[Federal Register Volume 59, Number 8 (Wednesday, January 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-743]
[[Page Unknown]]
[Federal Register: January 12, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33411; International Series Release No. 627; File No.
SR-OCC-92-29]
Self-Regulatory Organizations; the Options Clearing Corp.; Order
Approving a Proposed Rule Change Relating to Delivery-Versus-Payment
Settlement Procedures
January 4, 1994.
On September 17, 1992, The Options Clearing Corporation (``OCC'')
submitted a proposed rule change (File No. SR-OCC-92-29) to the
Securities and Exchange Commission (``Commission'') pursuant to section
19(b) of the Securities Exchange Act of 1934 (``Act'')\1\ concerning
delivery-versus-payment (``DVP'') settlement procedures. Notice of the
proposal appeared in the Federal Register on December 14, 1992, to
solicit comment from interested persons.\2\ No comments were received
by the Commission. This order approves the proposal.
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\1\15 U.S.C. 78s(b) (1988).
\2\Securities Exchange Act Release No. 31566 (December 4, 1992),
57 FR 59190.
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I. Description of the Proposal
OCC is amending its Rule 1606A to modify its DVP settlement
procedures. First, the proposal clarifies that a clearing member that
elects to settle using DVP procedures in Rule 1606A is not discharged
from its obligation to U.S. dollars or to deliver foreign currency in
settlement of the exercise of foreign currency options until the
earlier of the time when (i) the clearing member's agent bank
irrevocably pays U.S. dollars or delivers foreign currency to OCC's
correspondent bank on behalf of the clearing member of (ii) OCC's
correspondent bank irrevocably credits OCC's account with the U.S.
dollars or the foreign currency deliverable by the clearing member's
agent bank whether or not the clearing member's agent bank has paid
U.S. dollars or delivered foreign currency to OCC's correspondent bank.
Second, the proposal emphasizes the conditional nature of OCC's
obligation in the DVP settlement process. OCC is obligated to cause its
correspondent bank to deliver the quantity of U.S. dollars or foreign
currency payable by OCC only against receipt from the agent bank of the
quantity of U.S. dollars or foreign currency payable to OCC. Finally,
the proposal clarifies that OCC's delivery obligation is to the party
designated in the DVP authorization, which may or may not be the
clearing member's agent bank.
II Discussion
The Commission believes that the proposal is consistent with the
Act and in particular section 17A of the Act.\3\ Sections 17A(b)(3) (A)
and (F) of the Act\4\ require that a clearing agency be organized and
its rules designed to promote the prompt and accurate clearance and
settlement of securities transactions and to assure the safeguarding of
funds in the custody or control of the clearing agency or for which it
is responsible.
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\3\15 U.S.C. 78q-1 (1988).
\4\15 U.S.C. 78q-1(b)(3) (A) and (F) (1988).
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The proposal clarifies certain DVP settlement procedures and
describes with more precision when a clearing member is discharged from
its delivery and payment obligations in foreign currency options. It
also clarifies OCC's payment and delivery obligations in connection
with DVP settlement. In particular, the proposal clarifies that OCC's
obligation arises only after the clearing member's agent bank fulfills
its obligation to OCC's correspondent bank. The Commission believes
that this effort by OCC to clarify the terms of DVP settlement should
add certainty to the settlement process and should provide an added
measure of protection for OCC. Because the rule change should further
enable OCC to comply with its statutory obligations to provide prompt
and accurate clearance and settlement of securities transactions and to
assure the safeguarding of securities and funds, the Commission
believes that approval of the rule change is warranted.
III. Conclusion
For the reasons discussed above, the Commission believes that the
proposal is consistent with the requirements of the Act, particularly
with section 17A of the Act,\5\ and the rules and regulations
thereunder.
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\5\15 U.S.C. 78q-1 (1988).
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It is therefore ordered, Pursuant to section 19(b)(2) of the
Act,\6\ that the above-mentioned proposed rule change (File No. SR-OCC-
92-29) be, and hereby is, approved.
\6\15 U.S.C. 78s(b)(2) (1988).
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For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
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\7\17 CFR 200.30-3(a)(12) (1991).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-743 Filed 1-11-94; 8:45 am]
BILLING CODE 8010-01-M