83 FR 3782 - Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify OCC's Rules Regarding the Exercise Procedures for Certain Options on Futures
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 18 (January 26, 2018)
Federal Register Volume 83, Issue 18 (January 26, 2018)
| Page Range | 3782-3784 | |
| FR Document | 2018-01358 |
[Federal Register Volume 83, Number 18 (Friday, January 26, 2018)] [Notices] [Pages 3782-3784] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-01358] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82543; File No. SR-OCC-2018-003] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify OCC's Rules Regarding the Exercise Procedures for Certain Options on Futures January 19, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on January 11, 2018, 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 by OCC. OCC filed the proposed rule change pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 19b-4(f)(4)(ii) \4\ 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. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ 15 U.S.C. 78s(b)(3)(A). \4\ 17 CFR 240.19b-4(f)(4)(ii). --------------------------------------------------------------------------- I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change This proposed rule change by OCC concerns modifications to OCC's Rules regarding the exercise procedures for certain options on futures in order to conform to changes proposed by Nasdaq Futures, Inc. (``NFX''), a futures market for which OCC clears such contracts. The proposed changes to OCC's Rules can be found in Exhibit 5 to the filing. All terms with initial capitalization that are not otherwise defined herein have the same meaning as set forth in the By-Laws and Rules.\5\ --------------------------------------------------------------------------- \5\ OCC's By-Laws and Rules can be found on OCC's public website: http://optionsclearing.com/about/publications/bylaws.jsp. --------------------------------------------------------------------------- II. Clearing Agency'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. (A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (1) Purpose The purpose of this proposed rule change is to amend OCC's Rules to permit a futures market that lists certain options on futures to instruct OCC to: (1) Eliminate a Clearing Member's ability to provide contrary instructions with respect to such futures options, and (2) permit automatic exercise of futures options that are call options and that settle at exactly the strike price for the option (i.e., an ``at- the-money'' futures option). These amendments to OCC's Rules would accommodate certain corresponding amendments to the rules of NFX, for which OCC clears relevant futures option contracts, and would not apply to any options on security futures to the extent OCC clears such products in the future.\6\ --------------------------------------------------------------------------- \6\ Options on security futures currently do not trade on the exchange for which OCC clears security futures. The proposed rule change would not apply to any securities, but rather futures products (i.e., options on futures that are not security futures) that are subject to the exclusive jurisdiction of the Commodity Futures Trading Commission (``CFTC''). See infra note 16. --------------------------------------------------------------------------- Contrary Instructions NFX has proposed to eliminate the ability of the holders of certain futures options contracts to provide ``contrary instructions'' or ``contrary exercises'' to the futures markets with respect to such contracts.\7\ NFX has advised OCC that the New York Mercantile Exchange, Inc. (``NYMEX'') has already made comparable changes to its rules for certain comparable options traded on NYMEX based on market feedback.\8\ NFX would like to replicate these changes for the comparable options contracts traded on NFX, none of which are options on security futures. --------------------------------------------------------------------------- \7\ See SR-NFX-2017-56, filed December 15, 2017 with the CFTC. \8\ See NYMEX Submission No. 17-272 filed July 21, 2017 with the CFTC. The filing also amended the rules of the Commodity Exchange, Inc. (``COMEX'') to make comparable changes for certain options traded on COMEX. --------------------------------------------------------------------------- A contrary instruction allows an option holder to exercise an ``out-of-the-money'' option to receive the underlying futures contract or to abandon an ``in-the-money'' option. Existing OCC Rule 1305 governs the exercise procedures for American and European-styled options on futures cleared by OCC that settle into the underlying futures contract. Subparagraph (c) of Rule 1305 provides [[Page 3783]] for the automatic exercise of such options that are in-the-money at expiration by ``such threshold amount as [OCC] may from time to time establish with respect to particular classes of options,'' unless the Clearing Member instructs OCC not to exercise such in-the-money options. The