[Federal Register Volume 60, Number 69 (Tuesday, April 11, 1995)]
[Notices]
[Pages 18435-18436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8869]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35566; File No. SR-OCC-95-03]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of a Proposed Rule Change Relating to OCC's Exercise-
by-Exception Procedures Applicable to Expiring Index Options
April 5, 1995.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on February 16, 1995, The
Options Clearing Corporation (``OCC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change (File No.
SR-OCC-95-03) 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) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the proposed rule change is to reduce the threshold
used to determine the in-the-money amount of index options (other than
flexibly structured index options) carried in clearing members'
customers' accounts in connection with OCC's exercise-by-exception
processing procedures.\2\
\2\Conforming changes have been proposed to OCC Rules 1804(a)
and (b).
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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 that 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.
(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 the exercise
threshold for index option contracts, including Quarterly Index
Expiration option contracts, carried in a clearing member's customer
account in connection with OCC's exercise-by-exception (``ex-by-ex'')
processing procedures.\3\ The exercise threshold used for flexibly
structured index options is not effected by the proposed change.
\3\Ex-by-ex processing presumes that a clearing member would
desire to exercise all options that are in-the-money by a specified
threshold. Accordingly, all options subject to ex-by-ex processing
are identified as being in-the-money, at-the-money, or out-of-the-
money in a report provided to the clearing member through C/MACS or
by hard copy. Such report reflects that the clearing member
instructs OCC to exercise all options that are in-the-money by the
threshold amount. However, the clearing member can issue contrary
instructions to OCC.
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Two thresholds are currently specified in OCC's Rules; the first
threshold is for index options carried in clearing members' customers'
accounts, and the second threshold is for index options carried in all
other clearing member accounts. The current threshold for customer
positions is $25.00 per index option contract and the threshold for all
other positions is $1.00 per index option contract. OCC proposes to
reduce the threshold for customer positions to $1.00 per index option
contract. Any position in-the-money by that amount or more would be
exercised unless the clearing member submitted a timely, contrary
instruction to OCC. The proposed change to the threshold for ex-by-ex
processing will not affect clearing members' obligations to their
customers or correspondent brokers, which are determined by contract
and by generally applicable principles of law.
The proposed change has been discussed with representatives from
OCC's participant exchanges and clearing membership who have concurred
in its implementation. Clearing member representatives have advised OCC
that the change would reduce the risks associated with the expiration
of index options as well as their operational costs. Accordingly, OCC
believes that the proposed change would provide cost savings to its
clearing membership without affecting the risk of processing expiring
options.
OCC believes the proposed rule change is consistent with the
requirements of the Act, specifically Section 17A of the Act, and the
rules and regulations thereunder because the rule proposal will
facilitate the prompt and accurate clearance and settlement of index
options transactions.
(B) Self-Regulatory Organization's Statement on Burden on Competition
OCC does not believe that the proposed rule change will impact or
impose a burden on competition.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants, or Others
No written comments have been solicited or received. OCC will
notify the Commission of any written comments received by OCC.
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
(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. 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.,
[[Page 18436]] Washington, DC 20549. Copies of such filing will also be
available for inspection and copying at the principal office of OCC.
All submissions should refer to the file number SR-OCC-95-03 and should
be submitted by May 2, 1995.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\4\
\4\17 CFR 200.30-3(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-8869 Filed 4-10-95; 8:45 am]
BILLING CODE 8010-01-M
