[Federal Register Volume 62, Number 4 (Tuesday, January 7, 1997)]
[Notices]
[Pages 1014-1015]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-232]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38105; File No. SR-OCC-96-13]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving Proposed Rule Change Relating to Unit Investment Trusts 
as Margin Collateral

December 31, 1996.
    On September 6, 1996, The Options Clearing Corporation (``OCC'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change (File No. SR-OCC-96-13) pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'').\1\ Notice of 
the proposal was published in the Federal Register

[[Page 1015]]

on October 11, 1996.\2\ No comment letters were received. For the 
reasons discussed below, the Commission is granting approval of the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act release No. 37793 (October 7, 1996), 
61 FR 53477.
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I. Description

    The proposed rule change adds subparagraph (4) to Rule 604(d) 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. The 
trust units must met the requirements applicable to stocks under Rule 
604(d). Rule 604(d) requires that to be eligible as margin deposits, 
stock must have a market value greater than $10 per share and must 
either (a) be traded on a national securities exchange and have last 
sale reports collected and disseminated pursuant to a consolidated 
transaction reporting plan or (b) be traded in the over-the-counter 
market and designated as a national market system security pursuant to 
the Commission's Rule 11Aa2-1.\3\ Pursuant to Rule 604(d)(1), trust 
units will be valued on a daily basis at 60% of currently market value.
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    \3\ 17 CFR 240.11Aa2-1.
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    In order to be eligible for deposit, the trust units must be of a 
class approved by OCC's Membership/Margin Committee (``Committee'') 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 replaces 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 clarifies that such sections apply not 
only to stocks but also corporate bonds eligible as margin deposits 
under rule 604(d)(1).

II. Discussion

    Section 17A(b)(3)(F) \4\ of the Act requires that the rules of a 
clearing agency be designed to safeguard securities and funds in its 
custody or control. Because the trust units must be either traded on a 
national securities exchange or designated as a national market system 
security to be eligible as collateral, the proposal ensures that only 
very liquid securities will be accepted. Furthermore, by initially 
limiting eligibility to S&P depository receipts on the S&P 500 Index 
and the S&P MidCap 400 Index, OCC will be able to gain experience in 
accepting trust units before expanding the types of trust units it will 
accept. Therefore, the Commission believes that OCC's acceptance of 
these classes of trusts units is consistent with OCC's obligation to 
safeguard securities and funds.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular Section 17A of the Act and the rules and regulations 
thereunder.
    It is therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-96-13) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-232 Filed 1-6-97; 8:45 am]
BILLING CODE 8010-01-M