[Federal Register Volume 63, Number 107 (Thursday, June 4, 1998)]
[Notices]
[Pages 30544-30548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-14830]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40042; File No. SR-OCC-98-03]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of Proposed Rule Change Relating to the Stock Loan/
Hedge Program

May 28, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 13, 1998, The 
Options Clearing Corporation (``OCC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change as 
described in Items, I, II, and III below, which items have been 
prepared primarily by OCC. The Commission is publishing this notice to 
solicit comments from interested persons on the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Term of 
Substance of the Proposed Rule Change

    The purpose of the proposed rule change is to amend OCC's By-Laws 
and Rules governing OCC's stock loan/ hedge program (``hedge program'') 
under which OCC operates a centralized facility for administering stock 
loan and stock borrow transactions between OCC clearing members.

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\
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    \2\ The Commission has modified the text of the summaries 
prepared by OCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Overall Purpose
    In general, the purpose of the proposed rule change is to make 
comprehensive amendments to OCC's By-Laws and Rules that govern the 
hedge program. Clearing members that are approved to participate in the 
hedge program are referred to as ``hedge clearing members.'' A clearing 
member that lends stock through the hedge program is referred to as a 
``lending clearing member,'' and a clearing member that borrows stock 
is referred to as a ``borrowing clearing member.'' Stocks that are 
eligible for the hedge program are referred to as ``eligible stocks.''
2. Summary of Primary Changes in Program
    (i) Stock Loan Initiation. Currently under the hedge program, a 
stock loan is initiated when two hedge clearing members agree on the 
terms of the loan, the lending clearing member transfers the stock to 
OCC's account at a ``correspondent depository'' (i.e., a securities 
depository at which OCC has an account), OCC directs the correspondent 
depository to redeliver the stock to the borrowing clearing member 
against payment of the required collateral amount to OCC, and OCC pays 
over the required collateral amount to the lending clearing member.
    Under the revised hedge program, OCC will have no involvement in a 
stock loan until after the clearing members that are parties to the 
stock loan have completed the transaction between themselves through 
the facilities of The Depository Trust Company (``DTC''). Upon 
receiving notice of the stock loan from DTC, OCC will verify the 
accuracy of the clearing members' account numbers and the information 
supplied to OCC with respect to the transaction. If this information is 
verified, OCC will accept the loan into the hedge program. Upon 
acceptance (and only upon acceptance) by OCC, the stock loan contract 
between the stock lender and the stock borrower will be replaced by two 
parallel contracts with congruent terms: one between the stock lender 
and OCC as stock borrower and one between the stock borrower and OCC as 
stock lender. If OCC rejects a transaction, the transaction will remain 
in effect between the lending clearing member and the borrowing 
clearing member but outside the hedge program.
    (ii) Universe of Eligible Stocks. Currently, the only stocks 
eligible for the hedge program are stock that are the underlying stocks 
for stock option contracts. Under the proposed rule change, all equity 
securities that are eligible for deposit at DTC will be eligible for 
the hedge program (other than any stock as to which OCC has made a 
determination pursuant to Section 2(c) of Article XXI of its By-Laws to 
terminate all outstanding stock loans relating to that stock).

[[Page 30545]]