provision also incorporates by reference certain operational aspects of the exercise-at-expiration procedures for listed options found in OCC Rule 805. Neither Rule 1305 nor Rule 805 provide a futures market with the ability to limit contrary instructions. Consequently, OCC proposes to add a new paragraph (d) to Rule 1305 that would provide futures markets with this ability in order to accommodate NFX's proposal to prohibit the use of contrary instructions. The proposed ability would not apply, however, to options on security futures cleared by OCC to the extent OCC clears such products in the future. At-the-Money Options Existing Rules 1305 and 805 are silent on what happens to options that expire at-the-money. By specifying what happens to options that expire in-the-money (i.e., automatic exercise), OCC's Rules indicate that options expiring at-the-money would be treated as if they were out-of-the-money and not automatically exercised, and therefore the holders would not automatically buy (or sell) futures contracts or equity securities at the strike price. NFX has proposed to amend its own rules regarding the treatment of certain at-the-money options. In order to accommodate these proposed changes at NFX, OCC proposes to add a new paragraph (e) to Rule 1305, which would permit a futures market to instruct OCC that futures options that are call options and settle at-the-money should be treated as if they settled in-the-money and futures options that are put options and settle at-the-money should be treated as if they settled out-of-the-money. However, the proposed ability would not apply to options on security futures that are cleared by OCC to the extent OCC clears such products in the future. Therefore, in the case of a call option the holder of the option would automatically buy the underlying futures contract at the option strike price, and in the case of a put option the holder would not automatically sell the underlying futures contract at the option strike price. Timing of Implementation OCC proposes that the proposed amendments to Rule 1305 would apply to any futures option for which a futures market has instructed OCC to apply the exercise procedures specified in Rules 1305(d) and/or (e). (2) Statutory Basis Section 17A(b)(3)(F) of the Act,\9\ requires, among other things, that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities and derivatives transactions, to foster cooperation and coordination with persons engaged in clearance and settlement, and, in general, to protect investors and the public interest. OCC believes that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act \10\ and the rules and regulations thereunder, because it would grant the futures markets for which OCC clears futures options contracts the ability to coordinate OCC's exercise procedures with the futures market's treatment of at-the-money options and to prohibit the use of contrary instructions, thereby promoting the prompt and accurate clearance and settlement of securities and derivatives transactions, fostering cooperation and coordination with persons engaged in clearance and settlement, and, in general, protecting investors and the public interest. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78q-1(b)(3)(F). \10\ Id. --------------------------------------------------------------------------- Rule 17Ad-22(e)(21) \11\ requires that a covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to, in part, be efficient and effective in meeting the requirements of its participants and the markets it serves. OCC believes that granting futures markets, like NFX, this flexibility would encourage efficiency and coordination across the market as a whole and reduce potential sources of operational risk for market participants. A lack of conformity in futures option contract terms across different futures markets could reduce efficiency and pose operational risks to market participants and would require them to undertake additional monitoring. OCC therefore believes that the proposed rule change is reasonably designed to comply with the requirements of Rule 17Ad-22(e)(21).\12\ --------------------------------------------------------------------------- \11\ 17 CFR 240.17Ad-22(e)(21). \12\ Id. --------------------------------------------------------------------------- The proposed rule change is not inconsistent with the existing rules of OCC, including any other rules proposed to be amended. (B) Clearing Agency's Statement on Burden on Competition Section 17A(b)(3)(I) of the Act \13\ requires that the rules of a clearing agency not impose any burden on competition not necessary or appropriate in furtherance of the Act. OCC does not believe that the proposed rule change would impact or impose any burden on competition. This proposed rule change would not inhibit access to OCC's services or disadvantage or favor any particular user in relationship to another, and it will be applied uniformly to all Clearing Members. The proposed rule change is intended to accommodate NFX's proposed rule change, which is designed to