[Federal Register Volume 68, Number 69 (Thursday, April 10, 2003)]
[Notices]
[Pages 17715-17717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8734]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47629; File No. SR-OCC-2002-21]


Self-Regulatory Organizations; the Options Clearing Corporation; 
Notice of Filing and Order Granting Accelerated Approval of a Proposed 
Rule Change Relating to Delivery Dates

April 3, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 28, 2002, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') 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 on the proposed rule change from interested persons 
and to grant accelerated approval.
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    \1\ 15 U.S.C. 78s(b)(1).

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[[Page 17716]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change amends OCC's rule 902, which obligates a 
delivering clearing member to deliver the underlying security or 
securities against payment of the aggregate purchase price on the 
designated delivery date.

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 III below. OCC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\2\
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    \2\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The proposed rule change modifies rule 902, which obligates a 
delivering clearing member to deliver the underlying security or 
securities against payment of the aggregate purchase price on the 
``delivery date.''\3\ The delivery date is the third business day 
following (1) the day on which an exercise notice is accepted by OCC 
(in the case of options) or (2) the maturity date (in the case of 
security futures). A different delivery date, however, may be 
designated by OCC for property that is deliverable following a contract 
adjustment or by the Board of Directors if such action is required in 
the public interest or to meet unusual conditions. The proposed rule 
change allows OCC's Board to delegate its authority to set a different 
delivery date to OCC's Chairman, Management Vice Chairman, or President 
or delegate of such officer.
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    \3\ The delivery date is also referred to in OCC's rules as the 
``exercise settlement date.'' OCC rule 101E.(4).
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    The need to set a different delivery date will generally result 
from unexpected events such as trading suspensions or delistings that 
cause NSCC to temporarily remove the underlying security from its CNS 
System.\4\ Delivery and payment obligations that cannot be settled 
through NSCC must be settled on a broker-to-broker basis under OCC's 
rules. Delaying settlement in these instances allows for more time to 
gather and validate necessary relevant information (e.g., if and when 
NSCC will again make the underlying security CNS-eligible). Convening 
an emergency meeting of the Board on the same day that OCC learns of a 
suspension or delisting is very difficult if not impossible. Granting 
the designated individuals the authority to delay settlement would 
provide OCC with greater flexibility in responding to these and other 
unexpected or unusual events.
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    \4\ Settlement of exercised and assigned or matured contracts 
requiring the physical delivery of the underlying security generally 
occurs at NSCC pursuant to arrangements between NSCC and OCC. OCC 
rule 913.
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    OCC believes that the proposed rule change is consistent with 
section 17A of the Act because it would provide OCC with greater 
flexibility to respond to unusual conditions in order to ensure the 
prompt and accurate clearance and settlement of securities 
transactions.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would 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. 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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-OCC-2002-21. This file number should be included on the 
subject line if e-mail is used. To help us process and review comments 
more efficiently, comments should be sent in hardcopy or by e-mail but 
not by both methods. 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 will also be available for inspection and copying at the 
principal office of FICC. All submissions should refer to the File No. 
SR-OCC-2002-21 and should be submitted by May 1, 2003.

IV. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder and particularly with the requirements of section 
17A(b)(3)(F).\5\ Section 17A(b)(3)(F) requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. The Commission 
believes that the proposed rule change is consistent with this 
requirement because it will improve OCC's ability to deal with 
unexpected events which effects the delivery and payment obligations of 
the underlying securities resulting from the exercise and assignment of 
option contracts. As a result, the proposed rule change should assist 
OCC in meeting its obligations to provide for the prompt and accurate 
clearance and settlement of securities transactions.
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    \5\ 15 U.S.C. 78q-1(b)(3)(I).
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    OCC has requested that the Commission approve this rule change 
prior to the thirtieth day after the date of publication of notice of 
the filing. The Commission finds good cause for approving the proposed 
rule change prior to the 30th day after publication of notice because 
such approval would immediately give OCC the flexibility it needs to 
delay the delivery date to address unusual conditions.

V. 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-

[[Page 17717]]

OCC-2002-21) 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. 03-8734 Filed 4-9-03; 8:45 am]
BILLING CODE 8010-01-P