    (iii) Margin-Ineligible Stock Loan and Borrow Positions. Under the 
current hedge program, all stock loan and stock borrow positions are 
taken into account in calculating each clearing member's obligation to 
deposit ``additional margin'' with OCC \3\ and may generate either an 
increased additional margin requirement (if the stock loan or borrow 
positions do not hedge other positions of the clearing member) or a 
reduced additional margin requirement (if the stock loan or borrow 
positions do hedge other positions of the clearing member).
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    \3\ Under the current hedge program, a hedge clearing member is 
required to deposit margin with OCC to cover OCC's risk that the 
market will move against the member's stock loan and borrow 
positions during a day and that the member will fail before making 
the required mark-to-market payment on the next business day. Under 
the proposed rule change, a hedge clearing member will continue to 
be required to deposit margin with OCC but only with respect to 
``margin-eligible'' stock loan and borrow positions. This margin is 
analogous to the ``additional margin'' that OCC requires with 
respect to short stock option positions, and therefore it is 
referred to in OCC's rules and in this notice as ``additional 
margin.''
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    Under the proposed rule change, a clearing member will be able to 
designate one or more of its accounts with OCC as ``margin-
ineligible.'' If an account is designated as margin-ineligible, OCC 
will not include any stock loan and stock borrow positions carried in 
that account in the calculation of the clearing member's additional 
margin obligations. Instead, OCC will rely on the other elements of its 
protection and back-up systems (primarily its clearing fund and its 
concentration monitoring surveillance system) to mitigate the risk to 
OCC created by those positions.\4\
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    \4\ Under the proposed rule change, lending and borrowing 
clearing members will continue to be required to pay or be entitled 
to daily mark-to-market payments to adjust the collateral held by 
lending clearing members with respect to all stock loans. The 
purpose of additional margin is to protect OCC from the risk of an 
adverse market move between mark-to-market payments. OCC has 
concluded that the other elements of its protection and back-up 
systems should be adequate to protect it against this risk with 
respect to margin-ineligible stock loan and borrow positions. 
Margin-ineligible stock loan and borrow positions will be taken into 
account in determining the clearing fund contributions of hedge 
clearing members even though they will not be taken into account in 
margin calculations.
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    (iv) Stock Loan and Borrow Baskets. Under the proposed rule change, 
a clearing member will be able to instruct OCC to treat specified stock 
loan positions in an account as constituting a ``stock loan basket'' 
and may instruct OCC to treat specified stock borrow positions in an 
account as constituting a ``stock borrow basket.'' Stock loan baskets 
and stock borrow baskets will be subject to margin under OCC's Rule 
602.\5\ The current hedge program has no provisions for stock loan and 
borrow baskets.
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    \5\ OCC Rule 602 describes the calculation of margin 
requirements for securities which are neither equity securities nor 
based on equity securities. This margin system is sometimes referred 
to as OCC's ``NEO'' or ``non-equity option'' margin system.
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    (v) Stock Loan Termination. Under the proposed rule change, the 
process for terminating stock loans will parallel the changes to the 
process for initiating stock loans. Under the current hedge program, a 
stock loan is terminated when the borrowing clearing member transfers 
the stock to OCC's account at the correspondent depository, OCC directs 
the correspondent depository to redeliver the stock to the lending 
clearing member against payment of the collateral amount to OCC, and 
OCC pays the collateral amount over to the borrowing clearing member. 
Under the proposed rule change, a stock loan will be terminated when 
the borrowing clearing member transfers the stock directly to the 
account of the lending clearing member at DTC against payment of the 
collateral amount to the DTC account of the borrowing clearing member.
3. Section-by-Section Discussion
    In Article I of OCC's By-Laws, the definition of the term 
``eligible stock'' will be revised to include all equity securities 
that are eligible for deposit at DTC. The terms ``margin-eligible,'' 
``margin-ineligible,'' ``stock borrow basket,'' and ``stock loan 
basket'' will be defined for the purposes described above.
    Article VIII of OCC's By-Laws will be amended to include the stock 
loan basket and stock borrow basket concepts in OCC's clearing fund. 
OCC's clearing fund is comprised of a ``stock clearing fund'' and a 
``non-equity securities clearing fund.'' Clearing members' 
contributions to each are based upon the members' equity option margin 
requirements under rule 601 and members' NEO margin requirements under 
Rule 602. As discussed above, stock loan and borrow baskets will be 
subject to margin in OCC's NEO margin system. Therefore, stock loan and 
borrow baskets will be taken into account in determining clearing 
members' contributions to the non-equity securities clearing fund. If 
OCC were ever to suffer a loss attributable to stock loan or borrow 
baskets, OCC's first recourse to the clearing fund would be to the non-
equity securities clearing fund.
    The definitions in Article XXI, Section 1 of the By-Laws will be 
revised primarily to accommodate the revisions to the manner in which 
stock loans are initiated. The definitions of the terms ``collateral'' 
and ``loaned stock'' will be revised to reflect that the loaned stock 
and collateral will no longer be passed through OCC's account at DTC. 
The definition of ``correspondent depository'' will be deleted and 
replaced with the new term ``depository.'' The term ``stock loan 
business day'' will be defined as a day on which OCC and DTC are both 
open for business, and this term will be used in the Rules describing 
stock loan settlement procedures.
    Article XXI, Section 2 of the By-Laws will be amended to reflect 
the revised manner in which stock loans are initiated, as described 
above. An interpretation will be added to section 2 to address certain 
situations in which the termination of a stock loan is reported to OCC 
at a settlement price (i.e., reflecting payment by the lending clearing 
member of an amount of collateral) which is not consistent with OCC's 
records. A similar interpretation will be added to Rule 2209 (currently 
Rule 2208) to address situations in which OCC receives a report of the 
termination either of a purported stock loan which does not exist on 
OCC's records or of a stock loan on OCC's records in a quantity which 
does not match the quantity in the termination report. OCC anticipates 
that both of these types of situations will be extremely unusual. 
However, they are theoretically possible because OCC will receive 
reports of terminations of stock loans only after the transactions are 
final on DTC's books. OCC's records will be dispositive in both of 
these types of situations, and OCC will not accept any responsibility 
for reconciling the discrepancy between its records and those of the 
affected clearing members.
    Paragraph (d) in Article XXI, Section 5 will be deleted. This 
paragraph currently limits the stock loan and borrow positions that may 
be maintained in a stock market-maker's or stock specialist's account 
to positions relating to the stock for which the stock market-maker or 
stock specialist acts as stock market-maker or stock specialist. 
Article VI, Section 3(f) of OCC's By-Laws restricts the options 
transactions which may be conducted in a stock market-maker's or stock 
specialist's account to those in options on underlying stocks for which 
the stock market-maker or specialist acts as market-maker or 
specialist. Section 5(d) of Article XXI was intended to extend that 
restriction to stock loan and borrow positions. However, the purpose of 
the Article VI, Section 3(f) restriction is to

