[Federal Register Volume 67, Number 233 (Wednesday, December 4, 2002)]
[Notices]
[Pages 72261-72262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-30674]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46914; File No. SR-OCC-2002-22]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change to Clear and Settle Options on Nonequity Fund Shares

November 26, 2002.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), as amended,\1\ notice is hereby given that on September 27, 
2002, The Options Clearing Corporation (``OCC'') filed with the 
Securities and Exchange Commission (``Commission'') and on October 18, 
2002, amended the proposed rule change as described in items I and II 
below, which items have been prepared primarily by OCC. The Commission 
is publishing this notice and order to solicit comments from interested 
persons and to grant accelerated approval of the proposed rule change.
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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 will amend OCC's by-laws and rules to 
accommodate the clearance and settlement of options on nonequity fund 
shares (i.e., shares representing interests in entities holding 
portfolios or baskets of nonequity securities).

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)

[[Page 72262]]

and (C) below, of the most significant aspects of these statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by OCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The immediate purpose of the proposed rule change amends article I, 
VI and XII of OCC's by-laws and chapters VI and XVIII of its rules to 
accommodate the introduction of options on ``iShares.'' iShares 
represent interests in an investment company holding portfolios of 
government securities, corporate debt securities, or government and 
corporate debt securities. OCC currently issues and clears options on 
interests in various entities holding portfolios of equity securities 
(including iShares' equity-based funds). OCC's Rules define such 
options and their underlying interests as ``stock fund options'' and 
``stock fund shares,'' respectively. To accommodate options on iShares 
representing interests in an entity holding portfolios of debt 
securities and to accommodate the possibility that exchanges may in the 
future list options on interests in other entities holding non-equity 
securities (or a combination of equity and non-equity), the proposed 
rule change will replace the terms ``stock fund options'' and ``stock 
fund shares'' with the terms ``fund options'' and ``fund shares'' and 
will eliminate any reference to ``stock'' or ``equity'' within the 
definitions.\3\
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    \3\ Because the term ``fund share'' is now being defined to 
include a broad class of securities, OCC will separately amend 
Filing No. SR-OCC-2002-04, which proposes to expand the forms of 
margin collateral accepted by OCC to include money market fund 
shares, to eliminate the few instances in which the same term is 
used to refer narrowly to money market fund shares.
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    OCC will interpret the term ``fund shares'' broadly, as it did the 
term ``stock fund shares,'' to include not only interests in registered 
investment companies but also interests in unregistered trusts (e.g., 
HOLDRs) and in other investment vehicles holding portfolios of 
securities. Accordingly, to reflect this broad interpretation the 
proposed rule change will substitute the term ``trusts'' for ``unit 
investment trusts'' in the definition of ``fund share.'' Conforming 
changes will be made throughout OCC's By-laws and Rules to incorporate 
the new definitions.
    OCC believes that the proposed rule change is consistent with the 
requirements of section 17A of the Act,\4\ as amended, and the rules 
and regulations thereunder applicable to OCC because it promotes the 
prompt and accurate clearance and settlement of securities 
transactions, fosters cooperation and coordination with persons engaged 
in the clearance and settlement of securities transactions, removes 
impediments to and perfects the mechanism of a national system for the 
prompt and accurate clearance and settlement of securities 
transactions, and, in general, protects investors and the public 
interest.
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    \4\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe that the proposed rule change will have any 
impact, or 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

    Section 17A(b)(3)(F) of the Act and the rules and regulations 
thereunder, requires that the rules of a clearing agency be designed to 
promote the prompt and accurate clearance and settlement of securities 
transactions.\5\ The Commission finds that the proposed rule change is 
consistent with this obligation because by allowing OCC to clear and 
settle options on nonequity fund shares, market participants trading 
these products will obtain the efficiencies and safeguards provided by 
OCC, a registered clearing agency.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    OCC has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after publication 
of the notice of filing. Both the American Stock Exchange (``Amex'') 
and the Chicago Board Options Exchange (``CBOE'') have informed OCC 
that they intend to begin trading options on iShares debt-based funds 
upon the Commission's approval of this proposed rule change and of a 
related supplement to the Options Disclosure Document. Accordingly, the 
Commission finds that there is good cause to approve the rule change 
prior to the thirtieth day after publication of the notice of filing 
because by so approving OCC will be able to immediately commence 
clearing and settling nonequity fund options when Amex and CBOE 
commence trading them.

IV. 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 also will be available for 
inspection and copying at the principal office of OCC. All submissions 
should refer to File No. SR-OCC-2002-22 and should be submitted by 
December 26, 2002.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2002-22) be, and hereby 
is, approved on an accelerated basis.

    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. 02-30674 Filed 12-3-02; 8:45 am]
BILLING CODE 8010-01-P