Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change Relating to Stock Loan Buy-In and Sell-Out Rules, 20861-20863 [2012-8270]
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Federal Register / Vol. 77, No. 67 / Friday, April 6, 2012 / Notices
structural changes to the Corporation’s
certificate of incorporation. These
changes, however, do not impact the
governance of the Exchange nor do they
modify the relative ownership of the
shareholders of the Corporation.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change imposes any
burden on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Changes and Timing for
Commission Action
Because the foregoing proposed rule
change does not significantly affect the
protection of investors or the public
interest, does not impose any significant
burden on competition, and, by its
terms, does not become operative for 30
days from the date on which it was
filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 5 and Rule 19b–
4(f)(6) thereunder.6
The Exchange has requested that the
Commission waive the 30-day operative
delay. The Exchange has argued that the
proposed rule change is consistent with
the protection of investors and the
public interest because it would permit
the Corporation to immediately amend
its certificate of incorporation to
facilitate the Corporation’s IPO, and
because the proposed amendments
would not impact the ownership or
governance of the Exchange.7 The
Exchange has stated that the
Corporation’s IPO may occur in the near
future, and that the changes described
in this proposal are a critical component
of such IPO. The Exchange has
represented that a waiver of the
operative waiting period will allow the
Corporation to promptly move forward
with the IPO without delay. The
Commission notes that the Exchange
has also represented that the proposed
mstockstill on DSK4VPTVN1PROD with NOTICES
5 15
U.S.C. 78s(b)(3)(A).
6 17 CFR 240.19b–4(f)(6). In addition, Rule 19b4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
7 See SR–BATS–2012–014, Item 7.
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20861
amendments to the Corporation’s
certificate of incorporation would not
impact the Corporation’s existing
governance structure or ownership and
voting limitations or the Exchange’s
self-regulatory functions. Therefore, the
Commission believes that a waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest. For this reason, the
Commission hereby waives the 30-day
operative delay requirement and
designates the proposed rule change as
operative upon filing.8
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend 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.
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 Web site viewing and
printing 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 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
publicly available. All submissions
should refer to File Number SR–BYX–
2012–007 and should be submitted on
or before April 27, 2012.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Elizabeth M. Murphy,
Secretary.
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 email to rulecomments@sec.gov. Please include File
Number SR–BYX–2012–007 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–BYX–2012–007. This file
number should be included on the
subject line if email 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
8 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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[FR Doc. 2012–8360 Filed 4–5–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66715; File No. SR–OCC–
2012–04]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of Proposed Rule Change
Relating to Stock Loan Buy-In and SellOut Rules
April 2, 2012.
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 March 22,
2012, 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.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of Terms of Substance of the
Proposed Rule Change
The proposed rule change would
make procedural changes to certain
stock loan buy-in and sell-out rules.
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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20862
Federal Register / Vol. 77, No. 67 / Friday, April 6, 2012 / Notices
II. Self-Regulatory Organization’s
Statement of 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 these statements.
A. Self-Regulatory Organization’s
Statement of Purpose of, and Statutory
Basis for, the Proposed Rule Change
mstockstill on DSK4VPTVN1PROD with NOTICES
As described below, OCC is proposing
three procedural changes to certain
rules relating to the Market Loan
Program 3 and the Stock Loan/Hedge
Program.4
First, OCC proposes to amend the
buy-in and sell-out processes under the
Market Loan Program. Under existing
Rules, buy-in and sell-out transactions
under the Market Loan Program would
be executed by the relevant Loan Market
using an independent broker. However,
Clearing Members participating in the
Market Loan Program have requested
that the execution of such buy-in or sellout transactions be left to the discretion
of Lending Clearing Member or
Borrowing Clearing Member, as
applicable. OCC understands that
Automated Equity Finance Markets, Inc.
(‘‘AQS’’), the operator of the Loan
Market supported by the Market Loan
Program, supports the requested change
and believes that allowing participants
in the Market Loan Program to manage
the buy-in and sell-out processes in the
manner that they are accustomed to will
foster the development of its
marketplace. To accommodate such
request, OCC proposes to amend Rule
2209A and Rule 2211A to update the
buy-in and sell-out processes described
therein and to redefine the respective
rights, obligations, and responsibilities
of OCC, Clearing Members and the
relevant Loan Market in connection
therewith.
