Securities Law & Instruments

Headnote

Trades by futures commission merchants in physically-settled narrow based stock index futures, physically-settled single stock futures and cash-settled single stock futures traded on OneChicago outside Canada and cleared through the Options Clearing Corporation exempt from sections 25 and 53 of the Act until such time as proposed Ontario Securities Commission Rule 14-502 (Commodities Futures Act) Designation of Additional Commodities comes into force.

Statutes Cited

Securities Act, R.S.O. 1990, as am., ss. 25, 53, 74(1)/

Commodity Futures Act, R.S.O. 1990, c. C.20, as am.

IN THE MATTER OF

THE SECURITIES ACT, R.S.O. 1990,

CHAPTER S.5, AS AMENDED (THE "ACT")

AND

IN THE MATTER OF

THE OPTIONS CLEARING CORPORATION

 

RULING

(Subsection 74(1) of the Act)

UPON the application (the "Application") of The Options Clearing Corporation ("OCC") with the consent, and on behalf, of OneChicago ("OCX") to the Ontario Securities Commission (the "Commission") for a ruling pursuant to subsection 74(1) of the Act that trades by futures commission merchants registered under the Commodity Futures Act, R.S.O. 1990, c.C.20, as amended (the "CFA"), as principal or agent, in physically-settled narrow based stock index futures, physically-settled single stock futures and cash-settled single stock futures (the "Products") traded on OCX outside Canada and cleared through OCC be exempt from sections 25 and 53 of the Act until such time as proposed Commission Rule 14-502 (Commodities Futures Act) Designation of Additional Commodities becomes effective;

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON OCC having represented to the Commission that:

1. OCC is the only derivatives clearing agency registered under Section 17A of the U.S. Securities Exchange Act of 1934 (the "Exchange Act").

2. In the United States, OCC operates under the jurisdiction of both the Securities and Exchange Commission ("SEC") and the Commodity Futures Trading Commission ("CFTC"). Under the SEC's jurisdiction, OCC clears or is qualified to clear transactions for put and call options on common stocks and other equity issues, stock indices, foreign currencies and interest rate composites, as well as futures on single equity issues and narrow-based stock indices ("security futures"), which were recently authorized to be traded in the United States pursuant to the Commodity Futures Modernization Act of 2000 (the "CFMA"). As a registered derivatives clearing organization ("DCO") under CFTC jurisdiction, OCC offers clearing and settlement services for transactions in commodity futures (i.e., futures other than security futures) and options on commodity futures.

3. OCX is an electronic exchange that lists futures on individual equity issues, including exchange traded funds ("ETFs"), and narrow-based indexes. OCX is a joint venture of the Chicago Board Options Exchange, Chicago Mercantile Exchange Inc. and the Chicago Board of Trade.

4. The Products currently listed for trading on OCX include "security futures products", as defined in the CFMA. OCX currently lists for trading the following Products:

(a) Single stock futures contracts for approximately 120 individual equity issues, including DIAMONDS® ETFs; and

(b) Narrow-based index futures contracts for 15 Dow Jones MicroSector IndexesSM.

5. The Products listed in paragraph 4 above are indicative of the types of Products currently listed for trading on OCX and OCX may list additional Products in the future as permitted under the CFMA.

6. OCC does not have any direct contact with Canadian clients of Canadian securities firms for which it provides clearing services.

AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;

IT IS THE DECISION of the Commission, pursuant to subsection 74(1) of the Act, that sections 25 and 53 of the Act do not apply to trades in the Products traded on OCX provided that:

(a) each trade is conducted by a futures commission merchant registered under the CFA acting for its own account or for the account of its clients; and

(b) this order shall expire upon the date that Commission Rule 14-502 (Commodities Futures Act) Designation of Additional Commodities becomes effective.

February 18, 2005.

"Paul M. Moore"
"David L. Knight"