Document ID: SEC-2008-0467-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Options Clearing Corporation
Posted Date: 2008-03-26T04:00Z

[Federal Register: March 26, 2008 (Volume 73, Number 59)]
[Notices]               
[Page 16086-16087]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26mr08-134]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57535; File No. SR-OCC-2008-01]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Granting Approval of a Proposed Rule Change Relating to its 
Facilities Management Agreements

March 20, 2008.

I. Introduction

    On January 9, 2008, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change 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 February 19, 2008.\2\ No comment letters 
were received. This

[[Page 16087]]

order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 57304 (February 11, 
2008), 73 FR 9155.
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II. Description

    The purpose of the proposed rule change is to provide an expedited 
process for reviewing a facilities management agreement proposed to be 
entered into by an operationally capable clearing member that desires 
to become a managed clearing member. A managed clearing member is one 
that outsources certain of its obligations as a clearing member to 
another clearing member (``managing clearing member'').
    Currently, Rule 309 prohibits a clearing member that proposes to 
enter into an outsourcing agreement with a managing clearing member 
from implementing the agreement without the prior approval of the 
Membership/Risk Committee (``Committee'').\3\ In 2006 and 2007, the 
Committee reviewed three requests to approve such outsourcing 
arrangements. However, none of the three clearing member's desired time 
frame for implementing its facilities management arrangement coincided 
with a regularly scheduled meeting of the Committee, and each firm was 
required to defer executing its outsourcing plans until after a meeting 
occurred.
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    \3\ Rule 309(f). See also Securities Exchange Act Release No. 
55686 (May 1, 2007), 72 FR 26191 (May 8, 2007) [SR-OCC-2006-21].
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    To provide for a more timely review of certain outsourcing 
agreements, OCC is modifying Rule 309. As amended, Rule 309 will 
provide that a managed clearing member is permitted to request an 
expedited review of its outsourcing agreement, and if OCC consents to 
an expedited review, the Chairman, the Management Vice Chairman, or the 
President will be authorized to determine whether the agreement meets 
applicable requirements and to approve or disapprove the agreement. At 
the next regularly scheduled Committee meeting, the Committee would 
independently review the outsourcing agreement and would determine de 
novo whether to approve or disapprove it. In the event the Committee's 
decision would result in a modification or a reversal of the action 
taken by the Chairman, the Management Vice Chairman, or President, no 
actions previously taken by OCC or the clearing member prior to the 
modification or reversal would be invalidated and no rights of any 
person arising out of such previous actions would be affected. In the 
unlikely event that the Committee disapproved an agreement previously 
approved by OCC, the clearing member would be given a reasonable time 
either to enter into an appropriately revised outsourcing agreement or 
to cease to be a Managed Clearing Member.
    This process is comparable to the process used when clearing 
members request expedited approval to clear a new type or kind of 
transaction.\4\ OCC believes that the proposed expedited review process 
strikes a reasonable balance between meeting the business requirements 
of clearing members and continuing to ensure appropriate review of the 
operational and financial aspects of outsourcing arrangements.
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    \4\ Article V, Section 1, Interpretation & Policy .03e. See also 
Securities Exchange Act Release No. 30169 (January 8, 1992) 57 FR 
1776 [SR-OCC-91-06].
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    The expedited review process is set forth in Interpretation & 
Policy .01 under Rule 309. The existing Interpretation and Policy .01, 
which required managing clearing members as of October 1, 2003, to meet 
revised capital requirements by October 1, 2004, is no longer 
applicable and is therefore being deleted. In addition, a technical 
change is being made to paragraph (f) of Rule 309 so that the language 
more closely parallels the language used in a cross-referenced By-law 
provision.

III. Discussion

    Section 17A(b)(3)(F) of the Act requires, among other things, that 
the rules of a clearing agency be designed to assure the safeguarding 
of securities and funds which are in its custody or control or for 
which it is responsible.\5\ The Commission finds the proposed rule 
change to be consistent with this requirement because the actions of 
senior management to approve an outsourcing agreement prior to a 
scheduled Committee meeting are subject to the Committee's subsequent 
review and approval.
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    \5\ 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.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2008-01) be and hereby 
is approved.\6\
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    \6\ 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).

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-6128 Filed 3-25-08; 8:45 am]

BILLING CODE 8011-01-P