[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]



=======================================================================
-----------------------------------------------------------------------

[[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.
---------------------------------------------------------------------------

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)
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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