bring the terms of the futures options contracts listed by NFX into conformity with those listed by other futures markets. Accommodating such a change would help promote a level playing field among market participants trading futures options by ensuring that such contracts could have identical terms. For the foregoing reasons, OCC believes the proposed rule change is in the public interest, would be consistent with the requirements of the Act applicable to clearing agencies, and would not impact or impose a burden on competition. --------------------------------------------------------------------------- \13\ 15 U.S.C. 78q-1(b)(3)(I). --------------------------------------------------------------------------- (C) Clearing Agency's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change 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 Pursuant to Section 19(b)(3)(A) of the Act,\14\ and Rule 19b- 4(f)(4)(ii) thereunder,\15\ the proposed rule change is filed for immediate effectiveness because it effects a change in an existing service of OCC that (i) primarily affects the clearing operations of OCC with respect to products that are not securities, i.e., options on futures that are not security futures,\16\ and (ii) does [[Page 3784]] not significantly affect any securities clearing operations of OCC or any rights or obligations of OCC with respect to securities clearing or persons using such securities clearing services. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78s(b)(3)(A). \15\ 17 CFR 240.19b-4(f)(4)(ii). \16\ Section 3(a)(10) of the Act defines a ``security'' as ``any note, stock, treasury stock, security future, security-based swap, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a `security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker's acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.'' 15 U.S.C. 77b(a)(1). Section 3(a)(55) of the Exchange Act defines ``security future'' as ``a contract of sale for future delivery of a single security or of a narrow-based security index, including any interest therein or based on the value thereof, except an exempted security.'' 15 U.S.C. 78c(a)(55). An option on a futures contract that is not a security future does not meet the definition of ``security'' and therefore is a product that is subject to the exclusive jurisdiction of the CFTC. --------------------------------------------------------------------------- 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.\17\ --------------------------------------------------------------------------- \17\ Notwithstanding its immediate effectiveness, implementation of this rule change will be delayed until this change is deemed certified under CFTC Rule 40.6. --------------------------------------------------------------------------- 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 CommentsUse the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-OCC-2018-003 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All submissions should refer to File Number SR-OCC-2018-003. This file number should be included on the subject line if email 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 website (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 website 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 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of OCC and on OCC's website at https://www.theocc.com/about/publications/bylaws.jsp. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-OCC-2018-003 and should be submitted on or before February 16, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\18\ Eduardo A. Aleman, Assistant Secretary. --------------------------------------------------------------------------- \18\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2018-01358 Filed 1-25-18; 8:45 am] BILLING CODE 8011-01-P
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Fax: 202–395–6974, Email address: SECURITIES AND EXCHANGE summaries, set forth in sections (A), (B),
OIRA_Submission@omb.eop.gov. COMMISSION and (C) below, of the most significant
aspects of these statements.
Brian D. Foster, [Release No. 34–82543; File No. SR–OCC–
Clearance Officer. 2018–003] (A) Clearing Agency’s Statement of the
[FR Doc. 2018–01383 Filed 1–25–18; 8:45 am] Purpose of, and Statutory Basis for, the
Self-Regulatory Organizations; The Proposed Rule Change
BILLING CODE 7905–01–P
Options Clearing Corporation; Notice
of Filing and Immediate Effectiveness (1) Purpose
of Proposed Rule Change To Modify The purpose of this proposed rule
OFFICE OF SCIENCE AND OCC’s Rules Regarding the Exercise change is to amend OCC’s Rules to
TECHNOLOGY POLICY Procedures for Certain Options on permit a futures market that lists certain
Futures options on futures to instruct OCC to:
Performance Review Board
(1) Eliminate a Clearing Member’s
Membership January 19, 2018.
ability to provide contrary instructions
Pursuant to Section 19(b)(1) of the with respect to such futures options,
AGENCY: Office of Science and
Securities Exchange Act of 1934 and (2) permit automatic exercise of
Technology Policy.
