[Federal Register Volume 62, Number 197 (Friday, October 10, 1997)]
[Notices]
[Pages 53041-53042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26902]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39201; File No. SR-OCC-97-09]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Order Approving a Proposed Rule Change Seeking To Amend the Valuation 
Rate Applied to Equity Securities and Corporate Debt Deposited as 
Margin Collateral

October 3, 1997.
    On May 21, 1997, The Options Clearing Corporation (``OCC'') filed 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change (File No. SR-OCC-97-09) 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 August 18, 1997.\2\ No comment 
letters were received. For the reasons discussed below, the Commission 
is approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 38923 (August 11, 1997), 
62 FR 44025.
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I. Description

    OCC currently operates a program to accept deposits of equity 
securities and corporate debt as margin collateral (``valued securities 
program'') under its rule 604(d).\3\ The proposed rule change

[[Page 53042]]

amends OCC Rule 604(d)(1) to increase the valuation rate that OCC 
applies to equity and corporate debt securities deposited with OCC 
under the valued securities program from 60 percent to 70 percent.
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    \3\ For a detailed description of the valued securities program, 
refer to Securities Exchange Act Release Nos. 33893 (April 14, 
1994), 59 FR 18427 [File No. SR-OCC-92-13] (order granting 
accelerated approval to proposed rule change) and 31169 (September 
10, 1992), 57 FR 43041 [File No. SR-OCC-92-13] (notice of filing of 
proposed rule change).
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    OCC Rule 604(d) permits OCC's clearing members to deposit as margin 
collateral common and preferred stock and corporate bonds which meet 
certain standards. Common and preferred stock must have a market value 
of greater than $10 per share and must either be (i) traded on a 
national securities exchange and have last sale reports collected and 
disseminated pursuant to a consolidated transaction reporting plan or 
(ii) traded in the over-the-counter market and designated as National 
Market System Securities pursuant to Commission Rule 11Aa2-1.\4\ 
Corporate bonds must (i) be listed on a national securities exchange 
and not be in default, (ii) have a current market value that is readily 
determinable on a daily basis, and (iii) be rated in one of the four 
highest rating categories by a nationally recognized statistical rating 
organization.\5\
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    \4\ 17 CFR 240.11Aa2-1.
    \5\ An issue that is suspended from trading in its primary 
market, or subject to special margin requirements under the rules of 
its primary market because of volatility, lack of liquidity or 
similar characteristics may not be deposited with OCC. OCC Rule 
604(d)(1).
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II. Discussion

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds in its custody or control or for which it is responsible. The 
Commission believes that the effective functioning of the valued 
securities program since its inception in 1985 and OCC's various 
financial safeguards and risk monitoring systems, taken as a whole,\7\ 
suggest that an increase from 60 percent to 70 percent in the valuation 
rate for debt and equity securities deposited as margin collateral 
should not detract from OCC's ability to safeguard funds and securities 
in its custody or control or for which it is responsible.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
    \7\ OCC financial safeguards include, for example, the valued 
securities program's eligibility standards for equity and corporate 
debt securities and OCC's authority to collect intraday margin calls 
as needed.
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of 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-97-09) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \28\ 7 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-26902 Filed 10-9-97; 8:45 am]
BILLING CODE 8010-01-M