Document ID: SEC-2008-0835-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Options Clearing Corp.
Posted Date: 2008-06-19T04:00Z

[Federal Register: June 19, 2008 (Volume 73, Number 119)]
[Notices]               
[Page 34969-34970]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19jn08-99]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57963; File No. SR-OCC-2008-08]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Relating to Its Facilities 
Management Agreements

June 13, 2008.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 9, 2008, 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. The Commission is publishing this notice to solicit comments 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

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

    The proposed rule change would amend OCC Rule 309 to permit 
expedited review of a managed clearing member's request to operate 
without a facilities management agreement.

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.\2\
---------------------------------------------------------------------------

    \2\ The Commission has modified the text of the summaries 
prepared by OCC.
---------------------------------------------------------------------------

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

    The purpose of the proposed rule change is to provide an expedited 
process for reviewing a managed clearing member's request to operate 
without a facilities management agreement (``FMA''). \3\
---------------------------------------------------------------------------

    \3\ Article V, Section 1 of OCC's By-laws, including the 
Interpretations and Policies thereunder, set forth the requirements 
for membership. Interpretation and Policy .04 permits an applicant 
for clearing membership (``managed clearing member'') to meet 
specified membership requirements by entering into an FMA with 
another clearing member (``managing clearing member'') pursuant to 
which managing clearing member would perform certain of the 
applicant's obligations as a clearing member (``managed services''). 
An operationally capable clearing member also may elect to outsource 
certain of its obligations as a clearing member, and thereby, become 
a managed clearing member. OCC Rule 309(f).
---------------------------------------------------------------------------

    Under OCC Rule 309(e), a managed clearing member that desires to 
terminate an FMA must withdraw from membership on the business day 
before the proposed termination unless the Membership/Risk Committee 
(``Committee'') has determined in accordance with Article V, section 1 
of OCC's By-laws either that the managed

[[Page 34970]]

clearing member has the operational capability, experience and 
competence to perform the managed services required of a clearing 
member or the managed clearing member has entered into another 
acceptable FMA that will be effective on or before such proposed 
termination.
    From March, 2006 to February, 2008, the Committee reviewed three 
requests to terminate FMAs, all of which were approved. In each case, 
the managed clearing member was required to defer terminating its FMA 
until the next regularly scheduled Committee meeting. To provide for a 
more timely review of certain FMA terminations, OCC proposes to adopt a 
new Interpretation and Policy .02 under Rule 309. Under the new policy, 
a managed clearing member desiring to terminate its FMA would be 
permitted to request an expedited review. If OCC consents to an 
expedited review,\4\ the Chairman, the Management Vice Chairman, or the 
President would be authorized to determine whether, as specified in 
Rule 309(e), a managed clearing member had the operational capability, 
experience, and competency to perform the managed services required of 
a clearing member, and to approve or disapprove the termination.
---------------------------------------------------------------------------

    \4\ OCC would use the expedited review process for FMA 
terminations only in cases that present no significant or novel 
issues. Requests involving complex issues would be presented to the 
Committee at its next regularly scheduled meeting.
---------------------------------------------------------------------------

    At the next regularly scheduled Committee meeting, the Committee 
would independently review de novo whether the managed clearing member 
met the requirements of Rule 309(e) and determine whether or not to 
approve the FMA's termination. Notwithstanding that, if the Committee 
modifies or reverses the action taken by the Chairman, the Management 
Vice Chairman, or the President, any actions taken by OCC or the 
clearing member prior to the modification or reversal would not be 
invalidated and no rights of any person arising out of such actions 
would be affected. In the unlikely event that the Committee disapproved 
of a termination previously approved by OCC, the clearing member would 
be given a reasonable time either to establish another FMA or to 
withdraw from membership.
    This proposal is comparable to a process recently approved by the 
Commission which permits the expedited review of requests by 
operationally capable clearing members that desire to outsource certain 
of their clearing member obligations by entering into FMAs.\5\ OCC 
believes that the rationale for giving senior management the authority 
to approve FMAs on an interim basis applies equally to FMA 
terminations. The proposal strikes a reasonable balance between meeting 
the business requirements of clearing members and continuing to ensure 
appropriate review of their operational capabilities.
---------------------------------------------------------------------------

    \5\ Interpretation & Policy .01 to Rule 309. See also Securities 
Exchange Act Release No. 57535 (March 20, 2008), 73 FR 16086 (March 
26, 2008) [SR-OCC-2008-01].
---------------------------------------------------------------------------

    OCC believes that the proposed change is consistent with the Act 
because it promotes the prompt and accurate clearance and settlement of 
securities transactions by providing an expedited review process for 
the termination of FMAs as proposed by managed clearing members. 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

    Within thirty-five 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 such 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 Number SR-OCC-2008-08 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2008-08. 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 and on OCC's Web 
site at http://www.theocc.com/publications/rules/proposed_changes/sr_
occ_08_08.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-
2008-08 and should be submitted on or before July 10, 2008.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-13855 Filed 6-18-08; 8:45 am]

BILLING CODE 8010-01-P