[Federal Register Volume 66, Number 131 (Monday, July 9, 2001)]
[Notices]
[Pages 35822-35823]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-17002]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44498; File No. SR-OCC-2001-06]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of a Proposed Rule Change by The Options 
Clearing Corporation Relating to Clearing Member Qualifications

June 29, 2001.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ notice is hereby given that on June 26, 2001, The Options 
Clearing Corporation (``OCC'') filed with the Securities and Exchange 
Commission the proposed rule change as described in Items I and II, 
below, which Items have been prepared by OCC. The Commission is 
publishing this notice and order to solicit comments on the proposed 
rule change from interested persons and to grant accelerated approval.
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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 will eliminate from Article V, Section 1 
of OCC's by-laws the requirement that applicants for membership in OCC 
``propose to engage upon acceptance in the clearance of options 
transactions for the applicant's firm account or for the accounts of 
customers.''

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. 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

    OCC wishes to delete from Article V, Section 1 of its by-laws the 
requirement that applicants for OCC membership ``propose to engage upon 
acceptance in the clearance of options transactions for the applicant's 
firm account or for the accounts of customers.'' OCC's by-laws 
currently contain a membership category designated as ``Hedge Clearing 
Member'' for clearing members who want to participate in OCC's stock 
loan/hedge program.\3\ OCC has always intended to allow this membership 
category to be available to firms wanting to participate in this 
program that do not plan to clear options transactions but meet all 
other OCC membership criteria. However, OCC overlooked the requirement 
in Article V, Section 1 when filing the stock loan/hedge program rule 
changes.\4\
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    \3\ Under the stock/loan hedge program, OCC administers stock 
loan and borrow transactions between participating clearing members 
and allows certain stock loan and borrow positions resulting from 
such transactions to constitute hedges against stock option 
positions overlying the same stocks for purposes of OCC's margin 
calculation.
    \4\ See Securities Exchange Act Release No. 40083 (June 11, 
1998), 63 FR 33424 (June 18, 1998); Securities Exchange Act Release 
No. 32638 (July 15, 1993), 58 FR 39264 (July 22, 1993).
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    OCC believes that deleting the requirement that members engage in 
the clearance of options transactions will allow broader participation 
in the stock loan/hedge program because many firms engaged in the stock 
loan business do not conduct an options business. Deleting this 
requirement will also allow OCC to admit firms that intend to clear 
security futures but not security options.\5\
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    \5\ OCC will not admit to membership any applicant that is 
seeking to clear only security futures until its rules for the 
clearance and settlement of security futures have been approved by 
the Commission.
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    OCC believes that the proposed rule change is consistent with 
Section 17A of the Act because it fosters cooperation and coordination 
with persons engaged in the clearance and settlement of securities 
transactions and removes impediments to and perfects the mechanism of a 
national system for the prompt and accurate clearance and settlement of 
securities transactions.

B. Self-Regulatory Organization's Statement on Burden on Competition

    OCC believes that the proposed rule change will not impose any 
burden on competition.

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

    OCC did not solicit or receive written comments with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency be designed to remove impediments to and perfect the 
mechanism of a national system for the prompt and accurate clearance 
and settlement of securities transactions and to assure the 
safeguarding of securities and funds which are in the custody or 
control of the clearing agency or for which it is responsible. The 
Commission finds that the proposed rule change is consistent with OCC's 
obligations under Section 17A of the Act. Under the proposal, OCC will 
continue to employ its monitoring and risk reduction procedures, which 
were subject to prior Commission review and approval, with respect to 
members that participate in the stock loan/hedge program but do not 
clear options transactions. Furthermore, the rule change will allow OCC 
to admit additional applicants to participate in its stock loan/hedge 
program. This should help to perfect the mechanism of a national system 
for the prompt and

[[Page 35823]]

accurate clearance and settlement of securities transactions because it 
will bring more stock loan transactions currently conducted by industry 
participants outside registered clearing agencies into OCC. This should 
add efficiencies and safety to such transactions.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    OCC has requested that the Commission find good cause for approving 
the proposed rule change prior to the thirtieth day after the date of 
publication of the notice of filing. The Commission finds good cause 
for approving the proposed rule change prior to the thirtieth day after 
the date of publication of the notice of filing in the Federal Register 
because by so approving it will be possible for more stock loan 
transactions to be immediately processed through OCC.

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 will also be available for 
inspection and copying at OCC's principal office. All submissions 
should refer to File No. SR-OCC-2001-06 and should be submitted by July 
30, 2001.
    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-OCC-2001-06) be, and hereby 
is, approved on an accelerated basis.
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    \7\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\7\
Jonathan G. Katz,
Secretary.
[FR Doc. 01-17002 Filed 7-6-01; 8:45 am]
BILLING CODE 8010-01-M