Document ID: SEC-2009-1543-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change relating to Its Market Loan Program To Allow
Posted Date: 2009-10-30T04:00Z

[Federal Register: October 30, 2009 (Volume 74, Number 209)]
[Notices]               
[Page 56253-56255]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30oc09-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60881; File No. SR-OCC-2009-16]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
relating to Its Market Loan Program To Allow Dividend Equivalent 
Payments To Be Principally Effected Through The Depository Trust 
Company's Facilities

October 26, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 28, 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. 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 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)(iii).
    \3\ 17 CFR 240.19b-4(f)(4).

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[[Page 56254]]

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

    The proposed rule change would amend OCC's rules relating to its 
Market Loan Program to allow Dividend Equivalent Payments to be 
principally effected through The Depository Trust Company's (``DTC'') 
facilities.

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.\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

    With respect to a stock loan effected under OCC's Market Loan 
Program (``Market Loan''), OCC guarantees payments in lieu of cash 
dividends and distributions (``Dividend Equivalent Payments'') that a 
lending clearing member is entitled to receive with respect to the 
loaned stock during the term of such Market Loan. OCC's guaranty is 
limited to the amount for which OCC has collected margin from the 
responsible borrowing clearing member prior to the expected payment 
date. Until now, OCC has effected collections and payments of Dividend 
Equivalent Payments between the relevant clearing members through its 
daily cash settlement system. However, clearing members participating 
in the Market Loan Program are now requesting that Dividend Equivalent 
Payments be made through DTC's Automatic Dividend Tracking Services 
(``Dividend Service''). In order to accommodate such request, OCC 
proposes to amend its Rules as described below.
    OCC proposes to amend paragraph (a)(ii) of Rule 2206A so that 
Dividend Equivalent Payments would be effected through DTC's facilities 
on each payment date by transfers from and to the relevant clearing 
members with such transfers flowing through OCC's account at DTC in 
order to maintain anonymity between lenders and borrowers.\5\ In order 
to provide reasonable assurance that there would not be any net 
settlement obligations against OCC's account at the end of any day, OCC 
is reserving the authority to remove a Market Loan from the Dividend 
Service and is reserving the authority to make null and void any 
obligation to effect such payments through DTC's facilities. Once such 
authority is exercised, Dividend Equivalent Payments for such Market 
Loans would no longer be settled through DTC's facilities. Instead, 
they would be settled through OCC's cash settlement system on the next 
business day to the extent that, as described above, OCC had already 
collected sufficient margin from the responsible borrowing clearing 
member. The new procedure for processing Dividend Equivalent Payments 
will be applied to Market Loans effected on and after October 2, 2009.
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    \5\ Preserving anonymity between lenders and borrowers is 
important to the operation of the Market Loan Program because the 
Market Loan Program is intended to provide a framework within which 
securities lending transactions will be executed, mostly on an 
anonymous basis, through electronic trading systems.
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    Although OCC will no longer serve as the primary channel through 
which collections and payments of Dividend Equivalent Payments are 
made, OCC will continue to collect margin with respect to such Dividend 
Equivalent Payments based on calculations provided by a loan market. 
Futhermore, OCC will continue to have no liability to a clearing member 
for errors in a loan market's calculations. Accordingly, OCC also 
proposes to amend Paragraph (a)(ii) of Rule 2206A to provide 
clarification with respect to such calculations and OCC's liability.
    The proposed rule change is consistent with Section 17A of the 
Act,\6\ as amended, because it will streamline the processing of 
Dividend Equivalent Payments thereby promoting the prompt and accurate 
clearance and settlement of securities lending transactions.
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    \6\ 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 were not and 
are not intended to be 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

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-
4(f)(4) \8\ thereunder because the proposed rule change effects a 
change in an existing service of OCC that: (i) Does not adversely 
affect the safeguarding of securities or funds in the custody or 
control of OCC or for which it is responsible and (ii) does not 
significantly affect the respective rights or obligations of OCC or 
persons using the service. At any time within sixty days of the filing 
of the 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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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 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

     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-2009-16 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2009-16. 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

[[Page 56255]]

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 Room, 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.theocc.com/
publications/rules/proposed_changes/sr_occ_09_16.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-2009-16 and should be 
submitted on or before November 20, 2009

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Florence E. Harmon,
Deputy Secretary.
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    \9\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-26174 Filed 10-29-09; 8:45 am]

BILLING CODE 8011-01-P