Self-Regulatory Organizations; The Options Clearing Corporation; Order Approving Proposed Rule Change Relating to Adjustment Panel Voting, 40394-40396 [2012-16625]
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40394
Federal Register / Vol. 77, No. 131 / Monday, July 9, 2012 / Notices
Exchange to request such information
upon request, if necessary. In addition,
in order to maintain transparency into
who is accessing the Exchange’s System,
the Exchange is also amending Rule
11.3(b)(2) to require Sponsoring
Members to maintain a list of Sponsored
Participants whom the Sponsoring
Member has authorized to obtain access
to the System pursuant to Rule 11.3.
The amended rule will also provide that
the Sponsoring Member shall update the
list of Sponsored Participants as
necessary, and provide the list to the
Exchange upon request. The Exchange
also proposes to amend Rule 11.3(b)(3)
to require that Sponsoring Members
shall comply with all requirements
under the Market Access Rule with
regard to market access arrangements
with Sponsored Participants.
2. Statutory Basis
The Exchange believes that the
proposed rule changes are consistent
with Section 6(b) of the Act 9 and further
the objectives of Section 6(b)(5) of the
Act,10 in that they are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities, and to remove
impediments to and perfect the
mechanisms of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The proposed rule changes are
consistent with these obligations
because they are designed to eliminate
superfluous and unnecessary regulatory
requirements, and thereby avoid
potential confusion. Additionally, the
proposed rule changes are designed to
make the Exchange’s Rules clearer and
more transparent to Members by
eliminating provisions that have been
rendered superfluous and unnecessary
by the Market Access Rule.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15
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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 changes.
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 or within such
longer period (i) as the Commission may
designate up to 45 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 selfregulatory organization consents, the
Commission will:
(A) By order approve or disapprove
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–EDGX–2012–24 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–EDGX–2012–24. 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 changes between the
Commission and any person, other than
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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 the 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
available publicly. All submissions
should refer to File Number SR–EDGX–
2012–24 and should be submitted on or
before July 30, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–16623 Filed 7–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67333; File No. SR–OCC–
2012–07]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Approving Proposed Rule Change
Relating to Adjustment Panel Voting
July 2, 2012.
I. Introduction
On May 7, 2012, The Options Clearing
Corporation (‘‘OCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change SR–OCC–2012–07 pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder.2 The proposed rule
change was published for comment in
the Federal Register on May 24, 2012.3
The Commission received no comment
letters on the proposal. This order
approves the proposal.
II. Description
OCC is updating the procedures
applied to adjustment panel voting and
eliminating the requirement that an
adjustment panel be convened to vote
on certain specific types of standard
11 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. 67021 (May
18, 2012), 77 FR 31060 (May 24, 2012).
1 15
E:\FR\FM\09JYN1.SGM
09JYN1
sroberts on DSK5SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 131 / Monday, July 9, 2012 / Notices
contract adjustments affecting equity
options. These changes are intended to
improve overall operational efficiency
in responding to events for which a
contract adjustment may be made.
Certain panels may be convened
under OCC’s by-laws to (i) determine
contract adjustments to the terms of
outstanding options when certain events
occur (e.g., stock distribution, stock
dividend, merger, consolidation or
reorganization) and (ii) fix certain
amounts or values in respect of certain
options in the event a required value is
unreported, inaccurate, unreliable,
unavailable, or inappropriate. Such
panels are convened in accordance with
Article VI, Section 11 of OCC’s by-laws
and currently consist of two
representatives of each options
exchange on which options affected by
the event are traded and one
representative of OCC, who votes only
in case of a tie. The decision to adjust
(and the nature of the adjustment to be
made) or to fix an amount or value is
made by majority vote of the adjustment
panel. Most often, panels are convened
to determine adjustments to the terms of
outstanding equity options in response
to certain corporate events.
The procedures for panel voting, as
described in Article VI, Section 11, have
not been updated for over 25 years. In
the past, a smaller number of OCC
options exchanges posed few problems
in convening panels to consider
adjustments for equity options.
Currently, however, there are ten
options exchanges and multiple listing
of equity options on several, if not all,
exchanges is common. It is increasingly
difficult to convene two members from
each exchange to consider adjustments
on a timely basis. This difficulty is
magnified when it is necessary to
convene panel meetings to address latebreaking events which often occur
outside of normal business hours.
