Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Descriptions of OCC's Assignment Procedures, 67991-67992 [E7-23319]

Download as PDF Federal Register / Vol. 72, No. 231 / Monday, December 3, 2007 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56845; File No. SR–OCC– 2007–14] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Descriptions of OCC’s Assignment Procedures November 27, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on October 9, 2007, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which items have been prepared primarily by OCC. OCC filed the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 2 and Rule 19b–4(f)(4) thereunder,3 so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would update the descriptions of OCC’s assignment procedures to reflect the expanded use of sub-accounts at OCC. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, OCC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. OCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of such statements.4 mstockstill on PROD1PC66 with NOTICES (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change OCC currently maintains two separate procedures for assigning exercise notices to clearing members. One is the 1 15 U.S.C. 78s(b)(1). U.S.C. 78s(b)(3)(iii). 3 17 CFR 240.19b–4(f)(4). 4 The Commission has modified parts of these statements. 2 15 VerDate Aug<31>2005 16:17 Nov 30, 2007 Jkt 214001 standard assignment procedure, which is commonly referred to as ‘‘random’’ assignment and is applied to most options classes.5 The other is the pro rata procedure which is applied to options on the S&P 500 Index as well as all flexibly structured foreign currency and cross-rate foreign currency options.6 The purpose of this filing is to modify the descriptions of both procedures to account for the expanded use of subaccounts as described in File No. SR– OCC–2007–11. Specifically, the modified descriptions reflect that OCC will assign exercise notices directly to short positions held in a sub-account established by a clearing member for a single beneficial owner. The proposed change is consistent with Section 17A of the Act because it promotes the prompt and accurate clearance and settlement of securities transactions and fosters cooperation and coordination with persons engaged in the clearance and settlement of securities transactions by updating the descriptions of OCC’s assignment procedures. The proposed rule change is not inconsistent with the existing rules of OCC, including any other rules proposed to be amended. (B) Self-Regulatory Organization’s Statement on Burden on Competition OCC does not believe that the proposed rule change would impose any burden on competition. (C) Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were not and are not intended to be solicited with respect to the proposed rule change, and none have been received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 7 and Rule 19b–4(f)(4) 8 promulgated thereunder because the proposal effects a change in an existing service of OCC that (A) does not adversely affect the safeguarding of securities or funds in the custody or control of OCC or for which it is responsible and (B) does not 5 Securities Exchange Act Release No. 46735 (October 28, 2002), 67 FR 67434 (November 5, 2002) (File No. SR–OCC–2002–19). 6 Securities Exchange Act Release Nos. 48908 (December 11, 2003), 68 FR 74689 (December 24, 2003) (File No. SR–OCC–2003–05) and 38165 (January 14, 1997), 62 FR 3070 (January 21, 1997) (File No. SR–OCC–96–19). 7 15 U.S.C. 78s(b)(3)(A)(iii). 8 17 CFR 240.19b–4(f)(4). PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 67991 significantly affect the respective rights or obligations of OCC or persons using the service. At any time within sixty days of the filing of the proposed rule change, the Commission could summarily abrogate such rule change if it appears to the Commission that such action was 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 an e-mail to rulecomments@sec.gov. Please include File Number SR–OCC–2007–14 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–2007–14. 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of OCC. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You E:\FR\FM\03DEN1.SGM 03DEN1 67992 Federal Register / Vol. 72, No. 231 / Monday, December 3, 2007 / Notices should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–OCC–2007–14 and should be submitted on or before December 21, 2007. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Nancy M. Morris, Secretary. [FR Doc. E7–23319 Filed 11–30–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56846; File No. SR–OCC– 2007–11] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Expanding Sub-Accounts November 27, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on September 28, 2007, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which items have been prepared primarily by OCC. OCC filed the proposed rule change pursuant to section 19(b)(3)(A)(iii) of the Act 2 and Rule 19b–4(f)(4) thereunder,3 so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. mstockstill on PROD1PC66 with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would expand the functions associated with sub-accounts. 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 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78s(b)(3)(iii). 3 17 CFR 240.19b–4(f)(4). 1 15 VerDate Aug<31>2005 16:17 Nov 30, 2007 Jkt 214001 in Item IV below. OCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of such statements.4 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The proposed rule change allows clearing members to maintain subaccounts for certain types of accounts for position reporting, margin, collateral, and settlement purposes.5 These sub-accounts would be gradually rolled out to interested clearing members and would be available for firm lien accounts, customers’ accounts, customers’ lien accounts, and customer segregated funds accounts. Clearing members could continue to be allowed to maintain sub-accounts for combined market-makers’ accounts only for position reporting purposes although, as described below, OCC’s system subaccounting function would also be used to enable clearing members to maintain three separate combined market-maker account types under the same clearing member number and to have each account treated as a separate account for all purposes under OCC’s By-laws and Rules. Sub-accounting would not be available for separate market-maker’s accounts, firm non-lien accounts, or cross-margin accounts other than the OCC internal cross-margin accounts, which are segregated funds accounts in which OCC-cleared securities options may be cross-margined with OCCcleared futures products. All sub-accounts for eligible accounts would be enabled to carry positions in OCC-cleared contracts. However, as described in more detail below, margin, collateral, and settlement functions could be turned on or off at the clearing member’s election except in combined market-makers’ accounts. A sub-account would have to be margin-enabled in order to be collateral enabled and collateral-enabled in order to be settlement-enabled. If a sub-account is not ‘‘margin enabled,’’ the positions in the subaccount will simply be included in the parent account for purposes of calculating the margin requirement except that if a short option position in the sub-account is covered by an escrow 4 The Commission has modified parts of these statements. 5 In File No. SR–OCC–2005–14, OCC established an interpretation to Article VI, Section 3 of OCC’s By-Laws under which clearing members may maintain sub-accounts with respect to any account for position reporting purposes. However, this functionality is currently available only with respect to combined market makers’ accounts. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 deposit or a specific deposit or if the short position has been properly identified in a spread instruction, the short position will not be included in the margin calculation for the parent account. If a sub-account is margin enabled, OCC will calculate and report to the clearing member a separate margin requirement considering only the positions in the sub-account. However, if the account is not collateral enabled or settlement enabled, any margin deficiency will be added to the margin requirement of the parent account. Any excess long option or other asset value in a margin enabled sub-account will not be applied against a margin deficit in the parent account. The provision of OCC Rule 604(b)(4), under which equity and debt issues of a single issuer may not be valued in excess of 10% of the margin requirement of the account in which the securities are deposited, will be separately applied to sub-accounts that are margin enabled. If a sub-account is ‘‘margin and collateral enabled,’’ collateral deposited by a clearing member to satisfy its margin requirements can be identified as being in the particular sub-account at the direction of the clearing member. If the account lacks sufficient excess collateral or has no excess, any margin deficiency will be added to the margin requirement of the parent account. Accordingly, a clearing member may withdraw collateral from the subaccount even if it has a margin deficiency or a margin deficiency would be created provided that the parent account has sufficient excess. If a sub-account is ‘‘margin, collateral, and settlement enabled,’’ OCC will make separate daily cash settlement with respect to the sub-account. The clearing member may but does not have to designate a bank account for such settlements that is different from the bank accounts used for other settlements. If there is a margin deficiency in the sub-account, OCC will draft the clearing member’s bank account for the deficit without regard to any margin excess in the parent account. Escrow deposits and specific deposits with respect to positions in a sub-account must specify the subaccount regardless of whether the subaccount is margin enabled. Similarly, spread instructions with respect to any position carried in a sub-account must identify the sub-account and will be given no effect unless both legs of the spread are in the same sub-account regardless of whether the sub-account is margin enabled. The new sub-accounts are not intended as a mechanism for identifying E:\FR\FM\03DEN1.SGM 03DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 72, Number 231 (Monday, December 3, 2007)]
[Notices]
[Pages 67991-67992]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-23319]



