Document ID: SEC-2006-0805-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Options Clearing Corp.
Posted Date: 2006-06-23T04:00Z

[Federal Register: June 23, 2006 (Volume 71, Number 121)]
[Notices]               
[Page 36155-36157]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23jn06-78]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53980; File No. SR-OCC-2006-04]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to a Back-Up Communication Channel to Internet Access for 
Clearing Members

June 14, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 27, 2006, 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. OCC filed the proposed rule change pursuant to Section 
19(b)(3)(A)(i) of the Act \2\ and Rule 19b-4(f)(1) thereunder \3\ 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 parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(i).
    \3\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change adopts a policy statement that requires 
each clearing member that uses the Internet as its primary means to 
access OCC information and data systems through a secure website to 
maintain a secure backup to Internet access in order to provide for 
business continuance should there be an Internet outage.

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

[[Page 36156]]

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.\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

    In 1997, OCC introduced a system called ECMI (Enhanced Clearing 
Member Interface) for clearing members to access C/MACS, OCC's post-
trade and collateral processing system. At the time, all clearing 
members were required to use ECMI either as their primary means of 
access or as a back-up to a dedicated T1 line. In 2002, with the 
deployment of ENCORE for positions processing, clearing members were 
able to access ENCORE for processing position-related post-trade 
transactions anytime from anywhere through OCC's secure website by 
using the Internet. With the deployment of ENCORE Release 4.5 
(Collateral), all post-trade transactions, including collateral 
transactions, could be accomplished using an Internet connection to the 
secure Web site. Most clearing members have now adopted the Internet as 
their primary means of accessing the secure website, and although some 
clearing members continue to use ECMI as a back-up communication 
channel, the current ECMI dial-up access does not provide the high 
speed and performance level necessary for daily ENCORE activity.
    With so many clearing members relying on the Internet as their 
primary means of accessing OCC information and data systems, OCC has 
determined to adopt a policy statement that requires such clearing 
members to maintain (i) separate service agreements with two 
independent internet service providers and (ii) a back-up to Internet 
access through an approved communication channel. OCC will determine if 
a clearing member's selected back-up communication channel is 
applicable to that clearing member by reference to guidelines, set 
forth in the following chart, incorporated within the policy statement.

----------------------------------------------------------------------------------------------------------------
                Business profile                                  Back-up communication channel
----------------------------------------------------------------------------------------------------------------
                                                   Category A
----------------------------------------------------------------------------------------------------------------
 Ranks in the top 25 Clearing Members    T1 Line.
 with the highest cleared volume during a
 calendar year.
 Clears more than one account type as
 defined in OCC's By-Laws and Rules.
 Clears two or more product types.
 Conducts Clearing Member Trade
 Assignment (``CMTA'') business.
 High volume of daily post-trade input.
 Generally utilizes multiple forms of
 collateral.
 Utilizes most ancillary services
 offered by OCC.
 Currently uses Lease Line for data
 transmissions.
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                                                   Category B
----------------------------------------------------------------------------------------------------------------
 Has mid-level volume..................  T1 Line or ISDN.
 Clears only one or more account types
 as defined in OCC's By-Laws and Rules.
 Clears one or more product types.
 Moderate to small volume of post-trade
 input.
 Generally utilizes one or two forms of
 collateral.
 May utilize Lease Line for data
 transmissions.
----------------------------------------------------------------------------------------------------------------
                                                   Category C
----------------------------------------------------------------------------------------------------------------
 Has low-level volume..................  ISDN, OCC office 1 or fax input.
 Clears no more than one account type
 as defined in OCC's By-Laws and Rules.
 Clears no more than one product type.
 Generally utilizes one or two forms of
 collateral.
 Minimal post-trade input.
----------------------------------------------------------------------------------------------------------------
\1\ Smaller firms that rely solely on the Internet can utilize OCC equipment if the clearing member is located
  in or near a city where OCC maintains operational centers.

    OCC's purpose in adopting this policy statement is to ensure that 
clearing members maintain secure back-ups to Internet access in order 
to be able to perform critical business activities in a timely manner 
even in the event of an Internet outage \5\ The Policy Statement, which 
became effective on May 1, 2006, was not incorporated into OCC's Rules 
but was implemented as a stand-alone document \6\ Clearing members have 
already been notified about the adoption of this policy statement and 
its effective date.
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    \5\ In File No. SR-OCC-2006-03, OCC reduced the fixed monthly 
ancillary services fees charged to Tier I, II, and III clearing 
members to reflect the termination of the ECMI Interface and to 
partially offset the additional cost of establishing a back-up 
communication channel. This fee reduction became effective in April, 
2006.
    \6\ Conforming changes are also being made to the Supplement to 
Agreement for OCC Services for Internet Access (``Supplement'') to 
incorporate the Policy Statement into the terms of the Supplement. 
Copies of Amendment No. 1 to the Supplement to be executed by 
existing clearing members, as well as the Amended and Restated 
Supplement for new clearing members are attached to the proposed 
rule filing. Language proposed to be added to the Amended and 
Restated Supplement is underlined. Language proposed to be deleted 
is in brackets. See also Securities Exchange Act Release No. 46152 
(July 1, 2002) 67 FR 45166 (July 8, 2002) [File No. SR-OCC-2001-09] 
for the text of the original Supplement.
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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.

[[Page 36157]]

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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(i) of the Act \7\ and Rule 19b-4(f)(1) \8\ 
thereunder because it constitutes a stated policy, practice, or 
interpretation with respect to the meaning, administration, or 
enforcement of an existing rule. 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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    \7\ 15 U.S.C. 78s(b)(3)(A)(i).
    \8\ 17 CFR 240.19b-4(f)(1).
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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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
) or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-OCC-2006-04 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2006-04. 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. Copies of such filing 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. 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-2006-04 and should be submitted on 
or before July 14, 2006.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-9694 Filed 6-22-06; 8:45 am]

BILLING CODE 8010-01-P