1014 Federal Register / Vol. 62, No. 4 / Tuesday, January 7, 1997 / Notices

7E.g., OCC Rule 305.

8Rule 214(a) contains provisions similar to

Interpretation .03 of Article V, Section 1 of the bylaws, supra notes 4 and 5 and accompanying text.

9 15 U.S.C. 78q–1(b)(3)(F).

10 17 CFR 200.30–3(a)(12).

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

initial margin deposits) or that

restrictions be imposed on the

applicant’s clearance of option

transactions if the Committee has

determined that the applicant’s

financial or operational condition in

relation to the business that the

applicant has proposed to transact

through OCC makes such action

necessary or advisable for the protection

of OCC, clearing members, or the

general public. The Board is required to

review independently such a

recommendation to determine whether

it should be imposed on an applicant.

Any requirements or restrictions so

imposed would remain in force for the

period determined by the Board but will

last no longer than the end of the first

three calendar months commencing

after the applicant’s admission to

clearing membership. Furthermore,

Interpretation .05 states that the

imposition of any additional

requirements or restrictions so imposed

shall not preclude OCC from imposing

contemporaneous requirements or

restrictions pursuant to other provisions

of OCC’s by-laws and rules.7

B. Article V, Section 3 of the By-Laws

Interpretation .01 has been added to

Section 3 of Article V. That

interpretation requires an applicant

approved for clearing membership

subject to the satisfaction of specified

conditions to meet those specified

conditions within six months from the

date on which its application is

approved unless the Board prescribes a

shorter time period at the time of

approval. If an applicant fails to meet

the specified conditions within the

applicable time period, the approval of

the application will be deemed

withdrawn, and the application will be

deemed to have lapsed unless the

period to satisfy those conditions is

extended by OCC. Any applicant

seeking an extension will be required to

make a written request specifying any

material changes that have occurred in

its ability to transact business with OCC.

The Chairman or the President is vested

with the authority to approve or

disapprove an extension request. No

deadline can be extended beyond one

year from the date the application

originally was approved.

C. Chapter II of the Rules

Rule 201 is amended (i) to delete the

requirement that each clearing member

maintain an office in the vicinity of the

office of OCC and (ii) to require every

clearing member to provide OCC with

prompt written notice of the relocation

of its principal office or the office

maintained by the clearing member to

comply with the requirements of Rule

201(a) and with respect to a non-U.S.

clearing member, prompt notice of a

material change in the office

arrangements OCC had previously

found satisfactory.

Rule 214(a) is amended to require that

only associated persons who are full

time employees of a clearing member

may satisfy the applicable requirements

of that rule.8 Interpretation .02

thereunder is amended (i) to shorten the

time period from one year to three

months within which a clearing member

must replace an associated person

through whom a clearing member has

been meeting the requirements of the

rule and (ii) to require prompt, written

notice of any separation between the

clearing member and such associated

person.

Rule 215 has been added to require

each clearing member to provide OCC

with prompt, prior, written notice of

material changes to its operations

including: (i) its involvement in any

merger, combination, or consolidation;

(ii) the acquisition of another entity; (iii)

the sale of a significant portion of its

assets; (iv) a change in its form of

business organization or the name under

which it does business; and (v) a change

in the direct or indirect beneficial

ownership of 10% or more of the equity

of the clearing member. Clearing

members will be required to provide

OCC with such documents as OCC

might require with respect to such

events as well as a list of persons or

entities that are the beneficial owners

directly or indirectly of 10% or more of

the equity of the clearing member.

II. Discussion

Section 17A(b)(3)(F) 9 of the Act

requires that the rules of a clearing

agency be designed to safeguard

securities and funds in its custody or

control. The proposal should assist OCC

in this regard by helping to ensure that

only entities that meet certain standards

are standards are admitted to OCC

membership. For example, seeking the

approval of an applicant’s DEA prior to

admission should help OCC to confirm

that the admission is consistent with the

applicant’s current operations.