Additionally, although all equity option
adjustments must currently be
addressed by an adjustment panel,
certain corporate events and their
corresponding option adjustments are so
regular and predictable that it no longer
appears necessary for an adjustment
panel to be convened to address them.
The OCC Securities Committee has
unanimously endorsed the proposed
changes and OCC’s Board of Directors
and stockholders have authorized OCC
to submit the proposed rule change.
OCC is continuing to evaluate the rules
applicable to adjustment determinations
and additional changes may be
proposed in the future.
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Proposed By-Law Changes
OCC is making several changes to the
voting procedures for the Securities
Committee and adjustment panels. OCC
believes the changes will provide
significant operational efficiencies,
allowing OCC and the option exchanges
to respond more quickly to corporate
events affecting listed options. The
changes to the procedures governing
adjustment panel voting (1) change the
requirement that each exchange be
represented by two persons to one
person,4 (2) allow that adjustment panel
actions be determined by votes
accomplished by such means as the
Securities Committee may designate for
that purpose, (3) provide that certain
kinds of corporate events shall not
require an adjustment panel vote, (4)
define a quorum for adjustment panels
and provide for majority vote,5 and (5)
allow the Chairman of OCC to designate
a non-officer as his representative on
adjustment panels.6
The specific corporate events which
would no longer require a panel vote to
effect an adjustment to the terms of an
option would be limited to stock splits
or stock distributions where additional
shares of the underlying security are
issued, reverse splits, and cash mergers
or similar events where all shares are
exchanged exclusively for cash.
Adjustments for stock splits, stock
4 Panels convened by OCC to fix a required
amount or value (as provided for in the by-laws)
would continue to include two representatives from
each exchange on which the affected series is open
for trading. (Such panels also include an OCC
representative, who votes only in case of a tie.) OCC
believes it appropriate to retain this requirement as
the need to fix such amount or value generally
would involve series that are less likely to be traded
on multiple exchanges. However, certain of the
procedural changes being made to Article VI,
Section 11 will be applied to the by-laws that
permit panels to be convened to fix a required
amount or value in order to improve efficiency.
These changes include eliminating the requirement
that at least one panel member from an exchange
be a member of the Securities Committee and
allowing such panels to transact its business by
such means as determined by the Securities
Committee.
5 The intent is to ensure that any adjustment
decision is determined by a majority of the
exchanges (including a representative of OCC if a
voting member) that trade the affected option. For
example, if eight exchanges trade an option, five
exchanges would constitute a quorum for an
adjustment panel. However, a majority vote of these
five exchanges would require only three exchanges.
In this case an adjustment decision would be
determined by a distinct minority of the exchanges
trading the option. Specifying an additional
requirement that the action be determined by a
majority of the exchanges trading the option
provides for an additional level of assurance that a
majority of eligible voting members will determine
an adjustment.
6 Currently, the Chairman is allowed to designate
an OCC officer as his representative. OCC believes
the Chairman should be able to designate a nonofficer as his representative.
PO 00000
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Fmt 4703
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40395
distributions, and reverse splits are
generally the most routine option
adjustments executed by OCC. Option
adjustments for these events, when
executed, are the result of well
understood formulae and consistent
precedent. The Securities Committee
does not believe it is necessary to
convene adjustment panels for ‘‘boiler
plate’’ adjustments of this kind. In like
manner, mergers and other events where
the affected security is exchanged
exclusively for cash have always
occasioned option adjustments which
have called for the delivery of cash. The
Securities Committee does not believe it
necessary to convene panel meetings to
authorize these adjustments.
While an adjustment panel vote
would not be required in these cases, an
adjustment panel could be convened at
any time at the request of any exchange
or OCC in order to address any aspect
of the corporate event or option contract
adjustment deemed to need discussion
by such panel. Also, in all cases of
option adjustments, OCC and the
exchanges would naturally coordinate
the operational execution of the
adjustments (effective date, option
symbol, strike prices, etc).
The changes also allow convened
panels the ability to conduct their
business by any means determined by
the Securities Committee. Currently, the
Securities Committee and panels are
allowed to conduct business in person
or by phone. For the purposes of
exchanging information and registering
votes, OCC and the Securities
Committee believe that electronic means
of communication (e.g., email) should
also be allowed as well as other means
of communication which may be
available in the future (e.g., OCC
systems applications developed for this
purpose).
