[Federal Register Volume 65, Number 137 (Monday, July 17, 2000)]
[Notices]
[Pages 44089-44090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18008]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43022; File No. SR-OCC-99-12]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Relating to Adjustments to 
Index Options

July 11, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 2, 1999, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items I, II, and III below, which items have been prepared 
primarily by OCC. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organizations Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change would amend OCC's By-Laws governing index 
option adjustment to permit the substitution of a successor index for 
an underlying index.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, OCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. OCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by OCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The primary reason for the proposed rule change is to provide for 
the substitution of a successor index for an underlying index. Because 
substitution of a successor index for an underlying index may require 
changes to the terms of outstanding options, OCC also seeks the 
authority to make adjustments to such terms as necessary to reflect the 
substitution. While OCC believes such substitution and adjustment are 
already implicitly provided for under the provisions of OCC's By-Laws 
at Article XVII, Section 4 (``Unavailability or Inaccuracy of Current 
Index Value''), OCC seeks to clarify its authority through the proposed 
rule change.
    New paragraph (d) of Article XVII, Section 3 will provide that a 
successor index may be substituted for an underlying index in the event 
that the underlying index's publication is discontinued, when the 
underlying index is replaced with another index, or when an index's 
composition or method of calculation has so materially changed that it 
is deemed to be a different index. As in the case of other adjustments, 
the determination to substitute a successor index and the selection of 
the index will be made by an adjustment panel. The successor index is 
to be an index which is deemed to be reasonably comparable to the index 
for which it substitutes.
    Article XVII, Section 3, paragraph (c), which is applicable to 
adjustments to index options generally, will be amended to provide for 
adjustments as necessary to accommodate a successor index. In addition, 
paragraph (c) will be amended to expand the rule in other respects to 
cover a broader range of potential changes in the calculation of index 
values and to give added flexibility to OCC in making appropriate 
adjustments to reflect such changes.
    These amendments will grant OCC the authority to adjust outstanding 
options in the event that an exchange increases or decreases the index 
multiplier for any index option contract or in the event that any 
change in the method of calculation of an underlying index creates a 
discontinuity or change in the level of the index that does not reflect 
a change in the prices or values of the index's constituent securities. 
Such a change would occur, for example, if the value of an index were 
reset from 10,000 to 1,000, which would create a discontinuity that 
would affect all outstanding options. The changes proposed to Article 
1, Section 1 and to Article XVII, Section 1 are designed to

[[Page 44090]]

clarify and conform the terminology to usage as it has developed since 
the index options provisions were originally drafted.
    OCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act because it refines and amplifies 
existing OCC rules that have proven effective in promoting the prompt 
and accurate clearance and settlement of securities transactions and in 
safeguarding securities and funds.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any 
burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    Written comments were not and are not intended to be solicited with 
respect to the proposed rule change, and none have been received.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such larger period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which OCC consents, the Commission will:
    (A) By order approve such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-
0609. Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of OCC. All 
submissions should refer to File No. SR-OCC-99-12 and should be 
submitted by August 7, 2000.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-18008 Filed 7-14-00; 8:45 am]
BILLING CODE 8010-01-M