Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Accelerated Approval of Proposed Rule Change To Accommodate Equity Options That Have a Unit of Trading of 10 Shares, 65917-65918 [2012-26711]
Download as PDF
<![CDATA[
Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Notices
others charged with monitoring the
work of the Commission or conducting
records management inspections.
5. To a commercial contractor in
connection with benefit programs
administered by the contractor on the
Commission’s behalf, including, but not
limited to, supplemental health, dental,
disability, life and other benefit
programs. Recipients of these records
shall be required to comply with the
requirements of the Privacy Act of 1974,
as amended, 5 U.S.C. 552a.
6. To interns, grantees, experts,
contractors, and others who have been
engaged by the Commission to assist in
the performance of a service related to
this system of records and who need
access to the records for the purpose of
assisting the Commission in the efficient
administration of its programs,
including by performing clerical,
stenographic, or data analysis functions,
or by reproduction of records by
electronic or other means. Recipients of
these records shall be required to
comply with the requirements of the
Privacy Act of 1974, as amended, 5
U.S.C. 552a.
7. To any Federal, state, or local
government authority implementing
child care subsidy programs or
investigating a violation or potential
violation of a statute, rule, regulation, or
order.
8. To the Office of Personnel
Management to be used for evaluating
the child care subsidy program.
POLICIES AND PRACTICES FOR STORING,
RETRIEVING, ACCESSING, RETAINING, AND
DISPOSING OF RECORDS IN THE SYSTEM:
providing services to the Commission
shall be required to maintain equivalent
safeguards.
RETENTION AND DISPOSAL:
SYSTEM MANAGER(S) AND ADDRESS:
On September 12, 2012, the Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–OCC–2012–16. The
proposed rule change, which was filed
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 was published for comment in
the Federal Register on September 28,
2012.2 The Commission received no
comment letters regarding the proposal.
For the reasons discussed below, the
Commission is granting approval of the
proposed rule change on an accelerated
basis.
Associate Executive Director, Office of
Human Resources, Securities and
Exchange Commission, 100 F Street,
NE., Washington, DC 20549–3901
NOTIFICATION PROCEDURE:
All requests to determine whether this
system of records contains a record
pertaining to the requesting individual
may be directed to the FOIA/PA Officer,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–2736.
tkelley on DSK3SPTVN1PROD with NOTICES
Records are safeguarded in a secured
environment. Buildings where records
are stored have security cameras and 24
hour security guard service. The records
are kept in limited access areas during
duty hours and in locked file cabinets
and/or locked offices or file rooms at all
other times. Access is limited to those
personnel whose official duties require
access. Computerized records are
safeguarded through use of access codes
and information technology security.
Contractors and other recipients
VerDate Mar<15>2010
17:08 Oct 30, 2012
Jkt 229001
I. Introduction
II. Description
Persons wishing to obtain information
on the procedures for gaining access to
or contesting the contents of these
records may contact the FOIA/PA
Officer, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–2736.
The proposed rule change will
accommodate Mini Options, which are
equity options that have a unit of
trading of 10 shares.3 OCC proposes to
amend its By-Law provision that sets
forth the minimum amount of a cash
dividend or distribution (‘‘Distribution’’) on an underlying equity
security that will result in an
adjustment of outstanding options on
that underlying equity security.
In June 2012, the International
Securities Exchange and NYSE Arca
filed proposed rule changes with the
Commission to list and trade Mini
Options on a select number of liquid,
high-priced and actively traded
securities.4 Mini Options are intended
See Record access procedures above.
RECORD SOURCE CATEGORIES:
Applications for child care subsidy
and supporting records, which are
voluntarily submitted by employees.
None.
SAFEGUARDS:
October 25, 2012.
RECORD ACCESS PROCEDURE:
EXEMPTIONS CLAIMED FOR THE SYSTEM:
These records are retrieved by the
employee name or social security
number.