III. Discussion
Section 19(b)(2)(B) of the Act directs
the Commission to approve a proposed
rule change of a self-regulatory
organization if it finds that such
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization.7
Section 17A(b)(3)(F) of the Act requires
that a clearing agency, among other
things, have the capacity to facilitate the
prompt and accurate clearance and
settlement of securities transactions for
which it is responsible.8
The Commission finds that the
proposed change is consistent with the
purposes and requirements of Section
7 15
8 15
E:\FR\FM\09JYN1.SGM
U.S.C. 78s(b)(2)(B).
U.S.C. 78q–1(b)(3)(F).
09JYN1
40396
Federal Register / Vol. 77, No. 131 / Monday, July 9, 2012 / Notices
17A of the Act 9 and the rules and
regulations thereunder applicable to
OCC. In particular, the Commission
believes that the proposed change
provides for more efficient procedures
that further the purposes of the Act by
facilitating the prompt and accurate
clearance and settlement of securities
transactions for which OCC is
responsible.
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 10 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,11 that the
proposed rule change (File No. SR–
OCC–2012–07) be, and hereby is,
approved.12
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin O’Neill,
Deputy Secretary.
[FR Doc. 2012–16625 Filed 7–6–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67332; File No. SR–EDGA–
2012–27]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing of
Proposed Rule Changes To Amend
EDGA Rules Regarding Market Access
July 2, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’), 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 22,
2012, the EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
changes as described in Items I and II
below, which items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
changes from interested persons.
sroberts on DSK5SPTVN1PROD with NOTICES
9 15
U.S.C. 78q–1.
U.S.C. 78q–1.
11 15 U.S.C. 78s(b)(2).
12 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).
13 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
10 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 11.3 to (1) delete those provisions
that the Exchange believes have been
rendered superfluous and unnecessary
in light of the adoption by the
Commission of Rule 15c3–5 under the
Act; and (2) add a requirement for
Sponsoring Members 3 to maintain a list
of Sponsored Participants 4 which the
Sponsoring Member has authorized to
obtain access to the Exchange’s System,5
and to provide the list of Sponsored
Participants to the Exchange upon
request. The Exchange is also proposing
amendments to Rule 11.3(b)(1) and Rule
1.5(z) to align the definition of
Sponsored Participant with the
terminology used in Rule 15c3–5 to
describe such arrangements.
The text of the proposed rule changes
is attached as Exhibit 5 and is available
on the Exchange’s Web site at
www.directedge.com, at the Exchange’s
principal office and at 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
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule changes and
discussed any comments it received on
the proposed rule changes. 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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Background on Market Access Rule
On November 3, 2010, the
Commission adopted Rule 15c3–5 (the
‘‘Market Access Rule’’). The Market
Access Rule governs risk management
controls by broker-dealers with market
access. The Market Access Rule had an
effective date of January 14, 2011, with
phased-in compliance dates of July 14,
2011, and November 30, 2011.6
defined in EDGA Rule 1.5(aa).
defined in EDGA Rule 1.5(z).
5 As defined in EDGA Rule 1.5(cc).
6 See Securities Exchange Act Release No. 63241
(November 3, 2010), 75 FR 69792 (November 15,
2011) [sic] (File No. S7–03–10). See also Securities
PO 00000
3 As
4 As
Frm 00077
Fmt 4703
Sfmt 4703
Among other things, the Market
Access Rule requires that any brokerdealer with market access,7 or that
provides a customer or any other person
with market access, must establish,
document and maintain a system of risk
management controls and supervisory
procedures that are reasonably designed
to manage the financial, regulatory and
other risks of this business activity.
These controls include financial risk
management controls reasonably
designed to prevent the entry of orders
that exceed appropriate pre-set credit or
capital thresholds in the aggregate for
each customer and the broker-dealer
itself, and to prevent the entry of
erroneous orders. In addition, the
Market Access Rule requires certain
regulatory risk management controls
that, among other things, prevent the
entry of orders unless compliance with
applicable regulatory requirements has
been satisfied on a pre-order entry basis,
and restrict access to trading systems
and technology that provide market
access to persons and accounts that
have been pre-approved and authorized
by the broker-dealer. These regulatory
risk management controls also include
measures designed to prevent the entry
of orders for a broker-dealer, customer
or other person if such person is
restricted from trading those securities,
and to assure that appropriate
surveillance personnel receive
immediate, post-trade execution reports
that result from market access.
These risk management controls and
associated supervisory procedures must
be under the direct and exclusive
control of the broker-dealer that is
subject to the Market Access Rule.