More specifically, under existing rules
where the Borrowing Clearing Member
fails to return the specified quantity of
3 The Market Loan Program, governed by Article
XXIA of OCC’s By-Laws and Chapter XXIIA of
OCC’s Rules, provides a framework that
accommodates securities lending transactions
executed through electronic trading systems (‘‘Loan
Markets’’).
4 The Stock Loan/Hedge Program, governed by
Article XXI of OCC’s By-Laws and Chapter XXII of
OCC’s Rules, allows approved clearing members to
register their privately negotiated securities lending
transactions with OCC.
VerDate Mar<15>2010
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Jkt 226001
loaned stock (or where the Lending
Clearing Member fails to pay the
settlement price with respect to the
specified quantity of loaned stock), the
relevant Loan Market will instruct an
independent broker to execute a buy-in
(or sell-out) of the loaned stock, and
OCC will determine in its sole
discretion, as between OCC and the
clearing members, whether the costs of
the transaction are reasonable. Under
the proposed rules, as is the more
common practice in connection with
securities lending, instead of an
independent broker the Lending
Clearing Member (or the Borrowing
Clearing Member) would determine if
and when to execute a buy-in (or sellout) of the loaned stock. Because the
Clearing Member would have sole
discretion with respect to execution of
the buy-in (or sell-out) transaction, such
Clearing Member would be required to
defend the timeliness of the transaction
and the reasonableness of the costs if
such matters were challenged. OCC
would have no responsibility with
respect to the resolution unless OCC
had suspended the Clearing Member. In
connection with the foregoing proposed
changes, OCC and AQS would amend
and restate the Agreement for Clearing
and Settlement Services between the
parties (‘‘AQS Agreement’’). A copy of
the amended and restated AQS
Agreement is attached to the proposed
rule change.5
Second, OCC proposes to amend the
Rules governing the Stock Loan/Hedge
Program to add a sell-out process.
Currently, Rule 2209, which governs
regular termination of stock loans under
the Stock Loan/Hedge Program, does not
describe a sell-out process. Although a
sell-out process is described in Rule
2211, the scope of its application is
limited by the context of Rule 2211,
which specifically governs the close-out
of stock loan positions of suspended
Clearing Members. Therefore, OCC
proposes to amend Rule 2209 to add a
sell-out process that would apply in the
context of regular termination of stock
loans and to amend Rule 2211 to update
the buy-in and sell-out processes
described therein and to redefine the
respective rights, obligations, and
responsibilities of OCC and Clearing
Members in connection therewith. Rule
5 Attached to the proposed rule change as Exhibit
5A is a marked copy showing the changes between
the original and amended and restated AQS
Agreement. These supporting changes to the AQS
Agreement principally are technical in nature.
Technical changes also have been made to reflect
the use of DTC’s Dividend Service to effect
settlement of certain cash dividends. See Exchange
Act Release No. 34–60881 (October 26, 2009), 74
F.R. 56253 (October 30, 2009) [SR–OCC–2009–16].
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2209 would also be amended to clarify
when stock loans are terminated,
including codifying a long standing
process which has permitted Clearing
Members to a stock loan to certify to
OCC that they have terminated the stock
loan and transferred the settlement price
between themselves.
Third, OCC proposes to amend the
Rules governing the Stock Loan/Hedge
Program to add a cash settlement
process. Under the Market Loan
Program, if the Lending Clearing
Member is unable to complete a buy-in,
OCC has the discretion to fix a cash
settlement value for the quantity of the
loaned stock not returned to the
Lending Clearing Member, thereby
facilitating the termination of the
relevant stock loan [see Rule
2209A(b)(3)]. However, currently OCC
does not have the same option available
under the Stock Loan/Hedge Program.
Therefore, OCC proposes to amend Rule
2209 and Rule 2211, as appropriate, to
include a cash settlement process
identical to the process available under
the Market Loan Program.
