[Federal Register Volume 69, Number 63 (Thursday, April 1, 2004)]
[Notices]
[Pages 17258-17259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-7277]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49478; File No. SR-OCC-2003-09]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Relating to Minimum Net 
Capital Requirements for Appointed Clearing Members

    March 25, 2004.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on August 22, 2003, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') 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 persons.
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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 specify minimum net capital 
requirements for appointed clearing members, which are OCC clearing 
members that facilitate stock settlement for other clearing members.

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

    OCC's by-laws define an ``underlying security'' with respect to 
physically settled stock options and stock futures to mean the security 
or other asset that OCC is obligated to sell or purchase upon exercise 
or maturity of the contract. Normally, underlying securities are 
delivered and paid for through the facilities of the National 
Securities Clearing Corporation (``NSCC''), and clearing members that 
are eligible to clear and carry stock options and stock futures 
contracts must be NSCC participants except as otherwise provided in 
OCC's rules. OCC's by-laws and rules permit a clearing member 
(``Appointing Clearing Member'') that is not an NSCC member to appoint 
another clearing member (``Appointed Clearing Member'') that is an NSCC 
member to deliver or to receive underlying securities and to effect 
payment therefore through the facilities of NSCC obligations of the 
Appointing Clearing Member.
    In connection with providing stock settlement services, an 
Appointed Clearing Member may be subject to increased risk of 
operational or other errors that could be charged against the Appointed 
Clearing Member's net capital. As a result, OCC has determined that 
Appointed Clearing Members should be required to maintain a specified 
minimum amount of net capital in order to perform such services. 
Therefore, OCC is proposing new Rule 309A to apply to stock settlement 
arrangements between clearing members the minimum net capital standards 
that currently are applied to facilities management arrangements 
between clearing members in Rule 309. This minimum net capital standard 
would require every Appointed Clearing Member to maintain net capital 
of not less than the greater of (i) the minimum net capital required 
under the provisions of OCC Rule 302 or (ii) the sum of (A) $2,000,000 
plus (B) $100,000 times the number of Appointing Clearing Members in 
excess of four on whose behalf the Appointed Clearing Member effects 
settlements.

[[Page 17259]]

    OCC believes that the proposed rule change is consistent with the 
purposes and requirements of Section 17A of the Act because it 
specifies the minimum net capital requirement for clearing members that 
facilitate stock settlements on behalf of other clearing members.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    OCC does not believe that the proposed rule change would 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 the 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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-OCC-2003-09. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, comments should be sent in 
hardcopy or by e-mail but not by both methods. 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 the principal office of OCC and on OCC's Web site at http://www.optionsclearing.com. All submissions should refer to the File No. 
SR-OCC-2003-09 and should be submitted by April 16, 2004.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\3\
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    \3\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-7277 Filed 3-31-04; 8:45 am]
BILLING CODE 8010-01-P