[Federal Register Volume 61, Number 199 (Friday, October 11, 1996)]
[Notices]
[Pages 53477-53478]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-26170]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37793; File No. SR-OCC-96-13]


Self-Regulatory Organization; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change Relating to Unit Investment 
Trusts as Margin Collateral

October 7, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on September 6, 1996, 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(b)(1) (1988).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will permit OCC to accept certain publicly 
traded units of beneficial interest in unit investment trusts as a form 
of margin collateral.

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 and 
discussed any comments it received on 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.\2\
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    \2\ These statements have been modified by the Commission.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The principal purpose of the proposed rule change is to permit 
clearing members to deposit as margin with OCC publicly traded units of 
beneficial interest (``trust units'') in unit investment trusts that 
hold portfolios or baskets of common stocks. These classes of trust 
units are traded and cleared like shares of common stock and are 
typically held in book entry form at a securities depository. As a 
result, OCC will be able readily to perfect a security interest in 
deposited trust units and to liquidate them if necessary. Accordingly, 
OCC believes it is appropriate to accept trust units as a form of 
margin collateral under the conditions specified in new subparagraph 
(4) to Rule 604(d).
    Subparagraph (4) will permit OCC to accept trust units as a form of 
margin collateral. It will provide that the term ``stock'' as used in 
Rule 604(d) includes trust units in unit investment trust holding 
portfolios or baskets of common stocks. In order to be eligible for 
deposit, the trust units will also have to meet the requirements 
applicable to stock under Rule 604(d) and be of a class approved by OCC 
for deposit as margin.\3\ Pursuant to Rule 604(d)(1), trust units will 
be valued on a daily basis at 60% of current market value.
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    \3\ Rule 604(d) requires that to be eligible as margin deposits, 
stock must have a market value greater than $10 per share and must 
be traded either on a national securities exchange and have last 
sale reports collected and disseminated pursuant to a consolidated 
transaction reporting plan or traded in the over-the-counter market 
and designated as a national market system security pursuant to the 
Commission's Rule 11Aa2-1.
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    Section 11 will be added to the Interpretations and Policies of 
Rule 604 to vest OCC's Membership/Margin Committee (the ``Committee'') 
with the authority to approve classes of trust units for deposit as 
margin. At the present time, the Committee has approved Standard & 
Poor's (``S&P'') depository receipts on the S&P 500 Index and S&P 
MidCap 400 Index as being classes approved for deposit as margin. In 
addition, the proposed rule change will replace the term ``stocks'' 
with the term ``securities'' in subparagraphs (2) and (3) to Rule 
604(d). Subparagraphs (2) and (3) of Rule 604(d) limit the use of 
customer securities as margin and prescribe the method of depositing 
margin securities. The amendment will clarify that such sections apply 
not only to stocks but also corporate bonds eligible as margin deposits 
under Rule 604(d)(1).
    The proposed rule change is consistent with Section 17A of the Act 
because it expands the forms of margin collateral that may be deposited 
with OCC in a prudent and safe manner

[[Page 53478]]

designed to assure the safeguarding of securities in OCC's custody and 
control\4\
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    \4\ 15 U.S.C. 78q-1 (1988).
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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 OCC consents, the Commission will:
    (A) By order approve such 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 N.W., Washington, D.C. 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. 552, will be available for inspection and copying in the 
Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, 
D.C. 20549. Copies of such filing will also be available for inspection 
and copying at the principal office of OCC. All submissions should 
refer to the File No. SR-OCC-96-13 and should be submitted by November 
1, 1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-26170 Filed 10-10-96; 8:45 am]
BILLING CODE 8010-01-M