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 futures options that are call options and
ACTION: Notice. notice is hereby given that on January that settle at exactly the strike price for
SUMMARY: The Office of Science and 11, 2018, The Options Clearing the option (i.e., an ‘‘at-the-money’’
Technology Policy publishes the names Corporation (‘‘OCC’’) filed with the futures option). These amendments to
of the members selected to serve on its Securities and Exchange Commission
OCC’s Rules would accommodate
SES Performance Review Board (PRB). (‘‘Commission’’) the proposed rule
certain corresponding amendments to
change as described in Items I, II, and
DATES: Membership is applicable on the rules of NFX, for which OCC clears
III below, which Items have been
January 22, 2018. relevant futures option contracts, and
prepared by OCC. OCC filed the
FOR FUTHER INFORMATION CONTACT: Ms. would not apply to any options on
proposed rule change pursuant to
Stacy L. Murphy, Operations Manager, security futures to the extent OCC clears
Section 19(b)(3)(A) 3 of the Act and Rule
Office of Science and Technology such products in the future.6
19b–4(f)(4)(ii) 4 thereunder so that the
Policy, 1650 Pennsylvania Ave. NW, proposal was effective upon filing with Contrary Instructions
Washington, DC 20504. Telephone 202– the Commission. The Commission is NFX has proposed to eliminate the
456–6123. publishing this notice to solicit ability of the holders of certain futures
SUPPLEMENTARY INFORMATION: Section comments on the proposed rule change options contracts to provide ‘‘contrary
4314(c) of Title 5, U.S.C. requires each from interested persons. instructions’’ or ‘‘contrary exercises’’ to
agency to establish, in accordance with I. Clearing Agency’s Statement of the the futures markets with respect to such
regulations prescribed by the Office of Terms of Substance of the Proposed contracts.7 NFX has advised OCC that
Personnel Management, one or more Rule Change the New York Mercantile Exchange, Inc.
PRBs. The purpose of this PRB is to (‘‘NYMEX’’) has already made
review and make recommendations This proposed rule change by OCC
concerns modifications to OCC’s Rules comparable changes to its rules for
concerning proposed performance certain comparable options traded on
appraisals, ratings, bonuses, pay regarding the exercise procedures for
certain options on futures in order to NYMEX based on market feedback.8
adjustments, and other appropriate NFX would like to replicate these
personnel actions for incumbents of the conform to changes proposed by Nasdaq
Futures, Inc. (‘‘NFX’’), a futures market changes for the comparable options
SES positions. The Board shall consist contracts traded on NFX, none of which
of at least three members and more than for which OCC clears such contracts.
The proposed changes to OCC’s Rules are options on security futures.
half of the members shall consist of A contrary instruction allows an
career appointees. The names and titles can be found in Exhibit 5 to the filing.
All terms with initial capitalization that option holder to exercise an ‘‘out-of-the-
of the PRB members are as follows: money’’ option to receive the
Martha M. Gagné, Deputy Associate are not otherwise defined herein have
the same meaning as set forth in the By- underlying futures contract or to
Director, Management and abandon an ‘‘in-the-money’’ option.
Administration, Office of National Drug Laws and Rules.5
Existing OCC Rule 1305 governs the
Council Policy; II. Clearing Agency’s Statement of the exercise procedures for American and
Jon E. Rice, Associate Director, Office Purpose of, and Statutory Basis for, the European-styled options on futures
of Policy, Research, and Budget, Office Proposed Rule Change cleared by OCC that settle into the
of National Drug Council Policy; underlying futures contract.
Barbara A. Menard, Chief, Health, In its filing with the Commission,
OCC included statements concerning Subparagraph (c) of Rule 1305 provides
Education, Veterans and Social
Programs, Office of Management and the purpose of and basis for the
6 Options on security futures currently do not
Budget; proposed rule change and discussed any
trade on the exchange for which OCC clears
Fred L. Ames, Assistant United States comments it received on the proposed security futures. The proposed rule change would
Trade Representative for rule change. The text of these statements not apply to any securities, but rather futures
Administration, United States Trade may be examined at the places specified products (i.e., options on futures that are not
in Item IV below. OCC has prepared security futures) that are subject to the exclusive
Representative.
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jurisdiction of the Commodity Futures Trading
Applicability Date: Membership is 1 15
Commission (‘‘CFTC’’). See infra note 16.
U.S.C. 78s(b)(1).
applicable on the date of this notice. 2 17
7 See SR–NFX–2017–56, filed December 15, 2017
CFR 240.19b–4. with the CFTC.
3 15 U.S.C. 78s(b)(3)(A).
Ted Wackler, 8 See NYMEX Submission No. 17–272 filed July
4 17 CFR 240.19b–4(f)(4)(ii).
Deputy Chief of Staff and Assistant Director. 21, 2017 with the CFTC. The filing also amended
5 OCC’s By-Laws and Rules can be found on the rules of the Commodity Exchange, Inc.
[FR Doc. 2018–01331 Filed 1–25–18; 8:45 am] OCC’s public website: http://optionsclearing.com/ (‘‘COMEX’’) to make comparable changes for certain
BILLING CODE 3270–F8–P about/publications/bylaws.jsp. options traded on COMEX.