Finally, in addition to the procedural
changes described above, OCC proposes
to amend Rule 2202(b) to clarify that
with respect to a stock loan that has
been novated by OCC under the Stock
Loan/Hedge Program, any terms of the
original stock loan (other than terms
that establish congruence) and any
representations, warranties, and
covenants made by the parties to the
original stock loan with respect to such
loan, to the extent that they do not
conflict with OCC’s By-Laws and Rules,
shall remain in effect as between such
parties. This change clarifies that, for
example, the agreements of the parties
to the original stock loan transaction
with respect to dividend and rebate
payments (which are not guaranteed by
OCC in the Stock Loan/Hedge Program)
are not affected by the provisions of
OCC’s By-Laws and Rules.
The proposed changes to OCC’s ByLaws and Rules are consistent with the
purposes and requirements of Section
17A of the Act, as amended, because
they are designed to promote the
prompt and accurate clearance and
settlement of stock loans by permitting
Clearing Members to manage the buy-in
and sell-out processes in the manner
that they are accustomed to and by
providing OCC with the additional
option of closing out stock loans
through a cash settlement process,
thereby fostering cooperation and
coordination with persons engaged in
the clearance and settlement of stock
loans, and removing impediments to
and perfecting the mechanism of a
national system for the prompt and
E:\FR\FM\06APN1.SGM
06APN1
Federal Register / Vol. 77, No. 67 / Friday, April 6, 2012 / Notices
accurate clearance and settlement of
stock loans. The proposed rule change
is not inconsistent with any rules of
OCC, including any 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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate 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 or disapprove
the proposed rule change or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
mstockstill on DSK4VPTVN1PROD with NOTICES
IV. Solicitation of Comments
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16:17 Apr 05, 2012
Jkt 226001
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 Web site viewing and
printing 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 filings
will also be available for inspection and
copying at the principal office of OCC
and on OCC’s Web site at https://
www.optionsclearing.com/components/
docs/legal/rules_and_bylaws/
sr_occ_12_04.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–
2012–04 and should be submitted on or
before April 27, 2012.
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Elizabeth M. Murphy,
Secretary.
In its filing with the Commission, the
Exchange 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. The
self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
[FR Doc. 2012–8270 Filed 4–5–12; 8:45 am]
BILLING CODE 8011–01–P
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 may be
submitted by using the Commission’s
Internet comment form (https://
www.sec.gov/rules/sro.shtml), or send
an email to rule-comments@sec.gov.
Please include File No. SR–OCC–2012–
04 on the subject line.
• Paper comments should be sent in
triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC, 20549–1090.
All submissions should refer to File
Number SR–OCC–2012–04. This file
number should be included on the
subject line if email 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
20863
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66714; File No. SR–EDGA–
2012–09]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing of
Proposed Rule Change Relating to
Amendments to Rule 2.11 That
Establish the Authority To Cancel
Orders and Describe the Operation of
an Error Account
April 2, 2012.
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 March 22,
2012, EDGA Exchange, Inc. (‘‘Exchange’’
or ‘‘EDGA’’) 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
6 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00085
Fmt 4703
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 2.11 to (1) add a new subparagraph
(a)(6) that addresses the authority of the
Exchange and its routing broker-dealer,
Direct Edge ECN LLC d/b/a DE Route
(‘‘DE Route’’) to cancel orders if and
when a systems, technical or
operational issue (herein, each
individually referred to as a ‘‘Systems
Issue,’’ and collectively referred to as
‘‘Systems Issues’’) occurs, and (2)
amend subparagraph (a)(4) and add new
subparagraph (a)(7) to describe the
operation of an error account for DE
Route. The text of the proposed rule
change is available on the Exchange’s
Web site, at the Exchange’s principal
office and in the Public Reference Room
of the Commission.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 2.11 by adding subparagraph (a)(6)
