[Federal Register Volume 62, Number 242 (Wednesday, December 17, 1997)]
[Notices]
[Pages 66167-66169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32827]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39420; File No. SR-OCC-97-08]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving a Proposed Rule Change to Create a New Office of
Management Vice Chairman and to Change the Title of Vice Chairman to
Member Vice Chairman
December 10, 1997.
On May 9, 1997, The Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') and on May
12, 1997, amended \1\ a proposed rule change (File No. SR-OCC-97-08)
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'').\2\ Notice of the proposal was published in the Federal
Register on August 29, 1997.\3\ On September 29, 1997, OCC filed a
second amendment to the proposed rule change. No comment letters were
received. For the reasons discussed below, the Commission is approving
the proposed rule change.
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\1\ The amendment was technical in nature and therefore did not
require republication of notice of filing.
\2\ 15 U.S.C. 78s(b)(1)(1988).
\3\ Securities Exchange Act Release No. 38954 (August 23, 1997)
62 FR 45901.
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The proposal amends OCC's by-laws to create a new office of
Management Vice Chairman and to change the title of Vice Chairman to
Member Vice Chairman. The proposal amends Article IV, Section 1 to
clarify that the existing Vice Chairman is elected by the Board of
Directors from among OCC's Member Directors \4\ and will be renamed the
Member Vice Chairman. Article IV, Section 1 is also amended to create
the position of Management Vice Chairman which will be elected at the
discretion of the Board of Directors. The board will not be required to
fill this position. Only OCC staff members will be eligible to serve as
the Management Vice Chairman, and any person serving in
[[Page 66168]]
this office shall not be eligible to serve concurrently in any other
OCC office.
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\4\ To distinguish the title of the current Vice Chairman from
the staff position of Management Vice Chairman, the modifier
``Member'' has been added to the office's title. Conforming changes
have also been made to several other sections of OCC's by-laws to
reflect addition of the modifier ``Member'' to the office's title.
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Article IV, Section 7, paragraphs (a) and (b) are amended to
provide for the duties and responsibilities of the Management Vice
Chairman and to clarify the duties and responsibilities of the Member
Vice Chairman. The duties of the Management Vice Chairman include
assuming all of the Chairman's responsibilities in the absence or
disability of the Chairman, including presiding over meetings of the
Board of Directors and the shareholders.\5\ The Member Vice Chairman
presides at such meetings and assumes all of the Chairman's
responsibilities only in the absence of the Chairman and Management
Vice Chairman. The Member Vice Chairman remains the chair of any
committee responsible for evaluating the performance of OCC or the
compensation of OCC's officers.\6\
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\5\ A conforming change is being made to Article IV, Section 9
to clarify that the office of the Management Vice Chairman shall be
in the line of succession in the absence of the Chairman.
\6\ As proposed, the rule change would have also included a
conforming amendment to Article IV, Section 8 that would have added
the Member Vice Chairman to the line of succession in the event of
the absence or disability of the Chairman. This proposed change
would have additionally clarified that the President's duty to act
in the place of the Chairman would arise only in the absence of the
Chairman, the Management Vice Chairman, and the Member Vice
Chairman. In accordance with OCC's second amendment, Article IV,
Section 8 will not be amended.
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The proposal also amends Article III, Section 15 paragraphs (a),
(b), and (e) to add the office of Management Vice Chairman to the list
of officers who may be granted emergency powers to declare the
existence of an emergency, call special meetings during such emergency,
and who may be empowered to act on behalf of any other officer who is
unable to fulfill any emergency powers granted to such officer.
Accordingly, the Management Vice Chairman position adds another person
to OCC's line of succession, which reduces the risk that OCC would be
without qualified leadership. The proposals establish a clear line of
succession. Article II, Section 4 is amended to add the office of the
Management Vice Chairman to the list of officers who may direct the
notice of meetings of shareholders. The purpose of this change is to
ensure the managerial readiness of OCC in the event the Chairman is
unavailable.
A technical correction to Article IV, Section 1 deletes the
requirement that the Board of Directors elect a senior management
officer of OCC to be in charge of each OCC office that is (i)
responsible for 20% or more of the volume of exchange transactions
cleared through OCC or (ii) located in the same city as an exchange on
which 20% or more of the volume of the exchange's transactions are
cleared through OCC. This requirement is no longer necessary due to
advances in systems design.
