Daily Rules, Proposed Rules, and Notices of the Federal Government
The proposed rule change will accommodate Mini Options, which are equity options that have a unit of trading of 10 shares.
In June 2012, the International Securities Exchange and NYSE Arca filed proposed rule changes with the Commission to list and trade Mini Options on a select number of liquid, high-priced and actively traded securities.
Under OCC's By-Laws, equity options may be adjusted upon the occurrence of certain corporate actions, including Distributions. Currently, OCC's By-Laws stipulate that a Distribution must be in excess of $12.50
Instead, OCC believes that it is appropriate to fashion a new adjustment policy such that a Distribution that would result in an adjustment on a Standard Option would also result in an adjustment on a Mini Option. Moreover, the exchanges that will list Mini Options, as well as OCC clearing members, have expressed a preference for OCC to design an adjustment policy under which OCC makes consistent and parallel adjustments to both Mini Options and Standard Options. Therefore, OCC has proposed to amend the adjustment threshold in Article VI, Section 11A of OCC's By-Laws to $.125
Furthermore, OCC does not intend for this rule change to affect options contracts that were originally listed with units of trading in excess of 100 shares. The Securities Committee
Section 19(b)(2)(C) of the Act
The Commission concludes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to OCC. By assuring that traders of Mini Options will receive appropriate adjustments when corporate Distributions are made, the proposed rule change will foster the prompt and accurate clearance and settlement of options contracts, facilitate cooperation with exchanges and others involved in the clearance and settlement of these contracts, and ensure the safety and proper allocation of securities and funds for which OCC is responsible.
Further, the Commission concludes that there is good cause, pursuant to Section 19(b)(2) of the Act,
On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act, in particular with the requirements of Section 17A of the Act