Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices 53371

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

2The Commission has modified the text of the

summaries prepared by OCC.

3For a description of the existing agreement, refer

to Securities Exchange Act Release No. 29888

(October 31, 1991), 56 FR 56680 [File No. SR–OCC–

91–07] (order approving establishment of crossmargining program between OCC and BOTCC) and

Securities Exchange Act Release No. 32681 (July 27,

1993), 58 FR 41302 [File No. SR–OCC–92–24]

(order approving expansion of cross-margining

program between OCC and BOTCC to include nonproprietary positions).

4A copy of the amendment has been submitted

with the proposed rule change and is available for

inspection and copying at the Commission ’s Public

Reference Room or at the principal office of OCC.

5For a description of the cross-margining

agreement among OCC, CME, and CCC, refer to

Securities Exchange Act Release No. 38584 (May 8,

1997), 62 FR 26602 [File No. SR–OCC–97–04]

(order granting accelerated approval to proposed

rule change).

disclosures and implementation of

specific procedures and controls.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange believes that the

proposal does 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

Comments were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the publication of

this notice in the Federal Register or

within such longer period (i) as the

Commission may designate up to 90

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 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, NW.,

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 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 at

the Commissions’ Public Reference

Section, 450 Fifth Street, N.W.,

Washington, D.C. 20549. Copies of such

filing will also be available for

inspection and copying at the principal

office of the above-mentioned selfregulatory organization. All submissions

should refer to File Number SR–NYSE–

97–25 and should be submitted by

November 3, 1997.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27046 Filed 10–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39203; File No. SR–OCC–

97–14]

Self-Regulatory Organizations; The

Option Clearing Corporation; Notice of

Filing and Order Granting Accelerated

Approval of a Proposed Rule Change

Relating to a Cross-Margining

Agreement With the Board of Trade

Clearing Corporation

October 3, 1997.

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

Securities Exchange Act of 1934

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

August 18, 1997, The Options Clearing

Corporation (‘‘OCC’’) 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 OCC. The Commission is

publishing this notice and order to

solicit comments form interested

persons and to grant accelerated

approval of the proposal.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The proposed rule change will allow

OCC to amend the cross-margining

agreement between OCC and the Board

of Trade Clearing Corporation

(‘‘BOTCC’’) and to amend the

agreements that are required to be

executed by participating clearing

members and market professionals

participating in the cross-margining

programs established by the crossmargining agreement.

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 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

filing is to revise the amended and

restated cross-margining agreement

between OCC and BOTCC

(‘‘Agreement’’).3 OCC and BOTCC have

executed an amendment to the

Agreement to revise the Agreement.4

Specifically, OCC proposed to amend

Exhibit A to the Agreement to update

the list of contracts eligible of OCC/

BOTCC cross-margining. OCC also

proposes to amend the agreements

governing the cross-margin accounts of

clearing members and market

professionals that participate in OCC/

BOTCC cross-margining. The changes to

those agreements essentially will

conform them to the comparable form of

the agreements used in the crossmargining program among OCC, the

Chicago Mercantile Exchange (‘‘CME’’)

and the Commodity Clearing

Corporation (‘‘CCC’’).5

The following forms of agreements are

required to be executed by clearing

members and market professionals

participating in the cross-margining

program established by the Agreement:

(1) Proprietary cross-margin account

agreement and security agreement for a

joint clearing member; (2) proprietary

cross-margin account agreement and

security agreement for affiliated clearing

members; (3) non-proprietary crossmargin account agreement and security

agreement for a joint clearing member;

(4) non-proprietary cross-margin

account agreement and security

agreement for affiliated clearing

members; (5) subordination agreement

for cross-margining for a joint clearing

member; and (6) subordination

agreement for cross-margining for
53372 Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices

6Copies of the agreements have been submitted

with the proposed rule change and are available for

inspection and copying at the Commission’s Public

Reference Room or at the principal office of OCC.

7 17 CFR 190, App. B.

8 11 U.S.C. 741, et seq.

affiliated clearing members.6 Each of

these agreements is based on the

comparable existing agreement used in

the current OCC/BOTCC crossmargining program, and each of the

agreements has been modified as

necessary to reflect changes that have

been made to the cross-margining

program among OCC, CME, and CCC.

