Document ID: SEC-2007-1592-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Options Clearing Corp.
Posted Date: 2007-11-26T05:00Z

[Federal Register: November 26, 2007 (Volume 72, Number 226)]
[Notices]               
[Page 66015-66017]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26no07-84]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56800; File No. SR-OCC-2007-10]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to the Fees Charged to Clearing Members and Non-Clearing 
Members for Theoretical Profit and Loss Values

November 16, 2007.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on

[[Page 66016]]

September 18, 2007, 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. 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The principal purpose of the rule change is to effect changes to 
the fees charged to clearing members and non-clearing members for 
Theoretical Profit and Loss Values.

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.\2\
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    \2\ The Commission has modified parts of these statements.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of this rule change is to: (i) Eliminate the fee 
charged to clearing members for Theoretical Profit and Loss Values and 
provide this information at no additional cost as part of the ancillary 
services offered to Tier I clearing members, and (ii) reduce the 
maximum fee charged to non-clearing members for such information. As a 
result of these changes in fees and service offerings, conforming 
changes are required in OCC's Schedule of Fees as well as in the 
Supplement to the Agreement for OCC Services: Ancillary Services. In 
addition, a new Supplement to the Agreement for OCC Services is being 
adopted to reflect that Theoretical Profit and Loss Values are now 
being provided to clearing members as part of OCC's ancillary service 
offerings.

A. Background

    OCC currently provides a theoretical profit/loss value file 
(``data'') to OCC clearing members and non-clearing member broker-
dealers for use in calculating (i) risk-based haircuts in order to 
determine SEC net capital requirements and (ii) margin for customer 
positions on a portfolio basis. Currently, the data is made available 
for download to OCC clearing members and non-clearing members by either 
(i) mainframe to mainframe transmission, (ii) File Transfer Protocol 
(``FTP''),\3\ or (iii) OCC's Theoretical Information Online (``TIO'') 
system.\4\ Both the mainframe to mainframe transmission and the FTP 
processes provide for receipt of the full theoretical file while TIO 
also allows partial file downloads.
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    \3\ OCC charges $2,000.00 per month for clearing members and 
non-clearing members to access the Data via mainframe to mainframe 
transmission or FTP.
    \4\ OCC currently charges a monthly fee of $0.10 per class group 
with a minimum monthly charge of $200.00 and a maximum monthly 
charge of $2,000.00 for clearing members and non-clearing members 
accessing the data via TIO.
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B. Discussion

    TIO once served as a practical and economical tool that allowed 
users to avoid downloading the entire theoretical file to access the 
desired information. The TIO ``per class group'' charge enabled 
clearing members and non-clearing members that needed data for a 
relatively small subset of all equity classes to save money by using 
TIO as compared to the other two means of downloading the data. 
However, the widespread availability of affordable broadband network 
services has practically eliminated the download time and other 
bandwidth-related concerns associated with downloading an entire file 
of theoretical values. Meanwhile, as more subscribers begin to use the 
customer margin risk arrays for customer positions margined on a 
portfolio basis, OCC believes the number of clearing members and non-
clearing members that would benefit from having the option to download 
a partial file will continue to decline.
1. Elimination or Reduction of Fees
    In May 2007, OCC's Board of Directors authorized a plan to 
decommission the TIO system due to its limited value and high 
maintenance cost. The data will remain available to clearing members 
and non-clearing members as a full file through either a mainframe to 
mainframe transmission or FTP.\5\ Effective October 1, 2007, OCC will 
eliminate the fee for Theoretical Profit and Loss Values charged to 
clearing members that receive the data via mainframe to mainframe or 
via FTP and will provide this information as part of the ancillary 
services offered to Tier I clearing members.\6\ Also effective October 
1, 2007, OCC will reduce the fee for non-clearing members to receive 
the data via mainframe to mainframe transmission or FTP to a flat rate 
of $1,000.00 per month.\7\ OCC attached as Exhibit 5A to SR-OCC-2007-10 
a Schedule of Fees as of October 1, 2007, which reflects the foregoing 
changes.\8\
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    \5\ OCC staff will work with affected TIO subscribers to assist 
them in their transition to FTP or mainframe to mainframe downloads 
by December 31, 2007.
    \6\ There are a total of five clearing members that subscribe to 
OCC's theoretical data that are not Tier I subscribers. Based upon 
July 2007 billing for June activity, the increased monthly cost of 
subscribing to Tier I ($450.00) would be more than offset for one of 
these clearing members by elimination of the separate charge for 
theoretical data ($2,000.00 per month). The other four clearing 
members will have a monthly billing increase of approximately $250. 
These four clearing members currently use TIO and on average 
download a minimal number of class groups per month.
    \7\ OCC will continue to support and make the data available 
through TIO until December 31, 2007. Clearing members and non-
clearing members that continue to receive data via TIO after October 
1, 2007, will be charged the current TIO fees for the data. However, 
effective January 1, 2008, TIO will be decommissioned, and the data 
will no longer be available via TIO. As a result, the TIO fee will 
then be eliminated from the Schedule of Fees.
    \8\ Exhibit 5A also contains references highlighting the phase-
out approach that OCC is adopting with respect to the 
decommissioning of TIO and the impact to fees charged to clearing 
members and non-clearing members during this time period. Such 
notations will no longer be applicable after TIO is retired, and 
they will be eliminated in connection with the republication of the 
January, 2008 schedule of fees.
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2. Conforming Changes
    As part of the proposed rule change, OCC is also making certain 
additional conforming changes to both its Schedule of Fees and its 
Ancillary Services Supplement, a copy of which is attached to SR-OCC-
2007-10 as Exhibit 5B, to reflect recent modifications to its ancillary 
service descriptions. Specifically, as of April 2007, OCC no longer 
provides monthly core reports to clearing members via cd-rom as 
currently referenced in Tiers I, II, III, and IV of the Schedule of 
Fees and the Ancillary Services Supplement. Instead, clearing members 
now have access to historical core reports on-line through ENCORE Core 
Reports. In addition, OCC's special settlement file and adjusted 
position file as currently referenced in Tier 1 of the Schedule of Fees 
and the Ancillary Services Supplement are no longer separately produced 
for clearing members as this information is now made available as part 
of OCC's data distribution service (``DDS''). Finally, OCC has now 
completed its conversion of DDS subscribers to its new format as 
previously described in File No. SR-

