Document ID: SEC-2010-0614-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Revise Certain By-Laws and Rules Related to the Stock Loan/Hedge and Market Loan Programs
Posted Date: 2010-04-23T04:00Z

[Federal Register Volume 75, Number 78 (Friday, April 23, 2010)]
[Notices]
[Pages 21377-21378]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-9272]

[[Page 21377]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61911; File No. SR-OCC-2010-06]

Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Revise Certain By-Laws and Rules Related to the Stock Loan/Hedge and 
Market Loan Programs

April 15, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 26, 2010, 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. 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 
proposed rule change from interested persons.
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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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the proposed rule change is to revise certain by-
laws and rules related to the Stock Loan/Hedge and Market Loan 
Programs.

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.\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

    OCC proposes three changes to certain by-laws and rules related to 
its stock lending programs known as Stock Loan/Hedge and Market 
Loan.\5\ First, OCC would amend the existing definition of ``marking 
price'' used in connection with ``loaned stock''. Marking price for a 
loaned stock is currently defined as the closing price on the primary 
market for a loaned stock on the preceding trading day or if the loaned 
stock did not trade on the previous trading day the highest reported 
asked quotation for such stock at or about the close of trading on the 
preceding trading day. OCC however recently determined that its pricing 
vendor for marking prices does not provide the highest reported asked 
quotation for stocks that did not trade on the previous trading day.\6\ 
To reconcile the difference between the vendor's reporting practice and 
the current marking price definition, as well as to address other 
potentially related price reporting issues, OCC proposes applying its 
general definition of marking price that is found in Article I, Section 
1 of its By-laws.\7\
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    \5\ The proposed changes to OCC's By-laws and Rules can be found 
in Exhibit 5 to proposed rule change SR-OCC-2010-06 at http://www.dtcc.com/downloads/legal/rule_filings/2010/nscc/2010-02.pdf.
    \6\ The vendor provides a marking price that is the mid-point 
between the bid and ask for such stocks.
    \7\ Article I, Section 1 of OCC's By-laws states, ``[t]he term 
`marking price' * * * means the most recent market value reasonably 
ascertainable (or the most recent reasonably ascertainable contract 
price, in the case of a future), as determined by [OCC] in its 
discretion * * *''.
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    Second, with respect to OCC's Market Loan Program, Automated Equity 
Finance Markets, Inc. (``AQS'') \8\ asked OCC to develop functionality 
to accept instructions from AQS to cancel Market Loan transactions that 
are pending settlement at The Depository Trust Company (``DTC''). AQS 
advised that this functionality would address situations of obvious 
error and facilitate its market operations. OCC would amend Rule 2204A 
to allow it to accept instruction from a Loan Market to cancel a 
previously-reported transaction that is pending settlement at DTC. When 
so instructed by a Loan Market, OCC already has authority to unwind 
settled Market Loan transactions that were erroneously executed.\9\ OCC 
therefore believes this proposed ability to cancel pending transactions 
would be a minor extension of existing authority.
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    \8\ AQS is a Loan Market as defined in the OCC's Market Loan 
Program rules.
    \9\ OCC Rule 2207A.
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    Finally, and also with respect to the Market Loan Program, AQS 
asked OCC to process dividend equivalent payments that are not covered 
by DTC's automatic dividend tracking services (``Dividend Service'') 
and to do so without removing a Market Loan from the Dividend Service. 
In October 2009, OCC amended its rules so that dividend equivalent 
payments are principally effected through DTC's Dividend Service. 
However, OCC retained authority to effect such payments through its 
cash settlement system if a Market Loan is removed by OCC from the 
Dividend Service.\10\
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    \10\ Securities Exchange Act Release No. 34-60881 (October 26, 
2009), 74 FR 56253 (October 30, 2009) File No. SR-OCC-2009-16.
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    Since the time of that rule change by OCC, AQS determined that 
certain dividend equivalent payments are not tracked by DTC and 
therefore are not covered by its Dividend Service. In such situations, 
AQS requested that OCC allow a Loan Market to instruct OCC to use its 
cash settlement system to transfer these ``non-tracked'' dividend 
equivalent payments from a borrower to a lender without removing a 
Market Loan from the Dividend Service. OCC would amend Rule 2206A to 
accommodate this request. Guaranty of dividend equivalent payments by 
OCC would remain limited to the amount of margin OCC collects prior to 
the expected dividend payment date from any responsible Borrowing 
Clearing Member.
    OCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \11\ and the rules and 
regulations thereunder applicable to OCC because the proposed rule 
change promotes efficiencies in the clearance and settlement of 
securities transactions by modifying OCC's by-laws and rules to (i) 
revise the definition of the term ``marking price'' used in its Stock 
Loan/Hedge and Market Loan programs, (ii) permit cancellation of Market 
Loan transactions prior to settlement at DTC, and (iii) permit OCC to 
settle dividend equivalent payments that are not tracked through DTC's 
Dividend Service without removing a Market Loan from the Dividend 
Service.
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    \11\ 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 have not yet 
been solicited or received. OCC will notify

[[Page 21378]]

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 rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(4) \13\ thereunder 
because the proposed rule change effects a change in an existing 
service of a registered clearing agency that: (i) Does not adversely 
affect the safeguarding of securities or funds in the custody or 
control of the clearing agency or for which it is responsible and (ii) 
does not significantly affect the respective rights or obligations of 
the clearing agency or persons using the service. At any time within 
sixty days of the filing of such 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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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 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

     Electronic comments may be submitted by using 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-2010-06 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2010-06. 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 Section, 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.optionsclearing.com/components/docs/legal/rules_and_bylaws/sr_occ_10_06.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-2010-06 
and should be submitted on or before May 14, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Florence E. Harmon,
Deputy Secretary.
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    \14\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2010-9272 Filed 4-22-10; 8:45 am]
BILLING CODE 8011-01-P