Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices 53369

4An ‘‘actively-traded’’ security is a subject or

reference security with a value of average daily

trading volume of at least $1 million, which is

issued by an issuer whose common equity

securities have a public float of at least $150

million. 5 15 U.S.C. 78o–3.

6 15 U.S.C. 78c(f).

7 17 U.S.C. 78s(B)(2).

8 17 CFR 200.30–3(a)(2).

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

2 17 CFR 240.19b–4.

regarding the scope of that provision.

The proposed rule change would clarify

that the managing underwriter is

required to request an Underwriting

Activity Report with respect to a

distribution of a security that is

considered an ‘‘actively-traded’’ security

under SEC Rule 101.4 Currently, the

language of Subparagraph (b)(11) is

misleading in that it only imposes this

requirement with respect to subject or

reference securities that are ‘‘subject to

SEC Rule 101.’’ Because ‘‘activelytraded’’ securities are exempt from SEC

Rule 101, they are not considered

‘‘subject to’’ SEC Rule 101. In Notice to

Members 97–10 (March 1997),

announcing adoption of the

amendments of the NASD to implement

Regulation M, the NASD stated that the

Underwriting Activity Report’’ will

indicate whether the security qualifies

under SEC Rule 101 as an activelytraded security or for the one-day or

five-day restricted periods.’’ Thus, the

proposed change to Subparagraph

(b)(11) will make the rule language

consistent with the Association’s

requirement that the managing

underwriter request an Underwriting

Activity Report for securities that are

considered ‘‘actively-traded’’ under SEC

Rule 101.

Moreover, NASD Regulation is

proposing to amend Subparagraph

(b)(11) to exclude exchange-listed

securities from the requirement that the

managing underwriter obtain an

Underwriting Activity Report.

Originally, it had been anticipated that

the managing underwriter would be

provided information on the value of

average daily trading volume and

market value of public float with respect

to exchange-listed securities, in addition

to securities included in The Nasdaq

Stock Market, Inc. or quoted on the OTC

Bulletin Board Service. However, since

this information has not been available,

the proposed rule change would

eliminate the obligation of managing

underwriters to request the

Underwriting Activity Report with

respect to exchange-listed securities.

The managing underwriter of an offering

of exchange-listed securities would,

nonetheless, continue to be responsible

under Subparagraph (b)(12) to advise

the Market Regulation Department of

information regarding the pricing and

termination of the offering. Conforming

amendments are made to Subparagraph

(b)(12) in light of this proposed change

to Subparagraph (b)(11). Finally,

Subparagraph (b)(12) is also proposed to

be revised to clarify that the managing

underwriter of any offering of securities

considered ‘‘actively-traded’’ under SEC

Rule 101 must also advise the Market

Regulation Department of information

on pricing and termination.

The NASD believes that the proposed

rule change is consistent with the

provisions of Section 15A(b)(2) 5 of the

Act in that the proposed rule change

will enforce and facilitate compliance

by NASD members with the

requirements of SEC Regulation M.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

NASD Regulation does not believe

that the proposed rule change will result

in any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act, as amended.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments were neither

solicited nor received.

III. 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

Room. Copies of such filing will also be

available for inspection and copying at

the principal office of the NASD. All

submissions should refer to the file

number in the caption above and should

be submitted by November 4, 1997.

IV. Commission’s Findings and Order

Granting Accelerated Approval of the

Proposed Rule Change

The Commission finds that the

NASD’s proposal is consistent with the

Act and the rules and regulations

thereunder applicable to a registered

national securities association.

Specifically, the provisions of Section

15A(b)(2) of the Act which requires that

an association enforce compliance with

Securities Exchange Act Rules in

addition to the rules of the association.

The Commission believes that the

proposal will enforce and facilitate

compliance by NASD members with the

requirements of Regulation M, SEC

Rules 100 through 105.

In addition, the Commission finds

that the NASD’s proposal is consistent

with the provisions of Section 15A(b)(6)

of the Act which requires, in part, that

an association have rules that are

designed to prevent fraudulent and

manipulative acts and practices,

promote just and equitable principals of

trade, and in general, to protect

investors. In approving this proposed

rule change, the Commission notes that

it has also considered the proposal’s

impact on efficiency, competition, and

capital formation.6

The Commission, therefore, finds

good cause for approving the proposed

rule change prior to the thirtieth day

after the date of publication of filing

thereof in the Federal Register.

It is therefore ordered, pursuant to

Section 19(b)(2) of the Act,7 that the

proposed rule change, SR–NASD–97–

68, be, and hereby is, approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.8

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–27051 Filed 10–10–97; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–39200; File No. SR–NYSE–

97–25]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the New York Stock Exchange, Inc., To

Amend Its Rule 382 Relating to

Carrying Agreements

October 3, 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

September 16, 1997, the New York

Stock Exchange, Inc. (‘‘NYSE’’ or

‘‘Exchange’’) filed with the Securities

and Exchange Commission (‘‘SEC’’ or
53370 Federal Register / Vol. 62, No. 198 / Tuesday, October 14, 1997 / Notices

3 15 U.S.C. 78f(b)(5).

