[Federal Register Volume 64, Number 78 (Friday, April 23, 1999)]
[Notices]
[Pages 20043-20044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10198]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41298; File No. SR-OCC-99-05]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change Regarding Joint Back Office 
Participants

April 16, 1999.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 3, 1999, The Options 
Clearing Corp. (``OCC'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule

[[Page 20044]]

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 from interested persons on the proposed rule 
change.
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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

    Under the proposed rule change, OCC will amend its rules and by-
laws to allow clearing members to maintain joint back office accounts 
in which long positions can be used to offset short positions in 
options for broker-dealers with which they have joint back office 
arrangements.

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\ 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 Proposed Rule Change

    The purpose of the proposed rule change is to allow OCC clearing 
members to maintain joint back office accounts (``JBO accounts'') for 
broker-dealers with whom the clearing members have joint back office 
arrangements. (These broker-dealers are referred to as JBO 
participants.) Under the proposed rule change, a broker-dealer 
registered with the Commission will be considered a JBO participant if 
it (1) maintains a joint back office arrangement with an OCC clearing 
member that satisfies the requirements of Regulation T,\3\ (2) meets 
the applicable requirements as specified in exchange rules, and (3) 
consents to having its exchange transactions cleared and its positions 
carried in a JBO participant account.
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    \3\ Joint back office arrangements are authorized under Section 
220.7 of Regulation T of the Board of Governors of the Federal 
Reserve System and permit non-clearing broker-dealers to be deemed 
self-clearing for credit extension purposes if the non-clearing 
broker-dealer has an ownership interest in the clearing firm.
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    OCC will treat JBO participants like market makers and specialists 
and will treat JBO participants' accounts like market maker's accounts 
and specialist's accounts. For example, long positions in a JBO 
participants' account will be treated as unsegregated long positions. 
The one exception to this treatment relates to Chapter IV of OCC's 
rules which pertains to matched trade reporting. OCC does not 
anticipate that its participant exchanges will report JBO transactions 
as market maker or specialist transactions for purposes of reporting 
matched trades. Accordingly, JBO participants will not be included 
within the term ``market maker'' or ``specialist'' for the purposes of 
the rules in Chapter IV.
    To implement the above changes, OCC will add definitions for ``JBO 
participant'' and ``JBO participants' account'' in Article I, Section 1 
of the by-laws. OCC will also amend the definition of ``unsegregated 
long position'' to include long positions in JBO participants' 
accounts. OCC will amend Interpretation .03 to Article V, Section 1 of 
the by-laws, which provides that applicants for clearing membership 
must agree to seek approval for the membership/margin committee to 
clear types of transactions for which the applicant did not initially 
seek approval in its membership application, by adding JBO participant 
transactions. Finally, Article VI, Section 3 of the by-laws will be 
amended to add JBO participants' accounts to the list of permissible 
accounts clearing members may maintain with OCC.
    OCC believes that the proposed rule change is consistent with 
Section 17A of the Act \4\ and the rules and regulations thereunder 
because the proposal is consistent with OCC's requirement to assure the 
safeguarding of securities and funds which are in OCC's custody or 
control or for which OCC is responsible.
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    \4\ 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 
material impact 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, including whether the proposed rule 
change is consistent with the Act. 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-
0609. 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 Section, 450 Fifth Street, N.W., 
Washington, D.C. 20549. Copies of such filing also will be available 
for inspection and copying at the principal office of OCC. All 
submissions should refer to File No. SR-OCC-99-05 and should be 
submitted by May 14, 1999.
    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. 99-10198 Filed 4-22-99; 8:45 am]
BILLING CODE 8010-01-M