[Federal Register Volume 62, Number 35 (Friday, February 21, 1997)]
[Notices]
[Pages 8070-8071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4234]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38284; File No. SR-OCC-96-15)


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Relating to Revisions to the 
Standards for Letters of Credit Deposited as Margin

    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 4, 1996, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-OCC-96-15) 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The purpose of the proposed rule change is to request the 
Commission's permanent approval for OCC's modifications to its 
standards for letters of credit deposited with OCC as a form of 
margin.\2\
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    \2\ For a complete description of these modifications to the 
standards for letters of credit, refer to Securities Exchange Act 
Release No. 29641 (August 30, 1991), 56 FR 46027 [File No. SR-OCC-
91-13] (order temporarily approving proposed rule change through 
February 28, 1992).
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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.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by OCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Purposed Rule Change

    In previous filings, OCC has proposed and the Commission has 
approved on a temporary basis OCC's modifications to its rules 
governing letters of credit deposited with OCC as a form of margin.\4\ 
This filing proposes to make permanent the Commission's temporary 
approval of OCC's modifications to its Rule 604, which sets forth the 
standards for letters of credit deposited with OCC as a form of margin.
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    \4\ Securities Exchange Act Release Nos. 29641 (August 30, 
1991), 56 FR 46027 [File No. SR-OCC-91-13] (order temporarily 
approving proposed rule change through February 28, 1992); 30424 
(February 28, 1992), 57 FR 8106 [File No. SR-OCC-92-06] (order 
temporarily approving proposed rule change through May 31, 1992); 
30763 (June 1, 1992), 57 FR 24284 [File No. SR-OCC-92-11] (order 
temporarily approving proposed rule change through August 31, 1992); 
31126 (September 1, 1992), 57 FR 40925 [File No. SR-OCC-92-19] 
(order temporarily approving proposed rule change through December 
31, 1992); 31614 (December 17, 1992), 57 FR 61142 [File No. SR-OCC-
92-37] (order temporarily approving proposed rule change through 
June 30, 1993); 32532 (June 28, 1993), 58 FR 36232 [File No. SR-OCC-
93-14] (order temporarily approving proposed rule change through 
June 30, 1994); 34206 (June 13, 1994), 59 FR 31661 [File No. SR-OCC-
94-06] (order temporarily approving proposed rule change through 
June 30, 1995); 36138 (August 23, 1995), 60 FR 44926 [File No. SR-
OCC-95-9] (order temporarily approving proposed rule change through 
June 28, 1996); and 37618 (August 29, 1996), 61 FR 46889 [File No. 
SR-OCC-96-07] (order temporarily approving proposed rule change 
through June 30, 1997).
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    The modifications for which OCC has temporary approval are as 
follows. First, in order to conform to the Uniform Commercial Code and 
to avoid any

[[Page 8071]]

ambiguity as to the latest time for honoring demands upon letters of 
credit, letters of credit must state expressly that payment must be 
made prior to the close of business on the third banking day following 
demand. Second, letters of credit must be irrevocable. Third, letters 
of credit must expire on a quarterly basis. Fourth, OCC included 
language in its Rule 604 to make explicit OCC's authority to draw upon 
letters of credit at any time, whether or not the clearing member that 
deposited the letter of credit has been suspended or is in default, if 
OCC determines that such draws are advisable to protect OCC, other 
clearing members, or the general public.
    According to OCC, since its original filing, OCC has received no 
adverse comments or complaints from any of its clearing members, the 
banks, or other interested parties with respect to the modifications to 
Rule 604 or the implementation of the revised letter of credit 
standards. As a result, OCC now requests that the Commission 
permanently approve its revisions.
    OCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act \5\ because the proposed rule 
change promotes the protection of investors by enhancing OCC's ability 
to safeguard the securities and funds in its possession or subject to 
its control.
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    \5\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would impose any 
burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Comments were not and are not intended to be solicited by OCC with 
respect to the proposed rule change, and none were 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. Sec. 552, will be available for inspection and copying in 
the Commission's Public Reference Section, 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 number SR-OCC-96-15 and should be 
submitted by March 14, 1997.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(1)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-4234 Filed 2-20-97; 8:45 am]
BILLING CODE 8010-01-M