[Federal Register Volume 59, Number 18 (Thursday, January 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1717]


[[Page Unknown]]

[Federal Register: January 27, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33497; File No. SR-OCC-93-16]

 

Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving a Proposed Rule Change Relating to the Definition of 
Index Group

January 21, 1994.
    On July 26, 1993, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') under 
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')\1\ a 
proposed rule change (File No. SR-OCC-93-16) relating to the definition 
of ``index group.'' The Commission published notice of this proposed 
rule change in the Federal Register on December 17, 1993.\2\ No public 
comments were received. For the reasons discussed below, the Commission 
is approving the proposed rule change.
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    \1\15 U.S.C. 78s(b)(1) (1988).
    \2\Securities Exchange Act Release No. 33315 (December 9, 1993), 
58 FR 66046.
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I. Description

    The proposed rule change modifies the definition of index group in 
OCC's By-Laws to accommodate the development of new types of stock 
indexes being introduced by the exchanges.\3\
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    \3\For instance, the American Stock Exchange (``AMEX'') recently 
introduced, with the Commission's approval, a new method of 
calculating stock indexes. This new methodology, called the equal 
dollar weighting methodology, is designed to ensure that each of the 
component securities in a stock index is represented in 
approximately equal dollar amounts. The equal dollar weighting 
calculation method uses both the market price and the capitalization 
value of the component stocks to determine the relative 
representation of stocks within an index.
    AMEX originally proposed the equal dollar weighting methodology 
with the introduction of the Biotechnology Index (Securities 
Exchange Act Release No. 31245 (September 28, 1992), 57 FR 45844 
[File No. SR-AMEX-92-1] (order approving proposal to list options on 
Biotechnology Index)]. In addition, the Commission recently approved 
a proposal that expands the use of this methodology with the 
introduction of the Morgan Stanley Indexes [Securities Exchange Act 
Release No. 32875 (September 13, 1993), 58 FR 48906 [File No. SR-
AMEX-93-8] (order approving a proposal relating to the trading of 
options on the Morgan Stanley Cyclical and Consumer Indexes and 
long-term options on Reduced Value Cyclical and Consumer Indexes].
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    Article XVII, Section 1 of OCC's By-Laws currently defines the term 
index group as ``a group of securities whose inclusion and relative 
representation in group is determined by the inclusion and relative 
representation of their current market prices in a securities index 
specified by an Exchange.'' To ensure that the definition of index 
group encompasses all currently traded indexes as well as other types 
of indexes that may be developed by the exchanges in the future, the 
proposed rule change will omit from the current definition of index 
group any reference to market price as the method for determining the 
relative representation of a stock within an index. Instead, the term 
index group will be more broadly defined as ``a group of securities 
whose inclusion and relative representation in the group is determined 
by their inclusion and relative representation in a securities index 
specified by an Exchange.'' This change is intended to clarify that an 
index need not be based on a strictly proportional representation of 
the market prices of the index's component stocks.

II. Discussion

    The Commission believes that OCC's proposal is consistent with the 
Act and in particular with Section 17A thereunder.\4\ Section 
17A(b)(3)(F) provides, among other things, that the rules of a clearing 
agency must be designed to remove impediments to and perfect the 
mechanism of a national system for the prompt and accurate clearance 
and settlement of securities transactions.\5\ By broadly defining the 
term index group and thereby clarifying that present and future 
exchange-listed indexes will be included thereunder, the proposal helps 
to remove impediments to and perfect the mechanism of a national system 
for the prompt and accurate clearance and settlement of securities 
transactions.
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    \4\15 U.S.C. 78q-1 (1988).
    \5\15 U.S.C. 78q-1(b)(3)(F) (1988).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the Act and in particular with 
Section 17A thereunder.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-93-16) be, and hereby 
is, approved.


    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\17 CFR 200.30-3(a)(12) (1993).
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Jonathan G. Katz,
Secretary.
[FR Doc. 94-1717 Filed 1-26-94; 8:45 am]
BILLING CODE 8010-01-M