‘‘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 Exchange proposes to amend

Exchange Rule 382, Carrying

Agreements to better monitor the

activities of introducing firms that are

parties to carrying agreements. The text

of the proposed rule change is available

at the Office of the Secretary, the NYSE,

and at the Commission.

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 purpose of the proposed rule

change is to revise Exchange Rule 382

to enhance the ability of the Exchange

and other securities self-regulatory

organizations (‘‘SROs’’) to monitor the

activities of introducing firms that are

parties to carrying agreements.

Exchange Rule 382 governs the

contractual agreements, known as

‘‘carrying agreements,’’ between a

‘‘carrying’’ and an ‘‘introducing’’ firm,

that allocate certain functions and

responsibilities associated with the

carrying of, and transactions in,

customer accounts. In ‘‘carrying’’ the

accounts of others, carrying firms

provide an introducing firm with a

variety of services for the accounts that

are ‘‘introduced’’ to them on behalf of

customers, pursuant to the carrying

agreement.

Under Rule 382, all carrying

agreements must be filed with and

approved by the Exchange if either party

to the agreement is a member of the

Exchange. Rule 382 also requires, with

respect to all ‘‘fully disclosed’’

arrangements, that the carrying

agreement specifically identify and

allocate between the carrying and

introducing organization certain key

enumerated functions and

responsibilities. To address recent

concerns regarding the ability of selfregulatory organizations to monitor the

activities of introducing firms, the

Exchange believes the proposed

amendments will increase SROs’ ability

to monitor the activities of introducing

firms that are party to carrying

arrangements. Generally, the proposed

amendments will provide for increased

monitoring of customer complaints

regarding introducing organizations,

require specific procedures for

introducing organizations requesting

reports offered by carrying

organizations, and address procedures

and responsibility for introducing

organizations that are permitted to issue

negotiable instruments of the carrying

organizations.

Specifically, the rule amendments

will require carrying organizations to

furnish promptly any written customer

complaint it receives regarding the

introducing firm to the introducing

organization and such firm’s Designated

Examining Authority (‘‘DEA’’). In

addition, the proposal would require

that the customer who submitted the

written complaint be notified in writing

by the carrying organization that the

complaint was received, that it was

furnished to the introducing firm and

the DEA, and that the customer has the

right, at the customer’s discretion, to

transfer the account to another brokerdealer.

The proposed amendment also

requires the carrying organization to

furnish, at the commencement of the

agreement and annually thereafter, to

each of its introducing organizations, a

list of all reports (e.g., exception type

reports) that it offers to the introducing

firm in order to assist the introducer in

supervising and monitoring customer

accounts. The proposal requires

introducing firms to notify the carrying

firm of those specific reports on the list

that should be furnished to it to

supervise and monitor customer

accounts.

In addition, the carrying organization

will be required to retain and preserve

copies of the specific reports requested

by and/or supplied to the introducing

firm pursuant to Exchange Rule 440 or

have the capability to: (1) Recreate

copies of reports furnished, or (2)

provide the report format and data

elements provided in the original

reports. The proposal further requires

the carrying firm to provide written

notice, on an annual basis within 30

days of July 1 of each year, to the Chief

Executive Officer and Compliance

Officer of the introducing firm, of the

list of reports offered to the introducer

and specify those reports actually

requested or supplied as of the report

date. A copy of this written notice must

also be provided to the introducer’s

DEA.

The amended rule also addresses

those agreements that allow introducing

organizations to issue negotiable

instruments (e.g., checks) to their

customers, for which the carrying

organization is the maker or drawer. The

proposed rule provides that the

introducing organization must represent

to the carrying organization that it has

supervisory procedures in place, which

it enforces and which are satisfactory to

the carrying organization, with respect

to the issuance of such instruments.

The Exchange believes that the

proposed amendments to Rule 382 will

clarify the relationship and

responsibilities between organizations

involved in carrying arrangements while

also recognizing the nature of the

contractual relationship between

carrying firms and introducing firms.

The Exchange further believes that

provisions requiring furnishing of

customer complaints and lists of reports

submitted by and furnished to

introducing organizations will enhance

the ability of the Exchange and other

SROs to monitor the activities of such

entities. In addition, the Exchange

believes that the requirement that

carrying organizations maintain and be

prepared to furnish copies of exception

reports or to recreate the report or

provide report format/data fields will

ensure that appropriate records are

available that detail the information

actually provided to the introducing

organization to monitor its customer

accounts.

2. Statutory Basis

The Exchange believes the proposed

rule change is consistent with the

requirements of Section 6(b)(5) of the

Act which 3 requires that the rules of the

Exchange be designed to prevent

fraudulent and manipulative acts and

practices, to promote just and equitable

principles of trade, and, in general, to

protect investors and the public interest,

in that it establishes standards to which

members and member organizations that

are parties to carrying agreements must

adhere while providing customer

protection through appropriate
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