[Release No. 34–68104; File No. SR–OCC–
2012–16]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Granting Accelerated Approval of
Proposed Rule Change To
Accommodate Equity Options That
Have a Unit of Trading of 10 Shares
CONTESTING RECORD PROCEDURE:
RETRIEVABILITY:
SECURITIES AND EXCHANGE
COMMISSION
These records will be maintained
until they become inactive, at which
time they will be retired or destroyed in
accordance with records schedules of
the United States Securities and
Exchange Commission and as approved
by the National Archives and Records
Administration.
STORAGE:
Records are maintained in electronic
and paper format. Electronic records are
stored in computerized databases and/or
on computer disc. Paper records and
records on computer disc are stored in
locked file rooms and/or file cabinets.
65917
1 15
By the Commission.
Dated: October 25, 2012.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012–26724 Filed 10–30–12; 8:45 am]
BILLING CODE 8011–01–P
PO 00000
U.S.C. 78s(b)(1).
Exchange Act Release No. 67917
(September 24, 2012), 77 FR 59687 (September 28,
2012). In its filing with the Commission, OCC
included statements concerning the purpose of and
basis for the proposed rule change. The text of these
statements, which the Commission has modified, is
incorporated into the discussion of the proposed
rule change in Section II below.
3 No other changes to OCC’s rules are needed to
clear Mini Options, as the definition of ‘‘unit of
trading’’ in Article I of OCC’s By-Laws is
sufficiently flexible to permit OCC to designate a
unit of trading other than the standard 100 shares
for particular series or classes of options. Similarly,
OCC’s risk management systems will take the
number of underlying shares into consideration.
4 Securities Exchange Act Release Nos. 67284
(June 27, 2012), 77 FR 39545 (July 3, 2012) (SR–
2 Securities
Continued
Frm 00066
Fmt 4703
Sfmt 4703
E:\FR\FM\31OCN1.SGM
31OCN1
65918
Federal Register / Vol. 77, No. 211 / Wednesday, October 31, 2012 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
to expand the choices available to
participants in the options markets.
Other than the difference in the unit of
trading, Mini Options have the same
terms, use, and characteristics as
standard equity options (‘‘Standard
Options’’), which cover 100 shares. The
Commission approved the exchanges’
request to list and trade Mini Options
on September 28, 2012.5
Under OCC’s By-Laws, equity options
may be adjusted upon the occurrence of
certain corporate actions, including
Distributions. Currently, OCC’s By-Laws
stipulate that a Distribution must be in
excess of $12.50 per contract in order
for OCC to consider adjusting any type
of option contract. Some Distributions,
however, would exceed the adjustment
threshold in the case of Standard
Options, but would not exceed the
adjustment threshold in the case of a
Mini Option. The reason for this is that
the per contract Distribution on the
Mini Option would be only 1/10th of
the Distribution on the Standard Option,
and the adjustment threshold is stated
on a per contract basis rather than a per
share basis. OCC does not believe this
result to be appropriate given that Mini
Options are intended to be identical to
Standard Options, but for the smaller
unit of trading.
Instead, OCC believes that it is
appropriate to fashion a new adjustment
policy such that a Distribution that
would result in an adjustment on a
Standard Option would also result in an
adjustment on a Mini Option. Moreover,
the exchanges that will list Mini
Options, as well as OCC clearing
members, have expressed a preference
for OCC to design an adjustment policy
under which OCC makes consistent and
parallel adjustments to both Mini
Options and Standard Options.
Therefore, OCC has proposed to amend
the adjustment threshold in Article VI,
Section 11A of OCC’s By-Laws to $.125
per share from $12.50 per contract.
Furthermore, OCC does not intend for
this rule change to affect options
contracts that were originally listed with
units of trading in excess of 100 shares.
The Securities Committee6 made this
ISE–2012–58); 67283 (June 27, 2012), 77 FR 39535
(July 3, 2012) (SR–NYSE Arca–2012–64). For
example, Mini Options are proposed to be listed on
SPY (SPDR S&P 500), GLD (SPDR Gold Trust) and
AAPL (Apple, Inc.).
