94-743. Self-Regulatory Organizations; the Options Clearing Corp.; Order Approving a Proposed Rule Change Relating to Delivery-Versus-Payment Settlement Procedures

[Federal Register Volume 59, Number 8 (Wednesday, January 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-743]


[[Page Unknown]]

[Federal Register: January 12, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33411; International Series Release No. 627; File No. 
SR-OCC-92-29]

 

Self-Regulatory Organizations; the Options Clearing Corp.; Order 
Approving a Proposed Rule Change Relating to Delivery-Versus-Payment 
Settlement Procedures

January 4, 1994.
    On September 17, 1992, The Options Clearing Corporation (``OCC'') 
submitted a proposed rule change (File No. SR-OCC-92-29) to the 
Securities and Exchange Commission (``Commission'') pursuant to section 
19(b) of the Securities Exchange Act of 1934 (``Act'')\1\ concerning 
delivery-versus-payment (``DVP'') settlement procedures. Notice of the 
proposal appeared in the Federal Register on December 14, 1992, to 
solicit comment from interested persons.\2\ No comments were received 
by the Commission. This order approves the proposal.
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    \1\15 U.S.C. 78s(b) (1988).
    \2\Securities Exchange Act Release No. 31566 (December 4, 1992), 
57 FR 59190.
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I. Description of the Proposal

    OCC is amending its Rule 1606A to modify its DVP settlement 
procedures. First, the proposal clarifies that a clearing member that 
elects to settle using DVP procedures in Rule 1606A is not discharged 
from its obligation to U.S. dollars or to deliver foreign currency in 
settlement of the exercise of foreign currency options until the 
earlier of the time when (i) the clearing member's agent bank 
irrevocably pays U.S. dollars or delivers foreign currency to OCC's 
correspondent bank on behalf of the clearing member of (ii) OCC's 
correspondent bank irrevocably credits OCC's account with the U.S. 
dollars or the foreign currency deliverable by the clearing member's 
agent bank whether or not the clearing member's agent bank has paid 
U.S. dollars or delivered foreign currency to OCC's correspondent bank. 
Second, the proposal emphasizes the conditional nature of OCC's 
obligation in the DVP settlement process. OCC is obligated to cause its 
correspondent bank to deliver the quantity of U.S. dollars or foreign 
currency payable by OCC only against receipt from the agent bank of the 
quantity of U.S. dollars or foreign currency payable to OCC. Finally, 
the proposal clarifies that OCC's delivery obligation is to the party 
designated in the DVP authorization, which may or may not be the 
clearing member's agent bank.

II Discussion

    The Commission believes that the proposal is consistent with the 
Act and in particular section 17A of the Act.\3\ Sections 17A(b)(3) (A) 
and (F) of the Act\4\ require that a clearing agency be organized and 
its rules designed to promote the prompt and accurate clearance and 
settlement of securities transactions and to assure the safeguarding of 
funds in the custody or control of the clearing agency or for which it 
is responsible.
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    \3\15 U.S.C. 78q-1 (1988).
    \4\15 U.S.C. 78q-1(b)(3) (A) and (F) (1988).
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    The proposal clarifies certain DVP settlement procedures and 
describes with more precision when a clearing member is discharged from 
its delivery and payment obligations in foreign currency options. It 
also clarifies OCC's payment and delivery obligations in connection 
with DVP settlement. In particular, the proposal clarifies that OCC's 
obligation arises only after the clearing member's agent bank fulfills 
its obligation to OCC's correspondent bank. The Commission believes 
that this effort by OCC to clarify the terms of DVP settlement should 
add certainty to the settlement process and should provide an added 
measure of protection for OCC. Because the rule change should further 
enable OCC to comply with its statutory obligations to provide prompt 
and accurate clearance and settlement of securities transactions and to 
assure the safeguarding of securities and funds, the Commission 
believes that approval of the rule change is warranted.

III. Conclusion

    For the reasons discussed above, the Commission believes that the 
proposal is consistent with the requirements of the Act, particularly 
with section 17A of the Act,\5\ and the rules and regulations 
thereunder.
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    \5\15 U.S.C. 78q-1 (1988).
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    It is therefore ordered, Pursuant to section 19(b)(2) of the 
Act,\6\ that the above-mentioned proposed rule change (File No. SR-OCC-
92-29) be, and hereby is, approved.

    \6\15 U.S.C. 78s(b)(2) (1988).
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    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-743 Filed 1-11-94; 8:45 am]
BILLING CODE 8010-01-M