602 Federal Register / Vol. 76, No. 3 / Wednesday, January 5, 2011 / Notices 

12For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

13 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.15c3–1. 

proposal may become operative 

immediately upon filing. 

The Exchange reports in connection 

with this proposal to make permanent 

Rule 123C(9)(a)(1) that it has completed 

testing of a functionality that would 

enable the electronic submission of 

orders after 4 p.m., and thus now 

proposes to remove the requirement that 

all interest entered after 4 p.m. in 

response to a DMM’s solicitation of 

interest to offset an extreme order 

imbalance must be represented by Floor 

brokers. The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest 

because doing so would allow the 

benefits of the new systems 

modifications allowing all market 

participants to enter orders 

electronically (rather than solely 

through a Floor broker) during a Rule 

123C(9)(a)(1) suspended close to be 

realized immediately.12 Accordingly, 

the Commission waives the 30-day 

operative delay requirement and 

designates the proposed rule change 

operative upon filing with the 

Commission. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

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 rulecomments@sec.gov. Please include File 

Number SR–NYSE–2010–84 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2010–84. 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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. 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 

publicly available. All submissions 

should refer to File Number SR–NYSE– 

2010–84 and should be submitted on or 

before January 26, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–33254 Filed 1–4–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63623; File No. SR–OCC– 

2010–19] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change 

Relating to Stock Loan Programs 

December 30, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

December 16, 2010, 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 

primarily by OCC. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The proposed rule change would 

provide OCC’s clearing members with 

clarification regarding the regulatory 

treatment under Rule 15c3–1 2 of 

collateral and margin posted by clearing 

members participating in stock loan 

transactions through OCC’s Stock Loan/ 

Hedge Program or Market Loan Program. 

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. 

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 provide OCC’s clearing 

members with clarification regarding 

the regulatory treatment under Rule 

15c3–1 of collateral and margin posted 

by clearing members participating in 

stock loan transactions through OCC’s 

Stock Loan/Hedge Program or Market 

Loan Program. 

1. Background 

OCC’s Stock Loan/Hedge Program, 

provided for in Article XXI of OCC’s ByLaws and Chapter XXII of OCC’s Rules, 

provides a means for OCC clearing 

members to submit broker-to-broker 

stock loan transactions to OCC for 

clearance. Broker-to-broker transactions 

are independently-executed stock loan 

transactions that are negotiated directly 

between two OCC clearing members. 

OCC’s Market Loan Program, provided 

for in Article XXIA of OCC’s By-Laws 

and Chapter XXIIA of OCC’s Rules, 

accommodates securities loan 

transactions executed through electronic 

trading platforms that match lenders 

and borrowers on an anonymous basis. 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 76, No. 3 / Wednesday, January 5, 2011 / Notices 603 

3With respect to both the Stock Loan/Hedge 

Program and the Market Loan Program, the loaned 

securities are moved to the account of the borrower 

against cash collateral (normally 102%) through the 

facilities of The Depository Trust Company (‘‘DTC’’), 

and DTC notifies OCC that the movement has 

occurred at the time the transaction is submitted for 

clearance. The securities are returned to the lender 

against return of the cash collateral through the 

same mechanism. 

4This OCC margin requirement is in addition to 

the cash collateral that is transferred to the stock 

lender and may be deposited in any form 

constituting acceptable collateral under OCC Rule 

604. 

5OCC does not calculate risk margin on stock 

loan positions and stock borrow positions 

separately from risk margin on options positions 

carried in the same account. 

6Securities Exchange Act Release No. 59036 (Dec. 

1, 2008), 73 FR 74554 (Dec. 8, 2008). 

7The text of the proposed amendment to 

interpretation .05 can be found at http://www.

optionsclearing.com/components/docs/legal/rules_

and_bylaws/sr_occ_10_19.pdf. 

8 15 U.S.C. 78q–1. 

Anonymous stock loan transactions are 

initiated when a lender or borrower, 

which is either an OCC clearing member 

participating in the Market Loan 

Program or a non-clearing member that 

has a clearing relationship with an OCC 

clearing member participating in the 

Market Loan Program, accepts a bid/ 

offer displayed on a trading platform. A 

clearing member participating in the 

Market Loan Program will be obligated 

to OCC as principal with respect to 

transactions effected by its customers 

that are non-clearing members of a 

trading platform. 

When a stock loan transaction is 

submitted to and accepted by OCC for 

clearance, OCC substitutes itself as the 

lender to the borrower and the borrower 

to the lender thus serving a function for 

the stock loan market similar to the one 

it serves within the listed options 

market. OCC guarantees the future daily 

market-to-market payments, which are 

effected through OCC’s cash settlement 

system, between the lending clearing 

member and borrowing clearing member 

and guarantees the return of the loaned 

stock to the lending clearing member 

and the collateral to the borrowing 

clearing member upon close-out of the 

stock loan transaction.3 One advantage 

of submitting stock loan transactions to 

OCC is that the stock loan and stock 

borrow positions then reside in the 

clearing member’s options account at 

OCC and, to the extent that they offset 

the risk of options positions carried in 

the same account, may reduce the 

clearing member’s margin requirement 

in the account. OCC’s risk is, in turn, 

reduced by having the benefit of the 

hedge. 