5 See Securities Exchange Act Release No. 67948
(September 28, 2012), 77 FR 60753 (October 4,
2012).
6 The Securities Committee is authorized under
OCC By-Law Article VI Section 11(a) to determine
contract adjustments in particular cases and to
formulate adjustment policy or interpretations
having general applicability. The Securities
Committee is comprised of representatives of OCC’s
participant options exchanges and authorized
representatives of OCC.
VerDate Mar<15>2010
17:08 Oct 30, 2012
Jkt 229001
determination because, if OCC applied a
$.125 per share threshold to all option
contracts, OCC might not adjust an
option contract that has a unit of trading
of 1,000 shares for certain Distributions
even though such a Distribution may
represent a significant dollar amount on
a per contract basis.7 For example, in
the case of an option contract with a
unit of trading of 1,000 shares, a
Distribution of $.12 per share would not
trigger an adjustment even though the
amount of the Distribution would be
$120 on a single 1,000 share contract—
far in excess of the existing $12.50 per
contract de minimis threshold. To
address this adjustment issue, OCC has
proposed to retain the existing
adjustment threshold of $12.50 per
contract in Article VI, Section 11A of its
By-Laws for options contracts that were
originally listed in share amounts
greater than 100 shares.
III. Discussion
Section 19(b)(2)(C) of the Act8 directs
the Commission to approve a selfregulatory organization’s proposed rule
change if it determines that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to such organization. Section
17A(b)(3)(F) of the Act9 requires, among
other things, that the rules of a clearing
agency be designed to further several
goals, including, among other things: (i)
Promoting the prompt and accurate
clearance and settlement of securities
transactions and, to the extent
applicable, derivative agreements,
contracts and transactions; (ii)
encouraging cooperation and
coordination with persons engaged in
the clearance and settlement of
securities transactions; and (iii)
safeguarding securities and funds that
are in a clearing agency’s custody or
control, or for which it is responsible.
The Commission concludes that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to OCC. By assuring that
traders of Mini Options will receive
appropriate adjustments when corporate
Distributions are made, the proposed
rule change will foster the prompt and
accurate clearance and settlement of
options contracts, facilitate cooperation
with exchanges and others involved in
the clearance and settlement of these
contracts, and ensure the safety and
7 OCC has rules to accommodate options with a
unit of trading of 1,000 shares, although no such
options currently trade.
8 15 U.S.C. 78s(b)(2)(C).
9 15 U.S.C. 78q–1(b)(3)(F).
PO 00000
Frm 00067
Fmt 4703
Sfmt 4703
proper allocation of securities and funds
for which OCC is responsible.
Further, the Commission concludes
that there is good cause, pursuant to
Section 19(b)(2) of the Act,10 for
approving the proposed rule change
prior to the 30th day after the date of
publication of notice in the Federal
Register. As noted above, the
Commission has approved proposals by
the International Securities Exchange
and NYSE Arca to list and trade Mini
Options.11 Accelerated approval of this
proposed rule change will facilitate the
prompt and accurate clearance and
settlement of options contracts by
ensuring that OCC is fully prepared to
clear and settle Mini Options as soon as
they begin to trade.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act, in particular with the requirements
of Section 17A of the Act12 and the rules
and regulations thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–OCC–2012–
16) be, and hereby is, approved on an
accelerated basis.14
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–26711 Filed 10–30–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68105; File No. SR–CBOE–
2012–097]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fees
Schedule
October 25, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
10 15
U.S.C. 78s(b)(2).
Securities Exchange Act Release No. 67948
(September 28, 2012), 77 FR 60753 (October 4,
2012).
12 15 U.S.C. 78q–1.
13 15 U.S.C. 78s(b)(2).
14 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).
