51348 Federal Register / Vol. 74, No. 192 / Tuesday, October 6, 2009 / Notices 

6 If the Fund has been in operation fewer than five 

years, the measured period will being immediately 

following the Fund’s first public offering. 

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

2 17 CFR 240.19b–4. 

3The Commission has modified the text of the 

summaries prepared by OCC. 4This proposal furthers OCC’s continuing efforts 

to utilize its System for Theoretical Analysis and 

Numerical Simulations (‘‘STANS’’) to its fullest 

risk-management potential resulting in lower risk to 

OCC while also increasing margin offset 

opportunities for OCC clearing members. Recent 

OCC rule filings with a similar objective include (i) 

a rule change eliminating the practice of allowing 

clearing members to carry stock loan and borrow 

positions without collecting risk margin and 

requiring instead that all such positions be included 

in the STANS margin calculation [Securities 

Exchange Act Release No. 59036 (December 12, 

2006), 73 FR 74554 (December 8, 2008)] and (ii) a 

rule change (‘‘Collateral in Margins’’) providing that 

common stock deposited as collateral be included 

in the STANS calculation rather than valuing the 

collateral at a current market price less an arbitrary 

30% haircut [Securities Exchange Act Release No. 

58158 (July 15, 2008), 73 FR 42646 (July 22, 2008)]. 

In addition, largely in response to market 

conditions, OCC recently reduced the minimum 

price for common stocks held as collateral from $10 

to $3 and eliminated the 10% concentration test for 

certain ETFs held as collateral. Securities Exchange 

Act Release No. 59845 (April 29, 2009), 74 FR 

21039 (May 6, 2009). 

5The term ‘‘common stock’’ or ‘‘stock’’ is broadly 

used in this rule change to refer to different types 

of equity securities including ETFs but not 

preferred stock. 

6 ‘‘Covered securities’’ are securities that are 

authorized for listing on the New York Stock 

Exchange, the American Stock Exchange, the 

National Market System of the Nasdaq Stock Market 

(collectively, ‘‘Exchanges’’), or any other national 

securities exchange, or tiers thereof, that the 

Commission determines are substantially similar to 

the listing standards applicable to securities on the 

Exchanges. 15 U.S.C. 77r(b)(1). 

date, is no more than 1 percentage point 

greater than the Fund’s average annual 

total return for the 5-year period ending 

on such date; 6 and 

ii. The transmittal letter 

accompanying any registration 

statement filed with the Commission in 

connection with such offering discloses 

that the Fund has received an order 

under section 19(b) to permit it to make 

periodic distributions of long-term 

capital gains with respect to its common 

stock as frequently as twelve times each 

year, and as frequently as distributions 

are specified by or determined in 

accordance with the terms of any 

outstanding preferred stock as such 

Fund may issue. 

7. Amendments to Rule 19b–1. The 

requested order will expire on the 

effective date of any amendment to rule 

19b–1 that provides relief permitting 

certain closed-end investment 

companies to make periodic 

distributions of long-term capital gains 

with respect to their outstanding 

common stock as frequently as twelve 

times each year. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–24005 Filed 10–5–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60743; File No. SR–OCC– 

2009–15] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Proposed Rule Change to 

Revise the Minimum Eligibility Criteria 

for Common Stock Loaned Through 

Stock Loan Programs and Deposited 

as Margin Collateral 

September 29, 2009. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder 2

notice is hereby given that on August 

28, 2009, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The proposed rule change would 

revise minimum eligibility criteria 

applicable to common stock loaned 

through OCC’s Stock Loan Programs and 

deposited as margin collateral. 

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.3

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

The purpose of this rule change is to 

revise OCC’s minimum eligibility 

requirements for stock borrows and 

loans accepted in the OCC’s Stock Loan 

Programs and common stock accepted 

as margin collateral.4

Stock Loan Programs 

OCC’s clearing services involve 

common stock 5 in several ways. Stocks 

are: (i) Underlying securities for 

exchange-traded equity option 

contracts, (ii) constituent securities of 

stock indexes that underlie stock index 

options or of indexes on which 

underlying ETFs are based, (iii) 

constituent securities of ETFs that 

although are not underlying securities 

are based on indexes that underlie index 

options (‘‘Index Option Related ETFs’’), 

(iv) the subject of stock loan or borrow 

transactions cleared pursuant to OCC’s 

Stock Loan Programs, and (v) deposited 

with OCC as margin collateral. 

