Document ID: SEC-2007-0148-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Options Clearing Corp.
Posted Date: 2007-02-01T05:00Z

[Federal Register: February 1, 2007 (Volume 72, Number 21)]
[Notices]               
[Page 4763-4764]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01fe07-106]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55152; File No. SR-OCC-2006-17]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Granting Approval of a Proposed Rule Change Relating to the 
Definition of Fund Share and Options on Commodity Pool ETFs

January 23, 2007.

I. Introduction

    On September 21, 2006, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') 
proposed rule change SR-OCC-2006-17 pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal 
was published in the Federal Register on November 28, 2006.\2\ No 
comment letters were received. For the reasons discussed below, the 
Commission is granting approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 54784, (November 20, 
2006), 71 FR 68871.
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II. Description

    The rule change permits OCC to issue, clear, and settle options on 
equity interests issued by exchange-traded funds (``ETFs'') that trade 
directly or indirectly in commodity futures products and are therefore 
subject to regulation by the Commodity Futures Trading Commission 
(``CFTC'') as commodity pools. The American Stock Exchange recently 
filed a proposed rule change to list and trade options on (1) interests 
( ``Interests'') issued by the DB Commodity Index Tracking Fund (``DBC 
Fund''), whose value is intended to track the performance of the 
``Deutsche Bank Liquid Commodity Indextm--Excess Return'' 
and (2) units issued by the United States Oil Fund, L.P. (``Oil 
Fund''), whose value is intended to track the spot price of West Texas 
Intermediate light, sweet crude oil delivered to Cushing, Oklahoma, 
less Oil Fund expenses.\3\
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    \3\ File No. SR-AMEX-2006-110. See Securities Exchange Act 
Release Nos. 54450 (September 14, 2006) 71 FR 55230 (September 21, 
2006) [File No. SR-AMEX-2006-44] and 53582 (March 31, 2006) 71 FR 
17510 (April 6, 2006) [File No. SR-AMEX-2005-127] for more detailed 
descriptions of the DBC Fund and of the Oil Fund.
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    The interests and the units are freely transferable and may be 
bought and sold like any other ETF interest or other exchange-listed 
security. In addition to options on the Interests and the Units, there 
may be other similar options on ETFs regulated by the CFTC as commodity 
pools that OCC may be asked to issue, clear, and settle in the future.
    The definition of ``fund share'' in Article I of OCC's By-Laws is 
currently limited to shares in entities ``holding portfolios or baskets 
of securities.'' However, the Oil Fund invests directly in commodity 
futures contracts. Additionally, although as a technical matter the DBC 
Fund invests exclusively in securities, entities such as the DBC Fund 
that invest in the securities issued by a commodity pool are themselves 
deemed to be commodity pools because they represent an indirect 
investment in commodity futures contracts. OCC is therefore amending 
the definition of ``fund share'' in Article I of its By-Laws to 
specifically refer to interests in an entity that is a commodity pool. 
The definition is revised to make it clear that it includes feeder 
funds.
    The proposed rule change will not be implemented until definitive 
copies of an appropriate supplement to the options disclosure document, 
Characteristics and Risks of Standardized Options, are available for 
distribution.

III. Discussion

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of a clearing agency be designed to promote the prompt and 
accurate clearance and settlement of securities

[[Page 4764]]

transactions.\4\ The purpose of the proposed rule change is to amend 
OCC's By-Laws so that OCC may clear and settle options on equity 
interests issued by ETFs that trade directly or indirectly in commodity 
futures products. Accordingly, the proposed rule change should promote 
the prompt and accurate clearance and settlement of securities 
transactions.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act and the rules and regulations 
thereunder.\5\
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    \5\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2006-17) be and hereby 
is approved.

    For the Commission by the Division of Market Regulation, 
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. E7-1588 Filed 1-31-07; 8:45 am]

BILLING CODE 8011-01-P