Article IX, Section 1(a) is amended to add the office of the
Management Vice Chairman to the list of officers who may, in
conjunction with at least one director, access or withdraw securities
owned by OCC from the appropriate safekeeping vault or account. Article
IX, Section 11 is similarly amended to give the Management Vice
Chairman the authority to sign OCC's share certificates.
Interpretations and Policies .03 to Article V, Section 1 is amended
to add the office of the management vice Chairman to the list of
officers authorized to approve or disapprove applications for clearing
membership on a temporary basis. Interpretations and Policies .01 to
Article V, Section 3 is similarly amended with respect to approvals and
disapprovals of deadline extensions for satisfaction of the
preconditions for qualification as a clearing member.
Interpretations and Policies .01 to Article VI, Section 17 is
amended to include the Management Vice Chairman as one who may act on
behalf of OCC in imposing exercise restrictions pursuant to Section
17(b).
In addition to the changes to OCC's by-laws, the proposal also
makes several conforming changes to OCC rules. Spxeifically, Rule 305
paragraphs (a), (b), and (c) are amended to authorize the management
vice chairman to impose restrictions on clearing members' transactions,
positions, and activities. Interpretations and Policies .07 and .10 to
Rule 305 are amended to include the Management Vice Chairman. Rule
309(d) is amended to enable the Management Vice Chairman to act
pursuant to Rule 305(a) in the event a managing clearing member's net
capital shall fall below a prescribed minimum level.
Certain Interpretations and Policies to Rules 601 and 602, and
Rules 608, 609, and 609A, are amended to add the office of the
Management Vice Chairman to the list of officers authorized to act
pursuant to such rules in connection with members' margin positions,
the withdrawal of margin, intra-day margin, and the waiver of margin.
Rules 801(e), 804, and 1905 are amended to authorize the Management
Vice Chairman to permit clearing members to file, revoke, or modify
eligible exercise notices and to require clearing members to file
certain reports with respect to the allocation of exercises, including
allocations of IP exercises.
Rule 913(d) is amended to permit the Management Vice Chairman to
extend or postpone the deadline for the delivery of securities in the
event that certain settlement arrangements are revoked. Rule 1312 is
amended to authorize the Management Vice Chairman to determine whether
good cause exists for any delay in delivery or payment for transactions
in GNMA options by its clearing members. Rules 1411, 1512, 1610, 2110,
and 2408 are similarly amended for such determinations regarding the
settlement of transactions in treasury security options, certificate of
deposit options, foreign currency options, cross-rate foreign currency
options, and flexibily structured index options denominated in a
foreign currency, respectively.
Rule 1104(b) and Rule 1106 paragraphs (d) and (e) are amended to
authorize the Management Vice Chairman to take certain actions with
respect to the suspension of a clearing member and the creation of a
liquidating settlement account. These changes permit the Management
Vice Chairman to determine whether it is in the best interest of OCC,
its clearing members, or the general public to convert to cash a
suspended clearing member's margin deposits and whether to close out
such member's unsegregated long or short positions. If such margin is
not converted to cash, or such long or short position is not closed
out, the change to Rule 1106(e) permits the Management Vice Chairman to
engage in hedging transactions to reduce the risk to OCC resulting from
such decisions.
II. Discussion
Section 17A(b)(3)(A) requires that a clearing agency have the
capacity to facilitate the prompt and accurate clearance and settlement
of securities transactions for which it is responsible.\7\ The
Commission believes that the proposal is consistent with the
requirements of Section 17A of the Act and the rules and regulations
thereunder because the addition of the position of Management Vice
Chairman should strengthen the line of succession in the absence or
disability of the Chairman of the Board and should ease any transition
from an existing Chairman of the Board to his or her successor. As a
result, these changes should promote the efficiency of OCC's operations
and therefore should support the goals of Section 17A of the Act.
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\7\ 15 U.S.C. 78q-1(b)(3)(A).
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with requirements of the Act and in particular
with the requirements of 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-97-08) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32827 Filed 12-16-97; 8:45 am]
BILLING CODE 8010-01-M