Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change To Accelerate the Expiration Date of American-Style Equity Options That Have Been Adjusted To Call for Cash-Only Delivery, 69172-69173 [E6-20209]

Download as PDF 69172 Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices to The Nasdaq Global Market continued listing standards.32 The Exchange also proposes to amend the preferred stock (and similar issues) and secondary classes of common stock continued listing standards.33 The Exchange would eliminate the current net worth requirement and continuing operations requirements. In addition, the proposed new preferred continued listing standards would contain a new $1 bid price requirement. The Commission notes that the proposed continued listing standards for preferred stock and similar issues and secondary classes of common stock are substantially similar to The Nasdaq Global Market continued listing standards.34 C. Other Changes The proposed rule change would permit the Exchange, rather than its board of directors, to approve securities for listing and to prescribe the form of listing applications.35 In particular, the Exchange may deny listing or apply additional or more stringent criteria based on any event, condition, or circumstance that makes the listing of the company inadvisable or unwarranted in the opinion of the Exchange. Such determination could be made even if the company meets the standards set forth below. The Commission believes that it is reasonable for the Exchange, based upon its experience, to determine whether the security of a company would be appropriate for inclusion on NYSE Arca. The Commission notes that this amendment is similar to NYSE’s listing standards.36 Further, with respect to the continued listing standards of all securities, the Exchange proposes to require all issuers to comply with the Exchange’s corporate governance qualitative standards, rather than only the independent directors/board committees requirement in current NYSE Arca Equities Rule 5.3(k).37 The Commission believes that these amendments are consistent with the requirements of the Act. D. Accelerated Approval Pursuant to Section 19(b)(2) of the Act,38 the Commission may not approve 32 See Nasdaq Rule 4450(a)–(b). proposed NYSE Arca Equities Rule 5.5(c). 34 See Nasdaq Rule 4450(h). 35 See proposed NYSE Arca Equities Rule 5.1(a) and 5.2(a). 36 See NYSE Listed Company Manual Section 101.00. 37 See also NYSE Arca Equities Rule 5.5(k), which sets forth other reasons for suspending or delisting securities on the Exchange. 38 15 U.S.C. 78s(b)(2). jlentini on PROD1PC65 with NOTICES 33 See VerDate Aug<31>2005 15:37 Nov 28, 2006 Jkt 211001 any proposed rule change prior to the 30th day after the date of publication of notice of the filing thereof, unless the Commission finds good cause for so doing and publishes its reasons for so finding. The Exchange has requested the Commission find good cause for approving the proposed rule change prior to the 30th day after the date of publication of notice in the Federal Register. The Commission believes that it is reasonable to grant accelerated approval to allow for the efficient administration of the Exchange’s initial and continued listing programs as promptly as possible. The Commission notes that the proposed listing standards, while significantly different than the Exchange’s current listing standards, are substantially similar to The Nasdaq Global Market, which the Commission previously approved. In addition, the Commission notes that the proposed listing standards would be in effect only as a pilot program for a six-month period.39 Accordingly, the Commission believes that there is good cause, pursuant to Sections 6(b)(5) of the Act 40 and 19(b)(2) of the Act,41 to grant accelerated approval to the proposed rule change prior to the 30th day after the date of publication of notice in the Federal Register. V. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, with Section 6(b)(5) of the Act.42 It is therefore ordered, pursuant to Section 19(b)(2) of the Act,43 that the proposed rule change (SR–NYSEArca– 2006–85), is hereby approved on an accelerated basis, as a six-month pilot, until May 29, 2007. 39 In any request under Section 19(b) of the Act for permanent approval or an extension of the pilot period, the Exchange may wish to report on the operations of the new standards during the pilot period. 40 15 U.S.C. 78f(b)(5). 41 15 U.S.C. 78s(b)(2). 42 15 U.S.C. 78f(b)(5). The staff of the Division of Market Regulation (‘‘Staff’’) would not recommend enforcement action to the Commission under Rules 15g–2 through 15g–9 under the Act if broker-dealers treat equity securities listed pursuant to the initial and continued listing requirements set forth in amended NYSE Arca Equities Rule 5 as meeting the exclusion from the definition of penny stock contained in Rule 3a51–1 udner the Act pursuant to paragraph (a)(2) thereof. In taking this position, the Staff notes in particular that these amended listing requirements are equivalent, in all material respects, to the listing requirments of the The Nasdaq Global Market. 43 15 U.S.C. 78s(b)(2). PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.44 Nancy M. Morris, Secretary. [FR Doc. E6–20211 Filed 11–28–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54793; File No. SR–OCC– 2006–20] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change To Accelerate the Expiration Date of American-Style Equity Options That Have Been Adjusted To Call for CashOnly Delivery November 20, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on October 26, 2006, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) 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 proposed rule change from interested parties. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The purpose of the proposed rule change is to accelerate the expiration date of American-style equity options that have been adjusted to call for cashonly delivery to the earliest practicable regular expiration date. OCC currently has such authority with respect to European-style options that have been so adjusted. 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), 44 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\29NON1.SGM 29NON1 Federal Register / Vol. 71, No. 229 / Wednesday, November 29, 2006 / Notices and (C) below, of the most significant aspects of these statements.3 jlentini on PROD1PC65 with NOTICES (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In a cash-out merger, the common equity of the acquired company (‘‘Security’’) is converted into a right to receive a fixed amount of cash. On the day after the announced consummation date for the merger, the stock exchanges on which the Security is traded suspend all trading in the Security. Concurrently, the option exchanges discontinue trading in options overlying the Security. If a customer does not liquidate an out-of-the-money option position before the exchange halts trading, its broker must carry the position until it expires. With increasing volume and the proliferation of options with long expiration dates, clearing members’ cost and operational overhead of carrying these positions is significant. In an effort to reduce these costs, OCC adopted Rule 807 in 1998 to provide for acceleration of the expiration date of European-style equity options that have been converted to a cash deliverable. OCC now proposes to extend Rule 807 to cover American-style equity options. Under the proposed rule change, OCC typically would accelerate the expiration date of American-style and European-style equity options that are adjusted to call for a cash deliverable to the earliest practicable regular expiration date. OCC proposes to set the exercise by exception price threshold for the adjusted contracts at $.01 per share of the amount of the cash deliverable.4 OCC proposes to implement the rule change on January 1, 2008, to allow clearing members and customers sufficient time to prepare for the change of methodology. OCC will not implement the proposed rule change until definitive copies of an appropriate revision of or supplement to the options disclosure document, Characteristics and Risks of Standardized Options, are available for distribution. OCC believes the proposed rule change is consistent with the requirements of Section 17A of the Act 5 and the rules and regulations 3 The Commission has modified the text of the summaries prepared by OCC. 4 OCC also proposes to make a conforming change to Rule 1106. Every option contract that has an exercise price below (in the case of a call) or above (in the case of a put) the amount of the cash deliverable by $.01 or more will be deemed to have been exercised immediately prior to the accelerated expiration time unless the clearing member directs otherwise. 5 15 U.S.C. 78q–1. VerDate Aug<31>2005 15:37 Nov 28, 2006 Jkt 211001 thereunder because it would eliminate inefficient procedures for clearance and settlement that impose unnecessary costs on investors and persons facilitating transactions by and acting on behalf of investors. As such, OCC believes it is designed to promote the prompt and accurate clearance and settlement of securities transactions. (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 Within thirty-five days of the date of publication of this notice in the Federal Register or within such longer period: (i) As the Commission may designate up to ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve such proposed rule change or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. 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–OCC–2006–20 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. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 69173 All submissions should refer to File Number SR–OCC–2006–20. 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/publications/ rules/proposed_changes/ sr_occ_06_20.pdf. 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– 2006–20 and should be submitted on or before December 20, 2006. For the Commission by the Division of Market Regulation, pursuant to delegated authority.6 Nancy M. Morris, Secretary. [FR Doc. E6–20209 Filed 11–28–06; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–54807; File No. SR–Phlx– 2006–53] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Relating to Assignments in Options Based on Root Symbol November 21, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 6 17 CFR 200.30–3(a)(12). E:\FR\FM\29NON1.SGM 29NON1

