50646 Federal Register / Vol. 62, No. 187 / Friday, September 26, 1997 / Notices

1 15 U.S.C. 78s(b)(1) (1994).

2 17 CFR 240.19b–4 (1997).

3The proposed rule change was originally

submitted on June 24, 1997. The CSE subsequently

submitted Amendment No. 1 which altered minor

technical language in Item II. Letter from Adam W.

Gurwitz, Vice President Legal and Secretary, CSE,

to Karl J. Varner, Esq., SEC, dated August 4, 1997.

This proposed rule change replaces SR–CSE–97–06,

which has been withdrawn. Letter from Adam W.

Gurwitz, Vice President Legal and Secretary, CSE,

to Katherine England, Assistant Director, SEC,

dated June 23, 1997.

4Securities Exchange Act Release No. 38922

(August 11, 1997), 62 FR 44024 (August 18, 1997).

5The Commission has considered the effect of the

proposed rule change on the promotion of

efficiency, competition and capital formation. 15

U.S.C. 78(c).

6 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by MBSCC.

of the Securities Exchange Act of 1934

(‘‘Act’’) 1 and Rule 19b–4 2 thereunder.3

Notice of the proposed rule change,

together with the substance of the

proposal, was published in the Federal

Register.4 No comment letters were

received. This order approves the

proposed rule change, as amended.

I. Background

Exchange Rule 8.14 provides the

Minor Rule Violation Program

(‘‘Program’’) as an alternative

disciplinary regime to violations of

Exchange Rules that the Exchange

determines are of a minor nature. The

Program provides the Exchange with the

ability, but not the obligation, to impose

a fine, not to exceed $2500, on any

member the Exchange determines has

violated a rule subject to the Program.

Section (e) of Exchange Rule 8.14

requires the Exchange from time to time

to prepare a list of minor rule violations.

Adding a particular rule violation to the

Program does not limit the Exchange’s

ability to treat violations of those rules

through more formal disciplinary

measures. The Program simply provides

the Exchange with greater flexibility in

addressing rule violations appropriately.

As part of its ongoing effort to

improve its regulatory program, the

Exchange has determined that certain

rule violations should be added to the

Program. The Program currently

includes the requirements of Exchange

Rules 4.1 and 4.2, concerning books and

records, to submit trade data to the

Exchange. The proposed rule change

will clarify that a member also must

provide financial and regulatory records

in accordance with Rule 4.2 and

Interpretations thereunder as well as

trade-related information. The proposed

rule change also will add Exchange Rule

11.9(c) to the Program. Exchange Rule

11.9(c) requires Designated Dealers, the

Exchange’s multiple, competing

specialists, to maintain continuous

quotations throughout the trading day.

II. Discussion

The Commission finds that the

proposed rule change is consistent with

Section 6(b) of the Act in general, and

furthers the objectives of Section 6(b)(7)

in particular because it provides a fair

procedure for the disciplining of

members and persons associated with

members in that the proposed rule

change will augment the Exchange’s

ability to police its market and will

increase the Exchange’s flexibility in

responding to minor rule violations.5

The Commission believes the proposed

rule change will enable the Exchange to

address appropriate minor rule

violations promptly and efficiently

through the minor rule procedures,

without the need to initiate formal

disciplinary proceedings.

Furthermore, the Commission

believes that proposed rule change is

consistent with Section 6(b)(5) in that it

is designed to promote just and

equitable principles of trade and to

remove impediments to and perfect the

mechanism of a free and open market

and a national market system, and, in

general, to protect investors and the

public interest because the proposed

rule change will help the Exchange

ensure compliance with its quotation

requirements and spread parameters,

which will enhance the value of

quotations made by the Exchange’s

multiple, competing specialists.

It is Therefore Ordered, pursuant to

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

proposed rule change, SR–CSE–97–07,

be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.6

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25606 Filed 9–25–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39103; File No. SR–

MBSCC–97–5]

Self-Regulatory Organizations; MBS

Clearing Corporation; Notice of Filing

of a Proposed Rule Change Regarding

Participant Liability for Transactions

Submitted on Behalf of

Nonparticipants

September 22, 1997.

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

Securities Exchange Act of 1934 (the

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

August 1, 1997, MBS Clearing

Corporation (‘‘MBSCC’’) filed with the

Securities and Exchange Commission

(‘‘Commission’’) the proposed rule

change (File No. SR–MBSCC–97–5) as

described in Items I, II, and III below,

which items have been prepared

primarily by MBSCC. 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 Substance of

the Proposed Rule Change

The proposed rule change will clarify

that participants will be liable as

principal for any contracts or other

transactions submitted to MBSCC on

behalf of entities that are not

participants (‘‘nonparticipants’’) and

that nonparticipants will not be deemed

to possess any rights or benefits of

participants.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission,

MBSCC 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. MBSCC 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

Currently, MBSCC’s rules state that

participants that process any contracts

or other transactions through MBSCC

for other participants are liable as

principal for such contracts or

transactions. However, it has always

been MBSCC’s intention that

participants be principally liable

whether they submit a contract or

transaction on behalf of other

participants or nonparticipants. Thus,

the proposed rule change will clarify

that participants will be liable as

principal for any contracts or other

transactions processed, compared,

settled, or carried out on behalf of

nonparticipants. In addition, the

proposed rule change states that such

nonparticipants will not be deemed to

possess any of the rights or benefits of

participants.
Federal Register / Vol. 62, No. 187 / Friday, September 26, 1997 / Notices 50647

3According to MBSCC’s rules, the term account

generally means any account maintained by MBSCC

on behalf of a participant for the comparison,

margining, and clearing of trades.

