[Federal Register Volume 74, Number 172 (Tuesday, September 8, 2009)]
[Notices]
[Pages 46278-46279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-21638]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60602; File No. SR-OCC-2009-14]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Clear Options Based on 
Index-Linked Securities

September 1, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that 
on August 12, 2009, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change described in Items I, II, and III below, which 
items have been prepared primarily by OCC. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The proposed rule change seeks to permit OCC to clear options based 
on index-linked securities (``Index-Linked 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), and (C) below, of the most significant aspects of these 
statements.\3\
---------------------------------------------------------------------------

    \3\ The Commission has modified the text of the summaries 
prepared by OCC.
---------------------------------------------------------------------------

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    Index-Linked Securities are non-convertible debt of a major 
financial institution that typically have a term of at least one year 
but not greater than thirty years and that provide for payment at 
maturity based upon the performance of an index or indices of equity 
securities or futures contracts, one or more physical commodities,

[[Page 46279]]

currencies or debt securities, or a combination of any of the 
foregoing. Index-Linked Securities are traded on national securities 
exchanges and meet the definition of ``NMS Stock'' under regulation 
NMS.\4\ The options exchanges will treat options on Index-Linked 
Securities (``Index-Linked Security Options'') as standardized equity 
options for listing and trading purposes and will generally govern 
their trading by the same rules that are applicable to trading in other 
equity options. Exercises of Index-Linked Security Options will be 
settled by delivery of the underlying securities in the same manner as 
exercises of equity options.
---------------------------------------------------------------------------

    \4\ Securities Exchange Act Release No. 51808 (Jun. 9, 2005), 70 
FR 37496 (Jun. 29, 2005). ``NMS Stock'' is defined in Rule 
600(b)(47) of Regulation NMS as ``any NMS security other than an 
option.'' The definition of ``NMS Security'' in Rule 600(b)(46) of 
Regulation NMS includes any security for which transaction reports 
are collected and disseminated under an effective national market 
system plan. Because Index-Linked Securities are exchange traded, 
they fall within this definition.
---------------------------------------------------------------------------

    OCC is proposing to amend its By-Laws and Rules to accommodate 
Index-Linked Security Options. OCC is proposing to add a definition of 
``index-linked security'' to Article I of its By-Laws, to amend the 
definition of ``stock option contract'' in Article I of its By-Laws to 
include Index-Linked Security Options, and to amend the definition of 
``non-equity securities option contract'' in Article I of its By-Laws 
to clarify that Index-Linked Security Options are excluded from the 
definition. OCC also is proposing to amend Interpretation and Policy 
.05 to Article VI, Section 11A of its By-Laws to clarify that call of 
an entire class of Index-Linked Securities will result in an adjustment 
of Index-Linked Security Options in the event of a cash merger, but 
that a partial call will not result in an adjustment. OCC also is 
proposing to add Interpretation and Policy .10 to Article VI, Section 
11A of the By-Laws that would state that interest payments on Index-
Linked Securities generally will be considered ``ordinary cash 
dividends or distributions'' within the meaning of paragraph (c) 
Article VI, Section 11A. In addition, OCC is proposing to add language 
to Rule 604(b)(4)(iii) stating that for the purposes of Rule 604, 
Index-Linked Securities will be treated as stock, assuming they meet 
the basic listing requirement applicable to stocks. Finally, OCC is 
proposing to amend Rule 604(b)(4) to conform to its practice of 
limiting the value of securities with the same CUSIP number, as opposed 
to securities of the same issuer, to 10% of the margin requirement of 
an account, and proposing to add Interpretation and Policy .14 to Rule 
604(b)(4) stating that OCC may disapprove for margin credit a security 
that otherwise meets the Rule 604(b) criteria if other factors warrant 
such a disapproval.
    OCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the rules and 
regulations thereunder because the proposed change will promote the 
prompt and accurate clearance and settlement of transaction in Index-
Linked Security Options by providing that such options will be cleared 
and settled subject to the same rules and procedures that have been 
used successfully by OCC to clear and settle stock options.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

(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 relating to the proposed rule change have not been 
solicited or received. OCC will notify the Commission of any written 
comments received by OCC.

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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period: (i) As the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) By order approve such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an e-mail to [email protected]. Please include 
File Number SR-OCC-2009-14 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-OCC-2009-14. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filings also will be available for 
inspection and copying at the principal office of OCC and on OCC's Web 
site at http://www.optionsclearing.com/publications/rules/proposed_changes/sr_occ_09_14.pdf. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-OCC-2009-14 and should be submitted on or before 
September 23, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-21638 Filed 9-4-09; 8:45 am]
BILLING CODE 8010-01-P