Furthermore, by allowing the

Committee to recommend that

additional requirements or restrictions

be placed on an applicant, OCC should

be better able to monitor such applicant

and evaluate the risks such applicant

poses to OCC. Similarly, by requiring

applicants to meet all conditions of

membership within six months of

admission, OCC limits the risk that such

applicant poses to OCC while

permitting an applicant a reasonable

amount of time to comply with OCC

rules.

Members are now required to provide

OCC prompt notice of such events as a

change in office or a material change in

operations. By providing prompt notice

of these changes, the proposal should

enable OCC to better monitor the

financial and operational status of its

members. By admitting applicants

subject to certain conditions and by

monitoring members’ conditions, OCC

should be able to further reduce the risk

of member default and thereby further

reduce the risk that OCC may need to

expend funds in satisfaction of a

defaulting member’s obligations. Thus,

the proposal should assist OCC in

safeguarding funds and securities.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposed

rule change is consistent with the

requirements of the Act and in

particular Section 17A of the Act and

the rules and regulations thereunder.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act, that the

proposed rule change (File No. SR–

OCC–96–11) be and hereby is approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.10

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–231 Filed 1–6–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38105; File No. SR–OCC–

96–13]

Self-Regulatory Organizations; The

Options Clearing Corporation; Order

Approving Proposed Rule Change

Relating to Unit Investment Trusts as

Margin Collateral

December 31, 1996.

On September 6, 1996, The Options

Clearing Corporation (‘‘OCC’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change (File No. SR–

OCC–96–13) pursuant to Section

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

of 1934 (‘‘Act’’).1 Notice of the proposal

was published in the Federal Register
Federal Register / Vol. 62, No. 4 / Tuesday, January 7, 1997 / Notices 1015

2Securities Exchange Act release No. 37793

(October 7, 1996), 61 FR 53477.

3 17 CFR 240.11Aa2–1.

4 15 U.S.C. 78q–1(b)(3)(F).

5 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release Nos. 36781

(January 26, 1996), 61 FR 3958 [Files Nos. SR–

SCCP–96–01 and SR–Philadep–96–01] and 37382

(June 28, 1996), 61 FR 35291 [File Nos. SR–

Philadep–96–08 and SR–SCCP–96–04] (orders

granting accelerated approval on a temporary basis

of proposed rule changes to provide for the

application of Article 8 of the New York UCC).

on October 11, 1996.2 No comment

letters were received. For the reasons

discussed below, the Commission is

granting approval of the proposed rule

change.

I. Description

The proposed rule change adds

subparagraph (4) to Rule 604(d) to

permit clearing members to deposit as

margin with OCC publicly traded units

of beneficial interest (‘‘trust units’’) in

unit investment trusts that hold

portfolios or baskets of common stocks.

These classes of trust units are traded

and cleared like shares of common stock

and are typically held in book entry

form at a securities depository. The trust

units must met the requirements

applicable to stocks under Rule 604(d).

Rule 604(d) requires that to be eligible

as margin deposits, stock must have a

market value greater than $10 per share

and must either (a) be traded on a

national securities exchange and have

last sale reports collected and

disseminated pursuant to a consolidated

transaction reporting plan or (b) be

traded in the over-the-counter market

and designated as a national market

system security pursuant to the

Commission’s Rule 11Aa2–1.3 Pursuant

to Rule 604(d)(1), trust units will be

valued on a daily basis at 60% of

currently market value.

In order to be eligible for deposit, the

trust units must be of a class approved

by OCC’s Membership/Margin

Committee (‘‘Committee’’) for deposit as

margin. At the present time, the

Committee has approved Standard &

Poor’s (‘‘S&P’’) depository receipts on

the S&P 500 Index and S&P MidCap 400

Index as being classes approved for

deposit as margin.

