[Federal Register Volume 70, Number 50 (Wednesday, March 16, 2005)]
[Notices]
[Pages 12934-12935]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-1143]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51350; File No. SR-OCC-2004-19]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving a Proposed Rule Change Relating to Clearing Member 
Trade Assignment Processing

March 9, 2005.
    On November 1, 2004, the Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change (File No. SR-OCC-2004-19) pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934.\1\ Notice of the 
proposal was published in the Federal Register on February 7, 2005.\2\ 
No comment letters were received. For the reasons discussed below, the 
Commission is approving the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 51120 (Feb. 1, 2005), 70 
FR 6486.
---------------------------------------------------------------------------

I. Description

    The proposed rule change will add new clearing member trade 
assignment (``CMTA'') processing requirements to OCC's By-Laws and 
Rules. Specifically, OCC will modify Article I (``Definitions'') of its 
By-Laws and Rules 401 and 403 to require clearing members that are 
parties to a CMTA arrangement involving CMTA customers to register with 
OCC certain customer identifiers that the clearing members use to 
process the CMTA transactions. The new rules will provide that an 
exchange transaction executed on behalf of a CMTA customer that is to 
be transferred by CMTA processing for clearance and settlement will be 
identified by a special indicator called a Customer CMTA Indicator in 
the matching trade information submitted with respect to that 
transaction.\3\ For each transaction marked with the

[[Page 12935]]

Customer CMTA Indicator, the matching trade information will also 
contain a ``CMTA Customer Identifier,'' which provides identification 
information about the CMTA customer on whose behalf a transaction was 
executed, and an ``IB Identifier,'' which provides identification 
information about the introducing broker that executed or arranged for 
the execution of such transaction.\4\
---------------------------------------------------------------------------

    \3\ The same indicator will be used by all options exchanges. 
OCC made various system changes to process this indicator and other 
information to be supplied with respect to CMTA customers' 
transactions. Matching trade information submitted by the options 
exchanges will need to include this information that requires 
changes to the exchanges' systems.
    \4\ If the ``introducing broker'' is also the ``executing 
clearing member,'' a separate IB Identifier will still be required.
---------------------------------------------------------------------------

    If a transaction is marked with the CMTA Indicator, OCC's systems 
will verify against a database of registered identifiers that the CMTA 
Customer Identifier and the IB Identifier supplied as a part of the 
trade information match registered identifiers for purposes of the CMTA 
arrangement between the carrying clearing member and executing clearing 
member. This verification step will be in addition to the other 
verifications performed by OCC's systems for CMTA processing. If a 
transaction is marked with a Customer CMTA Indicator but either the 
CMTA Customer Identifier or the IB Identifier is incomplete, 
inaccurate, or missing, OCC's systems will treat the transaction as a 
failed CMTA and will cause the transaction to be cleared in the 
executing clearing member's designated or default account in accordance 
with OCC Rule 403.
    Under the terms of a model agreement, which was developed by a 
working group of clearing members, options exchanges, and OCC, the 
firms will identify each CMTA covered customer. Each clearing member 
will then assign identifiers to their CMTA customers and introducing 
brokers. One clearing member will then register the assigned 
identifiers with OCC. OCC's systems will require the other clearing 
member to approve the identifiers before they are submitted to OCC for 
registration. Identifiers will be effectively registered when they are 
accepted by OCC's systems, subject to OCC's right to reject an already 
registered identifier.\5\ OCC will retain the right to specify criteria 
applicable to the characters used to form identifiers for systemic 
reasons.
---------------------------------------------------------------------------

    \5\ Carrying and executing clearing members will be responsible 
to update their respective registrations of CMTA Customer 
Identifiers and IB Identifiers including registering any changes or 
deletions with respect thereto.
---------------------------------------------------------------------------

II. Discussion

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. The Commission 
finds that the proposed rule change is consistent with OCC's 
obligations under Section 17A(b)(3)(F) because including identifying 
information about the CMTA customer and introducing broker to a 
transaction will make CMTA processing more transparent and should 
increase the regulatory and legal certainties with respect thereto. 
Specifically, the amendment to CTMA processing should better enable OCC 
members to make sure that transactions are properly sent to their 
accounts for clearing.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of Section 17A of the Act \7\ and the 
rules and regulations thereunder.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2004-19) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. E5-1143 Filed 3-15-05; 8:45 am]
BILLING CODE 8010-01-P