[Federal Register: November 26, 2007 (Volume 72, Number 226)]
[Notices]
[Page 66015-66017]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26no07-84]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56800; File No. SR-OCC-2007-10]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to the Fees Charged to Clearing Members and Non-Clearing
Members for Theoretical Profit and Loss Values
November 16, 2007.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on
[[Page 66016]]
September 18, 2007, 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(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The principal purpose of the rule change is to effect changes to
the fees charged to clearing members and non-clearing members for
Theoretical Profit and Loss Values.
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 parts of these statements.
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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 this rule change is to: (i) Eliminate the fee
charged to clearing members for Theoretical Profit and Loss Values and
provide this information at no additional cost as part of the ancillary
services offered to Tier I clearing members, and (ii) reduce the
maximum fee charged to non-clearing members for such information. As a
result of these changes in fees and service offerings, conforming
changes are required in OCC's Schedule of Fees as well as in the
Supplement to the Agreement for OCC Services: Ancillary Services. In
addition, a new Supplement to the Agreement for OCC Services is being
adopted to reflect that Theoretical Profit and Loss Values are now
being provided to clearing members as part of OCC's ancillary service
offerings.
A. Background
OCC currently provides a theoretical profit/loss value file
(``data'') to OCC clearing members and non-clearing member broker-
dealers for use in calculating (i) risk-based haircuts in order to
determine SEC net capital requirements and (ii) margin for customer
positions on a portfolio basis. Currently, the data is made available
for download to OCC clearing members and non-clearing members by either
(i) mainframe to mainframe transmission, (ii) File Transfer Protocol
(``FTP''),\3\ or (iii) OCC's Theoretical Information Online (``TIO'')
system.\4\ Both the mainframe to mainframe transmission and the FTP
processes provide for receipt of the full theoretical file while TIO
also allows partial file downloads.
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\3\ OCC charges $2,000.00 per month for clearing members and
non-clearing members to access the Data via mainframe to mainframe
transmission or FTP.
\4\ OCC currently charges a monthly fee of $0.10 per class group
with a minimum monthly charge of $200.00 and a maximum monthly
charge of $2,000.00 for clearing members and non-clearing members
accessing the data via TIO.
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B. Discussion
TIO once served as a practical and economical tool that allowed
users to avoid downloading the entire theoretical file to access the
desired information. The TIO ``per class group'' charge enabled
clearing members and non-clearing members that needed data for a
relatively small subset of all equity classes to save money by using
TIO as compared to the other two means of downloading the data.
However, the widespread availability of affordable broadband network
services has practically eliminated the download time and other
bandwidth-related concerns associated with downloading an entire file
of theoretical values. Meanwhile, as more subscribers begin to use the
customer margin risk arrays for customer positions margined on a
portfolio basis, OCC believes the number of clearing members and non-
clearing members that would benefit from having the option to download
a partial file will continue to decline.
1. Elimination or Reduction of Fees
In May 2007, OCC's Board of Directors authorized a plan to
decommission the TIO system due to its limited value and high
maintenance cost. The data will remain available to clearing members
and non-clearing members as a full file through either a mainframe to
mainframe transmission or FTP.\5\ Effective October 1, 2007, OCC will
eliminate the fee for Theoretical Profit and Loss Values charged to
clearing members that receive the data via mainframe to mainframe or
via FTP and will provide this information as part of the ancillary
services offered to Tier I clearing members.\6\ Also effective October
1, 2007, OCC will reduce the fee for non-clearing members to receive
the data via mainframe to mainframe transmission or FTP to a flat rate
of $1,000.00 per month.\7\ OCC attached as Exhibit 5A to SR-OCC-2007-10
a Schedule of Fees as of October 1, 2007, which reflects the foregoing
changes.\8\
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\5\ OCC staff will work with affected TIO subscribers to assist
them in their transition to FTP or mainframe to mainframe downloads
by December 31, 2007.
\6\ There are a total of five clearing members that subscribe to
OCC's theoretical data that are not Tier I subscribers. Based upon
July 2007 billing for June activity, the increased monthly cost of
subscribing to Tier I ($450.00) would be more than offset for one of
these clearing members by elimination of the separate charge for
theoretical data ($2,000.00 per month). The other four clearing
members will have a monthly billing increase of approximately $250.
