[Federal Register Volume 60, Number 66 (Thursday, April 6, 1995)]
[Notices]
[Page 17600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8421]



-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-35552; File No. SR-OCC-94-11]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving Proposed Rule Change Relating to Implementation of a 
Three-Day Settlement Standard

March 30, 1995.
    On December 30, 1994, the Options Clearing Corporation (``OCC'') 
filed a proposed rule change (File No. SR-OCC-94-11) with the 
Securities and Exchange Commission (``Commission'') pursuant to Section 
19(b) of the Securities Exchange Act of 1934 (``Act'').\1\ Notice of 
the proposal was published in the Federal Register on February 2, 1995, 
to solicit comments from interested persons.\2\ As discussed below, 
this order approves the proposed rule change.

    \1\15 U.S.C. 78s(b) (1988).
    \2\Securities Exchange Act Release No. 35265 (January 23, 1995), 
60 FR 6583.
---------------------------------------------------------------------------

I. Description

    The proposed rule change will conform OCC's rules effective June 7, 
1995, to Rule 15c6-1 under the Act. That rule establishes three 
business days after the trade date (``T+3''), instead of five business 
days (``T+5''), as the standard settlement cycle for most transactions 
in securities that underlie many OCC issued options. Rule 15c6-1 will 
become effective June 7, 1995.\3\ As described below, OCC is revising 
several of OCC's rules that include references to underlying securities 
settlement time frames.

    \3\Securities Exchange Act Release Nos. 33023 (October 6, 1993), 
58 FR 52891 (adoption of Rule 15c6-1) and 34952 (November 9, 1994), 
59 FR 59137 (changing effective date from June 1, 1995, to June 7, 
1995).
---------------------------------------------------------------------------

    Under Rule 902, the assigned clearing member of an exercised call 
option contract or the exercising clearing member of an exercised put 
option contract will be required to deliver the underlying securities 
on the third business day following the day on which the exercise 
notice was given to OCC. Rule 2207 will provide that the settlement 
date for a stock loan will be three business days after the date on 
which the lending clearing member initiates the termination by 
notifying OCC. Rule 2208(b) will provide that if the lending clearing 
member initiates the termination of a stock loan and does not receive 
the loaned stock in its securities depository account within three 
business days, the stock loan shall be completed when (1) OCC has 
transferred the stock to the lending clearing member's account after 
OCC has received the securities from the borrowing member or (2) the 
lending clearing member has executed a buy-in. Rule 2208(b) also will 
provide that the lending clearing member may execute a buy-in three 
business days after initiating the termination or at any time 
thereafter if the lending clearing member has not received the loaned 
stock by such date.
    OCC has requested that the proposed rule change become effective on 
the same date as Rule 15c6-1. Rule 15c6-1 is scheduled to become 
effective on June 7, 1995.\4\

    \4\The transition from T+5 settlement to T+3 settlement will 
occur over a four day period. Friday, June 2, will be the last 
trading day with five business day settlement. Monday, June 5, and 
Tuesday, June 6, will be trading days with four business day 
settlement. Wednesday, June 7, will be the first trading day with 
three business day settlement. As a result, trades from June 2 and 
June 5 will settle on Friday, June 9. Trades from June 6 and June 7 
will settle on Monday, June 12.
---------------------------------------------------------------------------

II. Discussion

    The Commission believes the proposal is consistent with the 
requirements of Section 17A of the Act.\5\ Specifically, Section 
17A(b)(3)(F)\6\ states that the rules of a clearing agency must be 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions, to assure the safeguarding of securities and 
funds which are in OCC's custody and control or for which OCC is 
responsible, and to foster cooperation and coordination with persons 
engaged in clearance and settlement of securities transactions. Several 
of OCC rules are based on a five day time frame for settlement of 
securities transactions. On June 7, 1995, the new settlement cycle or 
T+3 will be established, as mandated by the Commission's Rule 15c6-1. 
As a result, the OCC's current rule establishing a T+5 settlement cycle 
will be inconsistent with Commission rules. This proposal will amend 
the OCC's rules to harmonize them with a T+3 settlement cycle. Further, 
as discussed in the release adopting Rule 15c6-1, a shorter settlement 
time frame could encourage greater efficiency in clearing agencies and 
broker-dealer operations. Thus, the proposed rule change should enhance 
the prompt and accurate clearance and settlement of securities 
transactions.

    \5\15 U.S.C. 79q-1 (1988).
    \6\15 U.S.C. 78q-1(b)(3)(F) (1988).
---------------------------------------------------------------------------

III. Conclusion

    For the reasons stated above, the Commission finds that OCC's 
proposal is consistent with Section 17A of the Act.\7\

    \7\15 U.S.C. 78f (1988).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\8\ that the proposed rule change (File No. SR-OCC-94-11) be and 
hereby is approved and will become effective June 7, 1995.

    \8\15 U.S.C. 78s(b)(2) (1988).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\

    \9\17 CFR 200.30(a)(12) (1994).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-8421 Filed 4-5-95; 8:45 am]
BILLING CODE 8010-01-M