Rationalizing the interrelationship 

among the criteria applied to stocks for 

these various purposes will maximize 

the potential for offsets and reduce risk 

in the clearing system. 

Under OCC’s Stock Loan Programs, 

only loans of stocks that are either 

underlying securities for options or 

futures or ETFs based on a stock index 

underlying an index option contract are 

eligible for clearance through OCC 

(collectively, ‘‘Options-Related Stocks’’). 

OCC restricted stock loan activity to 

limit its risk to loans supporting short 

sales that might be serving as hedges for 

options transactions or helping to add 

liquidity to the options markets. At the 

time this criterion was implemented in 

2002, OCC managed the risk of stock 

loan transactions for most clearing 

members on a credit basis—that is OCC 

did not collect margin on such 

transactions. As noted above, OCC now 

requires margin on all stock loan 

transactions thus reducing the risk 

associated with this activity. 

Accordingly, OCC believes that it is no 

longer necessary or appropriate to limit 

stock loan transactions to OptionsRelated Stocks. 

In connection with the foregoing 

change, OCC is proposing to 

supplement its existing criteria for stock 

eligible for the Stock Loan Programs by 

requiring that in order to qualify as an 

‘‘Eligible Stock’’ for purposes of the 

Stock Loan Programs a stock must be a 

‘‘covered security’’ as defined in Section 

18(b)(1) of the Securities Act of 1933.6

By agreement with the options 

exchanges, OCC already requires that all 

underlying stocks meet this criterion, 

and OCC believes that it is an 

appropriate minimum assurance of 

quality. In addition, OCC is imposing a 

$3 minimum share price requirement 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 192 / Tuesday, October 6, 2009 / Notices 51349 

7This minimum price requirement corresponds 

to the minimum price standard contained in the 

criteria used by the options exchanges for initial 

selection of underlying securities that are also 

‘‘covered securities’’ 8 15 U.S.C. 78q–1. 

that would be applicable only to stocks 

other than Options-Related Stocks.7

OCC would, however, retain the ability 

to waive the $3 minimum price where 

specified other factors suggest that the 

stock is nevertheless suitable for 

inclusion in the Stock Loan Programs. 

Common Stock as Collateral 

Under current OCC Rule 604(b)(4), 

clearing members can deposit common 

stocks that meet the following criteria: 

minimum price of $3 per share and 

traded on a national securities 

exchange, or traded in the Nasdaq 

Global Market or the Nasdaq Capital 

Market. The aggregate value of margin 

attributed to a single stock cannot 

exceed 10% of a clearing member’s total 

margin requirement. Stocks are haircut 

by 30% for margin valuation purposes. 

Stocks that have been suspended from 

trading by or are subject to special 

margin requirements under the rules of 

a listing market because of volatility, 

lack of liquidity, or similar 

characteristics are not eligible for 

deposit as margin. 

Under the approved but not yet 

implemented Collateral in Margins 

program, any common stock that meets 

the above criteria except the minimum 

price requirement and that is 

deliverable upon exercise or maturity of 

a cleared contract (i.e., is an underlying 

security), as well as index option related 

ETFs, will be afforded collateral value 

as determined by STANS. Moreover, the 

margin concentration requirement will 

be inapplicable to such deposits. Thus, 

upon implementation of the Collateral 

in Margins proposal, the minimum price 

requirement and margin concentration 

requirement would be eliminated for 

common stocks that are underlying 

securities or index option related ETFs. 

The minimum price requirement is 

being eliminated for these securities in 

order to provide a greater opportunity 

for members to hedge their equity 

options positions with pledges of the 

underlying securities. This decision also 

reflects OCC’s judgment that the 

minimum price requirement is less 

important in the current environment 

where OCC is able to closely monitor 

collateral in the form of common stock 

and to apply the sophisticated risk 

management technique incorporated in 

STANS in order to determine the 

appropriate value to assign to such 

collateral. The concentration test 

requirement is being eliminated because 

STANS contains its own built-in 

functionality that adequately handles 

concentrated options and collateral 

holdings. 

