
[Federal Register Volume 77, Number 250 (Monday, December 31, 2012)]
[Notices]
[Pages 77157-77158]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31258]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68531; File No. SR-OCC-2012-26]


 Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Interpretative Guidance Relating to the Adjustment of Stock 
Options and Single Stock Futures for Cash Dividends and Distributions 
on Underlying Securities

December 21, 2012.
    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 December 19, 2012, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') the rule 
change described in Items I, II and III below, which items have been 
prepared primarily by OCC. OCC filed the proposal pursuant to Section 
19(b)(3)(A)(i) of the Act,\3\ and Rule 19b-4(f)(1) \4\ thereunder so 
that the proposal was effective upon filing with the Commission. The 
Commission is publishing this Notice to solicit comments on the rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(i).
    \4\ 17 CFR 240.19b-4(f)(1).
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I. Self-Regulatory Organization's Statement of Terms of Substance of 
the Proposed Rule Change

    OCC is amending interpretative guidance relating to the adjustment 
of stock options and single stock futures for cash dividends and 
distributions on underlying securities.

II. Self-Regulatory Organization's Statement of 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 rule change and discussed 
any comments it received on the 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.\5\
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    \5\ The Commission has modified the text of the summaries 
prepared by OCC.
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A. Self-Regulatory Organization's Statement of Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Background
    In 2008,\6\ OCC adopted interpretative guidance (``Interpretative 
Guidance'') developed by the OCC's Securities Committee regarding the 
administration and application of an adjustment method for cash 
dividends and distributions (``Adjustment Methodology'').\7\ The 
purpose of this rule change is to add certain clarifications to the 
Interpretative Guidance regarding how OCC applies the Adjustment 
Methodology and to incorporate the contents of OCC Information Memos 
31714 and 31806, which OCC recently published and posted on its public 
Web site.\8\
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    \6\ Release No. 34-58059 (June 30, 2008), 73 FR 39367 (July 9, 
2008).
    \7\ The Adjustment Methodology was approved by the Commission in 
Release No. 34-55258 (February 8, 2007), 72 FR 7701 (February 16, 
2007). It was further amended by SR-OCC-2008-16 and approved by the 
Commission in Release No. 34-58586 (September 18, 2008), 73 FR 55582 
(September 25, 2008). The Interpretative Guidance was amended to 
reflect amendments to the Adjustment Methodology by SR-OCC-2009-01 
(Release No. 34-59442 (February 24, 2009), 74 FR 9654 (March 5, 
2009)).
    \8\ www.theocc.com.
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2. Amendment to Interpretative Guidance
    In addition to several technical revisions to the Interpretative 
Guidance, OCC is making two clarifications. First,

[[Page 77158]]

OCC is amending the Interpretative Guidance in response to requests for 
clarification from clearing members and market participants regarding 
whether a company's acceleration of its regular dividend would cause 
such dividend to be deemed ``non-ordinary'' and occasion an adjustment 
to the overlying option or security future. These questions have been 
prompted by the prospect of tax increases in the new year that have 
caused some issuers of underlying equity securities to accelerate the 
payment of regularly scheduled dividends into the current year. 
Pursuant to the exercise of its discretionary authority under Article 
VI, Sections 11 and 11A of OCC's By-Laws, OCC's Securities Committee 
has determined that cash dividends or distributions that are paid 
pursuant to a company's regular dividend payment program but that are 
subject to accelerated payment shall be deemed ``ordinary'' dividends. 
Under Article VI, Section 11A(c)(ii) of OCC's By-Laws, ordinary 
dividends generally do not occasion adjustment. Therefore, OCC is 
amending the Interpretative Guidance to incorporate a reference to the 
previously announced determination of the Securities Committee that 
such accelerated dividends are generally considered to be ``ordinary'' 
and do not occasion an adjustment.
    Second, OCC is amending the Interpretative Guidance in response to 
requests for clarification from clearing members and market 
participants regarding the application of the $.125 per share 
adjustment threshold to capital gains and other distributions made by 
exchange-traded funds (``Fund Share Distributions''). These 
distributions, when considered individually, may be less than $.125 per 
share but greater than $.125 per share when considered in aggregate. 
Pursuant to Article VI, Sections 11 and 11A of the OCC By-Laws, OCC's 
Securities Committee has determined that the $.125 per share adjustment 
threshold will generally be applied to the aggregate of capital gains 
and other non-ordinary Fund Share Distributions that have the same ex-
date. OCC is amending the Interpretative Guidance to incorporate a 
reference to these previously announced determinations that such non-
ordinary distributions are aggregated for purposes of determining 
whether the $.125 per share adjustment threshold is met. 
Notwithstanding this Interpretive Guidance, all adjustment decisions 
are made on a case-by-case basis and are within the sole discretion of 
OCC's Securities Committee.
    OCC believes the rule change is consistent with Section 17A of the 
Act because it fosters cooperation and coordination among persons 
engaged in the clearance and settlement of securities transactions and 
contributes to the protection of investors \9\ by providing market 
participants with interpretative guidance on the application of the 
Adjustment Methodology. The rule change is not inconsistent with the 
existing rules of OCC, including any other rules proposed to be 
amended.
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    \9\ 15 U.S.C. 78s(b)(3)(F).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe the 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 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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) \10\ of the Act and Rule 19b-4(f)(1) \11\ thereunder 
because it establishes or changes a due, fee, or other charge 
applicable only to a member. At any time within 60 days of the filing 
of the 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.\12\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(1).
    \12\ 15 U.S.C. 78s(b)(3)(C).
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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 email to rule-comments@sec.gov. Please include 
File No. SR-OCC-2012-26 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-OCC-2012-26. 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 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 Web site 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 
Web site at http://www.theocc.com/components/docs/legal/rules_and_bylaws/sr_occ_12_26.pdf.
    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-2012-26 
and should be submitted on or before January 22, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-31258 Filed 12-28-12; 8:45 am]
BILLING CODE 8011-01-P


