[Federal Register Volume 60, Number 66 (Thursday, April 6, 1995)]
[Notices]
[Page 17600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8421]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35552; File No. SR-OCC-94-11]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving Proposed Rule Change Relating to Implementation of a
Three-Day Settlement Standard
March 30, 1995.
On December 30, 1994, the Options Clearing Corporation (``OCC'')
filed a proposed rule change (File No. SR-OCC-94-11) with the
Securities and Exchange Commission (``Commission'') pursuant to Section
19(b) of the Securities Exchange Act of 1934 (``Act'').\1\ Notice of
the proposal was published in the Federal Register on February 2, 1995,
to solicit comments from interested persons.\2\ As discussed below,
this order approves the proposed rule change.
\1\15 U.S.C. 78s(b) (1988).
\2\Securities Exchange Act Release No. 35265 (January 23, 1995),
60 FR 6583.
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I. Description
The proposed rule change will conform OCC's rules effective June 7,
1995, to Rule 15c6-1 under the Act. That rule establishes three
business days after the trade date (``T+3''), instead of five business
days (``T+5''), as the standard settlement cycle for most transactions
in securities that underlie many OCC issued options. Rule 15c6-1 will
become effective June 7, 1995.\3\ As described below, OCC is revising
several of OCC's rules that include references to underlying securities
settlement time frames.
\3\Securities Exchange Act Release Nos. 33023 (October 6, 1993),
58 FR 52891 (adoption of Rule 15c6-1) and 34952 (November 9, 1994),
59 FR 59137 (changing effective date from June 1, 1995, to June 7,
1995).
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Under Rule 902, the assigned clearing member of an exercised call
option contract or the exercising clearing member of an exercised put
option contract will be required to deliver the underlying securities
on the third business day following the day on which the exercise
notice was given to OCC. Rule 2207 will provide that the settlement
date for a stock loan will be three business days after the date on
which the lending clearing member initiates the termination by
notifying OCC. Rule 2208(b) will provide that if the lending clearing
member initiates the termination of a stock loan and does not receive
the loaned stock in its securities depository account within three
business days, the stock loan shall be completed when (1) OCC has
transferred the stock to the lending clearing member's account after
OCC has received the securities from the borrowing member or (2) the
lending clearing member has executed a buy-in. Rule 2208(b) also will
provide that the lending clearing member may execute a buy-in three
business days after initiating the termination or at any time
thereafter if the lending clearing member has not received the loaned
stock by such date.
OCC has requested that the proposed rule change become effective on
the same date as Rule 15c6-1. Rule 15c6-1 is scheduled to become
effective on June 7, 1995.\4\
\4\The transition from T+5 settlement to T+3 settlement will
occur over a four day period. Friday, June 2, will be the last
trading day with five business day settlement. Monday, June 5, and
Tuesday, June 6, will be trading days with four business day
settlement. Wednesday, June 7, will be the first trading day with
three business day settlement. As a result, trades from June 2 and
June 5 will settle on Friday, June 9. Trades from June 6 and June 7
will settle on Monday, June 12.
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II. Discussion
The Commission believes the proposal is consistent with the
requirements of Section 17A of the Act.\5\ Specifically, Section
17A(b)(3)(F)\6\ states that the rules of a clearing agency must be
designed to promote the prompt and accurate clearance and settlement of
securities transactions, to assure the safeguarding of securities and
funds which are in OCC's custody and control or for which OCC is
responsible, and to foster cooperation and coordination with persons
engaged in clearance and settlement of securities transactions. Several
of OCC rules are based on a five day time frame for settlement of
securities transactions. On June 7, 1995, the new settlement cycle or
T+3 will be established, as mandated by the Commission's Rule 15c6-1.
As a result, the OCC's current rule establishing a T+5 settlement cycle
will be inconsistent with Commission rules. This proposal will amend
the OCC's rules to harmonize them with a T+3 settlement cycle. Further,
as discussed in the release adopting Rule 15c6-1, a shorter settlement
time frame could encourage greater efficiency in clearing agencies and
broker-dealer operations. Thus, the proposed rule change should enhance
the prompt and accurate clearance and settlement of securities
transactions.
\5\15 U.S.C. 79q-1 (1988).
\6\15 U.S.C. 78q-1(b)(3)(F) (1988).
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III. Conclusion
For the reasons stated above, the Commission finds that OCC's
proposal is consistent with Section 17A of the Act.\7\
\7\15 U.S.C. 78f (1988).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\8\ that the proposed rule change (File No. SR-OCC-94-11) be and
hereby is approved and will become effective June 7, 1995.
\8\15 U.S.C. 78s(b)(2) (1988).
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\9\
\9\17 CFR 200.30(a)(12) (1994).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-8421 Filed 4-5-95; 8:45 am]
BILLING CODE 8010-01-M