One of the tools that OCC uses to 

manage its exposure to stock loan 

transactions is the margin that OCC 

calculates and collects with respect to 

each account of a clearing member.4

Such margin consists of a mark-tomarket component that is based on the 

net asset value of the account (i.e., the 

cost to liquidate the account at current 

prices). A second component of such 

margin is the risk component (‘‘Risk 

Margin’’) determined under OCC’s 

proprietary margin system on the basis 

of the net risk of all open positions 

carried in the account, including stock 

loan positions as well as options 

positions.5 An additional margin 

requirement (‘‘Additional Margin’’), 

which is solely applicable to stock loan 

transactions, arises where the collateral 

provided by the borrowing clearing 

member is greater than the current 

market value of the loaned stock. For 

example, where in a stock loan 

transaction the borrowing clearing 

member is required to provide collateral 

equal to 102% of the current market 

value of the loaned stock, OCC will 

charge the corresponding lending 

clearing member an Additional Margin 

amount equal to the 2% excess 

collateral and credit the borrowing 

clearing member an equal amount. 

These Additional Margin charges/ 

credits are designed to provide OCC 

with resources to fully compensate a 

party to a stock loan transaction in the 

event that the counterparty defaults and 

the loaned stock or collateral held by 

the non-defaulting party is less than the 

value of the collateral or loaned stock 

exchanged. 

2. Description of Rule Change 

In December 2008, the Commission 

approved an OCC proposed rule change 

that memorialized OCC’s understanding 

that where stock loan transactions are 

submitted to OCC for clearance through 

the Stock Loan/Hedge Program, any 

Additional Margin that a clearing 

member is required to deposit with OCC 

will be treated the same as any other 

portion of the OCC margin deposit 

requirement and therefore will not 

constitute an unsecured receivable that 

would otherwise be required to be 

deducted from such clearing member’s 

net capital for purposes of Rule 15c3– 

1.6

Under the current proposed rule 

change, OCC would expand the prior 

interpretive relief so that: (i) clearing 

members also would not be required to 

take a net capital deduction with respect 

to any excess of the collateral over the 

market value of the loaned stock and (ii) 

such expanded interpretive relief would 

apply to stock loan transactions 

submitted to OCC for clearance through 

the Market Loan Program. As explained 

above, any over-collateralization of the 

loaned stock would be secured and 

offset by Additional Margin charges/ 

credits applied by OCC. Therefore, any 

such excess collateral on loaned stock 

also would not be deemed to constitute 

an unsecured receivable for purposes of 

Rule 15c3–1. 

OCC believes that providing such 

relief from Rule 15c3–1(c)(2)(iv)(B) is 

within the policy objectives of the rule. 

Specifically, while the intent behind the 

capital charges is to protect the stock 

borrower against credit exposure to the 

lender, the borrower has no such credit 

exposure where OCC is substituted as 

the central counterparty. Furthermore, 

under the Market Loan Program, 

whereby stock loan transactions are 

effected through an electronic trading 

platform, it is literally impossible for the 

clearing member to look through OCC 

and treat another clearing member as its 

counterparty. 

In connection with the abovereferenced initiatives, OCC proposes to 

amend interpretation .05 to OCC Rule 

601 to reflect the regulatory treatment 

under Rule 15c3–1 of collateral and 

margin posted by clearing members 

participating in stock loan transactions 

through the Stock Loan/Hedge Program 

and/or Market Loan Program.7

OCC states that the proposed change 

to OCC’s Rules is consistent with the 

purposes and requirements of Section 

17A of the Act 8 because it is designed 

to promote the prompt and accurate 

clearance and settlement of stock loan 

transactions, to foster cooperation and 

coordination with persons engaged in 

the clearance and settlement of such 

transactions, to remove impediments to 

and perfect the mechanism of a national 

system for the prompt and accurate 

clearance and settlement of such 

transactions, and, in general, to protect 

investors and the public interest. OCC 

further states that the proposed rule 

change is not inconsistent with the 

existing rules of OCC including any 

rules proposed to be amended. 

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 

OCC did not solicit or receive written 

comments with respect to the proposed 

rule change. OCC will notify the 

Commission of any written comments it 

receives. 


jlentini on DSKJ8SOYB1PROD with NOTICES
604 Federal Register / Vol. 76, No. 3 / Wednesday, January 5, 2011 / Notices 

9 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 34– 

63095 (October 13, 2010), 75 FR 64372 (the 

‘‘Commission’s Notice’’). 

