[Federal Register Volume 60, Number 187 (Wednesday, September 27, 1995)]
[Notices]
[Pages 49968-49969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23934]
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[[Page 49969]]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36254; International Series Release No. 857; File No.
SR-OCC-95-05]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving a Proposed Rule Change to Issue, Clear, and Settle
Customized Foreign Currency Options on the Italian Lira and the Spanish
Peseta
September 19, 1995.
On May 4, 1995, The Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change (File No. SR-OCC-95-05) 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 July 14, 1995.\2\ No comment
letters were received. For the reasons discussed below, the Commission
is approving the proposed rule change.
\1\ 15 U.S.C. 78s(b)(1) (1988).
\2\ Securities Exchange Act Release No. 35937 (July 5, 1995), 60
FR 36320.
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I. Description of the Proposal
Under the rule change, OCC will issue, clear, and settle option
transactions where the Italian lira or the Spanish peseta is either the
trading currency or the underlying currency.\3\ The Commission is
approving a proposal by The Philadelphia Stock Exchange (``PHLX'') to
list and trade such foreign currency options through the PHLX
customized options facility concurrently with the approval of this
proposed rule change.\4\
\3\ The term ``trading currency'' is defined in Article I,
Section 1 of the OCC By-Laws as the currency in which premium and/or
exercise prices are denominated for a class of foreign currency
options or cross-rate foreign currency options. The term
``underlying currency'' is defined in Article I Section 1 of the OCC
By-Laws as the currency which is required to be delivered upon the
exercise of a class of foreign currency or cross-rate foreign
currency options.
\4\ For a discussion of the addition of the lira and the peseta
to the list of approved currencies on which customized foreign
currency options may be listed and traded through the PHLX
customized options facility, refer to Securities Exchange Act
Release No. 36255 (September 20, 1995) [File Nos. SR-PHLX-20 and SR-
PHLX-21] (order approving the proposed rule change to list and trade
options on the Italian lira and Spanish peseta)
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The PHLX rule filings enable its members to trade customized
contracts between the lira or the peseta and any other approved
currency. Currently, OCC has approval to list and clear flexibly
structured option contracts \5\ on any combination of the following
currencies: (1) Australian dollar, (2) British pound, (3) Canadian
dollar, (4) German mark, (5) European Economic Community currency unit,
(6) French franc, (7) Japanese yen, (8) Swiss franc, and (9) United
States dollar. The Italian lira and the Spanish peseta now will be
included in OCC's list of approved currencies.
\5\ The term ``flexibly structured option'' is defined in
Article XXIII, Section 1(F)(1) in respect of flexibly structured
index options where the premium and exercise price are denominated
in a foreign currency as an index option having an expiration date,
an exercise price, an exercise style, an index value determinant,
and in the case of a capped option, a cap interval, that are
reported to OCC by a national securities exchange or association
registered with OCC pursuant to OCC's matched trade reporting
requirements set forth in Article VI, Section 6 of the OCC By-Laws
and Rule 401 of the OCC's Rules.
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Options on the lira or the peseta will be cleared and settled in
accordance with the clearance and settlement mechanisms already in
place for flexibly structured foreign currency options and for cross-
rate foreign currency options. In addition, options on the lira or the
peseta will be margined like OCC's existing foreign currency and cross-
rate foreign currency option contracts. Accordingly, OCC has determined
that no changes to its By-Laws or rules are necessary to accommodate
these new contracts.
II. Discussion
Section 17A(b)(3)(F) \6\ of the Act requires that the rules of a
clearing agency be designed to assure the safeguarding of securities
and funds which are in the custody or control of the clearing agency or
for which it is responsible. The Commission believes that OCC's
proposed rule change is consistent with OCC's obligations under the Act
because OCC's proposal will allow the clearance and settlement of
option contracts where the peseta or the lira is either the trading
currency or the underlying currency by using existing OCC systems,
rules, and procedures already in place for flexibly structured foreign
currency options and for cross-rate foreign currency options. Thus, OCC
should be able to implement the clearance and settlement of such
options with little difficulty due to the similarity of these option
contracts to the option contracts currently cleared and settled in
OCC's existing system.
\6\ 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
proposal is consistent with the requirements of the Act and in
particular with the requirements of 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-95-05) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-23934 Filed 9-26-95; 8:45 am]
BILLING CODE 8010-01-M