Document ID: SEC-2005-0338-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Options Clearing Corp.
Posted Date: 2005-12-08T05:00Z

[Federal Register: December 8, 2005 (Volume 70, Number 235)]
[Notices]               
[Page 73045-73047]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08de05-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52869; File No. SR-OCC-2005-16]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Gasoline Index Futures

December 1, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on October 26, 2005, 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. OCC filed the

[[Page 73046]]

proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 
\2\ and Rule 19b-4(f)(4) thereunder \3\ making the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed 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)(iii).
    \3\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would permit OCC to clear and settle cash-
settled futures contracts proposed to be listed by the CBOE Futures 
Exchange (``CFE'') that are intended to track the price of 
reformulated, regular octane gasoline sold through retail outlets 
(``Gasoline Index Futures'').

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

A. Gasoline Index Futures
    The purpose of this rule change is to permit OCC to clear and 
settle Gasoline Index Futures contracts proposed to be listed by CFE. 
Gasoline Index Futures will have as their underlying interest indexes 
of retail gasoline prices (``Gasoline Indexes'') published by the 
Energy Information Administration (``EIA'') of the U.S. Department of 
Energy. The Gasoline Indexes are compiled and released each Monday 
evening from surveys of prices at retail gasoline outlets conducted by 
the EIA each Monday morning. CFE is proposing to list Gasoline Index 
Futures on six underlying Gasoline Indexes, one for the entire United 
States and one for each of five ``Petroleum Administration for Defense 
Districts.'' Gasoline Index Futures would cease trading on the third 
Friday of the expiration month and would settle on the following 
Tuesday using as a final settlement price (a) The Gasoline Index levels 
published on the Monday preceding the settlement date multiplied by (b) 
a contract multiplier of 10,500. For example, a Gasoline Index of $3.00 
per gallon would result in a final settlement price of $31,500.
    OCC currently clears and settles futures on stock indexes. Although 
Gasoline Index Futures will be the first non-stock index futures 
contracts cleared and settled by OCC, OCC can clear them under its 
existing By-Laws and Rules applicable to clearing futures contracts 
with the minor amendments proposed in this filing. OCC will collect 
margin and make variation payments with respect to Gasoline Index 
Futures as in the case of any other futures contract. However, because 
the Gasoline Indexes are published only once a week, OCC will be 
required to estimate one-day volatilities in calculating initial 
margin. Because OCC will estimate volatilities conservatively, margins 
are likely to be higher than if underlying prices were available on a 
daily basis. Gasoline Index Futures will be cleared under the current 
clearing agreement between OCC and CFE subject only to the execution by 
OCC and CFE of a new Schedule C listing the Gasoline Indexes as 
permissible underlyings.
B. Rule Changes
    The terms Broad-Based Index Future and Narrow-Based Index Future 
were defined in OCC's rule filing permitting it to clear security 
futures in a manner that limited OCC's futures clearing and settlement 
activities to futures on narrow-based stock indexes. There is no longer 
a need to describe any such limitation because OCC is registered with 
the Commodity Futures Trading Commission (``CFTC'') as a derivatives 
clearing organization, and the Commission and the CFTC have previously 
approved rules permitting OCC to clear commodity futures contracts. In 
order to simplify OCC's Rules and to provide for non-stock index 
futures, those terms are removed, and the definition of ``Index 
Future'' is being amended to apply to a future on an index of 
securities or commodities. Like the definition of Index Future, 
Sections 4(a) and (b) of Article XII of OCC's By-Laws are amended so 
that underlying indexes need not consist only of indexes of securities.
    A new sentence is added at the end of Article XII, Section 4(c) to 
account for the possibility that if the Gasoline Indexes (or similar 
indexes not derived from market-traded instruments) become unavailable, 
a substitute index may not be available. In that instance, OCC would 
terminate the index future and fix a settlement price in accordance 
with Section 5, and any options on such future would be automatically 
exercised if in-the-money based on the settlement price set by OCC. 
Options that were out-of-the-money would terminate.
    Section 5 is amended to account for the fact that the prices that 
are used to calculate Gasoline Indexes are not derived from an 
organized market. Currently, Section 5(a) assumes that the price or 
value of all underlying interests or the constituents of all underlying 
indexes will be taken from organized markets where such underlying 
interests or constituents are traded. Because different rules are 
necessary when the prices or values of underlying interests or 
constituents are not available from an organized market, introductory 
language is added to Section 5(a) to limit that paragraph's 
applicability to market-traded interests or constituents, and a new 
paragraph (b) is added so that OCC may act when a price or value of an 
underlying interest or constituent that is not traded on a market is 
unavailable. Current paragraph (a)(2) is being redesignated as (c)(2), 
and a new provision is added to that paragraph so that OCC may (i) fix 
the final settlement price for a non-market-traded underlying interest 
or constituent using a price or value or a combination or average of 
prices or values deemed appropriate by OCC or (ii) simply fix the final 
settlement price at the most recently determined settlement price for 
the future. Because in the latter case the final settlement price would 
equal the previous settlement price, no final variation payment would 
be made.
    The introductory paragraph to Chapter XIII is simplified by 
replacing lists of underlying interests and contracts cleared and 
settled by OCC with more generic terms incorporating all underlying 
interests and all futures and futures options OCC is permitted to clear 
under its current rules. This change conforms that paragraph to the 
corresponding introductory paragraph in Article XII.
    The proposed changes to OCC's By-Laws and Rules are consistent with 
Section 17A of the Act \5\ and the rules and regulations thereunder 
applicable to OCC because they are designed to promote the prompt and 
accurate clearance and settlement of derivative transactions, to foster 
cooperation and coordination with persons engaged in the clearance and 
settlement of such transactions, to remove impediments to and perfect 
the mechanism of a national system for the prompt and accurate

[[Page 73047]]

clearance and settlement of such transactions, and, in general, to 
protect investors and the public interest. The proposed rule change is 
not inconsistent with any other provision of the By-Laws and Rules of 
OCC.
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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

    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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(4) \7\ 
thereunder because it effects a change in an existing service 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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    \6\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \7\ 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

     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-2005-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-OCC-2005-16. 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 inspection 
and copying in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549. 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.optionsclearing.com. 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-2005-16 and should be submitted on 
or before December 29, 2005.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-7065 Filed 12-7-05; 8:45 am]

BILLING CODE 8010-01-P