to address the authority of the Exchange
and DE Route to cancel orders when a
Systems Issue occurs, and by amending
subparagraph (a)(4) and adding
subparagraph (a)(7) to describe the
conditions under which DE Route may
maintain and use an error account.3
3 DE Route is a facility of the Exchange.
Accordingly, under Exchange Rule 2.11(a)(1), the
Exchange is responsible for filing with the
Commission rule changes and fees relating to DE
Route’s outbound router function. In addition,
EDGA is using the phrase ‘‘the Exchange or DE
Route’’ in this rule filing to reflect the fact that a
decision to cancel orders affected by Systems Issue
may be made by the Exchange or DE Route
Continued
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]]>Agencies
[Federal Register Volume 77, Number 67 (Friday, April 6, 2012)]
[Notices]
[Pages 20861-20863]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8270]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66715; File No. SR-OCC-2012-04]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change Relating to Stock Loan Buy-In
and Sell-Out Rules
April 2, 2012.
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 March 22, 2012, 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. 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\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of Terms of Substance of
the Proposed Rule Change
The proposed rule change would make procedural changes to certain
stock loan buy-in and sell-out rules.
[[Page 20862]]
II. Self-Regulatory Organization's Statement of 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 these
statements.
A. Self-Regulatory Organization's Statement of Purpose of, and
Statutory Basis for, the Proposed Rule Change
As described below, OCC is proposing three procedural changes to
certain rules relating to the Market Loan Program \3\ and the Stock
Loan/Hedge Program.\4\
---------------------------------------------------------------------------
\3\ The Market Loan Program, governed by Article XXIA of OCC's
By-Laws and Chapter XXIIA of OCC's Rules, provides a framework that
accommodates securities lending transactions executed through
electronic trading systems (``Loan Markets'').
\4\ The Stock Loan/Hedge Program, governed by Article XXI of
OCC's By-Laws and Chapter XXII of OCC's Rules, allows approved
clearing members to register their privately negotiated securities
lending transactions with OCC.
---------------------------------------------------------------------------
First, OCC proposes to amend the buy-in and sell-out processes
under the Market Loan Program. Under existing Rules, buy-in and sell-
out transactions under the Market Loan Program would be executed by the
relevant Loan Market using an independent broker. However, Clearing
Members participating in the Market Loan Program have requested that
the execution of such buy-in or sell-out transactions be left to the
discretion of Lending Clearing Member or Borrowing Clearing Member, as
applicable. OCC understands that Automated Equity Finance Markets, Inc.
(``AQS''), the operator of the Loan Market supported by the Market Loan
Program, supports the requested change and believes that allowing
participants in the Market Loan Program to manage the buy-in and sell-
out processes in the manner that they are accustomed to will foster the
development of its marketplace. To accommodate such request, OCC
proposes to amend Rule 2209A and Rule 2211A to update the buy-in and
sell-out processes described therein and to redefine the respective
rights, obligations, and responsibilities of OCC, Clearing Members and
the relevant Loan Market in connection therewith.
More specifically, under existing rules where the Borrowing
Clearing Member fails to return the specified quantity of loaned stock
(or where the Lending Clearing Member fails to pay the settlement price
with respect to the specified quantity of loaned stock), the relevant
Loan Market will instruct an independent broker to execute a buy-in (or
sell-out) of the loaned stock, and OCC will determine in its sole
discretion, as between OCC and the clearing members, whether the costs
of the transaction are reasonable. Under the proposed rules, as is the
more common practice in connection with securities lending, instead of
an independent broker the Lending Clearing Member (or the Borrowing
Clearing Member) would determine if and when to execute a buy-in (or
sell-out) of the loaned stock. Because the Clearing Member would have
sole discretion with respect to execution of the buy-in (or sell-out)
transaction, such Clearing Member would be required to defend the
timeliness of the transaction and the reasonableness of the costs if
such matters were challenged. OCC would have no responsibility with
respect to the resolution unless OCC had suspended the Clearing Member.
