Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of a Proposed Rule Change Relating to Flexibly Structured Cross-Rate Foreign Currency Options

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-34360; International Series Release No. 683; File No.

SR-OCC-94-07]

Self-Regulatory Organizations; The Options Clearing Corporation;

Notice of Filing of a Proposed Rule Change Relating to Flexibly

Structured Cross-Rate Foreign Currency Options

July 13, 1994.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''),\1\ notice is hereby given that on June 6, 1994, The Options

Clearing Corporation (``OCC'') filed with the Securities and Exchange

Commission (``Commission'') the proposed rule change as described in

Items I, II, and III below, which Items have been prepared primarily by

OCC. The Commission is publishing this notice to solicit comments on

the proposed rule change from interested persons.

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\1\15 U.S.C. 78s (1988).

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I. Self-Regulatory Organization's Statement of the Terms of Substance

of the Proposed Rule Change

The purpose of the proposed rule change is to enable OCC to issue,

clear, and settle new flexibly structured cross-rate foreign currency

option contracts.

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. 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.

A. Self-Regulatory Organization's Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule Change

The purpose of this filing is to enable OCC to issue, clear, and

settle new flexibly structured cross-rate foreign currency option

contracts proposed for trading by the Philadelphia Stock Exchange

(``PHLX'').\2\ In OCC's original cross-rate foreign currency options

filing, OCC sought and obtained approval to issue, clear, and settle

the following cross-rate option contracts: (1) options on German

Deutsche marks with exercise prices in Japanese yen (``DM/JY''

options); (2) options on British pounds with exercise prices in

Japanese yen (``BP/JY options''); and (3) options on British pounds

with exercise prices in German Deutsche marks (``BP/DM options'').\3\

In that filing, OCC advised the Commission that it anticipated clearing

additional cross-rate option contracts in the future, including cross-

rate option contracts involving different combinations of currencies.

OCC stated that it would submit a rule filing with the Commission

before issuing any new cross-rate option products.

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\2\For a description of the PHLX proposed rule change, refer to

Securities Exchange Act Release No. 34308 (July 5, 1994), 59 FR

35551, [File No. SR-PHLX-94-18] (notice of filing of proposed rule

change).

\3\Securities Exchange Act Release No. 29920 (November 7, 1991),

56 FR 58105 [File No. SR-OCC-91-04] (order approving proposed rule

change establishing cross-rate foreign currency options).

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OCC was recently advised by the PHLX that it is proposing to trade

new flexibly structured cross-rate options through the PHLX's

customized option facility. Under the PHLX proposal, options may be

traded on any combination of currencies underlying existing foreign

currency option contracts.\4\ For example, options on British pounds

with exercise prices in French francs (``BP/FF options'') may be

traded.

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\4\The following currencies underlie existing foreign currency

options contracts: (1) Australian dollars (``AUD''), (2) British

pounds (``BP''), (3) Canadian dollars (``CD''), (4) German Deutsche

marks (``DM''), (5) European Economic Community currency units

(``ECU''), (6) French francs (``FF''), (7) Japanese yen (``JY'') and

(8) Swiss francs (``SF'').

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Accordingly, OCC is proposing to issue, clear, and settle these new

cross-rate option contracts. OCC has reviewed its By-Laws and Rules and

has determined that no changes are necessary to accommodate these new

products because they will be margined and settled like the existing

cross-rate option contracts.

The proposed rule change is consistent with the purposes and

requirements of Section 17A of the Securities Exchange Act of 1934, as

amended, because it will provide for the prompt and accurate settlement

of transactions in new cross-rate foreign currency option contracts and

for the safeguarding of related securities and funds. The proposed rule

change meets such requirements by establishing a framework in which

existing, reliable OCC systems, rules, and procedures will be extended

to the processing of such cross-rate foreign currency options.

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

OCC does not believe that the proposed rule change will 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 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

Within thirty-five days of the date of publication of this notice

in the Federal Register or within such longer period (i) as the

Commission may designate up to ninety days of such date if it finds

such longer period to be appropriate and publishes its reasons for so

finding or (ii) as to which the self-regulatory organization consents,

the Commission will:

(A) by order approve the proposed rule change or

(B) institute proceedings to determine whether the proposed rule

change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and

arguments concerning the foregoing. Persons making written submissions

should file six copies thereof with the Secretary, Securities and

Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.

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. Sec. 552, will be available for inspection and copying in

the Commission's Public Reference Section, 450 Fifth Street, NW.,

Washington, DC 20549. Copies of such filing will also be available for

inspection and copying at the principal office of the above-referenced

self-regulatory organization.

All submissions should refer to File No. SR-OCC-94-07 and should be

submitted by August 10, 1994.

For the Commission by the Division of Market Regulation,

pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-17584 Filed 7-19-94; 8:45 am]

BILLING CODE 8010-01-M