

[Federal Register: December 14, 2006 (Volume 71, Number 240)]
[Notices]               
[Page 75287-75289]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14de06-116]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54898; File No. SR-OCC-2006-08]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change To Revise Stock Futures 
Adjustment Methodology

December 8, 2006.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on May 19, 2006, 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. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).

---------------------------------------------------------------------------

[[Page 75288]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    OCC is seeking to amend Article XII (Futures and Futures Options), 
Section 3 (Adjustments to Futures and Futures Options) of OCC's By-Laws 
to conform to the changes sought in proposed rule change SR-OCC-2006-01 
to Article VI (Clearance of Exchange Transactions), Section 11A 
(Adjustments for Stock Option Contracts).\2\
---------------------------------------------------------------------------

    \2\ The Commission published the notice for proposed rule change 
SR-OCC-2006-01 on March 9, 2006. Securities Exchange Act Release No. 
53400 (March 2, 2006), 71 FR 12226.
---------------------------------------------------------------------------

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.\3\
---------------------------------------------------------------------------

    \3\ The Commission has modified the text of the summaries 
prepared by OCC.
---------------------------------------------------------------------------

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

    On January 12, 2006, OCC filed with the Commission proposed rule 
change SR-OCC-2006-01. Pursuant to SR-OCC-2006-01, OCC proposed, among 
other things, to amend its adjustment rules in Article VI, Section 11A 
for stock option contracts with respect to stock dividends, stock 
distributions, and stock splits. Subject to the Commission approving 
proposed rule change SR-OCC-2006-01, OCC is proposing to amend Article 
XII, Section 3 to ensure stock futures contracts can be adjusted in a 
manner consistent with adjustments made to stock option contracts on 
the same underlying security.
    As described in proposed rule change SR-OCC-2006-01, OCC desires to 
change certain of its adjustment rules with respect to stock option 
contracts to eliminate the need to round strike prices and/or units of 
trading in the event of certain stock dividends, stock distributions, 
and stock splits.\4\ The adjustment rules for stock futures as 
currently provided in Article XII, Section 3 parallel the current 
adjustment rules for stock options provided in Article VI, Section 11A. 
This uniformity ensures stock futures contracts can be adjusted in a 
manner consistent with adjustments made to stock option contracts on 
the same underlying security. The changes to Article XII, Section 3 
that are the subject of this proposed rule change are made solely to 
track the changes proposed to be made to Article VI, Section 11A and 
are intended to ensure that adjustments to stock options and to stock 
futures made for stock dividends, stock distributions, and stock splits 
will remain consistent with respect to an underlying security.
---------------------------------------------------------------------------

    \4\ The notice for SR-OCC-2006-01 describes OCC's proposed 
changes to and the rationale for the proposed rule change to its 
adjustment rules for stock options.
---------------------------------------------------------------------------

    As noted above, the central purpose of the rule change proposed in 
SR-OCC-2006-01 is to eliminate inequities which result from certain 
rounding practices currently required by OCC's By-Laws because stock 
option strike prices are quoted in and therefore rounded to the nearest 
one-eighth. Stock futures do not have the same issue because they are 
quoted in decimals. Nevertheless, in order to ensure adjustments for 
stock options and for stock futures remain consistent, OCC proposes to 
revise the adjustment rules with respect to stock futures to match the 
proposed revised adjustment rules with respect to stock options for 
stock dividends, stock distributions, and stock splits.
    OCC will not implement the proposed rule change described herein 
until implementation of SR-OCC-2006-01. In the event any amendments are 
made to SR-OCC-2006-01, OCC would seek approval for conforming parallel 
changes to this proposed rule change.
    OCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ and the rules and 
regulations thereunder applicable to OCC because it is intended solely 
to keep the adjustment rules for stock futures with respect to stock 
dividends, stock distributions, and stock splits consistent with the 
adjustment rules for stock options with respect to stock dividends, 
stock distributions, and stock splits and thus should protect 
investors.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------

(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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (A) by order approve such proposed rule change or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2006-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-OCC-2006-08. 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

[[Page 75289]]

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.theocc.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-2006-08 and should be 
submitted on or before December 29, 2006.
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E6-21276 Filed 12-13-06; 8:45 am]

BILLING CODE 8011-01-P
