Document ID: SEC-2005-0307-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Options Clearing Corp.
Posted Date: 2005-12-01T05:00Z

[Federal Register: December 1, 2005 (Volume 70, Number 230)]
[Notices]               
[Page 72138-72139]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01de05-61]                         

[[Page 72138]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52830; File No. SR-OCC-2005-15]

 
Self-Regulatory Organizations; the Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to Rejection of Erroneous Post-Trade Instructions

November 23, 2005.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ notice is hereby given that on October 26, 2005, The Options 
Clearing Corporation (``OCC'') filed with the Securities and Exchange 
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 
proposed rule change pursuant to section 19(b)(3)(A)(ii) of the Act \2\ 
and Rule 19b-4(f)(2) thereunder \3\ which renders the proposal 
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)(ii).
    \3\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The proposed rule change will authorize OCC to reject all types of 
post-trade transactions when OCC determines, in its sole discretion, 
that the input regarding the adjustment or other transaction contains 
an error or omission.

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. The self-regulatory organization 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

    Under the proposed rule change, OCC will amend Article VI, Section 
1, of its By-Laws by adding paragraph (c) to Interpretations and 
Policies .01 and will amend Rule 403(b) to expressly authorize OCC to 
reject all types of post-trade transactions that OCC determines, in its 
sole discretion, that the input regarding the adjustment or other 
transaction contains an error or omission.
    OCC occasionally receives instructions from clearing members 
attempting to effect post-trade transactions, such as clearing member 
trade assignment (``CMTA'') \5\ transfers and position adjustments, 
that appear to be erroneous and that if not corrected would create 
large settlement obligations that could pose substantial credit risk 
for OCC. For example, recently an OCC clearing member submitted a CMTA 
transfer instruction specifying a premium value of $6,500 instead of 
$1.65 that would have produced a $5 billion settlement requirement. 
Such mistakes are ordinarily corrected by communicating with the 
clearing member or clearing members involved. However, OCC may not 
always be able to contact the affected parties or to obtain a timely 
agreement as to the appropriate corrective measure.
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    \5\ For an explanation of CMTA, refer to Securities Exchange Act 
Release No. 51350 (Mar. 9, 2005), 70 FR 12934 (Mar. 16, 2005).
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    Currently, OCC's By-Laws and Rules do not expressly authorize OCC 
to reject post-trade transactions when OCC determines that the input 
regarding such transactions contains an error or omission.\6\ Unlike 
option exchange transactions, for which it is OCC's general policy not 
to reject, post-trade transactions have not been examined for errors 
through the trade matching process and, therefore, are more vulnerable 
to errors and omissions.
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    \6\ In contrast, OCC Rules 614(c) and (e) authorize OCC to 
reject erroneous instructions for pledge positions and to release 
pledged positions, and OCC Rule 2202 enables OCC to reject erroneous 
stock loan transactions.
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    OCC believes that the proposed changes are consistent with the 
purposes and requirements of section 17A of the Act \7\ because such 
changes are designed to enable OCC to safeguard securities and funds in 
its possession or control for which it is responsible.
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    \7\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    OCC believes that the proposed rule change will not 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

    OCC has not solicited or received written comments relating to the 
proposed rule change. OCC will notify the Commission of any written 
comments it receives.

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)(i) of the Act \8\ and Rule 19b-4(f)(1) \9\ 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 
proposed 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(i).
    \9\ 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-2005-15 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington DC 20549-9303.
    All submissions should refer to File Number SR-OCC-2005-15. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your

[[Page 72139]]

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 OCC's 
principal office and on OCC's Web site at http://www.optionsclearing. 

com/publications/rules/proposed--changes/proposed--changes.jsp. 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-2005-15 and should be 
submitted on or before December 22, 2005.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-6731 Filed 11-30-05; 8:45 am]

BILLING CODE 8010-01-P