[[Page 67991]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56845; File No. SR-OCC-2007-14]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to the Descriptions of OCC's Assignment Procedures

November 27, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 9, 2007, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II, and III below, which items have been prepared 
primarily by OCC. OCC filed the proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) 
thereunder,\3\ so that the proposal was effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(iii).
    \3\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

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

    The proposed rule change would update the descriptions of OCC's 
assignment procedures to reflect the expanded use of sub-accounts at 
OCC.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, OCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. OCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\4\
---------------------------------------------------------------------------

    \4\ The Commission has modified parts of these statements.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    OCC currently maintains two separate procedures for assigning 
exercise notices to clearing members. One is the standard assignment 
procedure, which is commonly referred to as ``random'' assignment and 
is applied to most options classes.\5\ The other is the pro rata 
procedure which is applied to options on the S&P 500 Index as well as 
all flexibly structured foreign currency and cross-rate foreign 
currency options.\6\ The purpose of this filing is to modify the 
descriptions of both procedures to account for the expanded use of sub-
accounts as described in File No. SR-OCC-2007-11. Specifically, the 
modified descriptions reflect that OCC will assign exercise notices 
directly to short positions held in a sub-account established by a 
clearing member for a single beneficial owner.
---------------------------------------------------------------------------

    \5\ Securities Exchange Act Release No. 46735 (October 28, 
2002), 67 FR 67434 (November 5, 2002) (File No. SR-OCC-2002-19).
    \6\ Securities Exchange Act Release Nos. 48908 (December 11, 
2003), 68 FR 74689 (December 24, 2003) (File No. SR-OCC-2003-05) and 
38165 (January 14, 1997), 62 FR 3070 (January 21, 1997) (File No. 
SR-OCC-96-19).
---------------------------------------------------------------------------

    The proposed change is consistent with Section 17A of the Act 
because it promotes the prompt and accurate clearance and settlement of 
securities transactions and fosters cooperation and coordination with 
persons engaged in the clearance and settlement of securities 
transactions by updating the descriptions of OCC's assignment 
procedures. The proposed rule change is not inconsistent with the 
existing rules of OCC, including any other rules proposed to be 
amended.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any 
burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    Written comments were not and are not intended to be solicited with 
respect to the proposed rule change, and none have been received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(4) \8\ promulgated 
thereunder because the proposal effects a change in an existing service 
of OCC that (A) does not adversely affect the safeguarding of 
securities or funds in the custody or control of OCC or for which it is 
responsible and (B) does not significantly affect the respective rights 
or obligations of OCC or persons using the service. At any time within 
sixty days of the filing of the proposed rule change, the Commission 
could summarily abrogate such rule change if it appears to the 
Commission that such action was necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------

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 an e-mail to rule-comments@sec.gov. Please include 
File Number SR-OCC-2007-14 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-2007-14. 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, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of OCC. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You

[[Page 67992]]

should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-OCC-2007-14 
and should be submitted on or before December 21, 2007.
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Nancy M. Morris,
Secretary.
[FR Doc. E7-23319 Filed 11-30-07; 8:45 am]
BILLING CODE 8011-01-P

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