Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of a Proposed Rule Change Relating to Membership Requirements, 26191-26192 [E7-8735]

Download as PDF Federal Register / Vol. 72, No. 88 / Tuesday, May 8, 2007 / Notices trade as part of the Penny Pilot. QQQQ has now been included in the Penny Pilot and therefore the Exchange will no longer assess a Marketing Charge on any trades in this issue. The Exchange also proposes making minor technical changes to this section of the Schedule with this filing. Royalty Fees In an effort to reduce costs associated with trading on NYSE Arca, the Exchange proposes to eliminate certain Royalty Fees. The Exchange proposes to eliminate the $0.10 per contract Royalty Fee for options traded on the following ETFs; the Financial Select Sector SPDR (XLF), the Technology Select Sector SPDR (XLK), and the Healthcare Select Sector SPRD (XLV). By eliminating these fees, the Exchange hopes to attract additional order flow and encourage more trading by market participants. Vendor Equipment Room Usage Fee This fee covers the use of server cabinets in the vendor equipment room located adjacent to the trading floor. This fee will now be called the Vendor Equipment Room Cabinet Fee, and the footnote associate with the fee will now be moved into the body of the Schedule. These minor changes simply serve to offer clarity as to how this fee is assessed, and makes no change to the fee itself. Technical and Formatting Changes The Exchange proposes making minor changes to the schedule in order correct certain typographical and grammatical errors and to make certain formatting changes. These changes will have no effect on existing fees or the application of the existing fees. 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) 6 of the Act, in general, and Section 6(b)(4),7 in particular, in that it provides for the equitable allocation of dues, fees and other charges among its members. cprice-sewell on PROD1PC66 with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. 6 15 7 15 U.S.C. 78f(b). U.S.C. 78f(b)(4). VerDate Aug<31>2005 15:36 May 07, 2007 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is subject to Section 19(b)(3)(A)(ii) of the Act 8 and Rule 19b–4(f)(2) thereunder 9 because it establishes or changes a due, fee, or other charge applicable only to a member imposed by the self-regulatory organization. Accordingly, the proposal is effective upon Commission receipt of the filing. 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 • Send e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2007–35 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–NYSEArca–2007–35. 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 8 15 9 17 Jkt 211001 PO 00000 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). Frm 00121 Fmt 4703 Sfmt 4703 26191 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 filings will also 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–NYSEArca–2007–35 and should be submitted by May 29, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–8732 Filed 5–7–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55686; File No. SR–OCC– 2006–21] Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of a Proposed Rule Change Relating to Membership Requirements May 1, 2007. I. Introduction On November 15, 2006, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 1 and Rule 19b–4 thereunder 2 a proposed rule change to modify certain OCC By-Laws and Rules relating to membership requirements. The proposed rule change was published for comment in the Federal Register on January 12, 2007.3 No comment letters were received. This order approves the proposal. 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 55047 (Jan. 5, 2007), 72 FR 1571. 1 15 E:\FR\FM\08MYN1.SGM 08MYN1 26192 Federal Register / Vol. 72, No. 88 / Tuesday, May 8, 2007 / Notices II. Description of the Proposal cprice-sewell on PROD1PC66 with NOTICES 1. Interpretation and Policy .03 Prior to this rule change, Interpretation and Policy .03 to Article V, Section 1, of OCC’s By-Laws required applicants for membership to employ two key operations employees on a fulltime basis. This requirement was intended to ensure that an applicant maintains sufficient staff to fulfill its obligations as a clearing member. However, several recent applicants for clearing membership have had difficulty meeting this requirement because their entire staff was employed by an affiliate of the applicant (i.e., a parent or related organization) rather than by the applicant itself. While these applicants entered into employee leasing arrangements in order to comply with OCC’s policy, OCC decided to reevaluate the policy in light of the fact that it had proved burdensome to a number of applicants. OCC understands that it is not uncommon for some entities of an affiliated corporate group to outsource certain or all functions to another entity of the corporate group and let the latter be the sole employer of the people who perform those functions. In situations of that nature, OCC concluded that there is not the same reason to be concerned about whether the applicant will have adequate staffing as in cases where the