By Chris Kentouris
The Options Clearing Corp. (OCC) has been selected by a group of options and equities exchanges to operate a new U.S. symbol reservation system.
In November, the Securities and Exchange Commission approved a plan for equities exchanges to reserve, select and allocate securities symbols. The SEC told market centers to implement the new procedures by January 5 and find a third-party processing agent to maintain a centralized database of symbols.
Along with OCC, the Depository Trust & Clearing Corp. (DTCC), Financial Industry Regulatory Authority (Finra), Issuer Advisory Group (IAG) and SFB Market Systems (SFBMS) were considered. OCC, which serves as the clearinghouse for U.S. listed options, was one of two industry-owned utilities to bid for the contract - DTCC operates several clearing and settlement subsidiaries. Self-regulatory organization Finra allocates symbols for unlisted securities.
An OCC spokesperson confirmed the clearinghouses selection but would not provide further details. Officials at Finra and DTCC were unavailable for comment.
According to a source with knowledge of the process, the selection committee was comprised of representatives from the Chicago Board Options Exchange, International Securities Exchange (ISE), Boston Options Exchange, Nasdaq, New York Stock Exchange, Chicago Stock Exchange and National Stock Exchange (NSX). Nasdaq and NYSE were each assigned three votes, while the others received one.
The bidding process began in December and ended Feb. 6; the candidates were informed of the decision February 12. The initial round of bidding ended early last month, when the entities were asked to resubmit their proposals with lower price tags. DTCC garnered the second-highest number of votes.
"While we were a more expensive solution, we believe that we represented a unique and important constituency--issuers," said Patrick Healy, CEO and founder of Chevy Chase, Maryland-based IAG. "For far too long, issuers have been underrepresented in these kinds of decisions." IAG, which offers consultancy services to public companies for the trading and listing of stocks, partnered with telecommunications company NeuStar to develop the necessary technology. Healy added that "we strongly support the SECs move toward portability and wish the OCC all the best as the processor."
Lee Clifford, president of SFBMS, which partnered with Broadridge Financial Solutions on its proposal, asserted said that her company was the "lowest bidder with the most comprehensive solution already written and ready for installation." Clifford noted that the venues that voted have seats on OCCs board. SFBMS, a Thorofare, N.J.-based vendor specializing in options symbology, applied to the SEC in September 2007 to serve as the plans administrator.
Due to the limited number of one-, two- and three-character symbols, the demand for a transparent reservation process has grown as exchanges increased their number of listings. The approved plan, which was put forward more than three years ago by Finra, Nasdaq, NSX and the Philadelphia Stock Exchange - since acquired by Nasdaq OMX Group - allows for symbols of one to five characters. Nasdaq had pressed to allow issuers moving from NYSE or the American Stock Exchange - now NYSE Alternext U.S. - to take their three-character symbols with them.
NYSE, Amex, CBOE and ISE had presented the SEC with a plan that included a three-character limit. The three-character plan would have granted both NYSE and Amex the right to reserve 200 symbols indefinitely; other equities exchanges could reserve as many as 40. Because NYSEs proposal only applied to issuers needing one-, two- or three-character symbols, Nasdaq and the other exchanges would have had to come up with a separate plan for those requiring four or five characters.
This article was originally published on SecuritiesIndustry.com.
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