[Federal Register Volume 59, Number 97 (Friday, May 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-12300]
[[Page Unknown]]
[Federal Register: May 20, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34064; File No. SR-OCC-94-04]
Self-Regulatory Organizations; the Options Clearing Corporation;
Notice of Filing of a Proposed Rule Change Relating to Flexibly
Structured Options
May 13, 1994.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 25, 1994, The
Options Clearing Corporation (``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 on the proposed rule change from interested persons.
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\1\15 U.S.C. 78s (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change will allow OCC to issue, clear, and settle
``flexibly structured options'' on foreign currencies. The rule change
also proposes technical amendments to OCC's By-Laws and Rules to
replace the term ``FLEX options'' with ``flexibly structured options.''
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. 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
Generally, the purpose of the proposed rule change is to enable OCC
to clear and settle flexibly structured options on foreign currencies.
Specifically, the purpose of the proposed rule change is to enable OCC
to accommodate within the framework of its existing By-Laws and Rules
the clearance and settlement of customized strike options as proposed
for trading on the Philadelphia Stock Exchange (``PHLX'').\2\
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\2\For a description of the PHLX proposed rule change, refer to
Securities Exchange Act Release No. 33959 (April 25, 1994), 59 FR
22698, [File No. SR-PHLX-9411] (notice of filing of proposed rule
change).
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Customized strike options are a type of flexibly structured options
where the underlying security is a foreign currency whereas the
underlying security for the current flexibly structured option product
is an index group. With the current flexibly structured index option
products, certain items, such as the exercise price, exercise style,
and expiration date, of the option can be customized by the parties
within specified limits established by the listing exchange. With
PHLX's customized strike option, parties will be able to establish the
exercise price for each new series of customized strike options.
Because customized strike options are foreign currency options with
flexibly structured exercise prices, they can be treated and processed
like the current foreign currency option product, and only a few
changes to OCC's By-Laws and Rules are necessary to accommodate them.
Accordingly, a definition of flexibly structured options is being added
to section 1 (``Definitions'') of Article XV (``Foreign Currency
Options'') of OCC's By-Laws which will encompass customized strike
options.\3\
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\3\With respect to foreign currency options, the term ``flexibly
structured option'' is defined in Article XV, Section 1, F(2) of
OCC's By-Laws as a foreign currency option having an expiration
date, an exercise price, and an exercise style that are reported to
OCC by an exchange. No similar term is being added to Article XX of
OCC's By-Laws (``Cross-Rate Foreign Currency Options'') at this
time. In order for OCC to clear and settle flexibly structured
cross-rate foreign currency options, OCC must submit for Commission
approval a proposed rule change under Section 19(b)(2) of the Act.
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The term ``FLEX option'' in Section 1 (``Definitions'') of Article
XVII (``Index Options'') is being changed to ``flexibly structured
option'' in order to make that term more generic. For the same reasons,
all references to FLEX options in OCC's By-Laws and Rules are being
changed to flexibly structured options. In addition, the definition of
the term flexibly structured option in Section 1 of Article XVII is
being modified to clarify that such definition is applicable only to
flexibly structured index options. As stated above, a separate
definition of flexibly structured options applicable to foreign
currency options is being added to Section 1 of Article XV.
OCC Rule 602(b) also is being amended to broaden the definition of
the term ``premium margin'' with respect to flexibly structured
options. The current definition is applicable only to flexibly
structured indexed options whereas the proposed definition will
encompass flexibly structured index options, customized strike options,
and other types of flexibly structured options as such options are
approved for trading on the various exchanges and for clearance and
settlement at OCC.
OCC believes that the proposed rule change is consistent with the
purposes and requirements of Section 17A of the Securities Exchange Act
of 1934 because it will facilitate the prompt and accurate clearance
and settlement of transactions in customized strike options and the
safeguarding of related securities and funds. The proposed rule change
provides a framework in which the existing OCC systems, rules, and
procedures can be extended to the processing of flexibly structured
foreign currency options.
B. Self-Regulatory Organization's Statement on the Burden on
Competition
OCC does not believe that the proposed rule change will 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 the self-regulatory organization consents,
the Commission will:
(A) By order approve the 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 N.W., Washington, D.C. 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 will also be available for
inspection and copying at the principal office of the above-referenced
self-regulatory organization.
All submissions should refer to File No. SR-OCC-94-04 and should be
submitted by June 10, 1994.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-12300 Filed 5-19-94; 8:45 am]
BILLING CODE 8010-01-M