15 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
11 See
E:\FR\FM\31OCN1.SGM
31OCN1
]]>Agencies
[Federal Register Volume 77, Number 211 (Wednesday, October 31, 2012)]
[Notices]
[Pages 65917-65918]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-26711]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68104; File No. SR-OCC-2012-16]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Granting Accelerated Approval of Proposed Rule Change To
Accommodate Equity Options That Have a Unit of Trading of 10 Shares
October 25, 2012.
I. Introduction
On September 12, 2012, the Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'')
proposed rule change SR-OCC-2012-16. The proposed rule change, which
was filed pursuant to Section 19(b)(1) of the Securities Exchange Act
of 1934 (``Act''),\1\ was published for comment in the Federal Register
on September 28, 2012.\2\ The Commission received no comment letters
regarding the proposal. For the reasons discussed below, the Commission
is granting approval of the proposed rule change on an accelerated
basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 67917 (September 24,
2012), 77 FR 59687 (September 28, 2012). In its filing with the
Commission, OCC included statements concerning the purpose of and
basis for the proposed rule change. The text of these statements,
which the Commission has modified, is incorporated into the
discussion of the proposed rule change in Section II below.
---------------------------------------------------------------------------
II. Description
The proposed rule change will accommodate Mini Options, which are
equity options that have a unit of trading of 10 shares.\3\ OCC
proposes to amend its By-Law provision that sets forth the minimum
amount of a cash dividend or distribution (``Distri- bution'') on an
underlying equity security that will result in an adjustment of
outstanding options on that underlying equity security.
---------------------------------------------------------------------------
\3\ No other changes to OCC's rules are needed to clear Mini
Options, as the definition of ``unit of trading'' in Article I of
OCC's By-Laws is sufficiently flexible to permit OCC to designate a
unit of trading other than the standard 100 shares for particular
series or classes of options. Similarly, OCC's risk management
systems will take the number of underlying shares into
consideration.
---------------------------------------------------------------------------
In June 2012, the International Securities Exchange and NYSE Arca
filed proposed rule changes with the Commission to list and trade Mini
Options on a select number of liquid, high-priced and actively traded
securities.\4\ Mini Options are intended
[[Page 65918]]
to expand the choices available to participants in the options markets.
Other than the difference in the unit of trading, Mini Options have the
same terms, use, and characteristics as standard equity options
(``Standard Options''), which cover 100 shares. The Commission approved
the exchanges' request to list and trade Mini Options on September 28,
2012.\5\
---------------------------------------------------------------------------
\4\ Securities Exchange Act Release Nos. 67284 (June 27, 2012),
77 FR 39545 (July 3, 2012) (SR-ISE-2012-58); 67283 (June 27, 2012),
77 FR 39535 (July 3, 2012) (SR-NYSE Arca-2012-64). For example, Mini
Options are proposed to be listed on SPY (SPDR S&P 500), GLD (SPDR
Gold Trust) and AAPL (Apple, Inc.).
\5\ See Securities Exchange Act Release No. 67948 (September 28,
2012), 77 FR 60753 (October 4, 2012).
---------------------------------------------------------------------------
Under OCC's By-Laws, equity options may be adjusted upon the
occurrence of certain corporate actions, including Distributions.
Currently, OCC's By-Laws stipulate that a Distribution must be in
excess of $12.50 per contract in order for OCC to consider adjusting
any type of option contract. Some Distributions, however, would exceed
the adjustment threshold in the case of Standard Options, but would not
exceed the adjustment threshold in the case of a Mini Option. The
reason for this is that the per contract Distribution on the Mini
Option would be only 1/10th of the Distribution on the Standard Option,
and the adjustment threshold is stated on a per contract basis rather
than a per share basis. OCC does not believe this result to be
appropriate given that Mini Options are intended to be identical to
Standard Options, but for the smaller unit of trading.
Instead, OCC believes that it is appropriate to fashion a new
adjustment policy such that a Distribution that would result in an
adjustment on a Standard Option would also result in an adjustment on a
Mini Option. Moreover, the exchanges that will list Mini Options, as
well as OCC clearing members, have expressed a preference for OCC to
design an adjustment policy under which OCC makes consistent and
parallel adjustments to both Mini Options and Standard Options.
