[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]


-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1(b)(3)(A).

---------------------------------------------------------------------------

[[Page 66169]]

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\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32827 Filed 12-16-97; 8:45 am]
BILLING CODE 8010-01-M