While a broker-dealer can use thirdparty providers to satisfy some or all of
these requirements, the broker-dealer is
nonetheless required to ensure that
whatever technology or other services
are provided by such third-parties are
under such broker-dealer’s direct and
exclusive control.
Rule 11.3(b): Sponsored Participants
Rule 11.3(b) sets forth the
requirements for Sponsored Participants
to obtain authorized access to the
Exchange Act Release No. 64798 [sic] (June 27,
2011), 76 FR 38293 (June 30, 2011) (File No. S7–
03–10) (providing limited extension of compliance
date for certain requirements); Securities Exchange
Act Release No. 65132 (August 15, 2011), 76 FR
51457 (August 18, 2011) (exempting floor broker
operations of certain broker-dealers with market
access from automated controls requirement of Rule
15c3–5).
7 The term ‘‘market access’’ is defined in Rule
15c3–5(a)(1) to include, inter alia, access to trading
in securities on an exchange or alternative trading
system (‘‘ATS’’) as a result of being a member or
subscriber of the exchange or ATS, respectively.
E:\FR\FM\09JYN1.SGM
09JYN1
]]>Agencies
[Federal Register Volume 77, Number 131 (Monday, July 9, 2012)]
[Notices]
[Pages 40394-40396]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16625]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67333; File No. SR-OCC-2012-07]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change Relating to Adjustment Panel
Voting
July 2, 2012.
I. Introduction
On May 7, 2012, The Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change SR-OCC-2012-07 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder.\2\ The proposed rule change was published for comment in
the Federal Register on May 24, 2012.\3\ The Commission received no
comment letters on the proposal. This order approves the proposal.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release No. 67021 (May 18, 2012), 77
FR 31060 (May 24, 2012).
---------------------------------------------------------------------------
II. Description
OCC is updating the procedures applied to adjustment panel voting
and eliminating the requirement that an adjustment panel be convened to
vote on certain specific types of standard
[[Page 40395]]
contract adjustments affecting equity options. These changes are
intended to improve overall operational efficiency in responding to
events for which a contract adjustment may be made.
Certain panels may be convened under OCC's by-laws to (i) determine
contract adjustments to the terms of outstanding options when certain
events occur (e.g., stock distribution, stock dividend, merger,
consolidation or reorganization) and (ii) fix certain amounts or values
in respect of certain options in the event a required value is
unreported, inaccurate, unreliable, unavailable, or inappropriate. Such
panels are convened in accordance with Article VI, Section 11 of OCC's
by-laws and currently consist of two representatives of each options
exchange on which options affected by the event are traded and one
representative of OCC, who votes only in case of a tie. The decision to
adjust (and the nature of the adjustment to be made) or to fix an
amount or value is made by majority vote of the adjustment panel. Most
often, panels are convened to determine adjustments to the terms of
outstanding equity options in response to certain corporate events.
The procedures for panel voting, as described in Article VI,
Section 11, have not been updated for over 25 years. In the past, a
smaller number of OCC options exchanges posed few problems in convening
panels to consider adjustments for equity options. Currently, however,
there are ten options exchanges and multiple listing of equity options
on several, if not all, exchanges is common. It is increasingly
difficult to convene two members from each exchange to consider
adjustments on a timely basis. This difficulty is magnified when it is
necessary to convene panel meetings to address late-breaking events
which often occur outside of normal business hours. Additionally,
although all equity option adjustments must currently be addressed by
an adjustment panel, certain corporate events and their corresponding
option adjustments are so regular and predictable that it no longer
appears necessary for an adjustment panel to be convened to address
them.
The OCC Securities Committee has unanimously endorsed the proposed
changes and OCC's Board of Directors and stockholders have authorized
OCC to submit the proposed rule change. OCC is continuing to evaluate
the rules applicable to adjustment determinations and additional
changes may be proposed in the future.