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for the automatic exercise of such exercise procedures specified in Rules (B) Clearing Agency’s Statement on
options that are in-the-money at 1305(d) and/or (e). Burden on Competition
expiration by ‘‘such threshold amount Section 17A(b)(3)(I) of the Act 13
as [OCC] may from time to time (2) Statutory Basis
requires that the rules of a clearing
establish with respect to particular Section 17A(b)(3)(F) of the Act,9 agency not impose any burden on
classes of options,’’ unless the Clearing requires, among other things, that the competition not necessary or
Member instructs OCC not to exercise
rules of a clearing agency be designed to appropriate in furtherance of the Act.
such in-the-money options. The
promote the prompt and accurate OCC does not believe that the proposed
provision also incorporates by reference
clearance and settlement of securities rule change would impact or impose
certain operational aspects of the
and derivatives transactions, to foster any burden on competition. This
exercise-at-expiration procedures for
cooperation and coordination with proposed rule change would not inhibit
listed options found in OCC Rule 805.
persons engaged in clearance and access to OCC’s services or disadvantage
Neither Rule 1305 nor Rule 805 provide
settlement, and, in general, to protect or favor any particular user in
a futures market with the ability to limit
investors and the public interest. OCC relationship to another, and it will be
contrary instructions. Consequently,
believes that the proposed rule change applied uniformly to all Clearing
OCC proposes to add a new paragraph
(d) to Rule 1305 that would provide is consistent with Section 17A(b)(3)(F) Members. The proposed rule change is
futures markets with this ability in order of the Act 10 and the rules and intended to accommodate NFX’s
to accommodate NFX’s proposal to proposed rule change, which is
regulations thereunder, because it
prohibit the use of contrary instructions. designed to bring the terms of the
would grant the futures markets for
The proposed ability would not apply, futures options contracts listed by NFX
which OCC clears futures options
however, to options on security futures into conformity with those listed by
contracts the ability to coordinate OCC’s other futures markets. Accommodating
cleared by OCC to the extent OCC clears exercise procedures with the futures
such products in the future. such a change would help promote a
market’s treatment of at-the-money level playing field among market
At-the-Money Options options and to prohibit the use of participants trading futures options by
Existing Rules 1305 and 805 are silent contrary instructions, thereby promoting ensuring that such contracts could have
on what happens to options that expire the prompt and accurate clearance and identical terms. For the foregoing
at-the-money. By specifying what settlement of securities and derivatives reasons, OCC believes the proposed rule
happens to options that expire in-the- transactions, fostering cooperation and change is in the public interest, would
money (i.e., automatic exercise), OCC’s coordination with persons engaged in be consistent with the requirements of
Rules indicate that options expiring at- clearance and settlement, and, in the Act applicable to clearing agencies,
the-money would be treated as if they general, protecting investors and the and would not impact or impose a
were out-of-the-money and not public interest. burden on competition.
automatically exercised, and therefore Rule 17Ad–22(e)(21) 11 requires that a (C) Clearing Agency’s Statement on
the holders would not automatically covered clearing agency establish, Comments on the Proposed Rule
buy (or sell) futures contracts or equity implement, maintain and enforce Change Received From Members,
securities at the strike price. NFX has written policies and procedures Participants or Others
proposed to amend its own rules
reasonably designed to, in part, be Written comments on the proposed
regarding the treatment of certain at-the-
efficient and effective in meeting the rule change were not and are not
money options. In order to
accommodate these proposed changes at requirements of its participants and the intended to be solicited with respect to
NFX, OCC proposes to add a new markets it serves. OCC believes that the proposed rule change and none have
paragraph (e) to Rule 1305, which granting futures markets, like NFX, this been received.
