[Federal Register Volume 70, Number 44 (Tuesday, March 8, 2005)]
[Notices]
[Pages 11295-11296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-967]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51291; File No. SR-OCC-2005-01]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Revise its Cross-Margining Agreement With The Clearing Corporation

March 2, 2005.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 1, 2005, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change 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 revise the Amended and Restated 
Cross-Margining Agreement between OCC and The Clearing Corporation 
(``CCorp'') (``X-M Agreement''), formerly known as Board of Trade 
Clearing Corporation, that governs the OCC-CCorp cross-margin program 
as well as the agreements governing the participation of clearing 
members and market professionals therein.

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

    The proposed rule change revises the ``X-M Agreement.\3\ 
Specifically, OCC and CCorp have executed an amendment that revises the 
X-M Agreement to: (1) Reflect CCorp's change in name and address along 
with OCC's change in address; (2) modify the description of the 
contract markets for which CCorp provides clearance and settlement 
services and, as a result thereof, make a conforming change to the 
definition of the term ``market professional''; (3) as permitted under 
OCC Rule 705, add Government-Sponsored Enterprise (GSE) debt securities 
as an eligible form of initial margin and make conforming changes to 
various provisions in the X-M Agreement; (4) eliminate common stock as 
an eligible form of initial margin as clearing members have never 
deposited such collateral in the cross-margin program; (5) subject to 
OCC Rule 705, permit the clearing organizations to agree to use the 
valuation rate of one or the other clearing organizations in valuing 
Government and GSE debt securities; \4\ (6) update certain contact 
information; and (7) update Exhibit A, which contains the list of 
contracts eligible under the OCC-CCorp cross-margining program.
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    \3\ For a description of the existing agreement, see Release No. 
34-39203 (October 3, 1997), 62 FR 53371, [File No. SR-OCC-97-14] 
(order approving amendments to the cross-margining agreements and 
the forms of agreements governing the cross-margin accounts of 
clearing members and market professionals that participate in OCC/
CCorp cross-margining); Release No. 34-32681 (July 27, 1993), 58 FR 
41302 [File No. SR-OCC-92-24] (order approving expansion of cross-
margining program between OCC and CCorp to include non-proprietary 
positions); and Release No. 34-29888 (October 31, 1991), 56 FR 56680 
[File No. SR-OCC-91-07] (order approving establishment of cross-
margining program between OCC and CCorp).
    \4\ The amendment to the X-M Agreement provides OCC with the 
flexibility to agree with CCorp to apply the valuation rates of one 
or the other clearing organization in the event Rule 705 is amended 
accordingly.
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    In addition, OCC and CCorp have amended the agreements governing 
the cross-margining accounts of clearing members and market 
professionals that participate in the OCC-CCorp cross-margining 
program. The amendments to these agreements: (1) Reflect CCorp's change 
in name; (2) reflect the revised definition of the term ``market 
professional''; (3) make other non-substantive, technical changes; \5\ 
and (4) eliminate the requirement that clearing members and market 
professionals furnish the clearing organizations with financing 
statements relating to positions, collateral and property maintained 
with respect to accounts subject to cross-margining. The adoption by 
all 50 states of the 1999 revisions to Articles 8 and 9 of the Uniform 
Commercial Code has rendered the financing statement requirement 
obsolete.
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    \5\ Such changes include, for example, describing firms as 
``participants'' in CCorp rather than as ``clearing members.''
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    The proposed change is consistent with Section 17A of the Act \6\ 
and the rules and regulations thereunder applicable to OCC because it 
updates agreements used in connection with a longstanding cross-
margining program that provides lower clearing margins to clearing 
members while enhancing the safety of the clearing system. The proposed 
rule change is not inconsistent with the existing rules of OCC, 
including any other rules proposed to be amended.
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    \6\ 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 
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

    The foregoing rule change has become effective upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(4)\8\ 
thereunder because the proposed rule does not significantly affect the 
respective rights or obligations of the clearing agency or persons 
using the service and does not adversely affect the safeguarding of 
securities or funds in the custody or control of OCC or for which it is 
responsible. At any time within sixty days of the filing of such rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of

[[Page 11296]]

investors, or otherwise in furtherance of the purposes of the Act.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(4).
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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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an e-mail to [email protected]. Please include 
File Number SR-OCC-2005-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-OCC-2005-01. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 and 
on OCC's Web site at http://www.optionsclearing.com. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-OCC-2005-01 and should be 
submitted on or before March 29, 2005.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-967 Filed 3-7-05; 8:45 am]
BILLING CODE 8010-01-P