[Federal Register: February 23, 2007 (Volume 72, Number 36)]
[Notices]
[Page 8236-8237]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23fe07-108]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55307; No. SR-OCC-2006-22]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Enhance Futures Clearing Services by Providing an Alternative Method
for Effecting Gross Position Adjustments and Certain Trade Management
Services
February 15, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given
that on December 19, 2006, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change described in Items I, II, and III below, which
items have been prepared primarily by OCC. OCC filed the proposed rule
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule
19b-4(f)(4) \4\ thereunder, which renders the proposal effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the rule change from interested parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
OCC proposes to amend Rule 401 to accommodate an alternative method
for effecting gross position adjustments and to enable members to
update certain non-critical trade information. The text of the proposed
rule change is available at http://www.optionsclearing.com, at the OCC,
and at the Commission's Public Reference Room.
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 these
statements.\5\
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\5\ 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
1. Purpose
OCC proposes to amend Rule 401 to accommodate an alternative method
for effecting gross position adjustments and to enable members to
update certain non-critical trade information.
Position Adjustments
Following the practice in the futures markets, OCC does not require
that matched trade information submitted by a market identify each
trade as opening or closing.\6\ If a market elects to submit trade
information without opening or closing identifiers, OCC treats all
transactions as opening transactions. A clearing member then submits
gross position adjustment information at the end of the day to reduce
its positions to reflect the actual open interest in its accounts. In
order to calculate gross position adjustment information for each
position in a series of futures contracts, a clearing member must:
determine its net ending position in that series; calculate its gross
ending position in that series on OCC's books;\7\
[[Page 8237]]
determine the gross position adjustment for that series by comparing
the net ending position on its books with its calculation of the gross
ending position on OCC's books; and submit gross position adjustments
for each series in each account to OCC to ensure that OCC's records
reflect the actual open interest.
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\6\ OCC is aware that some markets may not have systems capable
of making such identifications.
\7\ This step requires the clearing member to assume for each
account that all trades defaulted to open, that OCC has received
correct information on all trades, and that post-trade instructions
affecting the segregated futures account were processed correctly.
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Futures commission merchant (``FCM'') clearing members find this
process cumbersome and complex. These clearing members have requested
OCC modify its systems to permit an alternative method of submitting
gross position adjustment information. Specifically, they want to be
able to advise OCC of the correct ending position for each series of
futures contracts in their account(s) and have OCC compare the
information to the current positions carried on OCC's books and effect
the necessary position adjustment.\8\ OCC understands this method of
effecting gross position adjustments is commonly used by other futures
clearing organizations.
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\8\ Typically, a firm advises the clearinghouse of the correct
ending long position in each series, and the clearinghouse adjusts
both long and short positions in the clearing member's segregated
futures account to ensure its books reflect such position and remain
in balance.
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Only minor changes to the Interpretations and Policies to OCC's
Rule 401 are necessary to support this alternative method of
determining the actual open interest for futures. OCC proposes to amend
Interpretation and Policy .01 to clarify that if there is an
insufficient number of contracts in the account to effect the stated
position adjustment, the adjustment will be applied only up to the
number of available contracts and the remainder of the adjustment will
not be affected.
Non-Critical Trade Information
FCM clearing members also have asked to use OCC's systems to update
non-critical trade information, a practice that is customary within the
futures industry. Non-critical trade information includes customer
account or other identifying information or codes. Only minor changes
to Rule 401 are required to accommodate this request. OCC is proposing
to add a second interpretation to Rule 401 to provide that its systems
may be used for such purposes provided that such updates are not in
contravention of any rule of the exchange or market on which the trade
was executed.
OCC will not implement this rule change until the requisite systems
are available, which is expected to be in or about the first quarter of
2007.
2. Statutory Basis
The proposed rule change is consistent with Section 17A of the
Act,\9\ as amended, because it promotes the prompt and accurate
clearance and settlement of transactions in derivatives contracts by
providing mechanisms that are designed to ensure OCC's books and
records contain accurate information regarding actual open interest in
futures contracts and because OCC is able to provide its FCM clearing
members with services that are standard in the futures industry.
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\9\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change will not impose any burden on competition
that is not necessary or appropriate in furtherance of the purpose of
the Act.
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
The foregoing proposed rule change has become effective upon filing
pursuant to Section 19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-
4(f)(4) \11\ thereunder because the rule does not adversely affect the
safeguarding of securities or funds in the custody or control of the
clearing agency or for which it is responsible and does not
significantly affect the respective rights or obligations of the
clearing agency or persons using the service.
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\10\ 15 U.S.C. 78s(b)(3)(A)(iii).
\11\ 17 CFR 240.19b-4(f)(4).
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At any time within sixty days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-OCC-2006-22 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2006-22. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). 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 Room. Copies of such
filings also will be available for inspection and copying at the
principal office of OCC and on OCC's Web site at http://www.optionsclearing.com.
All comments received will be posted without
change; the Commission does not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly. All submissions should refer to File Number
SR-OCC-2006-22 and should be submitted on or before March 16, 2007.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\12\
Florence E. Harmon,
Deputy Secretary.
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\12\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E7-3071 Filed 2-22-07; 8:45 am]
BILLING CODE 8010-01-P