[Federal Register Volume 67, Number 213 (Monday, November 4, 2002)]
[Notices]
[Pages 67228-67229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27916]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46733; File No. SR-OCC-2002-15]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Granting Approval of a Proposed Rule Change Relating to Dating 
Assignments

October 28, 2002.

I. Introduction

    On July 3, 2002, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') proposed 
rule change File No. SR-OCC-2002-15 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 23, 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. 46377 (August 19, 2002), 
67 FR 54689.
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II. Description

    This rule change modifies OCC Rule 803 to provide that assignments 
will be dated and effective on the same date that the related exercise 
notice is accepted by OCC. Rule 803(b) currently provides that 
assignments are dated and effective as of the business day following 
the exercise date. This reflects the mechanics of OCC's processing. OCC 
assigns exercises on an overnight basis, but assigned clearing members 
do not receive notice of assignment until the morning of the day after 
exercise. OCC's practice has been to date assignments as of the day the 
assigned clearing members receive the notice of assignment. However, 
the ``trade'' resulting from the exercise is treated as having occurred 
on the exercise date not the assignment date. Thus, settlement takes 
place on the third business day following the exercise date.\3\
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    \3\ OCC Rule 902.
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    This has the potential to cause confusion for call writers. OCC has 
learned that some, if not all, clearing

[[Page 67229]]

members use the same assignment date as OCC. As a result, when a holder 
exercises a call on the day before an ex-dividend date in order to 
capture the dividend, the writer who is assigned the exercise may see 
an assignment date the same as the ex-dividend date. The writer's 
broker may then have to explain that the writer is required to give up 
the dividend to the exercising holder because the exercise occurred 
before the ex-dividend date even though the assignment did not. While 
the language of this filing reflects OCC's current business of clearing 
and settling exchange traded options, the filing and the change to 
OCC's by-laws and rules extend to assignments from national securities 
exchanges, national securities associations, futures merchants, 
security futures markets, and international markets for which OCC 
clears and settles transactions.\4\ Dating assignments on the same date 
as the related exercise will lessen the potential for this kind of 
confusion.
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    \4\ OCC Rules 912 and 913(e).
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    Other nonsubstantive changes are made to Rule 803 for the purposes 
of updating obsolete language. In addition, a conforming change is made 
to Rule 402, which pertains to supplemental reports of matched trades.
    OCC believes that the proposed rule change is consistent with 
Section 17A of the Act because it eliminates a potential source for 
investor confusion.

III. Discussion

    Section 17A(b)(3)(F) 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.\5\ OCC's current 
procedure for dating assignments is a potential source of confusion. By 
changing OCC's assignment dating procedure to provide that assignments 
will be dated and effective on the same date that the related exercise 
notice is accepted by OCC, the proposed rule change should eliminate 
the potential for confusion and therefore is consistent with OCC's 
section 17A obligation to promote the prompt and accurate clearance and 
settlement of securities transactions.
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    \5\ 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(b)(3)(F) 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-2002-15) 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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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-27916 Filed 11-1-02; 8:45 am]
BILLING CODE 8010-01-P