4According to MBSCC’s rules, the term

‘‘participant fund’’ means the fund for which

provision is made in Article IV to which

participants are required to make basic deposits,

minimum market margin differential deposits, and

market margin differential deposits.

5 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 38625 (May

13, 1997), 62 FR 27638.

3Similarly, OCC permits its clearing members to

use certain publicly traded units of beneficial

interest in unit investment trusts (‘‘trust units’’) as

margin deposits under the conditions specified in

subparagraph (4) of Rule 604(d). Currently, the only

trust units approved for deposit as margin are

Standard & Poor’s (‘‘S&P’’) Depository Receipts

(‘‘SPDR’s’’) on the S&P 500 Index and S&P 400 MidCap Index.

4The proposed rule change also makes numbering

changes to Rule 1801 as a result of the addition of

new subparagraph (b)(2).

MBSCC believes that the proposed

rule change will further protect MBSCC

in the event a participant fails to

discharge its liabilities. In this respect,

MBSCC will treat all of a participant’s

accounts 3 and obligations as belonging

to such participant regardless of the

identity of the original underlying party.

In addition, MBSCC believes that the

proposed rule change will remove any

doubt that a participant’s participant

fund 4 deposits will be available for all

of the participant’s transactions

regardless of the source. Furthermore,

MBSCC believes that this proposed rule

change will foreclose any attempt by a

nonparticipant to assert a claim against

MBSCC with respect to a trade.

MBSCC believes that the proposed

rule change is consistent with Section

17A of the Act and the rules and

regulations promulgated thereunder in

that it will enhance MBSCC’s ability to

protect itself and its participants against

loss.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

MBSCC does not believe that the

proposed rule change will impose any

burden on competition 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

MBSCC has not solicited or received

comments relating to the proposed rule

change. MBSCC will notify the

Commission of any written comments

received by MBSCC.

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 findings or

(ii) as to which MBSCC consents, the

Commission will:

(A) By order approve 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.

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 provisions of

5 U.S.C. 552, will be available for

inspection and copying in the

Commission’s Public Reference Room,

450 Fifth Street, N.W., Washington, D.C.

20549. Copies of such filing will also be

available for inspections and copying at

the principal office of MBSCC. All

submissions should refer to the File No.

SR–MBSCC–97–5 and should be

submitted by October 17, 1997.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.5

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–25519 Filed 9–25–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39104; File No. SR–OCC–

97–01]

Self-Regulatory Organizations; The

Options Clearing Corporation; Order

Approving a Proposed Rule Change

Permitting the Use of Certain Fund

Shares to Satisfy Margin Requirements

and Permitting the Use of Certain Fund

Shares and Trust Units as Escrow

Deposits

September 22, 1997.

On February 21, 1997, The Options

Clearing Corporation (‘‘OCC’’) filed with

the Securities and Exchange

Commission (‘‘Commission’’) a

proposed rule change (File No. SR–

OCC–97–01) 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 May 20, 1997.2 No comment letters

were received. For the reasons

discussed below, the Commission is

approving the proposed rule change.

I. Description

(1) Using Fund Shares as a Form of

Margin

The proposal amends subparagraph

(4) of OCC Rule 604(d), which sets forth

the margin deposit eligibility

requirements for debt and equity issues,

to permit OCC’s clearing members to

deposit as a form of margin collateral

fund shares issued by open-end

management investment companies that

hold portfolios or baskets of common

stocks (‘‘fund shares’’).3 The proposal

amends the term ‘‘stock’’ defined Rule

604(d)(4) to include fund shares. Fund

shares will have to meet the

requirements applicable to stocks under

Rule 604(d) and be of a class approved

by OCC for deposit as margin to be

eligible for deposit as margin collateral.

Because Rule 604(d)(1) requires that a

stock be exchange listed or traded on

the NASDAQ National Market System,

the ‘‘publicly traded’’ requirement of

subparagraph (4) has been deleted. The

proposal also amends Section 11 of

OCC’s Interpretations and Policies to

require that OCC’s Membership/Margin

Committee (‘‘Committee’’) approve

classes of fund shares for deposit as

margin. Presently, World Equity

Benchmark Shares (‘‘WEBS’’) listed on

the American Stock Exchange are the

only class of fund shares the Committee

has approved.

(2) Using Fund Shares and Trust Units

as Escrow Deposits

The proposal amends OCC Rule

1801(b), which relates to index option

escrow deposits, by adding new

subparagraph (2) which will define the

term ‘‘common stocks’’ to include fund

shares and trust units.4 By adding this

definition, OCC Rule 1801(b) now

permits clearing members to use fund

shares and trust units as part of an

escrow deposit made with respect to

index call option contracts carried in a