4See e-mail from Coastal Securities, Inc., dated 

November 8, 2010 (‘‘Coastal Securities Letter’’); 

letter from Bond Dealers of America, dated 

November 9, 2010 (‘‘BDA Letter I’’); letter from 

Hartfield Titus & Donnelly, LLC, dated November 

9, 2010 (‘‘HTD Letter’’); letter from the Securities 

Industry and Financial Markets Association, dated 

November 9, 2010 (‘‘SIFMA Letter I’’); e-mail from 

RW Smith Associates, Inc., dated November 9, 2010 

(‘‘RW Smith Letter’’); letter from Southwest 

Securities, Inc., dated November 9, 2010 

(‘‘Southwest Securities Letter’’); letter from the 

Government Finance Officers Association, dated 

November 9, 2010 (‘‘GFOA Letter’’); letter from TD 

Ameritrade Holding Corporation, dated November 

9, 2010 (‘‘TD Ameritrade Letter’’); letter from 

Edward Jones, dated November 9, 2010 (‘‘Edward 

Jones Letter I’’); letter from BMO Capital Markets, 

dated November 9, 2010 (‘‘BMO Letter’’); letter from 

Morgan Stanley Smith Barney LLC, dated 

November 10, 2010 (‘‘Morgan Stanley Letter’’); letter 

from Lawrence P. Sandor, Senior Associate General 

Counsel, MSRB, dated November 19, 2010 (‘‘MSRB 

Response Letter’’); letter from Jeffries & Company, 

Inc., dated November 29, 2010 (‘‘Jeffries Letter’’); 

letter from the Securities Industry and Financial 

Markets Association, dated December 2, 2010 

(‘‘SIFMA Letter II’’), letter from Bond Dealers of 

America, dated December 14, 2010 (‘‘BDA Letter 

II’’); letter from Edward Jones, dated December 14, 

2010 (‘‘Edward Jones Letter II’’); and letter from 

Lawrence P. Sandor, Senior Associate General 

Counsel, MSRB, dated December 28, 2010 

(‘‘Supplemental MSRB Response Letter’’). 

5 15 U.S.C. 78o-4(b)(2)(J). 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 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 

90 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 or disapprove 

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. 

Comments may be submitted by any of 

the following methods: 

• Electronic comments may be 

submitted by using the Commission’s 

Internet comment form (http:// 

www.sec.gov/rules/sro.shtml), or send 

an e-mail to rule-comment@sec.gov. 

Please include File No. SR–OCC–2010– 

19 on the subject line. 

• Paper comments should be sent in 

triplicate to Elizabeth M. Murphy, 

Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington DC 20549–1090. 

All submissions should refer to File No. 

SR–OCC–2010–19. 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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at OCC’s principal office and 

OCC’s Web site (http:// 

www.theocc.com/about/publications/ 

bylaws.jsp). 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 submission should refer to File No. 

SR–OCC–2010–19 and should be 

submitted within January 26, 2011 days 

after the date of publication. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–33304 Filed 1–4–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63621; File No. SR–MSRB– 

2010–10] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Order Granting Approval of 

Proposed Rule Change Consisting of 

Amendments to Rule A–13 To Increase 

Transaction Assessments for Certain 

Municipal Securities Transactions 

Reported to the Board and to Institute 

a New Technology Fee on Reported 

Sales Transactions 

December 29, 2010. 

I. Introduction 

On September 30, 2010, the 

Municipal Securities Rulemaking Board 

(‘‘MSRB’’ or ‘‘Board’’), filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Exchange Act’’),1 and Rule 

19b–4 thereunder,2 a proposed rule 

change which consists of amendments 

to Rule A–13 to increase transaction 

assessments for certain municipal 

securities transactions reported to the 

Board and to institute a new technology 

fee on reported sales transactions. The 

proposed rule change was published for 

comment in the Federal Register on 

October 19, 2010.3 The Commission 

received fifteen comment letters 

regarding the proposed rule change, the 

MSRB’s response, and a supplemental 

response to the MSRB’s response.4

This order approves the proposed rule 

change. 

II. Background and Description of 

Proposal 

A. Current Sources of MSRB Revenue 

Section 15B(b)(2)(J) of the Exchange 

Act states that the MSRB’s rules should 

‘‘provide that each municipal securities 

broker, municipal securities dealer, and 

municipal advisor shall pay to the 

Board such reasonable fees and charges 

as may be necessary or appropriate to 

defray the costs and expenses of 

operating and administering the 

Board.’’ 5 The MSRB currently levies 

four types of fees that are generally 

applicable to dealers pursuant to three 

separate rules. 

MSRB Rule A–12 provides for a $100 

fee paid once by a dealer when it first 

begins to engage in municipal securities 

activities. MSRB Rule A–13 provides for 

a) an underwriting fee of $.03 per $1000 

par value of municipal securities 

purchased in a primary offering (with 

specified exceptions), and b) a 

transaction fee (the ‘‘transaction fee’’) of 

$.005 per $1000 par value of sale 

transactions of municipal securities 

(with specified exceptions). Finally, 

MSRB Rule A–14 provides for an annual 

fee of $500 from each dealer who 

conducts municipal securities activities. 

In addition, since this proposed rule 

was filed, the MSRB has amended Rule 

A–12 to establish an initial fee of $100 


jlentini on DSKJ8SOYB1PROD with NOTICES