Agencies

[Federal Register Volume 71, Number 229 (Wednesday, November 29, 2006)]
[Notices]
[Pages 69172-69173]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-20209]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54793; File No. SR-OCC-2006-20]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Accelerate the Expiration 
Date of American-Style Equity Options That Have Been Adjusted To Call 
for Cash-Only Delivery

 November 20, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 26, 2006, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') 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 proposed rule change from 
interested parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The purpose of the proposed rule change is to accelerate the 
expiration date of American-style equity options that have been 
adjusted to call for cash-only delivery to the earliest practicable 
regular expiration date. OCC currently has such authority with respect 
to European-style options that have been so adjusted.

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),

[[Page 69173]]

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

    In a cash-out merger, the common equity of the acquired company 
(``Security'') is converted into a right to receive a fixed amount of 
cash. On the day after the announced consummation date for the merger, 
the stock exchanges on which the Security is traded suspend all trading 
in the Security. Concurrently, the option exchanges discontinue trading 
in options overlying the Security. If a customer does not liquidate an 
out-of-the-money option position before the exchange halts trading, its 
broker must carry the position until it expires. With increasing volume 
and the proliferation of options with long expiration dates, clearing 
members' cost and operational overhead of carrying these positions is 
significant. In an effort to reduce these costs, OCC adopted Rule 807 
in 1998 to provide for acceleration of the expiration date of European-
style equity options that have been converted to a cash deliverable. 
OCC now proposes to extend Rule 807 to cover American-style equity 
options.
    Under the proposed rule change, OCC typically would accelerate the 
expiration date of American-style and European-style equity options 
that are adjusted to call for a cash deliverable to the earliest 
practicable regular expiration date. OCC proposes to set the exercise 
by exception price threshold for the adjusted contracts at $.01 per 
share of the amount of the cash deliverable.\4\
---------------------------------------------------------------------------

    \4\ OCC also proposes to make a conforming change to Rule 1106. 
Every option contract that has an exercise price below (in the case 
of a call) or above (in the case of a put) the amount of the cash 
deliverable by $.01 or more will be deemed to have been exercised 
immediately prior to the accelerated expiration time unless the 
clearing member directs otherwise.
---------------------------------------------------------------------------

    OCC proposes to implement the rule change on January 1, 2008, to 
allow clearing members and customers sufficient time to prepare for the 
change of methodology. OCC will not implement the proposed rule change 
until definitive copies of an appropriate revision of or supplement to 
the options disclosure document, Characteristics and Risks of 
Standardized Options, are available for distribution.
    OCC believes the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the rules and 
regulations thereunder because it would eliminate inefficient 
procedures for clearance and settlement that impose unnecessary costs 
on investors and persons facilitating transactions by and acting on 
behalf of investors. As such, OCC believes it is designed to promote 
the prompt and accurate clearance and settlement of securities 
transactions.
---------------------------------------------------------------------------

    \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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period: (i) As the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) By order approve such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2006-20 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-OCC-2006-20. 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/publications/rules/
proposed_changes/sr_occ_06_20.pdf. 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-2006-20 and should be submitted on 
or before December 20, 2006.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
[FR Doc. E6-20209 Filed 11-28-06; 8:45 am]
BILLING CODE 8011-01-P