In connection with the foregoing proposed changes, OCC and AQS would
amend and restate the Agreement for Clearing and Settlement Services
between the parties (``AQS Agreement''). A copy of the amended and
restated AQS Agreement is attached to the proposed rule change.\5\
---------------------------------------------------------------------------
\5\ Attached to the proposed rule change as Exhibit 5A is a
marked copy showing the changes between the original and amended and
restated AQS Agreement. These supporting changes to the AQS
Agreement principally are technical in nature. Technical changes
also have been made to reflect the use of DTC's Dividend Service to
effect settlement of certain cash dividends. See Exchange Act
Release No. 34-60881 (October 26, 2009), 74 F.R. 56253 (October 30,
2009) [SR-OCC-2009-16].
---------------------------------------------------------------------------
Second, OCC proposes to amend the Rules governing the Stock Loan/
Hedge Program to add a sell-out process. Currently, Rule 2209, which
governs regular termination of stock loans under the Stock Loan/Hedge
Program, does not describe a sell-out process. Although a sell-out
process is described in Rule 2211, the scope of its application is
limited by the context of Rule 2211, which specifically governs the
close-out of stock loan positions of suspended Clearing Members.
Therefore, OCC proposes to amend Rule 2209 to add a sell-out process
that would apply in the context of regular termination of stock loans
and to amend Rule 2211 to update the buy-in and sell-out processes
described therein and to redefine the respective rights, obligations,
and responsibilities of OCC and Clearing Members in connection
therewith. Rule 2209 would also be amended to clarify when stock loans
are terminated, including codifying a long standing process which has
permitted Clearing Members to a stock loan to certify to OCC that they
have terminated the stock loan and transferred the settlement price
between themselves.
Third, OCC proposes to amend the Rules governing the Stock Loan/
Hedge Program to add a cash settlement process. Under the Market Loan
Program, if the Lending Clearing Member is unable to complete a buy-in,
OCC has the discretion to fix a cash settlement value for the quantity
of the loaned stock not returned to the Lending Clearing Member,
thereby facilitating the termination of the relevant stock loan [see
Rule 2209A(b)(3)]. However, currently OCC does not have the same option
available under the Stock Loan/Hedge Program. Therefore, OCC proposes
to amend Rule 2209 and Rule 2211, as appropriate, to include a cash
settlement process identical to the process available under the Market
Loan Program.
Finally, in addition to the procedural changes described above, OCC
proposes to amend Rule 2202(b) to clarify that with respect to a stock
loan that has been novated by OCC under the Stock Loan/Hedge Program,
any terms of the original stock loan (other than terms that establish
congruence) and any representations, warranties, and covenants made by
the parties to the original stock loan with respect to such loan, to
the extent that they do not conflict with OCC's By-Laws and Rules,
shall remain in effect as between such parties. This change clarifies
that, for example, the agreements of the parties to the original stock
loan transaction with respect to dividend and rebate payments (which
are not guaranteed by OCC in the Stock Loan/Hedge Program) are not
affected by the provisions of OCC's By-Laws and Rules.
The proposed changes to OCC's By-Laws and Rules are consistent with
the purposes and requirements of Section 17A of the Act, as amended,
because they are designed to promote the prompt and accurate clearance
and settlement of stock loans by permitting Clearing Members to manage
the buy-in and sell-out processes in the manner that they are
accustomed to and by providing OCC with the additional option of
closing out stock loans through a cash settlement process, thereby
fostering cooperation and coordination with persons engaged in the
clearance and settlement of stock loans, and removing impediments to
and perfecting the mechanism of a national system for the prompt and
[[Page 20863]]
accurate clearance and settlement of stock loans. The proposed rule
change is not inconsistent with any rules of OCC, including any 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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate 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 or disapprove the 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 may be submitted by using the
Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml), or send an email to rule-comments@sec.gov. Please include
File No. SR-OCC-2012-04 on the subject line.
Paper comments should be sent in triplicate to Elizabeth
M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC, 20549-1090.
All submissions should refer to File Number SR-OCC-2012-04. This
file number should be included on the subject line if email 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 Web site viewing and
printing 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 filings will also be available for
inspection and copying at the principal office of OCC and on OCC's Web
site at https://www.optionsclearing.com/components/docs/legal/rules_and_bylaws/sr_occ_12_04.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-2012-04 and should be submitted on or before April
27, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-8270 Filed 4-5-12; 8:45 am]
BILLING CODE 8011-01-P