applicant relies on an unaffiliated third party for staffing. OCC therefore is modifying its policy in order to provide greater flexibility to recognize this alternative employment structure by amending Interpretation and Policy .03 to Article V, Section 1, to permit the Membership/Risk Committee (‘‘Committee’’) to waive the requirement that an applicant employ two key operations employees on a full-time basis if the daily operations of the applicant are conducted by staff employed on a full-time basis by an entity affiliated with such applicant. OCC believes that the Committee’s authority to waive such requirement is consistent with its existing authority to waive the requirement that an applicant employ at least one full-time person who is registered as a ‘‘Limited Principal—Financial and Operations’’ or comparable registration requirement, as applicable. 2. Rule 309 OCC is also amending Rule 309 by adding new paragraph (f) to clarify that if an operationally capable clearing member proposes to become a managed clearing member (i.e., outsource certain of its obligations as a clearing member to another clearing member [‘‘managing VerDate Aug<31>2005 15:36 May 07, 2007 Jkt 211001 clearing member’’]), the applicant must obtain prior approval from the Committee. Prior to this rule change, Interpretation and Policy .04 to Rule 309 primarily contemplated the use of facilities management agreements by applicants for membership rather than by existing clearing members. Nonetheless, OCC has always interpreted its By-Laws and Rules as requiring prior Committee review and approval of all facilities management agreements, including those proposed to be entered into by operationally capable clearing members. The amendment to Rule 309 makes this interpretation explicit. 3. Rule 901 OCC is amending Rule 901 to provide that a clearing member’s appointment of another clearing member or CDS Clearing and Depository Services Inc. (‘‘CDS’’) 4 for purposes of effecting settlements of exercised or matured cleared securities may not be terminated until after the 30th calendar day following notice to OCC of such termination.5 Prior to this rule change, clearing members were required to provide three business days notice of terminating such appointments. However, OCC concluded that three business days was insufficient time for OCC to determine whether or not the clearing member has made appropriate alternative settlement arrangements. Accordingly, OCC is changing the notice period to be consistent with the notice period required to advise OCC of the termination of a facilities management agreement.6 III. Discussion 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 registered clearing agency. In particular, the Commission believes the proposal is consistent with the requirements of Section 17A(b)(3)(F),7 which, among other things, requires the rules of a clearing agency to assure the safeguarding of securities and funds that are in the 4 CDS is the successor organization to Canadian Depository for Securities Ltd. OCC’s By-Law definition of CDS is being amended to reflect this organizational change. 5 OCC surveyed appointed clearing members that effect NSCC settlements for nonaffiliated clearing members and CDS to ascertain their views regarding the proposed change in the notice period for terminating such appointments. There were no objections to the proposed change. 6 Conforming changes have been made to the related appointment forms, which are attached as Exhibits 5A and 5B to the proposed rule filing. 7 15 U.S.C. 78q–1(b)(3)(F). PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 custody or control of the clearing agency or for which it is responsible. Although OCC is giving the Membership/Risk Committee the ability to waive the requirement that an applicant employ two key operations employees on a fulltime basis, the revised requirement that allows an applicant to have full-time operational staff employed by an affiliate of the applicant should provide OCC with the practical flexibility to permit such arrangements and still have reasonable assurance that its members are operationally sound. Moreover, specifying that a clearing member’s appointment of another clearing entity to effect settlement on its behalf can not be terminated until after the 30th calendar day following notice to OCC of such termination should provide OCC with an appropriate amount of time in which to determine that the clearing member has made alternative settlement arrangements. IV. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of Section 17A of the Act 8 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–2006–21) be, and hereby is, approved.9 For the Commission by the Division of Market Regulation, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–8735 Filed 5–7–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55689; File No. SR–Phlx– 2007–36] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Quoting Obligations in Long Term Options May 1, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 8 15 U.S.C. 78q–1. approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 10 17 CFR 200.30–3(a)(12). 9 In E:\FR\FM\08MYN1.SGM 08MYN1

