; File No. SR–Phlx– 2005–70] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Approving Proposed Rule Change Relating to the Deletion of Phlx Rule 454 On November 9, 2005, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’), filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 to delete Phlx Rule 454, ‘‘Limitations on Members’’ Trading Because of Options, etc.’’ The proposed rule change was published for comment in the Federal Register on February 6, 2006.3 The Commission received no comments regarding the proposal. This order approves the proposed rule change. The Phlx proposes to delete Phlx Rule 454, which prohibits a member, while on the floor, from initiating the purchase or sale of a security on the Exchange for the member’s own account or a related account if the member or a related account holds or has granted an over-the counter option on the security. The Phlx notes that it adopted Phlx Rule 454 in 1935.4 After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.5 In particular, the 8 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 53188 (January 30, 2006), 71 FR 6122. 4 See Securities Exchange Act Release No. 13016 (November 29, 1976), 41 FR 53383 (December 6, 1976) (order approving File No. SR–Phlx–76–15) (amending Phlx Rule 454 to permit a Phlx member to trade an underlying security on the Phlx if the member has purchased or sold a listed option on the underlying security). 5 In approving this proposal, the Commission has considered the proposed rule’s impact on 1 15 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 13649 Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,6 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Commission believes that the deletion of Phlx Rule 454 is consistent with Section 6(b)(5) of the Act because the Phlx now has in place comprehensive surveillance and oversight procedures designed to monitor trading in options and their underlying securities. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,7 that the proposed rule change (SR–Phlx–2005– 70) is approved. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.8 Nancy M. Morris, Secretary. [FR Doc. E6–3804 Filed 3–15–06; 8:45 am] BILLING CODE 8010–01–P SOCIAL SECURITY ADMINISTRATION Agency Information Collection Activities: Proposed Request and Comment Request The Social Security Administration (SSA) publishes a list of information collection packages that will require clearance by the Office of Management and Budget (OMB) in compliance with Public Law 104–13, the Paperwork Reduction Act of 1995, effective October 1, 1995. The information collection packages that may be included in this notice are for new information collections, approval of existing information collections, revisions to OMB-approved information collections, and extensions (no change) of OMBapproved information collections. SSA is soliciting comments on the accuracy of the agency’s burden estimate; the need for the information; its practical utility; ways to enhance its quality, utility, and clarity; and on ways to minimize burden on respondents, including the use of automated collection techniques or other forms of information technology. Written efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 6 15 U.S.C. 78f(b)(5). 7 15 U.S.C. 78s(b)(2). 8 17 CFR 200.30–3(a)(12). E:\FR\FM\16MRN1.SGM 16MRN1

Agencies

[Federal Register Volume 71, Number 51 (Thursday, March 16, 2006)]
[Notices]
[Pages 13648-13649]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-3807]



[[Page 13648]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53455; File No. SR-OCC-2005-22]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Granting Approval of a Proposed Rule Change Relating to 
Allocations Processing

March 8, 2006.

I. Introduction

    On December 13, 2005, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') 
proposed rule change SR-OCC-2005-22 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 30, 2006.\2\ No 
comment letters were received. For the reasons discussed below, the 
Commission is granting approval of the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 53150 (January 19, 
2006), 71 FR 4953.
---------------------------------------------------------------------------

II. Description

    The proposed rule change relates to new Rule 405, ``Allocations,'' 
which governs the processing of post-trade allocation instructions by 
clearing members. OCC installed a new system to process post-trade 
allocation instructions in January 2006, and 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 
Commodity Futures Trading Commission (``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\ OCC included 
Interpretation and Policy .02 to Rule 405 to provide that the new 
system could not be used for positions in contracts which are subject 
to the Commission's jurisdiction (i.e., securities options or security 
futures) until the Commission issued an order approving the use of Rule 
405 and the new system for processing post-trade allocations with 
respect to such positions. The purpose of the proposed rule change is 
to obtain such Commission approval and to delete Interpretation and 
Policy .02 to Rule 405.
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 53151 (January 19, 
2006), 71 FR 4951 (January 30, 2006).
---------------------------------------------------------------------------

    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 OCC to move a transaction or position to 
the account of another clearing member (i.e., the ``carrying'' or 
``given-up'' clearing member).
    Post-trade allocations of securities options have been 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.\4\ Under the new 
allocation system, 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.
---------------------------------------------------------------------------

    \4\ OCC Rule 403.
---------------------------------------------------------------------------

    Most post-trade allocations of commodity futures cleared through 
OCC have been processed through The Clearing Corporation's (``CCorp'') 
``give-up'' system, which requires the given-up clearing member to 
affirmatively accept a transaction.\5\ OCC's new allocation system has 
enabled clearing members to process commodity futures ``give-ups'' 
without going through the CCorp system.
---------------------------------------------------------------------------

    \5\ OCC Rule 404.
---------------------------------------------------------------------------

    New Rule 405 currently governs the processing of allocation 
instructions for contracts subject to the exclusive jurisdiction of the 
CFTC. As amended by this proposed rule change, Rule 405 will operate in 
the same fashion for contracts subject to the Commission's 
jurisdiction. 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.\6\ 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 responsible for the 
positions.
---------------------------------------------------------------------------

    \6\ 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 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.\7\ For

[[Page 13649]]

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.
---------------------------------------------------------------------------

    \7\ 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 security futures, 
provided that such use does not violate exchange rules or applicable 
law.
---------------------------------------------------------------------------

    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.

III. Discussion

    Section 17A(b)(3)(F) of the Act provides that the rules of a 
clearing agency should be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. OCC's rules 
permitting allocation of clearing member positions are designed to 
ensure that positions are carried in the appropriate clearing member 
account at OCC. The new allocation service offered under Rule 405 is 
designed to improve upon and add efficiencies to OCC's existing CMTA 
functionality for allocating post-trade instructions by centralizing 
and further automating post-trade allocations. Although OCC designed 
the new allocation system to be an improvement upon its current system, 
clearing members may choose to continue using the CMTA functionality. 
Accordingly, because the proposed rule change is designed to enhance 
OCC's service offerings and to provide efficiencies to clearing 
members, the Commission finds that the proposed rule change is designed 
to promote the prompt and accurate clearance and settlement of 
securities transactions.

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 with the requirements of 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-OCC-2005-22) be and hereby 
is approved.

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

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

Nancy M. Morris,
Secretary.
[FR Doc. E6-3807 Filed 3-15-06; 8:45 am]
BILLING CODE 8010-01-P