would permit a futures market to flexibility would encourage efficiency
and coordination across the market as a III. Date of Effectiveness of the
instruct OCC that futures options that Proposed Rule Change and Timing for
are call options and settle at-the-money whole and reduce potential sources of
operational risk for market participants. Commission Action
should be treated as if they settled in-
the-money and futures options that are A lack of conformity in futures option Pursuant to Section 19(b)(3)(A) of the
put options and settle at-the-money contract terms across different futures Act,14 and Rule 19b–4(f)(4)(ii)
should be treated as if they settled out- markets could reduce efficiency and thereunder,15 the proposed rule change
of-the-money. However, the proposed pose operational risks to market is filed for immediate effectiveness
ability would not apply to options on participants and would require them to because it effects a change in an existing
security futures that are cleared by OCC undertake additional monitoring. OCC service of OCC that (i) primarily affects
to the extent OCC clears such products therefore believes that the proposed rule the clearing operations of OCC with
in the future. Therefore, in the case of change is reasonably designed to respect to products that are not
a call option the holder of the option comply with the requirements of Rule securities, i.e., options on futures that
would automatically buy the underlying 17Ad–22(e)(21).12 are not security futures,16 and (ii) does
futures contract at the option strike
The proposed rule change is not 13 15 U.S.C. 78q–1(b)(3)(I).
price, and in the case of a put option the
holder would not automatically sell the inconsistent with the existing rules of 14 15 U.S.C. 78s(b)(3)(A).
underlying futures contract at the option OCC, including any other rules 15 17 CFR 240.19b–4(f)(4)(ii).
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16 Section 3(a)(10) of the Act defines a ‘‘security’’
strike price. proposed to be amended.
as ‘‘any note, stock, treasury stock, security future,
security-based swap, bond, debenture, certificate of
Timing of Implementation interest or participation in any profit-sharing
OCC proposes that the proposed 9 15 U.S.C. 78q–1(b)(3)(F). agreement or in any oil, gas, or other mineral
royalty or lease, any collateral-trust certificate,
amendments to Rule 1305 would apply 10 Id.
preorganization certificate or subscription,
to any futures option for which a futures 11 17 CFR 240.17Ad–22(e)(21). transferable share, investment contract, voting-trust
market has instructed OCC to apply the 12 Id. Continued
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not significantly affect any securities only one method. The Commission will ‘‘Exchange’’) filed with the Securities
clearing operations of OCC or any rights post all comments on the Commission’s and Exchange Commission
or obligations of OCC with respect to internet website (http://www.sec.gov/ (‘‘Commission’’) the proposed rule
securities clearing or persons using such rules/sro.shtml). Copies of the change as described in Items I and II
securities clearing services. submission, all subsequent below, which Items have been prepared
At any time within 60 days of the amendments, all written statements by the Exchange. The Commission is
filing of the proposed rule change, the with respect to the proposed rule publishing this notice to solicit
Commission summarily may change that are filed with the comments on the proposed rule change
temporarily suspend such rule change if Commission, and all written from interested persons.
it appears to the Commission that such communications relating to the
action is necessary or appropriate in the I. Self-Regulatory Organization’s
proposed rule change between the
public interest, for the protection of Statement of the Terms of Substance of
Commission and any person, other than
investors, or otherwise in furtherance of the Proposed Rule Change
those that may be withheld from the
the purposes of the Act.17 public in accordance with the The Exchange proposes to amend the
provisions of 5 U.S.C. 552, will be Schedule of Fees to introduce a new
IV. Solicitation of Comments pricing model on MRX that is designed
available for website viewing and
Interested persons are invited to printing in the Commission’s Public to reward members that bring order flow
submit written data, views and Reference Room, 100 F Street NE, to the Exchange and thereby increase
arguments concerning the foregoing, Washington, DC 20549, on official liquidity and trading opportunities for
including whether the proposed rule business days between the hours of all members.
change is consistent with the Act. 10:00 a.m. and 3:00 p.m. Copies of such The text of the proposed rule change
Comments may be submitted by any of filing also will be available for is available on the Exchange’s website at
the following methods: inspection and copying at the principal http://nasdaqmrx.cchwallstreet.com/, at
office of OCC and on OCC’s website at the principal office of the Exchange, and
Electronic Comments
https://www.theocc.com/about/ at the Commission’s Public Reference
• Use the Commission’s internet publications/bylaws.jsp. Room.
comment form (http://www.sec.gov/ All comments received will be posted
rules/sro.shtml); or II. Self-Regulatory Organization’s
without change. Persons submitting Statement of the Purpose of, and
• Send an email to rule-comments@ comments are cautioned that we do not
sec.gov. Please include File Number SR– Statutory Basis for, the Proposed Rule
redact or edit personal identifying Change
OCC–2018–003 on the subject line. information from comment submissions.