In addition, the proposed rule change

replaces the term ‘‘stocks’’ with the term

‘‘securities’’ in subparagraphs (2) and (3)

to Rule 604(d). Subparagraphs (2) and

(3) of Rule 604(d) limit the use of

customer securities as margin and

prescribe the method of depositing

margin securities. The amendment

clarifies that such sections apply not

only to stocks but also corporate bonds

eligible as margin deposits under rule

604(d)(1).

II. Discussion

Section 17A(b)(3)(F) 4 of the Act

requires that the rules of a clearing

agency be designed to safeguard

securities and funds in its custody or

control. Because the trust units must be

either traded on a national securities

exchange or designated as a national

market system security to be eligible as

collateral, the proposal ensures that

only very liquid securities will be

accepted. Furthermore, by initially

limiting eligibility to S&P depository

receipts on the S&P 500 Index and the

S&P MidCap 400 Index, OCC will be

able to gain experience in accepting

trust units before expanding the types of

trust units it will accept. Therefore, the

Commission believes that OCC’s

acceptance of these classes of trusts

units is consistent with OCC’s

obligation to safeguard securities and

funds.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposed

rule change is consistent with the

requirements of the Act and in

particular Section 17A of the Act and

the rules and regulations thereunder.

It is therefore Ordered, pursuant to

Section 19(b)(2) of the Act, that the

proposed rule change (File No. SR–

OCC–96–13) be and hereby is approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–232 Filed 1–6–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38099; File Nos. SRPhiladep–96–20 and SR–SCCP–96–09]

Self-Regulatory Organizations;

Philadelphia Depository Trust

Company and Stock Clearing

Corporation of Philadelphia; Notice of

Filing and Order Granting Permanent

Approval on an Accelerated Basis of

Proposed Rule Changes Concerning

the Adoption of Article 8 of the New

York Uniform Commercial Code to

Govern Certain Transactions

December 30, 1996.

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

Securities Exchange Act of 1934

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

November 15, 1996, the Philadelphia

Depository Trust Company (‘‘Philadep’’)

and the Stock Clearing Corporation of

Philadelphia (‘‘SCCP’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

changes (File Nos. SR-Philadep–96–20

and SR–SCCP–96–09) as described in

Items I and II below, which Items have

been prepared primarily by Philadep

and SCCP. The Commission is

publishing this notice and order to

solicit comments from interested

persons and to grant permanent

approval of the proposed rule changes

on an accelerated basis.

I. Self-Regulatory Organizations’

Statement of the Terms of Substance of

the Proposed Rule Changes

Philadep and SCCP request

permanent approval for their respective

adoption of Article 8 of the State of New

York’s Uniform Commercial Code

(‘‘UCC’’) to govern certain transactions

involving Philadep, SCCP, their

participants, and pledgees. On June 28,

1996, the Commission temporarily

approved through December 31, 1996,

Philadep’s and SCCP’s adoption of New

York’s U.C.C. Article 8.2

II. Self-Regulatory Organizations’

Statements of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In their filings with the Commission,

Philadep and SCCP included statements

concerning the purpose of and the basis

for the proposed rule changes and

discussed any comments received on

the proposed rule changes. The text of

these statements may be examined at

the places specified in Item IV below.

Philadep and SCCP have prepared

summaries, as set forth in sections (A),

(B), and (C) below, of the most

significant aspects of these statements.

(A) Self-Regulatory Organizations’

Statements of the Purpose of, and the

Statutory Basis for, the Proposed Rule

Changes

Philadep and SCCP propose to

permanently adopt Rule 32 and Rule 41,

respectively, and to permanently amend

Rule 1 of their rules. The proposed rule

change codifies Philadep’s and SCCP’s

decision to elect Article 8 of the New

York UCC to govern certain transactions

for the purpose of providing a uniform,

consistent, and predictable body of law.

Specifically, Rule 32 and Rule 41 will

assure that the rights and obligations of

Philadep and SCCP, their participants,

and their pledgees with respect to

transfers and pledges of securities, to

the extent Article 8 of the UCC applies

thereto, will be governed by and

construed in accordance with Article 8

of the UCC of New York in effect from