Federal Register / Vol. 62, No. 4 / Tuesday, January 7, 1997 / Notices 1013

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

2Securities Exchange Act Release No. 37792

(October 7, 1996), 61 FR 53475.

3Under OCC’s current membership review

procedures, an applicant’s DEA is contacted for

information regarding the applicant and is

requested to provide advice or any objections with

respect to the applicant’s ability to self-clear option

transactions.

4Associated person is defined in Interpretation

.03 as any partner, officer, director, or branch

manager of such applicant (or any person

occupying a similar status or performing similar

functions), any person directly or indirectly

controlling, controlled by, or under common

control with such applicant, or any employee of

such applicant.

5Clauses a. through c. require that: an applicant

that is a registered broker-dealer must be registered

as a ‘‘Limited Principal—Financial Operations’’

with the National Association of Securities Dealers;

an applicant that is applying for clearing

membership as an exempt Canadian clearing

member must be registered as a principal/director/

officer and as a designated registered options

principal with the Investment Dealers Association

of Canada; and an applicant that is a non-U.S.

securities firm must have completed any applicable

OCC financial and operational examination for

employees who are responsible for supervising the

preparation of applicant’s financial reports.

6Currently, OCC has two clearing members that

use the same non-clearing member facilities

manager.

most significant aspects of such

statements.

(A) Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

(1) Purpose

The purpose of the change is to

respond to the needs of our constituents

with respect to overall competitive

market conditions and customer

satisfaction.

(2) Statutory Basis

The basis under the Act for the

proposed rule change is the requirement

under Section 6(b)(4) that an Exchange

have rules that provide for the equitable

allocation of reasonable dues, fees, and

other charges among its members,

issuers and other persons using its

services.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes that the

proposed fee change will not impose

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

(C) Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants or Others

The Exchange has not solicited, and

does not intend to solicit, comments

regarding the proposed rule change. The

Exchange has not received any

unsolicited written comments from

members or other interested parties.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

The foregoing rule change has become

effective pursuant to Section 19(b)(3)(A)

of the Act and subparagraph (e) of Rule

19b–4 thereunder. At any time within

60 days of the filing of such proposed

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

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.

Persons making written submissions

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, N.W.,

Washington, D.C. 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, N.W.,

Washington, D.C. Copies of such filing

will also be available for inspection and

copying at the principal office of the

above-mentioned self-regulatory

organization. All submissions should

refer to File No. SR–NYSE–96–39 and

should be submitted by January 28,

1997.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–234 Filed 1–6–97; 8:45 am]

BILLING CODE 8010–01–M

[Release No. 34–38103; File No. SR–OCC–

96–11]

Self-Regulatory Organizations; The

Options Clearing Corporation; Order

Approving Proposed Rule Change

Relating to Membership Standards

December 31, 1996.

On August 30, 1996, The Options

Clearing Corporation (‘‘OCC’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) the

proposed rule change (File No. SR–

OCC–96–11) 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

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 amends

OCC’s by-laws and rules regarding

OCC’s initial membership standards and

the ongoing duties of clearing members

as follows.

A. Article V, Section 1 of the By-Laws

Clause d. has been added to

Interpretation .02 of the Interpretations

and Policies (‘‘Interpretations’’) under

Article V, Section 1 of OCC’s by-laws.

Clause d. provides that the

Membership/Margin Committee

(‘‘Committee’’) of the Board of Directors

(‘‘Board’’) will not recommend approval

of an application for clearing

membership unless the applicant’s

Designated Examining Authority

(‘‘DEA’’) has stated that it has no

objections to the application for clearing

membership.3 Pursuant to that clause,

the Committee, if requested in writing

by the applicant, is permitted to waive

the requirement in exceptional cases

and where good cause is shown.

Interpretation .03 is amended to

require that if an applicant elects to use

an associated person 4 to satisfy the

applicable requirements of clause a.

through c. thereof, the designated

associated person must be a full time

employee of the applicant.5

Interpretation .03 also is amended to

require that the key operations

employees required to have attended

applicable OCC operations readiness

review sessions and successfully

completed any applicable OCC

operational and financial examinations

for operations employees be full time

employees and attend all such review

sessions. Interpretation .04 is amended

to eliminate the ability of an applicant

for clearing membership to enter into a

facilities management arrangement with

a non-clearing member.6

Interpretation .05 is added to

authorize the Committee to recommend

to the Board that additional financial

requirements be imposed on an

applicant for clearing membership (e.g.,

an increase in net capital or a

requirement to make and maintain
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