[Federal Register Volume 65, Number 180 (Friday, September 15, 2000)]
[Notices]
[Pages 56015-56016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-23735]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-43276; File No. SR-OCC-99-15]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change Relating to Clearing Member 
Affiliates

September 11, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on November 2, 1999, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') and on August 11, 2000, amended 
the proposed rule 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 on the proposed rule change 
from interested parties.
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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 proposed rule change would allow certain affiliates of a 
clearing member to be designated as non-customers under the 
Commission's hypothecation rules.

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 these 
statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by OCC.

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[[Page 56016]]

(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The principal purpose of the proposed rule change is to allow 
certain affiliates of a clearing member to be designated as non-
customers under the Commission's hypothecation rules \3\ so that the 
affiliates may have their transactions and positions commingled in 
their clearing member's firm account and/or proprietary X-M account at 
OCC for the purpose of receiving more favorable clearing margin 
treatment. \4\ The proposed rule change creates a definition of Member 
Affiliate that consists of the relevant portion of the existing 
definition of Related Person in OCC's By-Laws. (for the sake of economy 
of expression and consistency, OCC proposes to replace that portion of 
the Related Person definition used to define Member Affiliate with the 
term Member Affiliate.) The proposed rule change then modifies the 
definition of Non-Customer to include a Member Affiliate that has 
executed a non-conforming subordination agreement \5\ that has been 
approved by the clearing member's designated examining authority.
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    \3\ 17 CFR 240.8c-1 and 15c2-1.
    \4\ See also no-action letter from Michael A. Macchiaroli, 
Associate Director, Division of Market Regulation, Commission, to 
William H. Navin, Executive Vice President and General Counsel, OCC, 
(June 15, 2000).
    \5\ Non-conforming subordination agreements are subordination 
agreements that do not meet the requirements of Appendix D of Rule 
15c3-1.
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    Additionally, the proposed rule change modifies the definition of 
Related Person to eliminate redundancies and to more closely parallel 
17 CFR 1.3(y), which defines ``proprietary account'' for the purposes 
of the Commodity Exchange Act's regulations. \6\ The proposed rule no 
longer refers to spouses of ``any such person'' (i.e., any officer, 
director, or general or special partner) which was redundant because 
the rule already covers spouses of ``any non-customer of the clearing 
member'' and the definition of Non-Customer includes officers, 
directors, or general or special partners. Additionally, in order to 
conform OCC rules with Section 1.3(y)'s definition of ``proprietary 
account'' the proposed rule change clarifies that not only are spouses 
and minor dependents of non-customers Related Persons but also that the 
spouses and minor dependents of certain employees are also Related 
Persons.
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    \6\ As defined, a Related Person is essentially a person whose 
account would be a ``proprietary account'' under the rules of the 
Commodity Futures Trading Commission but who is nevertheless a 
``customer'' for purposes of the Commission's hypothecation rules 
cited above. Market Makers who are Related Persons of a clearing 
member are deemed to be Associated Market Makers and are excluded 
from the Combined Market Maker Account under Article VI, Section 
3(c) of OCC's By-Laws.
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    The proposed rule change is consistent with the purpose and 
requirements of Section 17A of the Act \7\ and the rules and 
regulations thereunder applicable to OCC because the proposed rule 
change will assure the safeguarding of securities and funds which are 
in OCC's custody or control and for which OCC is responsible, foster 
cooperation and coordination with persons engaged in the clearance and 
settlement of securities transactions, remove impediments to and 
perfect the mechanism of a national system for the prompt and accurate 
clearance and settlement of securities transactions, and, in general, 
protect investors and the public interest.
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    \7\ 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 will have any 
impact or impose any burden 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 the self-regulatory organization 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, NW., Washington, DC 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, NW., 
Washington, DC 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-99-15 and should be submitted by 
October 6, 2000.

    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. 00-23735 Filed 9-14-00; 8:45 am]
BILLING CODE 8010-01-M