[[Page 66017]]

OCC-2006-06.\9\ Therefore, the surcharge currently referenced in OCC's 
Schedule of Fees in connection with the DDS conversion is no longer 
applicable and will be removed along with each of the other above-
described items.
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    \9\ Securities and Exchange Act No. 54059 (June 28, 2006), 71 FR 
38962 (July 10, 2006).
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3. Supplement to Agreement for OCC Services: Theoretical Profit and 
Loss Values
    Exhibit 5C to SR-OCC-2007-10 is the Supplement to the Agreement for 
OCC Services: Theoretical Profit and Loss Values to be entered into 
between OCC and clearing members subscribing to Theoretical Profit and 
Loss Values (``Supplement'').\10\ The Supplement is structured to fit 
within OCC's existing framework for the Agreement for OCC Services and 
will replace the current form agreement between clearing members and 
OCC. The provisions are generally self-explanatory, and they are 
intended to describe the respective responsibilities of OCC and the 
subscribing clearing member. Section 1 describes the Theoretical Profit 
and Loss Values and identifies the available means of downloading the 
data. Sections 2 and 3 set forth the authorized scope of use of the 
data and related documentation. Section 4 describes the clearing 
member's obligations with respect to security and access codes. Section 
5 describes the fees associated with the data. Section 6 sets forth the 
confidential nature of the data and documentation. Sections 7 through 
11 set forth further responsibilities of the parties including 
warranties, liability, and indemnification. Section 12 describes the 
termination rights of the parties. Section 13 contains general terms 
regarding survival of certain provisions. Exhibit A to the Supplement 
is the form of acknowledgment to be signed by a managed clearing 
member.
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    \10\ Non-clearing members will also be required to execute a 
corresponding subscription agreement for the data.
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    The proposed rule change is consistent with Section 17A of the Act 
because it involves a fee, due, or charge applicable to subscribers of 
information that provides for a reasonable allocation of costs. The 
proposed rule change is not inconsistent with the existing rules of 
OCC, including any other rules proposed to be amended.

(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.

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

    Because the foregoing rule change changes fees charged by OCC, it 
has become effective pursuant to section 19(b)(3)(A)(ii) of the Act 
\11\ and Rule 19b-4(f)(2) \12\ thereunder. 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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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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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-2007-10 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-2007-10. 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 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 filing also will be available for 
inspection and copying at the principal office of OCC. 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-2007-10 and should be 
submitted on or before December 17, 2007.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-22910 Filed 11-23-07; 8:45 am]

BILLING CODE 8011-01-P