With respect to the proprietary crossmargin account agreement and security

agreement for a joint clearing member,

section 2 will be revised to make clear

that margin deposited with respect to

the cross-margined proprietary accounts

(‘‘proprietary X–M accounts’’) is

security for all of the obligations of the

joint clearing member whether or not

such obligations arise from the

proprietary X–M accounts. Section 5

will be amended to make clear that OCC

and BOTCC have a joint lien on and

security interest in the proprietary X–M

accounts. Section 5 also will be updated

to comply with recent revisions to

Article 8 and Article 9 of the Uniform

Commercial Code. Section 5 will be

changed by making explicit that OCC

and BOTCC have a right of setoff against

collateral held with respect to the

proprietary X–M accounts. Section 5

will be amended to reflect that the

prohibition against the joint clearing

member granting any lien on or security

interest in such collateral without the

written consent of OCC and BOTCC

shall not apply to any interest of the

joint clearing member in the collateral

which is subordinate to that of OCC and

BOTCC. OCC has informed the

Commission that no other substantive

changes have been made to the

proprietary cross-margin account

agreement and security agreement for a

joint clearing member.

With respect to the proprietary crossmargin account agreement and security

agreement for affiliated clearing

members, section 2 will be amended to

make the affiliated clearing members

jointly and severally liable to OCC and

BOTCC for any obligation arising from

the proprietary X–M accounts. Section 2

also will be revised to make clear that

neither of the affiliated clearing

members is obligated to make any

contribution to the clearing or guarantee

fund of a clearing organization (i.e.,

OCC or BOTCC) of with such clearing

member is not itself a member. Section

3 will be revised to make clear that

margin deposited with respect to the

proprietary X–M accounts is security for

all of the obligations of the affiliated

clearing members whether or not such

obligations arise from the proprietary X–

M accounts. Section 6 will be amended

to make clear that OCC and BOTCC

have a joint lien on and security interest

in the proprietary X–M accounts by

adding a specific reference to the

accounts. Section 6 also will be updated

to comply with recent revisions to

Article 8 and Article 9 of the Uniform

Commercial Code. Section 6 will be

changed by making explicit that OCC

and BOTCC have a right of setoff against

collateral held with respect to the

proprietary X–M accounts. Section 6

also will be amended to reflect that the

prohibition against a clearing member

granting any lien on or security interest

in such collateral without the written

consent of OCC and BOTCC shall not

apply to any interest of the clearing

member in the collateral which is

subordinate to that of OCC and BOTCC.

OCC has informed the Commission that

no other substantive changes have been

made to the proprietary cross-margin

account agreement and security

agreement for affiliated clearing

members.

With respect to the non-proprietary

cross-margin account agreement and

security agreement for a joint clearing

member, section 3 will be amended to

provide for the selection of a designated

clearing organization (‘‘DCO’’) (i.e.,

either OCC or BOTCC) by a joint

clearing member that does not maintain

any proprietary X–M accounts. Section

5 will be amended to make clear that

OCC and BOTCC have a joint lien on

and security interest in the crossmargined non-proprietary accounts

(‘‘non-proprietary X–M accounts’’).

Section 5 also will be updated to

comply with recent revisions to Article

8 and Article 9 of the Uniform

Commercial Code. In addition, section 5

will be changed by making explicit that

OCC and BOTCC have a right of setoff

against collateral held with respect to

the non-proprietary X–M accounts. OCC

has informed the Commission that no

other substantive changes have been

made to the non-proprietary crossmargin account agreement and security

agreement for a joint clearing member.

With respect to the non-proprietary

cross-margin account agreement and

security agreement for affiliated clearing

members, section 2 will be changed to

make affiliated clearing members jointly

and severally liable to OCC and BOTCC

for any obligation arising from the nonproprietary X–M accounts, Section 2

also will be changed to provide that

neither of the affiliated clearing member

is obligated to make any contribution to

the clearing or guarantee fund of a

clearing organization (i.e., OCC or

BOTCC) of which such clearing member

is not itself a member. Section 4 will be

amended to provide for the selection of

a DCO by affiliated clearing members

that do not maintain proprietary X–M

accounts. Section 6 will be amended to

make clear that OCC and BOTCC have

a joint lien on and security interest in

the non-proprietary X–M accounts.

Section 6 also will be amended to

comply with recent revisions to Article

8 and Article 9 of the Uniform

Commercial Code. In addition, section 6

will be changed by making explicit that

OCC and BOTCC have a right of setoff

against collateral held with respect to

the non-proprietary X–M accounts. OCC

has informed the Commission that no

other substantive changes have been

made to the non-proprietary crossmargin account agreement and security

agreement for affiliated clearing

members.

With respect to each of the

subordination agreement for crossmargining for a joint clearing member

and the subordination agreement for

cross-margining for affiliated clearing

members (‘‘market professionals

agreements’’), section 1 will be changed

to include a representation that the

member executing the agreement is a

member or a firm owning a membership

on the Chicago Board of Trade. Section

4 of each of the market professionals

agreements will be amended to include

the liquidation provisions found in

Appendix B of Part 190 of the

regulations of the Commodity Futures

Trading Commission (‘‘CFTC’’) 7 and to

provide that claims against a clearing

member will be subordinated to all

other customers as provided in

subchapter III of Chapter 7 of the U.S.

