[Federal Register Volume 75, Number 78 (Friday, April 23, 2010)]
[Notices]
[Pages 21377-21378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9272]
[[Page 21377]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61911; File No. SR-OCC-2010-06]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Revise Certain By-Laws and Rules Related to the Stock Loan/Hedge and
Market Loan Programs
April 15, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 26, 2010, The
Options Clearing Corporation (``OCC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
primarily by OCC. OCC filed the proposal pursuant to Section
19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) \3\ thereunder so
that the proposal was effective upon filing with the Commission. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78s(b)(3)(A)(iii).
\3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The purpose of the proposed rule change is to revise certain by-
laws and rules related to the Stock Loan/Hedge and Market Loan
Programs.
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 such
statements.\4\
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\4\ 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
OCC proposes three changes to certain by-laws and rules related to
its stock lending programs known as Stock Loan/Hedge and Market
Loan.\5\ First, OCC would amend the existing definition of ``marking
price'' used in connection with ``loaned stock''. Marking price for a
loaned stock is currently defined as the closing price on the primary
market for a loaned stock on the preceding trading day or if the loaned
stock did not trade on the previous trading day the highest reported
asked quotation for such stock at or about the close of trading on the
preceding trading day. OCC however recently determined that its pricing
vendor for marking prices does not provide the highest reported asked
quotation for stocks that did not trade on the previous trading day.\6\
To reconcile the difference between the vendor's reporting practice and
the current marking price definition, as well as to address other
potentially related price reporting issues, OCC proposes applying its
general definition of marking price that is found in Article I, Section
1 of its By-laws.\7\
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\5\ The proposed changes to OCC's By-laws and Rules can be found
in Exhibit 5 to proposed rule change SR-OCC-2010-06 at http://www.dtcc.com/downloads/legal/rule_filings/2010/nscc/2010-02.pdf.
\6\ The vendor provides a marking price that is the mid-point
between the bid and ask for such stocks.
\7\ Article I, Section 1 of OCC's By-laws states, ``[t]he term
`marking price' * * * means the most recent market value reasonably
ascertainable (or the most recent reasonably ascertainable contract
price, in the case of a future), as determined by [OCC] in its
discretion * * *''.
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Second, with respect to OCC's Market Loan Program, Automated Equity
Finance Markets, Inc. (``AQS'') \8\ asked OCC to develop functionality
to accept instructions from AQS to cancel Market Loan transactions that
are pending settlement at The Depository Trust Company (``DTC''). AQS
advised that this functionality would address situations of obvious
error and facilitate its market operations. OCC would amend Rule 2204A
to allow it to accept instruction from a Loan Market to cancel a
previously-reported transaction that is pending settlement at DTC. When
so instructed by a Loan Market, OCC already has authority to unwind
settled Market Loan transactions that were erroneously executed.\9\ OCC
therefore believes this proposed ability to cancel pending transactions
would be a minor extension of existing authority.
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\8\ AQS is a Loan Market as defined in the OCC's Market Loan
Program rules.
\9\ OCC Rule 2207A.
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Finally, and also with respect to the Market Loan Program, AQS
asked OCC to process dividend equivalent payments that are not covered
by DTC's automatic dividend tracking services (``Dividend Service'')
and to do so without removing a Market Loan from the Dividend Service.
In October 2009, OCC amended its rules so that dividend equivalent
payments are principally effected through DTC's Dividend Service.
However, OCC retained authority to effect such payments through its
cash settlement system if a Market Loan is removed by OCC from the
Dividend Service.\10\
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\10\ Securities Exchange Act Release No. 34-60881 (October 26,
2009), 74 FR 56253 (October 30, 2009) File No. SR-OCC-2009-16.
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Since the time of that rule change by OCC, AQS determined that
certain dividend equivalent payments are not tracked by DTC and
therefore are not covered by its Dividend Service. In such situations,
AQS requested that OCC allow a Loan Market to instruct OCC to use its
cash settlement system to transfer these ``non-tracked'' dividend
equivalent payments from a borrower to a lender without removing a
Market Loan from the Dividend Service. OCC would amend Rule 2206A to
accommodate this request. Guaranty of dividend equivalent payments by
OCC would remain limited to the amount of margin OCC collects prior to
the expected dividend payment date from any responsible Borrowing
Clearing Member.
OCC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act \11\ and the rules and
regulations thereunder applicable to OCC because the proposed rule
change promotes efficiencies in the clearance and settlement of
securities transactions by modifying OCC's by-laws and rules to (i)
revise the definition of the term ``marking price'' used in its Stock
Loan/Hedge and Market Loan programs, (ii) permit cancellation of Market
Loan transactions prior to settlement at DTC, and (iii) permit OCC to
settle dividend equivalent payments that are not tracked through DTC's
Dividend Service without removing a Market Loan from the Dividend
Service.
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\11\ 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 relating to the proposed rule change have not yet
been solicited or received. OCC will notify
[[Page 21378]]
the Commission of any written comments received by OCC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(4) \13\ thereunder
because the proposed rule change effects a change in an existing
service of a registered clearing agency that: (i) Does not adversely
affect the safeguarding of securities or funds in the custody or
control of the clearing agency or for which it is responsible and (ii)
does not significantly affect the respective rights or obligations of
the clearing agency or persons using the service. At any time within
sixty days of the filing of such rule change, the Commission may
summarily abrogate such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act.
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(4).
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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
Electronic comments may be submitted by using the
Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml), or
Send an e-mail to [email protected]. Please include
File No. SR-OCC-2010-06 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-2010-06. 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 Web site viewing and
printing 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/components/docs/legal/rules_and_bylaws/sr_occ_10_06.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-2010-06
and should be submitted on or before May 14, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Florence E. Harmon,
Deputy Secretary.
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\14\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-9272 Filed 4-22-10; 8:45 am]
BILLING CODE 8011-01-P