Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Order Granted Accelerated Approval of a Proposed Rule Change Relating to Closing Early

[Federal Register Volume 64, Number 232 (Friday, December 3, 1999)]
[Notices]
[Pages 67964-67965]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-31392]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42164; File No. SR-OCC-99-13]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Order Granted Accelerated Approval of a Proposed 
Rule Change Relating to Closing Early

November 19, 1999.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act''), notice is hereby given that on October 27, 1999, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission the proposed rule change as described in Items I, 
II and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(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 would allow OCC the flexibility, with 
notice to its Clearing Members, to set earlier cut-off times in Rule 
801 when OCC's participant exchanges close early.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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. The self-regulatory organization 
has prepared summaries, set forth in sections A, B, and C below, of the 
most significant aspects of such statements.\2\
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    \2\ 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

    The purpose of the proposed rule change is to provide OCC the 
flexibility to deviate, with notice to its Clearing Members, from the 
cut-off times designated in OCC's Rule 801 on those dates when OCC's 
participant exchanges announce an early close. For example, the rule 
change would apply to early market closes scheduled for November 26, 
1999 and December 31, 1999.
    Rule 801 designates specific cut-off times for the exercise of 
options on business days other than the business day preceding the 
expiration date. These times include the time by which exercise notices 
must be submitted and the time when they become irrevocable. In respect 
of most American option contracts, the time for both of these events is 
7:00 p.m.\3\ OCC is unable to commence its processing until after that 
time, as the exercises made during a business day are an integral part 
of OCC's nightly processing. When the exchanges close early, OCC has to 
wait for hours before it can close the window for exercise notices and 
begin nightly processing. Likewise, Clearing Members have to wait for 
critical production reports from OCC. The flexibility to deviate from 
the designated time in Rule 801 when the participant exchanges close 
early would allow OCC to process early and generate critical reports to 
Clearing Members on a more timely basis. Thus, it would provide for a 
more prompt clearance and settlement process and benefit both OCC and 
its Clearing Members.
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    \3\ All times herein are Central time.
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    The ability to process early is even more critical for December 31, 
1999. The participant exchanges have announced an early market close 
for that day. OCC would like to complete its processing that day by 
midnight in an effort to reduce any year 2000 related problems, 
including the potential for any issues caused by third party vendors. 
OCC's nightly processing for December 31, includes both its processing 
for that trading day and its year-end processing. Early processing 
would better ensure that timely reports will be provided to OCC's 
Clearing Members. It would also give OCC more time to address any 
problems that might arise. Thus, for that day, the flexibility to 
change the times under Rule 801 would promote both the prompt and 
accurate clearance and settlement of securities transactions.
    To help achieve the goal of completing processing by midnight on 
December 31, the exchanges have agreed to transmit their matched and 
unmatched trade files to OCC early. However, as previously stated, to 
commence early processing, it is necessary to advance the cut-off time 
for exercises. OCC anticipates providing Clearing Members with the same 
amount of time to transmit post-trading activity and exercise notices 
to OCC as after a regular market close. However, as a result of this 
earlier processing by OCC, Clearing members would receive critical 
production reports earlier, allowing them to complete their own 
internal processing for December 31 on a more timely basis.
    The exchanges have also announced an early market close for 
November 26, 1999, the day after Thanksgiving. On that day, OCC and the 
exchanges would like to process early as a test for the early 
processing scheduled for December 31. The rule change would allow OCC 
the flexibility to conduct this ``test run.''
    The proposed rule change is consistent with Section 17A of the Act, 
because it promotes the prompt and accurate clearance and settlement of 
securities transactions by giving OCC flexibility to begin processing 
early.

B. Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe that the proposed rule change will impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act, in the public interest, and for the protection 
of investors.

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

    OCC requests accelerated effectiveness of this filing pursuant to 
Section 19(b)(2) inasmuch as such treatment is necessary to enable OCC 
to provide adequate notice to its Members of the time changes for the 
November 25, 1999 and December 31, 1999 processing schedules so they 
can notify their customers.

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. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
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

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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, 450 Fifth Street, NW, Washington, DC 20549. Copies 
of such filing will also be available for inspection and copying at the 
principal office of the above-mentioned self-regulatory organization. 
All submissions should refer to the file number in the caption above 
and should be submitted by December 27, 1999.
    It Is Therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-99-13) be, and hereby 
is, approved on an accelerated basis.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.
Jonathan Katz,
Secretary.
[FR Doc. 99-31392 Filed 12-2-99; 8:45 am]
BILLING CODE 8010-01-M