[Federal Register Volume 66, Number 77 (Friday, April 20, 2001)]
[Notices]
[Pages 20343-20344]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-9843]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44183; File No. SR-OCC-99-14]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Granting Approval of a Proposed Rule Change Relating to Price 
Used in Calculating Premium Margin

April 16, 2001.
    On October 26, 1999, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change (File No. SR-OCC-99-14) 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 17, 2000.\2\ 
No comment letters were received. For the reasons discussed below, the 
Commission is granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 43023 (July 11, 2000), 
65 FR 44088.
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I. Description

    OCC proposes to amend Rule 601 (relating to margining of equity 
options) and Rule 602 (relating to margining of

[[Page 20344]]

non-equity options) to set marking prices \3\ at the last sale price, 
adjusted to the highest bid if the last sale price is below the highest 
bid or adjusted to the lowest offer if the last sale price is above the 
lowest offer. The purpose of the proposed rule change is twofold. 
First, OCC believes that the proposed change results in a more accurate 
assessment of risk and therefore a more appropriate margin requirement. 
Second, OCC believes that the proposed rule change will provide 
consistency with the marking practices of clearing members, the 
majority of whom are believed to use the method currently proposed.
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    \3\ OCC Rule 601(b)(6) defines marking price when used on any 
business day with respect to the security underlying any stock 
option, BOUND or stock loan or borrow position, as the closing price 
for such underlying security on the primary market for such 
underlying security during the preceding trading day or, if such 
underlying security was not traded in the primary market, the 
highest reported asked quotation for such underlying security at or 
about the close of trading on such day.
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II. Discussion

    Section 17A(b)(3)(F) \4\ of the Act requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and 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. For the 
reasons set forth below, the Commission believes that OCC's proposed 
rule change is consistent with OCC's obligations under the Act.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposed amendments to Rule 601 and Rule 602 to set marking 
prices at the last sale price, adjusted to the highest bid if the last 
sale price is below the highest bid or adjusted to the lowest offer if 
the last sale price is above the lowest offer should result in a more 
accurate assessment of risk and a more appropriate margin requirement 
thus further assuring the safeguarding of securities and funds within 
OCC's control. In addition the proposed rule change should provide 
consistency with the marking practices of clearing members, the 
majority of whom are believed to use the method currently proposed. 
This should further promote more prompt and accurate clearance and 
settlement of securities transactions for OCC and its members.

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular 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-99-14) be and hereby is 
approved.


    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-9843 Filed 4-19-01; 8:45 am]
BILLING CODE 8010-01-M