Proposed By-Law Changes
OCC is making several changes to the voting procedures for the
Securities Committee and adjustment panels. OCC believes the changes
will provide significant operational efficiencies, allowing OCC and the
option exchanges to respond more quickly to corporate events affecting
listed options. The changes to the procedures governing adjustment
panel voting (1) change the requirement that each exchange be
represented by two persons to one person,\4\ (2) allow that adjustment
panel actions be determined by votes accomplished by such means as the
Securities Committee may designate for that purpose, (3) provide that
certain kinds of corporate events shall not require an adjustment panel
vote, (4) define a quorum for adjustment panels and provide for
majority vote,\5\ and (5) allow the Chairman of OCC to designate a non-
officer as his representative on adjustment panels.\6\
---------------------------------------------------------------------------
\4\ Panels convened by OCC to fix a required amount or value (as
provided for in the by-laws) would continue to include two
representatives from each exchange on which the affected series is
open for trading. (Such panels also include an OCC representative,
who votes only in case of a tie.) OCC believes it appropriate to
retain this requirement as the need to fix such amount or value
generally would involve series that are less likely to be traded on
multiple exchanges. However, certain of the procedural changes being
made to Article VI, Section 11 will be applied to the by-laws that
permit panels to be convened to fix a required amount or value in
order to improve efficiency. These changes include eliminating the
requirement that at least one panel member from an exchange be a
member of the Securities Committee and allowing such panels to
transact its business by such means as determined by the Securities
Committee.
\5\ The intent is to ensure that any adjustment decision is
determined by a majority of the exchanges (including a
representative of OCC if a voting member) that trade the affected
option. For example, if eight exchanges trade an option, five
exchanges would constitute a quorum for an adjustment panel.
However, a majority vote of these five exchanges would require only
three exchanges. In this case an adjustment decision would be
determined by a distinct minority of the exchanges trading the
option. Specifying an additional requirement that the action be
determined by a majority of the exchanges trading the option
provides for an additional level of assurance that a majority of
eligible voting members will determine an adjustment.
\6\ Currently, the Chairman is allowed to designate an OCC
officer as his representative. OCC believes the Chairman should be
able to designate a non-officer as his representative.
---------------------------------------------------------------------------
The specific corporate events which would no longer require a panel
vote to effect an adjustment to the terms of an option would be limited
to stock splits or stock distributions where additional shares of the
underlying security are issued, reverse splits, and cash mergers or
similar events where all shares are exchanged exclusively for cash.
Adjustments for stock splits, stock distributions, and reverse splits
are generally the most routine option adjustments executed by OCC.
Option adjustments for these events, when executed, are the result of
well understood formulae and consistent precedent. The Securities
Committee does not believe it is necessary to convene adjustment panels
for ``boiler plate'' adjustments of this kind. In like manner, mergers
and other events where the affected security is exchanged exclusively
for cash have always occasioned option adjustments which have called
for the delivery of cash. The Securities Committee does not believe it
necessary to convene panel meetings to authorize these adjustments.
While an adjustment panel vote would not be required in these
cases, an adjustment panel could be convened at any time at the request
of any exchange or OCC in order to address any aspect of the corporate
event or option contract adjustment deemed to need discussion by such
panel. Also, in all cases of option adjustments, OCC and the exchanges
would naturally coordinate the operational execution of the adjustments
(effective date, option symbol, strike prices, etc).
The changes also allow convened panels the ability to conduct their
business by any means determined by the Securities Committee.
Currently, the Securities Committee and panels are allowed to conduct
business in person or by phone. For the purposes of exchanging
information and registering votes, OCC and the Securities Committee
believe that electronic means of communication (e.g., email) should
also be allowed as well as other means of communication which may be
available in the future (e.g., OCC systems applications developed for
this purpose).
III. Discussion
Section 19(b)(2)(B) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\7\ Section 17A(b)(3)(F) of the Act requires that a
clearing agency, among other things, have the capacity to facilitate
the prompt and accurate clearance and settlement of securities
transactions for which it is responsible.\8\
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\7\ 15 U.S.C. 78s(b)(2)(B).
\8\ 15 U.S.C. 78q-1(b)(3)(F).
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The Commission finds that the proposed change is consistent with
the purposes and requirements of Section
[[Page 40396]]
17A of the Act \9\ and the rules and regulations thereunder applicable
to OCC. In particular, the Commission believes that the proposed change
provides for more efficient procedures that further the purposes of the
Act by facilitating the prompt and accurate clearance and settlement of
securities transactions for which OCC is responsible.
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\9\ 15 U.S.C. 78q-1.
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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 \10\ and the
rules and regulations thereunder.
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\10\ 15 U.S.C. 78q-1.
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\11\ that the proposed rule change (File No. SR-OCC-2012-07) be,
and hereby is, approved.\12\
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\11\ 15 U.S.C. 78s(b)(2).
\12\ 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 Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2012-16625 Filed 7-6-12; 8:45 am]
BILLING CODE 8011-01-P