Paper Comments You should submit only information In its filing with the Commission, the
that you wish to make available Exchange included statements
• Send paper comments in triplicate concerning the purpose of and basis for
to Secretary, Securities and Exchange publicly.
All submissions should refer to File the proposed rule change and discussed
Commission, 100 F Street NE, any comments it received on the
Number SR–OCC–2018–003 and should
Washington, DC 20549–1090. proposed rule change. The text of these
be submitted on or before February 16,
All submissions should refer to File 2018. statements may be examined at the
Number SR–OCC–2018–003. This file places specified in Item IV below. The
number should be included on the For the Commission, by the Division of Exchange has prepared summaries, set
Trading and Markets, pursuant to delegated
subject line if email is used. To help the forth in sections A, B, and C below, of
authority.18
Commission process and review your the most significant aspects of such
Eduardo A. Aleman,
comments more efficiently, please use statements.
Assistant Secretary.
certificate, certificate of deposit for a security, any [FR Doc. 2018–01358 Filed 1–25–18; 8:45 am] A. Self-Regulatory Organization’s
put, call, straddle, option, or privilege on any BILLING CODE 8011–01–P
Statement of the Purpose of, and
security, certificate of deposit, or group or index of Statutory Basis for, the Proposed Rule
securities (including any interest therein or based Change
on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national SECURITIES AND EXCHANGE 1. Purpose
securities exchange relating to foreign currency, or COMMISSION
in general, any instrument commonly known as a The purpose of the proposed rule
‘security’; or any certificate of interest or [Release No. 34–82537; File No. SR–MRX– change is to amend the Schedule of Fees
participation in, temporary or interim certificate for, 2018–01] to introduce a new pricing model on
receipt for, or warrant or right to subscribe to or MRX that is designed to reward
purchase, any of the foregoing; but shall not include Self-Regulatory Organizations; Nasdaq
currency or any note, draft, bill of exchange, or members that bring order flow to the
MRX, LLC; Notice of Filing and
banker’s acceptance which has a maturity at the Exchange and thereby increase liquidity
Immediate Effectiveness of Proposed
time of issuance of not exceeding nine months, and trading opportunities for all
exclusive of days of grace, or any renewal thereof Rule Change To Amend the Schedule
members. The Exchange believes that
the maturity of which is likewise limited.’’ 15 of Fees To Introduce a New Pricing
U.S.C. 77b(a)(1). Section 3(a)(55) of the Exchange the proposed pricing model will
Model
Act defines ‘‘security future’’ as ‘‘a contract of sale encourage additional order flow to be
for future delivery of a single security or of a January 19, 2018. sent to the Exchange, and contribute to
narrow-based security index, including any interest a more active and quality market in
therein or based on the value thereof, except an
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 MRX-listed options to the benefit of all
daltland on DSKBBV9HB2PROD with NOTICES
exempted security.’’ 15 U.S.C. 78c(a)(55). An option
on a futures contract that is not a security future (‘‘Act’’),1 and Rule 19b–4 thereunder,2 market participants that trade on the
does not meet the definition of ‘‘security’’ and notice is hereby given that on January 4, Exchange.
therefore is a product that is subject to the exclusive
jurisdiction of the CFTC.
2018, Nasdaq MRX, LLC (‘‘MRX’’ or I. Member Volume Program
17 Notwithstanding its immediate effectiveness,
implementation of this rule change will be delayed
18 17 CFR 200.30–3(a)(12). Currently, the Exchange operates
until this change is deemed certified under CFTC 1 15 U.S.C. 78s(b)(1). using a pricing schedule that rewards
Rule 40.6. 2 17 CFR 240.19b–4. members that execute a higher average
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Document Created: 2018-10-26 10:07:30
Document Modified: 2018-10-26 10:07:30
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 83 FR 3782 |
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