[Federal Register Volume 77, Number 239 (Wednesday, December 12, 2012)]
[Notices]
[Pages 74043-74044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-29930]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68368; File No. SR-ODD-2012-02]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Granting Approval of Accelerated Delivery of Supplement to the
Options Disclosure Document Reflecting Certain Changes to Disclosure
Regarding Adjustments for Cash Dividends and Distributions in Respect
of Options Overlying Less than 100 Shares To Accommodate the Trading of
Mini Options
December 6, 2012.
On October 2, 2012, The Options Clearing Corporation (``OCC'')
submitted to the Securities and Exchange Commission (``Commission''),
pursuant to Rule 9b-1 under the Securities Exchange Act of 1934
(``Act''),\1\ five preliminary copies of a supplement (``November 2012
Supplement'') to amend the options disclosure document (``ODD'') to
reflect certain changes to disclosure regarding adjustments for cash
dividends and distributions in respect of options overlying less than
100 shares to accommodate the trading of mini options.\2\ On November
14, 2012, the OCC submitted to the Commission definitive copies of the
November 2012 Supplement.\3\
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\1\ 17 CFR 240.9b-1.
\2\ See letter from Jean M. Cawley, Senior Vice President,
Deputy General Counsel and Chief Compliance Officer, OCC, to Sharon
Lawson, Senior Special Counsel, Division of Trading and Markets
(``Division''), Commission, dated October 1, 2012.
\3\ See letter from Jean M. Cawley, Senior Vice President,
Deputy General Counsel and Chief Compliance Officer, OCC, to Sharon
Lawson, Senior Special Counsel, Division, Commission, dated November
9, 2012.
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The ODD currently contains general disclosures on the
characteristics and risks of trading standardized options. In September
2012, the Commission approved proposed rule changes that permitted the
International Securities Exchange, LLC and NYSE Arca, Inc. to list and
trade mini options (``Mini Options'') overlying 10 shares of SPDR S&P
500 ETF, Apple Inc., SPDR Gold Trust, Google Inc., and Amazon.com,
Inc.\4\ Subsequently, NASDAQ OMX PHLX LLC filed a proposed rule change
to list and trade these Mini Options.\5\ The current proposed November
2012 Supplement amends the ODD disclosure to accommodate adjustments
for cash dividends and distributions in respect of options overlying
less than 100 shares.\6\ This change will help to ensure that Mini
Options are adjusted when the corresponding standard-sized options are
adjusted. Specifically, the November 2012 Supplement would make clear
that no adjustment will normally be made for any cash dividend or
distribution that amounts to less than $0.125 per underlying share. In
addition, for contracts originally listed with a unit of trading larger
than 100 shares, the November 2012 Supplement will continue to provide
that no adjustment normally would be made for any cash dividend or
distribution that amounts to less than $12.50 per contract. The
proposed supplement is intended to be read in conjunction with the more
general ODD, which discusses the characteristics and risks of options
generally.\7\
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\4\ See Securities Exchange Act Release No. 67948 (September 28,
2012), 77 FR 60735 (October 4, 2012) (SR-NYSEArca-2012-64 and SR-
ISE-2012-58).
\5\ See Securities Exchange Act Release No. 68132 (November 1,
2012), 77 FR 66904 (November 7, 2012) (SR-Phlx-2012-126) (notice of
filing and immediate effectiveness of proposed rule change to list
and trade Mini Options).
\6\ The Commission recently approved a proposed rule change by
the OCC to make similar changes to its By-Laws. See Securities
Exchange Act Release Nos. 67917 (September 24, 2012), 77 FR 59687
(September 28, 2012) (``OCC Notice'') and 68104 (October 25, 2012),
77 FR 65917 (October 31, 2012) (SR-OCC-2012-16). In its filing, the
OCC stated that without the By-Law amendments, some cash dividends
or distributions that would exceed the adjustment threshold in the
case of standard options would not exceed the adjustment threshold
in the case of a Mini Option because the per contract distribution
on the Mini Option would be only \1/10\th of the distribution on the
standard option and the adjustment threshold was stated on a per
contract basis rather than a per share basis. Therefore, the OCC
amended, with Commission approval, the adjustment threshold from
$12.50 per contract to $0.125 per share. In its filing, the OCC also
stated that it did not intend for the rule change to affect options
contracts that were originally listed with units of trading in
excess of 100 shares.
\7\ The Commission notes that the options markets must continue
to ensure that the ODD is in compliance with the requirements of
Rule 9b-1(b)(2)(i) under the Act, 17 CFR 240.9b-1(b)(2)(i),
including when changes regarding Mini Options are made in the
future. Any future changes to the rules of the options markets
concerning Mini Options would need to be submitted to the Commission
under Section 19(b) of the Act. 15 U.S.C. 78s(b).
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Rule 9b-1(b)(2)(i) under the Act \8\ provides that an options
market must file five copies of an amendment or supplement to the ODD
with the Commission at least 30 days prior to the date definitive
copies are furnished to customers, unless the Commission determines
otherwise, having due regard to the adequacy of the information
disclosed and the public interest and protection of investors.\9\ In
addition, five copies of the definitive ODD, as amended or
supplemented,
[[Page 74044]]
must be filed with the Commission not later than the date the amendment
or supplement, or the amended ODD, is furnished to customers. The
Commission has reviewed the proposed November 2012 Supplement, and the
amendments to the ODD contained therein, and finds that, having due
regard to the adequacy of the information disclosed and the public
interest and protection of investors, the supplement may be furnished
to customers as of the date of this order.
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\8\ 17 CFR 240.9b-1(b)(2)(i).
\9\ This provision permits the Commission to shorten or lengthen
the period of time which must elapse before definitive copies may be
furnished to customers.
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It is therefore ordered, pursuant to Rule 9b-1 under the Act,\10\
that definitive copies of the November 2012 Supplement to the ODD (SR-
ODD-2012-02), reflecting changes to disclosure regarding adjustments
for cash dividends and distributions in respect of options overlying
less than 100 shares, may be furnished to customers as of the date of
this order.
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\10\ 17 CFR 240.9b-1.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(39).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29930 Filed 12-11-12; 8:45 am]
BILLING CODE 8011-01-P