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Notice

Self-Regulatory Organizations; OneChicago, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating To Block Trade and EFP Transaction Reporting Procedures

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Start Preamble August 1, 2007.

Pursuant to section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”) [1] and Rule 19b-7 thereunder,[2] notice is hereby given that on July 20, 2007, OneChicago, LLC (“OneChicago” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change described in Items I, II and III below, which Items have been substantially prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. The Exchange has also filed the proposed rule change with the Commodity Futures Trading Commission (“CFTC”), together with a written certification under Section 5c(c) of the Commodity Exchange Act (“CEA”),[3] on July 19, 2007.

I. Self-Regulatory Organization's Description of the Proposed Rule Change

OneChicago is proposing to amend its policies and procedures relating to the reporting of block trades and Exchange of Futures for Physical (“EFP”) transactions. The text of the proposed rule change is available on OneChicago's Web site (http://onechicago.com), at OneChicago's principal office, and at the Commission's Public Reference Room.

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

The Exchange has prepared statements concerning the purpose of, and basis for, the proposed rule change, burdens on competition, and comments received from its members, participants, and others. The text of these statements may be examined at the places specified in Item IV below. The Exchange 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, Proposed Rule Change

1. Purpose

OneChicago proposes to amend its Block Trade Reporting Procedures (“Block Reporting Procedures”) and its EFP Transactions: Guidelines and Reporting Procedures (“EFP Reporting Procedures”) to permit reporting of block trades and EFP transactions through the OneChicago Block & EFP Trading System (“OneChicago BETS”). In addition, OneChicago proposes to make conforming changes to OneChicago Policies: Block Trades, Pre-Execution Discussions and Cross Trades (“Block Trade Policy”).

OneChicago BETS permits authorized traders to trade and report block trades, as well as match and report EFP transactions electronically.[4] The proposed rule change would add language to the Block Reporting Procedures that would permit those Start Printed Page 44604authorized to report block trades to do so through OneChicago BETS, telephonically as permitted by the Exchange, or in a form and method approved by OneChicago. In addition, the proposed rule change would amend the provision of the Block Reporting Procedures that requires the selling firm to call the OneChicago Operations Management (“OOM”) Help Desk for block trades reported telephonically by allowing the counterparty to agree to a different reporting arrangement. A similar change to the Block Reporting Procedures is proposed for the reporting of blocks that are spreads or combinations. The proposed rule change would also amend the footnote to the Block Reporting Procedures to delete “500,” currently the stated minimum contract size, and add a cross-reference to the minimum contract size specified in the Block Trade Policy. Under the proposed rule change, the total quantity of the legs of a spread or combination must continue to meet the minimum contract size requirement as stated in the Block Trade Policy.

The amendments to the EFP Reporting Procedures would add language to make it clear that entering into an EFP via OneChicago BETS would fulfill the requirement to complete an EFP Transaction Report in a form and manner approved by the Exchange. Under the proposed rule change, if a transaction is matched by OneChicago BETS, then the party that traded against the resting bid or offer (the “Aggressor”) would be obligated to enter the base price into OneChicago BETS from which a futures price would be generated by adding the matched differential.[5] If the transaction is an EFP that is only reported on OneChicago BETS (i.e., a Bi-lateral transaction), then either party to the transaction may enter the information into OneChicago BETS, and the counter-party trader must confirm the transaction on OneChicago BETS.

The proposed rule change would also eliminate the requirement in the EFP Reporting Procedures that the parties to the transaction exchange their respective Trade Reporter IDs and agree upon a unique trade ID to be used when recording the terms of their trade. Since the Exchange has the Trade Reporter IDs and provides a unique trade ID for each trade, it is no longer necessary to have the Trade Reporters exchange and create such IDs. Conforming language was also added to clarify that the OOM Help Desk will only compare the details on trades that are not reported through OneChicago BETS.

Conforming changes are also proposed for the Block Trade Policy. Thus, under the proposal, the buyer of a block trade could agree that the seller is not obligated to report a block trade; language requiring the OOM Help Desk to provide a trade identification and requiring traders to provide the OOM Help Desk trade identification when reporting a block trade would be deleted; and new language would be added to make clear that OOM Help Desk would only report block trades reported to them telephonically to the OneChicago trade engine.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act,[6] in general and section 6(b)(5) of the Act,[7] in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The proposed rule change would permit electronic reporting of block trades and EFP transactions, which would promote just and equitable principles of trade and protect investors and the public interest by providing more efficient reporting of block trades and EFPs and by providing a strong audit trail.

B. Self-Regulatory Organization's Statement on Burden on Competition

OneChicago does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

No written comments were solicited or received with respect to the proposed rule change.

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

Pursuant to section 19(b)(7)(B) of the Act,[8] the proposed rule change became effective on July 20, 2007. Within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be re-filed in accordance with the provisions of section 19(b)(1) of the Act.[9]

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

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-OC-2007-03. 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 Commissions 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 the principal office of the Exchange. 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-OC-2007-03 and should be submitted on or before August 29, 2007.

Start Signature
Start Printed Page 44605

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

Florence E. Harmon.

Deputy Secretary.

End Signature End Preamble

Footnotes

4.  OneChicago BETS also permits electronic trading and reporting of Block Roll trades, a block trade where a trader enters into a calendar spread.

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5.  EFPs on BETS are quoted in spreads. The futures price is calculated by adding the quoted spread to the base price negotiated by the parties.

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[FR Doc. E7-15384 Filed 8-7-07; 8:45 am]

BILLING CODE 8010-01-P