
[Federal Register: July 31, 2009 (Volume 74, Number 146)]
[Notices]               
[Page 38252-38253]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31jy09-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60386; File No. SR-OCC-2009-13]

 
Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Clearance and Settlement of Treasury Futures Contracts

July 24, 2009.

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 1, 2009, 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 primarily by OCC. OCC filed 
the proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the 
Act \2\ and Rule 19b-4(f)(4) thereunder \3\ 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b-4(f)(4).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will establish parameters for OCC to clear 
and settle futures contracts based on U.S. Treasury Notes and Bonds 
(``Treasury Futures'').

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 such statements.

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

    The purpose of this proposed rule change is to establish new 
provisions to OCC's rules in order for OCC to provide clearance and 
settlement services for Treasury Futures transactions that are proposed 
to be traded by ELX Futures LP. (``ELX''), an electronic futures market 
that was designated as a contract market by the Commodity Futures 
Trading Commission (``CFTC'') on May 22, 2009.\4\ Under the terms of 
its clearing agreement with ELX dated December 5, 2008,\5\ OCC will 
operate as the exclusive provider of clearance and settlement services 
through physical delivery for Treasury Futures and other futures, 
futures options, or commodity options that may be traded on ELX. As 
such, ELX will send OCC matched trade data so that OCC can margin the 
contracts and inform ELX members their payment and securities delivery 
obligations.
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    \4\ Commodity Futures Trading Commission Release No. 5662-09 
(May 28, 2009).
    \5\ The clearing agreement is attached as Exhibit 5A to OCC's 
rule filing with the Commission. OCC states that the clearing 
agreement is generally similar to corresponding agreements between 
OCC and other futures exchanges.
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1. Delivery of Underlying Treasury Securities
    As detailed in proposed modifications to Chapter 13 of its Rules, 
OCC clearing members may satisfy their delivery obligations with 
respect to Treasury Futures by delivering different treasury securities 
provided the securities meet certain specifications. Since there is not 
an established delivery date to deliver the underlying treasury 
securities, OCC proposes to permit a seller of Treasury Futures to 
elect to deliver on any business day during the delivery month, which, 
in the case of certain Treasury Futures, includes up to the third 
business day of the following month.
    Delivery of the treasury securities underlying Treasury Futures 
will be effected directly between OCC clearing members rather than 
through the facilities of OCC. The delivery process will occur over a 
period of three business days and will be initiated by the submission 
of a delivery intent by the clearing member holding a short position in 
the Treasury Futures. After a delivery intent is submitted to OCC, OCC 
will assign the delivery intent to an open long position in Treasury 
Futures beginning with long positions with the oldest trading date. On 
the second business day of the delivery process, the delivering 
clearing members will be

[[Page 38253]]

required to submit invoices identifying the specific treasury 
securities to be delivered and the amounts the receiving clearing 
members must pay in settlement of the actual deliveries. On the second 
business day following the submission of a delivery intent, the 
treasury securities will be delivered and payment will be made through 
the correspondent banks of the delivering and receiving clearing 
members.
2. Settlement Failure
    OCC is also proposing to add rules to Chapter 13 to address the 
direct settlement between clearing members for the delivery of the 
underlying treasury securities upon maturity of the Treasury Futures 
and to address failure to complete settlement. Specifically, in the 
event that either the delivering clearing member or the receiving 
clearing member with respect to a physically-settled futures contract 
believes that a failure to settle has occurred without proper cause, 
such clearing member will need to notify OCC of such failure by a set 
cut-off time. Then, OCC will determine whether delivery has in fact 
failed and if necessary determine the damages.
    OCC's transactional guarantee will be limited to paying reasonable 
damages as determined by OCC in accordance with Rule 1308B. Rule 1308B 
provides that in the event of such a failure OCC will make payment to 
the non-defaulting clearing member in an amount equal to the damages 
incurred by the non-defaulting clearing member from such failure as 
determined by OCC. Such damages would be charged by OCC to the 
defaulting clearing member. OCC is proposing to add provisions to its 
By-laws addressing inabilities to deliver underlying treasury 
securities similar to the provisions of Articles XIII of the By-Laws 
addressing the inability to delivery treasury securities upon the 
exercise of options on treasury securities.
    OCC states that the proposed changes to OCC's By-Laws and Rules are 
consistent with the purposes and requirements of Section 17A of the Act 
\6\ because the changes are designed to permit OCC to perform clearing 
services for products that are subject to the jurisdiction of the CFTC 
without adversely affecting OCC's obligations with respect to the 
prompt and accurate clearance and settlement of securities transactions 
or the protection of investors and the public interest. The changes 
accomplish this purpose by applying substantially the same rules and 
procedures to transactions in Treasury Futures as OCC applies to 
transactions in security futures and securities options. The proposed 
rule change is not inconsistent with any rules of OCC including any 
rules proposed to be amended.
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    \6\ 15 U.S.C. 78q-1.
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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

    OCC has not solicited or received written comments relating to the 
proposed rule change. OCC will notify the Commission of any written 
comments it receives.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(4) \8\ thereunder 
because it effects a change in an existing service of a registered 
clearing agency that does not adversely affect the safeguarding of 
securities and funds in the custody or control of the clearing agency 
or for which it is responsible and does not significantly affect the 
respective rights or obligations of the clearing agency or persons 
using the service. At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate 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.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(4).
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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 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 No. SR-OCC-2009-13 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-OCC-2009-13. 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 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 Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at OCC's principal office and on OCC's Web site 
at http://www.theocc.com/publications/rules/proposed_changes/
proposed_changes.jspU. 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 No. SR-
OCC-2009-01 and should be submitted on or before August 21, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-18279 Filed 7-30-09; 8:45 am]

BILLING CODE 8010-01-P
