Document ID: SEC-2010-1243-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; ProposedRule Changes: Options Clearing Corp.
Posted Date: 2010-08-16T04:00Z

[Federal Register: August 16, 2010 (Volume 75, Number 157)]
[Notices]               
[Page 50030-50032]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16au10-128]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62685; File No. SR-OCC-2010-12]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the Definition of Government Securities To Exclude Separate 
Trading of Registered Interest and Principal Securities on Treasury 
Inflation Protected Securities, Commonly Known as TIP-STRIPS

August 10, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 29, 2010, The Options 
Clearing Corporation (``OCC'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change described in Items 
I and II below, which items have been prepared primarily by OCC. OCC 
filed the proposal pursuant to Section 19(b)(3)(A)(i) of the Act \2\ 
and Rule 19b-4(f)(1) \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)(i).
    \3\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will modify the definition of ``Government 
securities'' found in Article I, Section 1 of OCC's By-Laws to exclude 
Separate Trading of Registered Interest and Principal Securities 
(``STRIPS'') on Treasury Inflation Protected Securities (``TIPS''), 
commonly known as TIP-STRIPS.

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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[[Page 50031]]

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

1. Purpose
    The purpose of this rule change is to modify the definition of 
``Government securities'' found in Article I, Section 1 of OCC's By-
Laws to exclude Separate Trading of Registered Interest and Principal 
Securities (``STRIPS'') on Treasury Inflation Protected Securities 
(``TIPS''), commonly known as TIP-STRIPS. The reason for the proposed 
exclusion is the absence of a liquid secondary market for TIP-STRIPS.
    U.S. and Canadian Government securities are acceptable forms of 
collateral for margin and clearing fund purposes. OCC defines 
Government securities to be securities issued or guaranteed by the 
United States or Canadian Government or any other government acceptable 
to OCC. U.S. Government securities include bills, bonds, notes, TIPS, 
and STRIPS. The U.S. Government does not issue STRIPS, but it does 
guarantee their principal payments making them eligible as Government 
securities for purposes of OCC's By-Laws and Rules. The U.S. Government 
also does not issue TIP-STRIPS. Nonetheless, TIP-STRIPS fall within 
OCC's definition of Government securities as their principal is 
guaranteed by the U.S. Government.
    TIP-STRIPS were first issued in the late 1990's by an investment 
bank to meet the needs of certain clients. The securities are 
registered in the Federal Reserve Bank's book entry system. The 
securities have a de minimis circulation, and there currently is no 
active secondary market for them resulting in a lack of price 
transparency and liquidity and no reliable means by which to determine 
their value. OCC's ability to liquidate this form of collateral in the 
event of a clearing member default could be severely compromised as a 
result of these factors. Accordingly, OCC has concluded TIP-STRIPS 
should be excluded from the definition of Government securities. OCC is 
unaware of any instance in which a clearing member has pledged TIP-
STRIPS to meet its margin or clearing fund obligation. Therefore, OCC 
believes excluding TIP-STRIPS from the definition of Government 
securities enhances the protection of OCC, clearing members, and the 
investing public without imposing a burden on clearing members 
depositing Government securities to meet their margin and clearing fund 
obligations.
2. Statutory Basis
    OCC believes that the proposed rule change is consistent with 
Section 17A of the Act,\5\ as amended, because it assures the 
safeguarding of securities and funds which are in OCC's custody and 
control and provides for the protection of investors and the public 
interest. The proposed change meets these objectives by making a 
security with de minimis circulation, liquidity, and price transparency 
ineligible for deposit as a form of collateral. As OCC has not 
identified an instance in which a clearing member has deposited such 
security as collateral, the proposed change does not burden clearing 
members or adversely affect their ability to meet their obligations to 
OCC. The proposed rule change is not inconsistent with the existing 
rules of OCC, including any other 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 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)(i) of the Act \6\ and Rule 19b-4(f)(1) 
\7\ thereunder because the proposed rule change constitutes a stated 
policy, practice, or interpretation with respect to the meaning, 
administration, or enforcement of an existing rule. At any time within 
60 days of the filing of the proposed rule change, the Commission 
summarily may temporarily suspend 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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    \6\ 15 U.S.C. 78s(b)(3)(A)(i).
    \7\ 17 CFR 240.19b-4(f)(1).
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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-2010-12 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-2010-12. 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 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_12.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-2010-12 
and should be submitted on or before September 7, 2010.

[[Page 50032]]

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20181 Filed 8-13-10; 8:45 am]
BILLING CODE 8010-01-P