[Federal Register Volume 75, Number 157 (Monday, August 16, 2010)]
[Notices]
[Pages 50030-50032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-20181]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62685; File No. SR-OCC-2010-12]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify the Definition of Government Securities To Exclude Separate
Trading of Registered Interest and Principal Securities on Treasury
Inflation Protected Securities, Commonly Known as TIP-STRIPS
August 10, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on July 29, 2010, The Options
Clearing Corporation (``OCC'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change described in Items
I and II below, which items have been prepared primarily by OCC. OCC
filed the proposal pursuant to Section 19(b)(3)(A)(i) of the Act \2\
and Rule 19b-4(f)(1) \3\ 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 parties.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78s(b)(3)(A)(i).
\3\ 17 CFR 240.19b-4(f)(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 will modify the definition of ``Government
securities'' found in Article I, Section 1 of OCC's By-Laws to exclude
Separate Trading of Registered Interest and Principal Securities
(``STRIPS'') on Treasury Inflation Protected Securities (``TIPS''),
commonly known as TIP-STRIPS.
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.\4\
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\4\ The Commission has modified the text of the summaries
prepared by OCC.
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[[Page 50031]]
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this rule change is to modify the definition of
``Government securities'' found in Article I, Section 1 of OCC's By-
Laws to exclude Separate Trading of Registered Interest and Principal
Securities (``STRIPS'') on Treasury Inflation Protected Securities
(``TIPS''), commonly known as TIP-STRIPS. The reason for the proposed
exclusion is the absence of a liquid secondary market for TIP-STRIPS.
U.S. and Canadian Government securities are acceptable forms of
collateral for margin and clearing fund purposes. OCC defines
Government securities to be securities issued or guaranteed by the
United States or Canadian Government or any other government acceptable
to OCC. U.S. Government securities include bills, bonds, notes, TIPS,
and STRIPS. The U.S. Government does not issue STRIPS, but it does
guarantee their principal payments making them eligible as Government
securities for purposes of OCC's By-Laws and Rules. The U.S. Government
also does not issue TIP-STRIPS. Nonetheless, TIP-STRIPS fall within
OCC's definition of Government securities as their principal is
guaranteed by the U.S. Government.
TIP-STRIPS were first issued in the late 1990's by an investment
bank to meet the needs of certain clients. The securities are
registered in the Federal Reserve Bank's book entry system. The
securities have a de minimis circulation, and there currently is no
active secondary market for them resulting in a lack of price
transparency and liquidity and no reliable means by which to determine
their value. OCC's ability to liquidate this form of collateral in the
event of a clearing member default could be severely compromised as a
result of these factors. Accordingly, OCC has concluded TIP-STRIPS
should be excluded from the definition of Government securities. OCC is
unaware of any instance in which a clearing member has pledged TIP-
STRIPS to meet its margin or clearing fund obligation. Therefore, OCC
believes excluding TIP-STRIPS from the definition of Government
securities enhances the protection of OCC, clearing members, and the
investing public without imposing a burden on clearing members
depositing Government securities to meet their margin and clearing fund
obligations.
2. Statutory Basis
OCC believes that the proposed rule change is consistent with
Section 17A of the Act,\5\ as amended, because it assures the
safeguarding of securities and funds which are in OCC's custody and
control and provides for the protection of investors and the public
interest. The proposed change meets these objectives by making a
security with de minimis circulation, liquidity, and price transparency
ineligible for deposit as a form of collateral. As OCC has not
identified an instance in which a clearing member has deposited such
security as collateral, the proposed change does not burden clearing
members or adversely affect their ability to meet their obligations to
OCC. The proposed rule change is not inconsistent with the existing
rules of OCC, including any other rules proposed to be amended.
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\5\ 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 will have any
impact or 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 relating to the proposed rule change were not and
are not intended to be solicited or received. OCC will notify the
Commission of any written comments received by OCC.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change has become effective upon filing
pursuant to Section 19(b)(3)(A)(i) of the Act \6\ and Rule 19b-4(f)(1)
\7\ thereunder because the proposed rule change constitutes a stated
policy, practice, or interpretation with respect to the meaning,
administration, or enforcement of an existing rule. 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.
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\6\ 15 U.S.C. 78s(b)(3)(A)(i).
\7\ 17 CFR 240.19b-4(f)(1).
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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 [email protected]. Please include
File Number SR-OCC-2010-12 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-2010-12. 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 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
a.m. and 3 p.m. Copies of such filings also will be available for
inspection and copying at the principal office of OCC and on OCC's Web
site at http://www.optionsclearing.com/components/docs/legal/rules_and_bylaws/sr_occ_10_12.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-2010-12
and should be submitted on or before September 7, 2010.
[[Page 50032]]
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20181 Filed 8-13-10; 8:45 am]
BILLING CODE 8010-01-P