In anticipation of the implementation 

of the Collateral in Margins program, 

and effective with such implementation, 

OCC proposes to further amend Rule 

604(b)(4)(i) as follows: 

(1) Replace the requirement of listing 

on a national securities exchange or 

specific Nasdaq markets with the 

requirement that all common stocks 

deposited as margin must be ‘‘covered 

securities’’ as described above; 

(2) Provide that the $3 minimum 

share price requirement will apply to 

deposits of common stocks that are not 

Options Related Stocks; 

(3) permit OCC to waive the $3 

minimum share price if it determines 

that other factors, including trading 

volume, the number of shareholders, the 

number of outstanding shares, and 

current bid/ask spreads warrant such 

action; 

(4) delete Interpretation and Policy 

.13, adopted in SR–OCC–2009–08, 

which made the 10% concentration test 

inapplicable to certain ETFs because the 

10% test will be eliminated for all 

stocks (including ETFs) when Collateral 

in Margins is implemented. 

In addition, OCC proposes to amend 

Rule 1001 to provide that the 

determination of ‘‘average aggregate 

daily margin requirement’’ and ‘‘daily 

margin requirement’’ would be 

performed without reference to any 

deposits of securities (e.g., common 

stocks including fund shares) that were 

valued within STANS pursuant to Rule 

601. This change ensures that 

contributions to the clearing fund will 

be determined without taking into 

account any reduction in margin 

requirements resulting from valuing 

deposits of such securities under 

STANS. Other proposed changes to Rule 

1001 are conforming or clarifying in 

nature. 

The changes proposed in this rule 

filing more closely align both the stock 

collateral and stock loan eligibility 

criteria with the criteria for selection of 

underlying equity securities. While 

some differences still exist, OCC 

believes that the proposed discretionary 

authority will provide OCC with 

sufficient flexibility to treat equity 

options, stock loan transactions, and 

stock collateral in a consistent manner 

when appropriate. For example, the $3 

minimum price requirement is similar 

or identical to requirements contained 

in the equity options listing criteria of 

the options exchanges. In addition, the 

factors that OCC proposes to be 

considered in determining whether an 

exception to the $3 minimum may be 

granted are consistent with those 

reflected in such criteria. These factors 

are widely regarded as among the most 

relevant in determining whether a stock 

is liquid. 

STANS’s functionality permits OCC 

to propose there changes. STANS 

considers a security’s historical price 

volatility in generating its simulated 

market moves resulting in coverage 

parameters that vary based on the 

overall risk of a particular underlying 

security. STANS also identifies and 

addresses concentrated positions. By 

incorporating equity options positions, 

stock loan positions, and upon 

implementation of the Collateral in 

Margins changes common stock 

deposits within a single concentration 

analysis, OCC can identify where 

hedged positions exist and can also 

identify areas of cumulative exposure 

where additional collateral may be 

appropriate (e.g., where a clearing 

member has long options, stock loan 

positions, and margin deposits all 

relating to the same security). 

Upon Commission approval, OCC 

proposes to implement the changes to 

stock loan eligibility criteria 

immediately. OCC proposes that the 

changes in eligibility criteria for 

common stock deposited as margin be 

implemented concurrently with 

implementation of the Collateral in 

Margins program, which is currently 

scheduled for implementation in the 

fourth quarter 2009. 

OCC believes the proposed rule 

change is consistent with the purposes 

and requirements of Section 17A of the 

Act 8 and the rules and regulations 

thereunder because the proposed rule 

change will promote the prompt and 

accurate clearance and settlement of 

transactions in securities and safeguard 

assets within OCC’s custody or control 

by facilitating appropriate offsets among 

equity options, stock loan and borrow 

positions, and stock collateral that are 

held in a single clearing member 

account thereby increasing market 

efficiency without increasing risk. 

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 


jlentini on DSKJ8SOYB1PROD with NOTICES
51350 Federal Register / Vol. 74, No. 192 / Tuesday, October 6, 2009 / 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. 60520 

(August 18, 2009), 74 FR 43176 (‘‘Notice’’). 

4See Notice, supra note 3, 74 FR at 43177. 

5NYSE Amex Rule 933NY(a) requires that a Floor 

Broker handling an order use due diligence to 

execute the order at the best price or prices 

available to him, in accordance with the Rules of 

the Exchange. 

