[Federal Register: August 19, 2008 (Volume 73, Number 161)]
[Notices]
[Page 48418-48419]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19au08-79]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58346; File No. SR-OCC-2008-08]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Granting Approval of a Proposed Rule Change Relating to its
Facilities Management Agreements
August 12, 2008.
I. Introduction
On January 9, 2008, The Options Clearing Corporation (``OCC'')
filed with the Securities and Exchange Commission (``Commission'')
proposed rule change SR-OCC-2008-08 pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal
was published in the Federal Register on June 19, 2008.\2\ No comment
letters were received. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 57963 (June 13, 2008),
73 FR 34969.
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II. Description
The purpose of the proposed rule change is to provide an expedited
process for reviewing a managed clearing member's request to operate
without a facilities management agreement (``FMA'').\3\ Under OCC Rule
309(e), a managed clearing member that desires to terminate an FMA must
withdraw from membership on the business day before the proposed
termination unless the Membership/Risk Committee (``Committee'') has
determined in accordance with Article V, Section 1 of OCC's By-laws
either that the managed clearing member has the operational capability,
experience, and competence to perform the managed services required of
a clearing member or that the managed clearing member has entered into
another acceptable FMA that will be effective on or before such
proposed termination.
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\3\ Article V, Section 1 of OCC's By-laws, including the
Interpretations and Policies thereunder, sets forth the requirements
for membership. Interpretation and Policy.04 permits an applicant
for clearing membership (``managed clearing member'') to meet
specified membership requirements by entering into an FMA with
another clearing member (``managing clearing member'') pursuant to
which the managing clearing member would perform certain of the
applicant's obligations as a clearing member (``managed services'').
An operationally capable clearing member also may elect to outsource
certain of its obligations as a clearing member, and thereby, become
a managed clearing member. OCC Rule 309(f).
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From March, 2006 to February, 2008, the Committee reviewed three
requests to terminate FMAs, all of which were approved. In each case,
the managed clearing member was required to defer terminating its FMA
until the next regularly scheduled Committee meeting. To provide for a
more timely review of certain FMA terminations, OCC is adopting a new
Interpretation and Policy.02 under Rule 309. Under the new policy, a
managed clearing member desiring to terminate its FMA will be permitted
to request an expedited review. If OCC consents to an expedited
review,\4\ the Chairman, the Management Vice Chairman, or the President
will be authorized to determine whether, as specified in Rule 309(e), a
managed clearing member had the operational capability, experience, and
competency to perform the managed services required of a clearing
member, and to approve or disapprove the termination.
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\4\ OCC would use the expedited review process for FMA
terminations only in cases that present no significant or novel
issues. Requests involving complex issues would be presented to the
Committee at its next regularly scheduled meeting.
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At the next regularly scheduled Committee meeting, the Committee
will independently review de novo whether the managed clearing member
has met the requirements of Rule 309(e) and determine whether or not to
approve the FMA's termination. Notwithstanding that, if the Committee
modifies or reverses the action taken by the Chairman, the Management
Vice Chairman, or the President, any actions taken by OCC or the
clearing member prior to the modification or reversal would not be
invalidated, and no rights of any person arising out of such actions
would be affected. In the unlikely event that the Committee disapproved
of a termination previously approved by OCC, the clearing member would
be given a reasonable time either to establish another FMA or to
withdraw from membership.
This proposal is comparable to a process recently approved by the
Commission which permits the expedited review of requests by
operationally capable clearing members that desire to outsource certain
of their clearing member obligations by entering into FMAs.\5\ OCC
believes that the rationale for giving senior management the authority
to approve FMAs on an interim basis applies equally to FMA
terminations. OCC believes the proposal strikes a reasonable balance
between meeting the business requirements of clearing members and
continuing to
[[Page 48419]]
ensure appropriate review of their operational capabilities.
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\5\ Interpretation & Policy.01 to Rule 309. See also Securities
Exchange Act Release No. 57535 (March 20, 2008), 73 FR 16086 (March
26, 2008) [SR-OCC-2008-01].
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III. Discussion
Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of a clearing agency be designed to assure the safeguarding
of securities and funds which are in its custody or control or for
which it is responsible.\6\ The Commission finds the proposed rule
change to be consistent with this requirement because the senior
management has the experience and familiarity with clearing members to
make such decisions and senior management's decision to approve the
termination of FMAs prior to a scheduled Committee meeting are subject
to the Committee's subsequent review at its next regularly scheduled
meeting. Moreover, proposals for expedited review of an FMA termination
would only occur where, in management's judgment, no significant or
novel issues are raised by the termination.
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion
On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act and
in particular Section 17A of the Act and the rules and regulations
thereunder.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-OCC-2008-08) be and hereby
is approved.\7\
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\7\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-19115 Filed 8-18-08; 8:45 am]
BILLING CODE 8010-01-P