Agencies

[Federal Register Volume 72, Number 88 (Tuesday, May 8, 2007)]
[Notices]
[Pages 26191-26192]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-8735]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55686; File No. SR-OCC-2006-21]


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

May 1, 2007.

I. Introduction

    On November 15, 2006, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 \1\ and Rule 19b-4 
thereunder \2\ a proposed rule change to modify certain OCC By-Laws and 
Rules relating to membership requirements. The proposed rule change was 
published for comment in the Federal Register on January 12, 2007.\3\ 
No comment letters were received. This order approves the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 55047 (Jan. 5, 2007), 72 
FR 1571.

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[[Page 26192]]

II. Description of the Proposal

1. Interpretation and Policy .03

    Prior to this rule change, Interpretation and Policy .03 to Article 
V, Section 1, of OCC's By-Laws required applicants for membership to 
employ two key operations employees on a full-time basis. This 
requirement was intended to ensure that an applicant maintains 
sufficient staff to fulfill its obligations as a clearing member. 
However, several recent applicants for clearing membership have had 
difficulty meeting this requirement because their entire staff was 
employed by an affiliate of the applicant (i.e., a parent or related 
organization) rather than by the applicant itself. While these 
applicants entered into employee leasing arrangements in order to 
comply with OCC's policy, OCC decided to reevaluate the policy in light 
of the fact that it had proved burdensome to a number of applicants.
    OCC understands that it is not uncommon for some entities of an 
affiliated corporate group to outsource certain or all functions to 
another entity of the corporate group and let the latter be the sole 
employer of the people who perform those functions. In situations of 
that nature, OCC concluded that there is not the same reason to be 
concerned about whether the applicant will have adequate staffing as in 
cases where the applicant relies on an unaffiliated third party for 
staffing. OCC therefore is modifying its policy in order to provide 
greater flexibility to recognize this alternative employment structure 
by amending Interpretation and Policy .03 to Article V, Section 1, to 
permit the Membership/Risk Committee (``Committee'') to waive the 
requirement that an applicant employ two key operations employees on a 
full-time basis if the daily operations of the applicant are conducted 
by staff employed on a full-time basis by an entity affiliated with 
such applicant. OCC believes that the Committee's authority to waive 
such requirement is consistent with its existing authority to waive the 
requirement that an applicant employ at least one full-time person who 
is registered as a ``Limited Principal--Financial and Operations'' or 
comparable registration requirement, as applicable.

2. Rule 309

    OCC is also amending Rule 309 by adding new paragraph (f) to 
clarify that if an operationally capable clearing member proposes to 
become a managed clearing member (i.e., outsource certain of its 
obligations as a clearing member to another clearing member [``managing 
clearing member'']), the applicant must obtain prior approval from the 
Committee. Prior to this rule change, Interpretation and Policy .04 to 
Rule 309 primarily contemplated the use of facilities management 
agreements by applicants for membership rather than by existing 
clearing members. Nonetheless, OCC has always interpreted its By-Laws 
and Rules as requiring prior Committee review and approval of all 
facilities management agreements, including those proposed to be 
entered into by operationally capable clearing members. The amendment 
to Rule 309 makes this interpretation explicit.

3. Rule 901

    OCC is amending Rule 901 to provide that a clearing member's 
appointment of another clearing member or CDS Clearing and Depository 
Services Inc. (``CDS'') \4\ for purposes of effecting settlements of 
exercised or matured cleared securities may not be terminated until 
after the 30th calendar day following notice to OCC of such 
termination.\5\ Prior to this rule change, clearing members were 
required to provide three business days notice of terminating such 
appointments. However, OCC concluded that three business days was 
insufficient time for OCC to determine whether or not the clearing 
member has made appropriate alternative settlement arrangements. 
Accordingly, OCC is changing the notice period to be consistent with 
the notice period required to advise OCC of the termination of a 
facilities management agreement.\6\
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    \4\ CDS is the successor organization to Canadian Depository for 
Securities Ltd. OCC's By-Law definition of CDS is being amended to 
reflect this organizational change.
    \5\ OCC surveyed appointed clearing members that effect NSCC 
settlements for nonaffiliated clearing members and CDS to ascertain 
their views regarding the proposed change in the notice period for 
terminating such appointments. There were no objections to the 
proposed change.
    \6\ Conforming changes have been made to the related appointment 
forms, which are attached as Exhibits 5A and 5B to the proposed rule 
filing.
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III. Discussion

    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 registered clearing agency. In particular, 
the Commission believes the proposal is consistent with the 
requirements of Section 17A(b)(3)(F),\7\ which, among other things, 
requires the rules of a clearing agency to assure the safeguarding of 
securities and funds that are in the custody or control of the clearing 
agency or for which it is responsible. Although OCC is giving the 
Membership/Risk Committee the ability to waive the requirement that an 
applicant employ two key operations employees on a full-time basis, the 
revised requirement that allows an applicant to have full-time 
operational staff employed by an affiliate of the applicant should 
provide OCC with the practical flexibility to permit such arrangements 
and still have reasonable assurance that its members are operationally 
sound. Moreover, specifying that a clearing member's appointment of 
another clearing entity to effect settlement on its behalf can not be 
terminated until after the 30th calendar day following notice to OCC of 
such termination should provide OCC with an appropriate amount of time 
in which to determine that the clearing member has made alternative 
settlement arrangements.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \8\ and the 
rules and regulations thereunder.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2006-21) be, and hereby 
is, approved.\9\
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    \9\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-8735 Filed 5-7-07; 8:45 am]
BILLING CODE 8010-01-P
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