[Federal Register Volume 64, Number 40 (Tuesday, March 2, 1999)]
[Notices]
[Pages 10172-10173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-5087]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41088; File No. SR-OCC-98-10]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of Proposed Rule Change Regarding Supplementary
Exercise Notices
February 22, 1999.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on September 10, 1998, The
Options Clearing Corp. (``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 from
interested persons on the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
Under the proposed rule change, OCC will amend its expiration date
exercise procedures to impose filing fees for exercise notices that are
tendered after OCC's prescribed deadlines.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, OCC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. OCC has prepared summaries, set forth in sections (A),
(B), and (C) below, of the most significant aspects of such
statements.\2\
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\2\ The Commission has modified the text of the summaries
prepared by OCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to modify OCC's rules
that govern the submission of supplementary exercise notices on an
expiration date.
Rule 805 governs the submission of expiration date exercise
instructions. The rule states that if a clearing member tenders an
exercise notice in response to an expiration exercise report after
OCC's deadline, the tender is in violation of OCC's procedures. Rule
805 further provides that the clearing member shall be subject to
disciplinary procedures unless the clearing member was prevented from
submitting timely exercise instructions due to one of the circumstances
specified in the rule.
Supplementary exercise notices require special processing that is
manually intensive. Therefore, OCC is in the process of reviewing the
effectiveness of its rules and procedures relating to expiration date
exercise processing. As a result of this ongoing review, OCC believes
it is necessary to modify Rule 805 to more closely align the treatment
of supplementary exercise notices that are submitted on expiration
dates with the treatment of late exercise instructions that are
submitted on other dates.
Rule 801 imposes a graduated schedule of filing fees for any
request to file exercise instructions after the applicable deadline.
Rule 801 fees increase at specified times depending on when the filing
is made in relation to OCC's nightly processing cycle.
Under the proposed rule change, OCC will institute a similar
schedule of fees for the submission of supplementary exercise notices
on expiration dates. These fees will also increase depending on when
the request was made in relation to the expiration processing cycle.
Under the rule change, OCC will impose a filing fee of $2,000 per
clearing member for any supplementary exercise notice tendered after
the deadline prescribed pursuant to subparagraph (b) of Rule 805 but
before the start of critical expiration processing. A filing fee of
$10,000 per line item per clearing member will be charged for any
supplementary exercise notice tendered after the start of critical
expiration processing. OCC's board of directors will be authorized to
remit any filing fee if it finds that the circumstances that gave rise
to the fee were beyond the clearing member's or its customer's control
or that remission would be otherwise equitable under the circumstances.
OCC will further modify Rule 805 to delete the required institution of
disciplinary procedures for the unexcused tender of supplementary
exercise notices. Instead, the institution of such procedures will be
permissive as is the case under Rule 801(e)(4).
Finally, OCC will amend Rule 805 to add a provision that will
require that the tender of supplementary exercise notices be in
accordance with the procedures prescribed by OCC from time to time.
Under the rule change, failure to follow the procedures prescribed by
OCC will result in the supplemental exercise notice being deemed null
and void. This requirement is intended to ensure that supplemental
exercise notices are received by the appropriate personnel who can act
on them in a timely fashion in order to prevent undue delays in
providing assignment information to clearing members.
The proposed rule change is consistent with Section 17A of the Act
\3\ and the rules and regulations thereunder because it enhances OCC's
procedures for expiration processing of options contracts.
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\3\ 15 U.S.C. 78q-1(b)(3)(A).
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(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 thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety 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 OCC consents, the Commission will:
(A) by order approve such proposed rule change or
[[Page 10173]]
(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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549. Copies
of the submission, all subsequent amendments, all written statements
with respect to the proposed rule change that are filed with the
Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for inspection and copying in the
Commission's Public Reference Section, 450 Fifth Street, NW,
Washington, DC 20549.
Copies of such filing also will be available for inspection and
copying at the principal office of OCC. All submissions should refer to
File No. SR-OCC-09-10 and should be submitted by March 23, 1999.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\4\
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\4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-5087 Filed 3-1-99; 8:45 am]
BILLING CODE 8010-01-M