Therefore, OCC has proposed to amend the adjustment threshold in
Article VI, Section 11A of OCC's By-Laws to $.125 per share from $12.50
per contract.
Furthermore, OCC does not intend for this rule change to affect
options contracts that were originally listed with units of trading in
excess of 100 shares. The Securities Committee\6\ made this
determination because, if OCC applied a $.125 per share threshold to
all option contracts, OCC might not adjust an option contract that has
a unit of trading of 1,000 shares for certain Distributions even though
such a Distribution may represent a significant dollar amount on a per
contract basis.\7\ For example, in the case of an option contract with
a unit of trading of 1,000 shares, a Distribution of $.12 per share
would not trigger an adjustment even though the amount of the
Distribution would be $120 on a single 1,000 share contract--far in
excess of the existing $12.50 per contract de minimis threshold. To
address this adjustment issue, OCC has proposed to retain the existing
adjustment threshold of $12.50 per contract in Article VI, Section 11A
of its By-Laws for options contracts that were originally listed in
share amounts greater than 100 shares.
---------------------------------------------------------------------------
\6\ The Securities Committee is authorized under OCC By-Law
Article VI Section 11(a) to determine contract adjustments in
particular cases and to formulate adjustment policy or
interpretations having general applicability. The Securities
Committee is comprised of representatives of OCC's participant
options exchanges and authorized representatives of OCC.
\7\ OCC has rules to accommodate options with a unit of trading
of 1,000 shares, although no such options currently trade.
---------------------------------------------------------------------------
III. Discussion
Section 19(b)(2)(C) of the Act\8\ directs the Commission to approve
a self-regulatory organization's proposed rule change if it determines
that the proposed rule change is consistent with the requirements of
the Act and the rules and regulations thereunder applicable to such
organization. Section 17A(b)(3)(F) of the Act\9\ requires, among other
things, that the rules of a clearing agency be designed to further
several goals, including, among other things: (i) Promoting the prompt
and accurate clearance and settlement of securities transactions and,
to the extent applicable, derivative agreements, contracts and
transactions; (ii) encouraging cooperation and coordination with
persons engaged in the clearance and settlement of securities
transactions; and (iii) safeguarding securities and funds that are in a
clearing agency's custody or control, or for which it is responsible.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(2)(C).
\9\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The Commission concludes that the proposed rule change is
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to OCC. By assuring that traders of
Mini Options will receive appropriate adjustments when corporate
Distributions are made, the proposed rule change will foster the prompt
and accurate clearance and settlement of options contracts, facilitate
cooperation with exchanges and others involved in the clearance and
settlement of these contracts, and ensure the safety and proper
allocation of securities and funds for which OCC is responsible.
Further, the Commission concludes that there is good cause,
pursuant to Section 19(b)(2) of the Act,\10\ for approving the proposed
rule change prior to the 30th day after the date of publication of
notice in the Federal Register. As noted above, the Commission has
approved proposals by the International Securities Exchange and NYSE
Arca to list and trade Mini Options.\11\ Accelerated approval of this
proposed rule change will facilitate the prompt and accurate clearance
and settlement of options contracts by ensuring that OCC is fully
prepared to clear and settle Mini Options as soon as they begin to
trade.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(2).
\11\ See Securities Exchange Act Release No. 67948 (September
28, 2012), 77 FR 60753 (October 4, 2012).
---------------------------------------------------------------------------
IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act, in particular
with the requirements of Section 17A of the Act\12\ and the rules and
regulations thereunder.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-OCC-2012-16) be, and hereby
is, approved on an accelerated basis.\14\
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78s(b)(2).
\14\ 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.\15\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------
\15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
[FR Doc. 2012-26711 Filed 10-30-12; 8:45 am]
BILLING CODE 8011-01-P