Bankruptcy Code.8 The current market

professionals agreements used for OCC/

BOTCC cross-margining do not follow

the liquidation distribution scheme of

Appendix B of Part 190 of the CFTC’s

regulations. Section 5 of the market

professionals agreements will be

amended to make clear that OCC and

BOTCC have a joint lien on and security

interest in the non-proprietary X–M

accounts. Section 5 also will be

amended to make explicit that the

member has granted to OCC and BOTCC

a right of setoff against collateral held

with respect to the non-proprietary X–

M accounts of the clearing member. A

new section 7 will be added to each of

the market professional agreements to

provide that an executed copy of each

such agreement is to be filed with OCC

and BOTCC and that an executed

market professionals agreement cannot
Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices 53373

9 15 U.S.C. 78q–1(b)(3)(F).

10 15 U.S.C. 78q–1(a)(2)(A)(ii).

11 15 U.S.C. 78s(b)(2).

12 17 CFR 200.30-3(a)(12).

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

2 17 CFR 240.19b–4.

be modified without the approval of the

clearing organization. These changes are

intended for the protection of OCC and

BOTCC. OCC has informed the

Commission that all other changes to

the market professionals agreements are

either stylistic or nonsubstantive in

nature.

OCC believes that the proposed rule

change is consistent with the purposes

and requirements of section 17A of the

Act because cross-margining enhances

the safety of the clearing system while

providing lower clearing margin costs to

participants.

(B) Self-Regulatory Organization’s

Statement on Burden of 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

have been received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

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

requires that the rules of a clearing

agency be designed to assure the

safeguarding of securities and funds

which are in the custody and control of

the clearing agency or for which it is

responsible. Section 17A(a)(2)(A)(ii) of

the Act 10 directs the Commission to use

its authority under the Act to facilitate

the establishment of transactions in

securities, securities options, contracts

of sale for future delivery and options

thereon, and commodity options. The

Commission believes that the proposed

rule change is consistent with these

requirements under the Act.

Similar to other cross-margining

arrangements to which OCC is a party,

the current proposal links and

coordinates the clearance and

settlement facilities of OCC and BOTCC

with respect to shared management of

risks associated with the clearing

members’ intermarket portfolios and

with respect to information sharing

regarding the financial condition of

participating joint and affiliated

members. The Commission views crossmargining arrangements as a significant

risk reduction method because they

provide a means whereby individual

clearing organizations do not have to

manage independently the risk

associated with some components (i.e.,

the futures or options component) of a

clearing member’s total portfolio.

Therefore, cross-margining programs

serve to help OCC assure the

safeguarding of securities and funds and

to facilitate the establishment of linked

or coordinated facilities for the

clearance and settlement of futures and

options, transactions in securities.

OCC has requested that the

Commission find good cause for

approving the proposed rule change

prior to the thirtieth day after

publication of the notice of filing. The

Commission finds good cause for

approving the proposed rule change

prior to the thirtieth day after

publication of the notice of the filing

because the proposed changes to the

OCC/BOTCC cross-margining program

are based on the OCC/CME/CCC crossmargining program, which the

Commission has previously approved.

In addition, the Commission does not

expect to receive any adverse comments

on the proposed rule change.

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 such

filing also will be available for

inspection and copying at the principal

office of OCC. All submissions should

refer to File No. SR–OCC–97–14 and

should be submitted by November 4,

1997.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,11 that the

proposed rule change (File No. SR–

OCC–97–14) be and hereby is approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.12

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27052 Filed 10–10–97; 8:45 am]

BILLING CODE 8010–10–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39188; File No. SR–PCX–

97–35]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Exchange, Inc., Relating to

the Listing and Trading of Portfolio

Depositary Receipts

October 2, 1997.

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

25, 1997, the Pacific Exchange, Inc.

(‘‘PCX’’ or ‘‘Exchange’’) filed with the

Securities and Exchange Commission

(‘‘SEC’’ or ‘‘Commission’’) the proposed

rule change as described in Items I, II

and III below, which Items have been

prepared by the self-regulatory

organization. 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 PCX proposes to adopt new rules

relating to the listing and trading of

Portfolio Depositary Receipts (‘‘PDRs’’).

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization 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.

The self-regulatory organization has

prepared summaries, set forth in

sections A, B and C below, of the 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 Exchange proposes to adopt new

Rule 8.300 to accommodate the trading