These four clearing members currently use TIO and on average
download a minimal number of class groups per month.
\7\ OCC will continue to support and make the data available
through TIO until December 31, 2007. Clearing members and non-
clearing members that continue to receive data via TIO after October
1, 2007, will be charged the current TIO fees for the data. However,
effective January 1, 2008, TIO will be decommissioned, and the data
will no longer be available via TIO. As a result, the TIO fee will
then be eliminated from the Schedule of Fees.
\8\ Exhibit 5A also contains references highlighting the phase-
out approach that OCC is adopting with respect to the
decommissioning of TIO and the impact to fees charged to clearing
members and non-clearing members during this time period. Such
notations will no longer be applicable after TIO is retired, and
they will be eliminated in connection with the republication of the
January, 2008 schedule of fees.
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2. Conforming Changes
As part of the proposed rule change, OCC is also making certain
additional conforming changes to both its Schedule of Fees and its
Ancillary Services Supplement, a copy of which is attached to SR-OCC-
2007-10 as Exhibit 5B, to reflect recent modifications to its ancillary
service descriptions. Specifically, as of April 2007, OCC no longer
provides monthly core reports to clearing members via cd-rom as
currently referenced in Tiers I, II, III, and IV of the Schedule of
Fees and the Ancillary Services Supplement. Instead, clearing members
now have access to historical core reports on-line through ENCORE Core
Reports. In addition, OCC's special settlement file and adjusted
position file as currently referenced in Tier 1 of the Schedule of Fees
and the Ancillary Services Supplement are no longer separately produced
for clearing members as this information is now made available as part
of OCC's data distribution service (``DDS''). Finally, OCC has now
completed its conversion of DDS subscribers to its new format as
previously described in File No. SR-
[[Page 66017]]
OCC-2006-06.\9\ Therefore, the surcharge currently referenced in OCC's
Schedule of Fees in connection with the DDS conversion is no longer
applicable and will be removed along with each of the other above-
described items.
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\9\ Securities and Exchange Act No. 54059 (June 28, 2006), 71 FR
38962 (July 10, 2006).
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3. Supplement to Agreement for OCC Services: Theoretical Profit and
Loss Values
Exhibit 5C to SR-OCC-2007-10 is the Supplement to the Agreement for
OCC Services: Theoretical Profit and Loss Values to be entered into
between OCC and clearing members subscribing to Theoretical Profit and
Loss Values (``Supplement'').\10\ The Supplement is structured to fit
within OCC's existing framework for the Agreement for OCC Services and
will replace the current form agreement between clearing members and
OCC. The provisions are generally self-explanatory, and they are
intended to describe the respective responsibilities of OCC and the
subscribing clearing member. Section 1 describes the Theoretical Profit
and Loss Values and identifies the available means of downloading the
data. Sections 2 and 3 set forth the authorized scope of use of the
data and related documentation. Section 4 describes the clearing
member's obligations with respect to security and access codes. Section
5 describes the fees associated with the data. Section 6 sets forth the
confidential nature of the data and documentation. Sections 7 through
11 set forth further responsibilities of the parties including
warranties, liability, and indemnification. Section 12 describes the
termination rights of the parties. Section 13 contains general terms
regarding survival of certain provisions. Exhibit A to the Supplement
is the form of acknowledgment to be signed by a managed clearing
member.
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\10\ Non-clearing members will also be required to execute a
corresponding subscription agreement for the data.
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The proposed rule change is consistent with Section 17A of the Act
because it involves a fee, due, or charge applicable to subscribers of
information that provides for a reasonable allocation of costs. The
proposed rule change is not inconsistent with the existing rules of
OCC, including any other rules proposed to be amended.
(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
Because the foregoing rule change changes fees charged by OCC, it
has become effective pursuant to section 19(b)(3)(A)(ii) of the Act
\11\ and Rule 19b-4(f)(2) \12\ thereunder. 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.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
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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-2007-10 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2007-10. 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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of OCC. 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-2007-10 and should be
submitted on or before December 17, 2007.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22910 Filed 11-23-07; 8:45 am]
BILLING CODE 8011-01-P