[Federal Register Volume 68, Number 46 (Monday, March 10, 2003)]
[Notices]
[Pages 11439-11440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-5566]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47418; File No. SR-ODD-2003-01]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Granting Approval of Proposed Supplement To Amend the Options 
Disclosure Document Regarding Options on Fund Shares, Settlement Prices 
for Index Options, and the Exemption of Standardized Options from the 
Provisions of the Securities Act of 1933; and Amendment to the Options 
Disclosure Document Front Cover Page To Identify the Markets in Which 
Options Are Traded

February 27, 2003.
    On February 25, 2003, the Options Clearing Corporation (``OCC'') 
submitted to the Securities and Exchange Commission (``Commission''), 
pursuant to Rule 9b-1 under the Securities Exchange Act of 1934 
(``Act''),\1\ five definitive copies of a Supplement to its options 
disclosure document (``ODD''), which amends the ODD to describe, among 
other things, the risks and characteristics of trading in options, and, 
in particular, options on fund shares, settlement prices for index 
options, and the exemption of standardized options from the provisions 
of the Securities Act of 1933.\2\ The ODD would also be amended to 
update its front inside cover page so

[[Page 11440]]

that it contains a current list of the U.S. exchanges that trade 
options issued by the OCC.
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    \1\ 17 CFR 240.9b-1.
    \2\ See letter from Jean M. Cawley, First Vice President and 
Deputy General Counsel, OCC, to Sharon Lawson, Senior Special 
Counsel, Division of Market Regulation, Commission, dated February 
24, 2003.
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    The ODD currently contains general disclosures on the 
characteristics and risks of trading standardized options. The 
Commission has approved options exchange proposals to list and trade 
options on particular fund shares based on fixed-income securities.\3\ 
To accommodate options on these particular types of funds, the 
Commission also approved an OCC proposal to replace the terms ``stock 
fund options'' and ``stock fund shares'' with the terms ``fund 
options'' and ``fund shares'' respectively, and also eliminated all 
references to ``stock'' or ``equity'' within the definitions to these 
terms.\4\ To provide a description of options on these particular types 
of fund shares based on fixed-income securities, the proposed 
Supplement amends the ODD to state that the term ``fund shares'' may 
include non-equity securities.
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    \3\ See Securities Exchange Act Release Nos. 46252 (July 24, 
2002), 67 FR 49715 (July 31, 2002) (approving File No. SR-Amex-2001-
35); and 46435 (August 29, 2002), 67 FR 57046 (September 6, 2002) 
(approving File No. SR-CBOE-2002-47).
    \4\ See Securities Exchange Act Release No. 46914 (November 26, 
2002), 67 FR 72261 (December 4, 2002) (approving File No. SR-OCC-
2002-22).
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    The Commission has also approved an OCC rule proposal that gives 
the OCC the ability to fix settlement prices for OCC-cleared index 
options where appropriate in the case of market disruptions.\5\ The 
proposed Supplement amends the ODD to incorporate a description of this 
change.
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    \5\ See Securities Exchange Act Release No. 46561 (September 26, 
2002), 67 FR 61943 (October 2, 2002) (approving File No. SR-OCC-
2002-09).
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    In addition, the Commission recently exempted standardized options 
issued by a registered clearing agency and traded on a registered 
national securities exchange or association from the provisions of the 
Securities Act of 1933,\6\ except for the antifraud provisions of 
Section 17A of the Securities Act of 1933.\7\ As a result, standardized 
options covered by the ODD are no longer required to be registered 
under the Securities Act of 1933, an OCC registration statement will no 
longer be available for inspection at the OCC's office, and copies of 
an OCC prospectus for standardized options will no longer be available 
from the OCC or the U.S. options markets. The proposed Supplement 
amends the ODD to incorporate descriptions of these changes.
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    \6\ See Securities Exchange Act Release No. 47082 (December 23, 
2002), 68 FR 188 (January 2, 2003) (adopting File No. S7-29-02 
creating an exemption for standardized options from provisions of 
the Securities Act of 1933 and from the registration requirements of 
the Act).
    \7\ 15 U.S.C. 78q-1.
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    Finally, the ODD would also be amended to update its front inside 
cover page so that it contains a current list of the U.S. exchanges 
that trade options issued by the OCC. Specifically, the list would be 
amended to delete reference to the New York Stock Exchange, Inc. 
(``NYSE'') (which no longer trades standardized options issued by the 
OCC) and its corporate address, and to add The International Securities 
Exchange, Inc. (``ISE'') (which currently trades standardized options 
issued by the OCC) and its corporate address.
    The Commission has reviewed the proposed ODD Supplement and finds 
that it complies with Rule 9b-1 under the Act.\8\ The Supplement is 
intended to be read in conjunction with the more general ODD, which, as 
described above, discusses the characteristics and risks of options 
generally. The Supplement provides additional information describing 
options on fund shares and the types of securities that can underlie 
them, the OCC's ability to fix settlement prices for OCC-cleared index 
options where appropriate in the case of market disruptions, and the 
implications resulting from the exemption of standardized options from 
the provisions of the Securities Act of 1933.
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    \8\ 17 CFR 240.9b-1.
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    Finally, the Commission has reviewed the proposed changes that 
update the front inside cover page of the ODD. Specifically, the 
Commission finds that it accurately identifies the markets in which 
options are currently traded pursuant to Rule 9b-1(c)(4) under the 
Act.\9\
    Rule 9b-1 under the Act \10\ provides that an options market must 
file five copies of an amendment or supplement to the ODD with the 
Commission at least 30 days prior to the date definitive copies are 
furnished to customers, unless the Commission determines otherwise, 
having due regard to the adequacy of information disclosed and the 
public interest and protection of investors.\11\ In addition, five 
definitive copies shall be filed with the Commission not later than the 
date the amendment or Supplement, or the amended options disclosure 
document, is furnished to customers. The Commission has reviewed the 
Supplement and amendment, and finds them consistent with the protection 
of investors and in the public interest to allow the distribution of 
these documents as of the date of this order.
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    \9\ 17 CFR 240.9b-1(c)(4).
    \10\ 17 CFR 240.9b-1.
    \11\ This provision is intended to permit the Commission either 
to accelerate or extend the time period in which definitive copies 
of a disclosure document may be distributed to the public.
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    It is therefore ordered, pursuant to Rule 9b-1 under the Act,\12\ 
that the proposed Supplement (SR-ODD-2003-01) regarding options on fund 
shares, settlement prices for index options, and the exemption of 
standardized options from the provisions of the Securities Act of 1933, 
as well as the proposed amendment to the Options Disclosure Document 
front cover page to identify the markets in which options are currently 
traded are approved. The Commission has also determined that definitive 
copies can be furnished to customers as of the date of this order.
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    \12\ 17 CFR 240.9b-1.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-5566 Filed 3-7-03; 8:45 am]
BILLING CODE 8010-01-P