Document ID: SEC-2010-1481-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corp.
Posted Date: 2010-09-28T04:00Z

[Federal Register: September 28, 2010 (Volume 75, Number 187)]
[Notices]               
[Page 59779-59780]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28se10-123]                         

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SECURITIES AND EXCHANGE COMMISION

[Release No. 34-62942; File No. SR-OCC-2010-16]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change Relating to Weekly Options And 
Monthly Options

September 20, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 15, 2010, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission the proposed rule change as described in Items I 
and II 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 the 
Substance of the Proposed Rule Change

    The proposed rule change would 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'').

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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of this proposed rule change is to accommodate Weekly 
Options and Monthly Options. The Chicago Board Options Exchange, Inc. 
(``CBOE''), is proposing to trade Weekly Options and Monthly Options on 
broad-based indexes (``Weekly Index Options'' and ``Monthly Index 
Options,'' respectively).\2\ 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 would be European-style, P.M.-settled 
contracts. CBOE proposes for these contracts to be subject to 
``automatic exercise procedures,'' meaning that these contracts would 
automatically be exercised at expiration without the opportunity for 
the clearing member to submit contrary exercise instructions if 
immediately prior to expiration the contract's settlement amount or 
exceeds a certain predetermined amount.
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    \2\ Securities Exchange Act Release No. 62658 (Aug. 5, 2010), 75 
FR 49010 (Aug. 12, 2010).
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    Weekly Options and Monthly Options can be cleared and settled by 
OCC with relatively minor revisions to current By-laws and Rules to 
provide for options that expire on a monthly or weekly schedule as 
proposed by CBOE.\3\ Therefore, OCC proposes amending Article I, 
Section 1 of its by-laws to include definitions covering Weekly

[[Page 59780]]

and Monthly Options. Changes to Rule 801, which relates to the 
submission of exercise notices, would be made 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. 
Changes to Interpretation and Policy .03 to Rule 805, which relates to 
expiration date exercise processing, would be made 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 effect for conventional 
options.\4\ A conforming change to Rule 1804, which supplements Rule 
805, also would 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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    \3\ 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.
    \4\ Interpretation .03 would 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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    OCC states that the proposed changes to OCC's By-Laws and Rules are 
consistent with the purposes and requirements of Section 17A of the Act 
\5\ because they are designed to permit OCC to perform clearing 
services for products that are subject to the jurisdiction of the SEC 
without adversely affecting OCC's obligations with respect to the 
prompt and accurate clearance and settlement of securities transactions 
or the protection of investors and the public interest. They accomplish 
this purpose by applying substantially the same rules and procedures to 
transactions in Monthly Index Options and Weekly Index Options as OCC 
applies to transactions in other options with a nonconventional expiry 
date, including Quarterly Index Options. The proposed rule change is 
not inconsistent with any rules of OCC, including any rules proposed to 
be amended.
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    \5\ 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 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

    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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to ninety days of such date if it finds such longer period 
to be appropriate and publishes its reasons for so finding or (ii) as 
to which the self-regulatory organization consents, the Commission 
will:
    (A) by order approve or disapprove the proposed rule change or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 No. SR-OCC-2010-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File No. SR-OCC-2010-16. 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 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 Web site viewing and 
printing 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 OCC's principal office and on OCC's Web site 
at http://www.theocc.com/publications/rules/proposed_changes/
proposed_changes.jspU. 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 submission should refer to File No. SR-
OCC-2010-16 and should be submitted on or before October 19, 2010

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-24199 Filed 9-27-10; 8:45 am]
BILLING CODE 8010-01-P