[Federal Register Volume 67, Number 130 (Monday, July 8, 2002)]
[Notices]
[Pages 45166-45167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-16984]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46152; File No. SR-OCC-2001-09]


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

July 1, 2002.
    On August 1, 2001, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') pursuant 
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ a proposed rule change (File No. OCC-2001-09). On April 23, 2002, 
OCC filed an amendment to the proposed rule change. Notice of the 
proposal was published in the Federal Register on June 7, 2002.\2\ No 
comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule change on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 46005 (May 30, 2002), 67 
FR 39460.
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I. Description

    The proposed rule change amends OCC's rules regarding access to its 
information and data systems via electronic means. OCC rules currently 
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 adds the 
definition of ``electronic data entry,'' which is broken down into 
``electronic data entry'' and ``electronic data retrieval,'' to Rule 
101 to provide a more flexible and broader description of the 
electronic means by which OCC and its clearing members can 
communicate.\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 pieces 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'' is defined as 
the transmission by a clearing member to OCC via electronic means of 
reports, notices, instructions, data, or other items. ``Electronic 
data retrieval'' is 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 also eliminates outdated provisions that 
require clearing members to send representatives to access lock boxes 
to obtain papers and documents distributed by OCC and clarifies the 
manner by 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]'') 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 also provide that such electronic transmissions 
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 has the 
discretion to designate alternative means or to extend any applicable 
cutoff times as may be deemed reasonable, practicable, and equitable 
under the circumstances. The proposed rule change amends 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'') sets 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 makes 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 term ``electronic data entry.'' Interpretations and 
Policies .01 under Rule 801 also is amended to

[[Page 45167]]

accurately reference Rule 205 instead of Rule 206.
    OCC also submitted as a part of the proposed rule change the 
``Supplement to the Agreement for OCC Services for Internet Access'' 
that will be entered into between OCC and its clearing members. OCC is 
developing a front-end portal 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.
    The 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 if it is 
acting as a ``managing clearing member'' to represent and warrant that 
it is authorized to obtain internet access on behalf of the ``managed 
clearing member.'' Sections 6 through 9 set forth further rights and 
responsibilities of the parties including limitations on liability, 
indemnification, and termination provisions. 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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II. Conclusion

    In Section 17A(a)(1)(A) of the Act, Congress set forth its finding 
that new data processing and communications techniques create the 
opportunity for more efficient, effective, and safe procedures for 
clearance and settlement. Section 17A(b)(3)(A) and (b)(3)(F) require 
that a clearing agency be organized, have the capacity, and have rules 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions. By amending its rules so that OCC and its 
clearing members can use a wider range of electronic means by which to 
communicate with each other, OCC is fulfilling this statutory 
obligation of providing for the prompt and accurate clearance and 
settlement of securities transactions. Therefore, the Commission finds 
that the proposal is consistent with the Act and in particular with 
Section 17A of the Act and the rules and regulations thereunder.
    OCC has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after the date of 
publication of notice of filing. Internet access to clearing reports is 
a key feature of OCC's new clearing system, and OCC wants to implement 
this feature as soon as possible. The Commission finds good cause for 
approving the proposed rule change prior to the thirtieth day after the 
date of publication of notice of filing because such approval will 
allow OCC to implement internet access to reports consistent with its 
systems implementation schedule.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2001-09) be, and hereby 
is, approved.

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-16984 Filed 7-5-02; 8:45 am]
BILLING CODE 8010-01-P