Document ID: SEC-2010-1748-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2010-11-16T05:00Z

[Federal Register Volume 75, Number 220 (Tuesday, November 16, 2010)]
[Notices]
[Pages 70055-70056]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-28830]

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SECURITIES AND EXCHANGE COMMISION

[Release No. 34-63293; File No. SR-OCC-2010-16]

 Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving Proposed Rule Change Relating to Weekly Options And 
Monthly Options

November 9, 2010.

I. Introduction

    On September 15, 2010, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission proposed rule change 
SR-OCC-2010-16 pursuant to Section 19(b)(1) of the Securities Exchange 
Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder.\2\ The proposed 
rule change will accommodate options that expire on (a) any Friday of a 
calendar month other than the third Friday of a calendar month 
(``Weekly Options'') or (b) on the last trading day of a calendar month 
(``Monthly Options''). The proposed rule change was published for 
comment in the Federal Register on September 28, 2010.\3\ No comment 
letters were received on the proposal. This order approves the 
proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 62942 (Sept. 20, 2010), 
75 FR 59779.
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II. Description of the Proposal

    The purpose of the proposed rule change is to allow OCC to clear 
and to settle the Weekly Options and Monthly Options on broad-based 
indexes (``Weekly Index Options'' and ``Monthly Index Options,'' 
respectively) that were recently approved by the Commission for listing 
on a pilot program basis on the Chicago Board Options Exchange, 
Incorporated, (``CBOE'').\4\ Series of Weekly Index Options will expire 
on a Friday of a calendar month other than the third Friday, and 
Monthly Index Options will expire on the last trading day of a calendar 
month. If the last trading day of the month is a Friday, CBOE would opt 
to list Monthly Index Options over Weekly Index Options. Weekly Index 
Options and Monthly Index Options will be European-style, P.M.-settled 
contracts. These contracts will be subject to ``automatic exercise 
procedures,'' which means that these contracts will automatically be 
exercised at expiration if immediately prior to expiration the 
contract's settlement amount equals or exceeds a predetermined amount 
without the opportunity for the clearing member to submit contrary 
exercise instructions.
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    \4\ Securities Exchange Act Release No. 62911 (Sept. 14, 2010), 
75 FR 57539 (Sept. 21, 2010).
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    Weekly Options and Monthly Options proposed by CBOE can be cleared 
and settled by OCC with relatively minor revisions to OCC's current By-
Laws and Rules to provide for options that expire on a monthly or 
weekly schedule.\5\ In particular, OCC will amend Article I, Section 1 
of its By-Laws to include definitions covering Weekly and Monthly 
Options. Rule 801, which relates to the submission of exercise notices, 
will be changed to permit a Weekly or Monthly Option to be exercised on 
the business day before the expiration date and to include Weekly Index 
Options and Monthly Index Options in the listing of options series 
subject to automatic exercise. Interpretation and Policy .03 to Rule 
805, which relates to expiration date exercise processing, will be 
amended to permit OCC to specify time frames for submitting exercise 
instructions and furnishing reports with respect to Weekly and Monthly 
Options on equity interests that are different than those time frames 
in effect for conventional options.\6\ A conforming change to Rule 
1804, which supplements Rule 805, also will be made to add Weekly Index 
Options and Monthly Index Options to the list of options series subject 
to automatic exercise.
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    \5\ OCC's By-laws and Rules already accommodate equity and index 
options that expire on a day other than a Saturday following the 
third Friday of the month. For example, they accommodate quarterly 
options, which expire on the last business day of a calendar 
quarter, and short term options, which expire a week after their 
introduction for trading. Quarterly index options and short term 
index options are also subject to automatic exercise procedures.
    \6\ Interpretation .03 will also be amended to clarify that it 
covers equity options with non-conventional expiration dates as 
opposed to index options with nonconventional expiration dates, 
which are subject to automatic exercise as described in Rule 1804.
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III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to DTC. In particular, the Commission believes 
the proposal is consistent with Section 17A(b)(3)(F) of the Act,\7\ 
which requires that the rules of a registered clearing agency are 
designed to, among other things, remove impediments to the perfection 
of the mechanism of a national system for the prompt and accurate 
clearance and settlement of securities transactions. By expanding its 
clearance and settlement services to Weekly Index Options and Monthly 
Index Options while using substantially the same rules and procedures 
that it applies to transactions in other options with a nonconventional 
expiry date, such as Quarterly Index Options, OCC will enable its 
members to avail themselves of OCC's automated and time-proven 
clearance and settlement services for such options, which should help 
OCC to further remove impediments to and perfect the mechanism of a 
national system for the prompt and accurate clearance and settlement of 
securities transactions.
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    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act \8\ and the rules and regulations 
thereunder.
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    \8\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (File No. SR-

[[Page 70056]]

OCC-2010-16) be and hereby is approved.\10\
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    \9\ 15 U.S.C. 78s(b)(2).
    \10\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28830 Filed 11-15-10; 8:45 am]
BILLING CODE 8011-01-P