47862 Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices

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

2The Commission has modified the text of the

summaries submitted by NSCC.

3See Securities Exchange Act Release No. 37616

(August 28, 1996), 61 FR 46887 (order approving

proposed rule changes riled by MBSCC, GSCC, and

ISCC seeking authority to enter into limited crossguaranty agreements).

4Such priority schedule may be amended by later

limited cross-guaranty agreements with other

entities by delivery of an amended priority

schedule to the counterparty.

5Securities Exchange Act Release No. 33548

(January 31, 1994), 59 FR 5638 (order approving

proposed rule change). The proposed rule change

incorporated the limited guaranty provisions into

NSCC’s rules and approved NSCC’s limited crossguaranty agreement with The Depository Trust

Company.

Authorization and Approval) requires the

written authorization of a customer before a

member may exercise any discretionary

power with respect to trading an options

contract in a customer account.

Rule 2860(b)(19) (Options; Requirements;

Suitability) prohibits a member from

recommending an options transaction unless

the member has reasonable grounds to

believe based on the information furnished

by the customer that the recommended

transaction is not unsuitable for the

customer.

Rule 2860(b)(23)(C)(i) (Options;

Requirements; Tendering Procedures for

Exercise of Options; Allocation of Exercise

Assignment Notices) requires notification to

customers of the method used to allocate

exercise notices to its customers’ accounts.

Rule 3110(c) (Books and Records;

Customer Account Information) requires

members to obtain specified customer

information.

Rule 3110(f)(3) (Books and Records;

Requirements when Using Predispute

Arbitration Agreements with Customers)

requires that a copy of the agreement

containing a predispute arbitration clause

must be given to the customer, who must

acknowledge receipt on the agreement or on

a separate document.

Rule 3110(g)(2) and (3) (Books and

Records; Telemarketing Requirements)

requires members to obtain written customer

authorization before obtaining a check drawn

on a customer’s account.

Rule 3230(d) (Clearing Agreements)

requires notification upon the opening of an

account to each customer whose account is

introduced on a full disclosed basis of the

existence of the clearing or carrying

agreement.

Marketplace Rules: The Nasdaq Stock Market

Rules

Rule 4643 (Customer Confirmations)

prohibits members from effecting

transactions in Nasdaq SmallCap Market

securities unless, at or before completion of

the transaction, the member gives or sends

the customer written notification disclosing

specified information.

Procedural Rules: Compliants, Investigations

and Sanctions

Rule 8110 (Availability to Customers of

Certificate, By-Laws and Rules) requires a

member to provide customer access to copies

of the NASD Certificate of Incorporation, ByLaws, and Rules.

Procedural Rules: Uniform Practice Code

Rule 11860(a)(3) and (4) (Acceptance and

Settlement of COD Orders) requires a

member to deliver to the customer a

confirmation, or all relevant data customarily

contained in a confirmation not later than the

close of business on the next business day

after any such execution and to obtain an

agreement from the customer to furnish

instructions regarding the receipt or delivery

of the securities involved in the transaction.

Rule 11870(c) (Customer Account Transfer

Contracts; Transfer Instructions): customers

must be informed of the conditions for

account transfer and must authorize the

transfer.

* * * * *

Questions concerning this Notice may be

directed to Mary Revell, Assistant General

Counsel, NASD Regulation, at (202) 728–

8203.

[FR Doc. 97–24140 Filed 9–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39020; File No. SR–NSCC–

97–11]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Notice of Filing and Order

Granting Accelerated Approval of

Proposed Rule Change Relating to

Limited Cross-Guaranty Agreements

September 4, 1997.

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

Securities Exchange Act of 1934

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

September 3, 1997, the National

Securities Clearing Corporation

(‘‘NSCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

the proposed rule change as described

in Items I and II below, which items

have been prepared primarily by NSCC.

The Commission is publishing this

notice and order to solicit comments

from interested persons and to grant

accelerated approval of the proposed

rule change.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The purpose of the proposed rule

change is to obtain Commission

approval of the limited cross-guaranty

agreements between NSCC and each of

the International Securities Clearing

Corporation (‘‘ISCC’’), the Government

Securities Clearing Corporation

(‘‘GSCC’’), and the MBS Clearing

Corporation (‘‘MBSCC’’).

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

NSCC 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. NSCC has prepared

summaries, set forth in sections A, B,

and C below, of the most significant

aspects of such statements.2

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 obtain Commission

approval of the limited cross-guaranty

agreements between NSCC and each of

ISCC, GSCC, and MBSCC. NSCC

represents that the limited crossguaranty agreements are substantially

similar to the form of limited crossguaranty agreement previously

approved by the Commission in filings

made by GSCC, ISCC, and MBSCC.3

The limited cross-guaranty

agreements between the clearing agency

counterparties provide a guarantee that

can be invoked in the event of a default

of a common member. The guarantee is

applicable only to the extent that the

common member has unsatisfied

obligations at one clearing agency and

excess resources at another clearing

agency. The guarantee is limited to the

amount of the defaulting common

member’s resources remaining at the

guaranteeing clearing agency. The

agreements also set forth each clearing

agency’s priority structure with respect

to the order in which it will make

guaranty payments to other clearing

agencies with which it has entered into

a limited cross-guaranty agreement.4

The agreements also provide that

demand for payment must be made

within six months of the suspension of

the common member.

