Skip to Content


Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of a Proposed Rule Change Relating to Dating Assignments

Document Details

Information about this document as published in the Federal Register.

Document Statistics
Document page views are updated periodically throughout the day and are cumulative counts for this document including its time on Public Inspection. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day.
Published Document

This document has been published in the Federal Register. Use the PDF linked in the document sidebar for the official electronic format.

Start Preamble October 28, 2002.

I. Introduction

On July 3, 2002, The Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change File No. SR-OCC-2002-15 pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)[1] . Notice of the proposal was published in the Federal Register on August 23, 2002.[2] No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change.

II. Description

This rule change modifies OCC Rule 803 to provide that assignments will be dated and effective on the same date that the related exercise notice is accepted by OCC. Rule 803(b) currently provides that assignments are dated and effective as of the business day following the exercise date. This reflects the mechanics of OCC's processing. OCC assigns exercises on an overnight basis, but assigned clearing members do not receive notice of assignment until the morning of the day after exercise. OCC's practice has been to date assignments as of the day the assigned clearing members receive the notice of assignment. However, the “trade” resulting from the exercise is treated as having occurred on the exercise date not the assignment date. Thus, settlement takes place on the third business day following the exercise date.[3]

This has the potential to cause confusion for call writers. OCC has learned that some, if not all, clearing Start Printed Page 67229members use the same assignment date as OCC. As a result, when a holder exercises a call on the day before an ex-dividend date in order to capture the dividend, the writer who is assigned the exercise may see an assignment date the same as the ex-dividend date. The writer's broker may then have to explain that the writer is required to give up the dividend to the exercising holder because the exercise occurred before the ex-dividend date even though the assignment did not. While the language of this filing reflects OCC's current business of clearing and settling exchange traded options, the filing and the change to OCC's by-laws and rules extend to assignments from national securities exchanges, national securities associations, futures merchants, security futures markets, and international markets for which OCC clears and settles transactions.[4] Dating assignments on the same date as the related exercise will lessen the potential for this kind of confusion.

Other nonsubstantive changes are made to Rule 803 for the purposes of updating obsolete language. In addition, a conforming change is made to Rule 402, which pertains to supplemental reports of matched trades.

OCC believes that the proposed rule change is consistent with Section 17A of the Act because it eliminates a potential source for investor confusion.

III. Discussion

Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions.[5] OCC's current procedure for dating assignments is a potential source of confusion. By changing OCC's assignment dating procedure to provide that assignments will be dated and effective on the same date that the related exercise notice is accepted by OCC, the proposed rule change should eliminate the potential for confusion and therefore is consistent with OCC's section 17A obligation to promote the prompt and accurate clearance and settlement of securities transactions.

IV. Conclusion

On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and in particular with the requirements of section 17A(b)(3)(F) of the Act and the rules and regulations thereunder applicable.

It is therefore ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (File No. SR-OCC-2002-15) be, and hereby is, approved.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[6]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


2.  Securities Exchange Act Release No. 46377 (August 19, 2002), 67 FR 54689.

Back to Citation

3.  OCC Rule 902.

Back to Citation

4.  OCC Rules 912 and 913(e).

Back to Citation

5.  15 U.S.C. 78q-1(b)(3)(F).

Back to Citation

[FR Doc. 02-27916 Filed 11-1-02; 8:45 am]