6NYSE Amex Rule 935NY states that users may 

not execute as principal orders they represent as 

agent unless (i) agency orders are first exposed on 

the Exchange for at least one second or (ii) the User 

has been bidding or offering on the Exchange for 

at least one second prior to receiving an agency 

order that is executable against such bid or offer. 

7NYSE Amex Rule 963NY states that the highest 

bid/lowest offer shall have priority over all other 

orders. In the event there are two or more bids/ 

offers for the same option contract representing the 

best price and one such bid/offer is displayed in the 

Consolidated Book, such bid shall have priority 

over any other bid at the post. In addition, if two 

or more bids/offers represent the best price and a 

bid/offer displayed in the Consolidated Book is not 

involved, priority shall be afforded to such bids in 

the sequence in which they are made. Rule 963NY 

also contains certain provisions related to splitprice priority and priority of complex orders. 

have been received. OCC will notify the 

Commission of any written comments 

received by OCC. 

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. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commissions Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml) or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–OCC–2009–15 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–OCC–2009–15. 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, 100 F Street, NE., Washington, 

D.C. 20549–1090, on official business 

days between the hours of 10 a.m. and 

3 p.m. Copies of such filings will also 

be available for inspection and copying 

at the principal office of the OCC and on 

OCC’s Web site at http:// 

www.optionsclearing.com/publications/ 

rules/proposed_changes/ 

sr_occ_09_15.pdf. 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– 

2009–15 and should be submitted on or 

before October 27, 2009. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.9

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23992 Filed 10–5–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60741; File No. SR– 

NYSEAmex–2009–45] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Order Approving Proposed 

Rule Change Amending Rule 476A 

(Imposition of Fines for Minor 

Violation(s) of Rules) 

September 29, 2009. 

On July 29, 2009, NYSE Amex LLC 

(‘‘NYSE Amex’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

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

19b–4 thereunder,2 a proposed rule 

change amending its Minor Rule Plan 

(‘‘MRP’’) to incorporate additional 

violations into the MRP and to increase 

the fine levels for certain MRP 

violations. The proposed rule change 

was published for comment in the 

Federal Register on August 26, 2009.3

The Commission received no comments 

regarding the proposal. This order 

approves the proposed rule change. 

The Exchange proposes to amend its 

MRP to incorporate violations for 

opening transactions in restricted 

classes, failure to report position and 

account information, and failure to 

complete mandatory annual training. 

The Exchange proposes to implement a 

fine schedule for Amex Options Trading 

Permit (‘‘ATP’’) Holders that effect 

opening transactions in restricted series 

of options, inconsistent with the terms 

of any such restriction, in violation of 

Rule 916 or 916C. This fine will consist 

of $1,000 for the first violation during a 

rolling 24-month period, $2,500 for a 

second violation within the same 

period, and $5,000 for a third violation 

during the same period. The Exchange 

also proposes to incorporate violations 

for failing to accurately report position 

and account information to the 

Exchange on a Large Option Position 

Report (‘‘LOPR’’) pursuant to Rules 

906(a) and 906C(a). This fine will 

consist of $1,000 for the first violation 

in a rolling 24-month period, $2,500 for 

a second violation within the same 

period, and $5,000 for a third violation 

within the same period. The Exchange 

believes that, in most cases, violations 

of trading in restricted classes and 

violations of LOPR reporting may be 

handled efficiently through the MRP. 

However, any egregious activity or 

activity that is believed to be 

manipulative will continue to be subject 

to formal disciplinary proceedings.4 The 

Exchange also proposes to implement a 

fine schedule for individuals who fail to 

complete a mandatory regulatory 

training program in violation of Rule 50, 

Commentary .03–.04. This fine will 

consist of $1,000 for the first violation 

in a rolling 24-month period, $2,500 for 

a second violation within the same 

period, and $5,000 for a third violation 

within the same period. 

The Exchange also proposes to 

increase fines for violations of NYSE 

Amex Rules 933NY(a),5 935NY,6 and 

963NY 7 to $1,000 for the first violation 

in a rolling 24-month period, $2,500 for 


jlentini on DSKJ8SOYB1PROD with NOTICES