[Federal Register Volume 67, Number 110 (Friday, June 7, 2002)]
[Notices]
[Pages 39460-39461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14298]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46005; File No. SR-OCC-2001-09]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Regarding Access to The 
Option Clearing Corporation's Information and Data Systems Via 
Electronic Means

May 30, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 1, 2001, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') and on April 23, 2002, amended 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 persons.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would amend OCC's Rules regarding access 
to its information and data systems via electronic means.

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 such 
statements.\2\
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    \2\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Currently, OCC Rules support on-line data entry and data retrieval, 
but these provisions are limited solely to direct access via on-line 
terminals. OCC is in the process of developing a new clearance and 
settlement system to replace its existing system.\3\ The new system 
will support internet access at a clearing member's election. The 
proposed rule change would add the definition of ``electronic data 
entry,'' which would be broken down into ``electronic data entry'' and 
``electronic data retrieval,'' to Rule 101 to provide a more flexible 
and broader description of electronic means to communicate with 
clearing members.\4\
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    \3\ As previously reported to the Commission, OCC is developing 
a new clearance and settlement system known as ENCORE to replace its 
existing system, INTRACS. OCC's implementation strategy is to 
replace INTRACS on a modular basis with new development code modules 
replacing targeted pieces of INTRACS which will then be 
``decommissioned''. Newly developed and installed code will 
interface with remaining portions of INTRACS until the old system is 
completely replaced.
    \4\ Under the proposal, ``electronic data entry'' would be 
defined as the transmission by a clearing member to OCC via 
electronic means of reports, notices, instructions, data, or other 
items. ``Electronic data retrieval'' would be defined as the 
retrieval by a clearing member via electronic means of reports, 
notices, instructions, data, and other items made available by OCC.
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    The proposed rule change would also eliminate outdated provisions 
that require clearing members to send representatives to access lock 
boxes to obtain papers and documents distributed by OCC and would 
clarify the manner in which clearing members exchange information with 
OCC. Under the proposed rule change, Rules 205 (``Submission of Items 
to Corporation [OCC]'') and 206 (``Retrieval of Items from Corporation 
[OCC]'') would require that a clearing member submit and retrieve 
instructions, notices, reports, data, and other items via electronic 
data entry or electronic data retrieval unless otherwise prescribed by 
OCC. Rules 205 and 206 would also provide that such electronic 
transmissions would constitute valid ``writings'' for purposes of 
applicable law. In the event unusual or unforeseen conditions prevent a 
clearing member from submitting or retrieving such items 
electronically, OCC would retain discretion to designate alternative 
means or to extend any applicable time cut-off times as may be deemed 
reasonable, practicable, and equitable under the circumstances.
    The proposed rule change would amend Rule 208 (``Reports by the 
Corporation [OCC]'') to provide clearing members with the ability to 
notify OCC via facsimile or e-mail of any errors contained in reports 
made available by OCC.
    Under the proposed rule change, a new Rule 212 (``Security 
Measures'') would set forth the obligations of clearing members to 
comply with security measures implemented by OCC, including access 
codes and authorization stamps. Under Rule 212, a clearing member would 
be bound by submissions made using a current access code or 
authorization stamp.
    Finally, the proposed rule change would make conforming changes to 
Interpretations and Policies under Rules 801 (``Exercise of Options'') 
and 1606A (``Alternative Settlement Procedures'') to delete references 
to ``on-line data entry'' and to replace those references with the 
newly defined ``electronic data entry.'' Interpretations and Policies 
.01 under Rule 801 also would be amended to accurately reference 
amended Rule 205 relating to the extension of cut-off times in the 
event of unusual or unforeseen conditions.
    Attached as Exhibit B to the proposed rule change is the 
``Supplement to the Agreement for OCC Services for Internet Access'' 
proposed to be entered into between OCC and its clearing members. OCC 
is developing a front-end portal

[[Page 39461]]

called MyOCC that will provide a unified access point from which 
clearing members will be able to obtain information from various 
applications contained within MyOCC for which the clearing member is 
authorized to have access. Access to MyOCC will be available to 
clearing members through the internet, existing enhanced clearing 
member interface terminals, or dedicated leased lines. To the extent 
clearing members elect to access OCC's information and data systems 
through internet connections, the Supplement specifies requirements 
relating to access codes, registration, authorization, and security.
    This Supplement is structured to fit within OCC's existing 
framework of the ``Agreement for OCC Services''.\5\ Provisions of the 
Supplement, which are generally self-explanatory, describe the 
respective responsibilities of the clearing member and OCC. Section 1 
describes the scope of information and data systems that will be made 
available through the internet. Section 2 creates a requirement on the 
part of the clearing member to maintain a backup communication channel 
as a means to obtain access to OCC's information and data systems. 
Sections 3 and 4 set forth criteria relating to the right to use 
internet access. Section 5 allocates responsibility relating to the 
confidentiality and security of access codes. That section also 
requires the clearing member to provide information as may be necessary 
to register its authorized users for internet access and to maintain 
its own equipment. Section 5 also requires the clearing member to 
represent and warrant that it is authorized to obtain internet access 
on behalf of a managed clearing member. Sections 6 through 9 set forth 
further rights and responsibilities of the parties including 
limitations on liability, indemnification, and termination provisions, 
etc. Section 10 discloses that OCC may monitor the use of internet 
access to ensure compliance with the Supplement. Section 11 contains 
general terms including interpretation, severability, waiver, survival, 
and governing law.
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    \5\ See Securities Exchange Act Release No. 21015, 49 FR 23971 
(June 4, 1984) (File No. SR-OCC-84-7) for the text of the Agreement 
for OCC Services.
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    The proposed rule change is consistent with section 17A of the Act 
because it promotes new data processing and communications techniques 
resulting in more efficient, effective, and safe procedures for 
clearance and settlement activities.

(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 longer 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 the self-regulatory organization 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.

VI. 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 NW, Washington, DC 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 NW., 
Washington, DC 20549. Copies of such filing will also be available for 
inspection and copying at the principal office of OCC. All submissions 
should refer to the File No. SR-OCC-2001-09 and should be submitted by 
June 24, 2002.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14298 Filed 6-6-02; 8:45 am]
BILLING CODE 8010-01-P