[Federal Register Volume 67, Number 198 (Friday, October 11, 2002)]
[Notices]
[Page 63489]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-26021]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46606; File No. SR-OCC-2002-12]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Granting Approval of a Proposed Rule Change Relating to 
Accelerating the Maturity Date for Certain Adjusted Security Futures 
Contracts

October 4, 2002.

I. Introduction

    On June 25, 2002, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change OCC-2002-12 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 August 13, 2002.\2\ No comment 
letters were received. For the reasons discussed below, the Commission 
is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 46319 (August 6, 2002), 
67 FR 52766.
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II. Description

    The purpose of the proposed rule change is to permit OCC to 
accelerate the maturity date of stock futures contracts that have been 
adjusted to call only for delivery of a fixed amount of cash. If the 
issuer of an underlying security were party to a cash merger in which 
its stock was converted into a right to receive cash only, futures on 
that stock would ordinarily be adjusted to call for delivery of the 
cash. Under the proposed rule change, OCC would have authority to 
accelerate the maturity dates of the adjusted futures to fall on or 
shortly after the effective date of the merger. The final settlement 
price for all accelerated futures, regardless of maturity date, will be 
fixed at the amount of cash into which the underlying security has been 
converted.
    The proposed rule change parallels OCC Rule 807, which governs the 
acceleration of European-style FLEX equity options. Acceleration of the 
expiration date for European-style options that have been adjusted to 
call for delivery of cash results in the acceleration of the options' 
ability to be exercised and therefore in the acceleration of payment of 
the exercise settlement amount to the holder if the option is in the 
money. Futures contracts, by contrast, are marked to market daily and 
settlement of an accelerated contract will occur through a final mark-
to-market payment based on the amount of cash into which the underlying 
security has been converted.

III. Discussion

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to protect investors and the public 
interest.\3\ By enabling OCC to advance the maturity dates of stock 
futures contracts when those contracts have been adjusted to call for a 
fixed amount of cash, the proposed rule change allows OCC to relieve 
market participants of the burden of continuing to maintain and account 
for open interest in contracts that no longer are subject to increases 
or decreases in value. Accordingly, the Commission finds that the rule 
change is consistent with OCC's obligation under Section 17A of the Act 
to protect investors and the public interest.
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    \3\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. 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 with the requirements of Section 17A of the Act and the 
rules and regulations thereunder applicable.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2002-12) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-26021 Filed 10-10-02; 8:45 am]
BILLING CODE 8010-01-P