NSCC amended its rules in File No.

SR–NSCC–93–07 to accommodate

limited cross-guaranty agreements.5

NSCC Rule 25 provides that in addition

to a member’s other obligations to NSCC

under its rules, each member is

obligated to NSCC for an amount equal

to any guaranty payment NSCC is

required to make to a cross-guaranty

party pursuant to the terms of any

clearing agency cross-guaranty

agreement.

NSCC believes that the proposed rule

change is consistent with the

requirements of Section 17A of the Act

because it promotes the safeguarding of
Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices 47863

6 15 U.S.C. 78q–1(b)(3)(F).

7This order also approves future limited crossguarantee agreements into which NSCC or OCC may

enter which other clearing agencies provided that

the form of such agreements are substantially

similar to the form of agreement approved in this

filing.

8 15 U.S.C. 78s(b)(2).

9 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries submitted by OCC and NSCC.

3Securities Exchange Act Release No. 38410

(March 17, 1997), 62 FR 13931 (order approving

proposed rule change). In general, the proposed rule

change added a provision to OCC Rule 1104 to

permit OCC to pay any amount owed by OCC to

another cross-guaranty party pursuant to a limited

cross-guaranty agreement; added a provision to

Article VIII, Section 5 of OCC’s by-laws to authorize

OCC to have recourse to a suspended clearing

member’s clearing fund contribution for the amount

of any payment which it is required to make

pursuant to a limited cross-guaranty agreement; and

added additional provisions to Article VIII, Section

5 of OCC’s by-laws to address the treatment in

various circumstances of amounts which OCC

might receive under a limited cross-guaranty

agreement.

securities and funds in the clearing

agency’s custody or control or for which

it is responsible and fosters cooperation

and coordination with other entities

engaged in the clearance and settlement

of securities transactions.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NSCC does not believe that the

proposed rule change will have an

impact on or impose a burden on

competition.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

No written comments relating to the

proposed rule change have been

solicited or received. NSCC will notify

the Commission of any written

comments it receives.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Section 17A(b)(3)(F) 6 of the Act

requires that the rules of a clearing

agency be designed to assure the

safeguarding of securities and funds

which are in the custody or control of

the clearing agency or for which it is

responsible and to foster cooperation

and coordination with persons engaged

in the clearance and settlement of

securities transactions. The Commission

believes that the proposal is consistent

with NSCC’s obligations to assure the

safeguarding of securities and funds in

its custody or control or for which it is

responsible because the agreement

should reduce NSCC’s risk of loss due

to a member’s default.7 The agreement

should also mitigate the systemic risks

posed to the national clearance and

settlement system as a result of a

defaulting common member and thus

should foster cooperation and

coordination with persons engaged in

the clearance and settlement of

securities transactions.

NSCC has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after the date

of publication of notice of the filing. The

Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after

publication of notice because it will

permit NSCC to put a risk reduction

mechanism into place in an expedient

fashion.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views, and

arguments concerning the foregoing.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington DC 20549. 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 the

filing will also be available for

inspection and copying at the principal

office of NSCC. All submissions should

refer to File No. SR–NSCC–97–11 and

should be submitted by October 2, 1997.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,8 that the

proposed rule change (File No. SR–

NSCC–97–11) be and hereby is

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–24136 Filed 9–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39022; File Nos. SR–OCC–

97–17 and SR–NSCC–97–12]

Self-Regulatory Organizations; The

Options Clearing Corporation and

National Securities Clearing

Corporation; Notice of Filing and Order

Granting Accelerated Approval of

Proposed Rule Changes Relating to a

Limited Cross-Guaranty Agreement

September 4, 1997.

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

Securities Exchange Act of 1934

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

September 2, 1997, The Options

Clearing Corporation (‘‘OCC’’) and on

September 3, 1997, the National

Securities Clearing Corporation

(‘‘NSCC’’) filed with the Securities and

Exchange commission (‘‘Commission’’)

the proposed rule changes as described

in Items I and II below, which items

have been prepared primarily by OCC

and NSCC. The Commission is

publishing this notice and order to

solicit comments from interested

persons and to grant accelerated

approval of the proposed rule changes.

I. Self-Regulatory Organizations’

Statements of the Terms of Substance of

the Proposed Rule Changes

The purpose of the proposed rule

changes is to obtain Commission

approval of the form of limited crossguaranty agreement into which OCC and

NSCC propose to enter.

II. Self-Regulatory Organizations’

Statements of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In their filings with the Commission,

OCC and NSCC included statements

concerning the purpose of and basis for

the proposed rule changes and

discussed any comments they received

on the proposed rule changes. The text

of these statements may be examined at

the places specified in Item IV below.

OCC and NSCC have prepared

summaries, set forth in sections A, B,

and C below, of the most significant

aspects of such statements.2

A. Self-Regulatory Organizations’

Statements of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

The purpose of the proposed rule

changes is to obtain Commission

approval of the form of limited crossguaranty agreement into which OCC and

NSCC propose to enter. OCC amended

its by-laws and rules in File No. SR–

OCC–96–18 3 to accommodate limited

cross-guaranty agreements and

accordingly is not proposing to amend

the language of its by-laws and rules