[[Page 30546]]

facilitate surveillance of stock market-makers' and specialists' 
trading activity conducted in those accounts.\6\ Stock loan and borrow 
positions are created by hedge clearing members and not by the stock 
market-maker or specialist for which a stock-market maker's or 
specialist's account is established. Therefore, the paragraph (d) 
restriction is irrelevant to the surveillance purpose of the Article 
VI, Section 3(f) restriction. OCC believes that a hedge clearing member 
should be permitted to carry a stock loan or borrow position relating 
to a particular stock in a stock-market maker's or specialist's account 
that is restricted to options transactions in a different stock if the 
clearing member wishes to do so.
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    \6\ Securities Exchange Act Release No. 22692 (December 6, 
1985), 50 FR 50882 [File No. SR-OCC-85-15].
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    A new paragraph (b)(12) will be added to Rule 601 to state that 
margin-ineligible stock loan and borrow positions will not be taken 
into account in determining a clearing member's margin requirements. 
Rule 601(c) will be revised to state that additional margin on margin-
eligible stock loan and borrow positions will be based only on the 
``net'' stock loan or borrow position in an account in a manner 
analogous to the method that OCC uses for options.\7\ Interpretation 
.06 to Rule 601 will be deleted because OCC has determined that it is 
unnecessary to have a special rule for the ``margin interval'' \8\ to 
be used for stock loan and borrow positions maintained in an account in 
which no options in the same class group are being maintained.
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    \7\ Rule 601 currently provides that additional margin 
calculations are based in part on the ``gross'' stock loan and 
borrow positions of a hedge clearing member (i.e., without regard to 
whether a position on the other side of the market was carried in 
the account). OCC has concluded that requiring additional margin on 
the gross positions leads to over-margining and is an unnecessary 
disincentive for clearing members to use the hedge program.
    \8\ ``Margin interval'' is the maximum daily change in the 
marking price of the underlying security, upwards or downwards, 
assumed by OCC for purposes of calculating additional margin.
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    Rule 602 will be amended to incorporate references to stock loan 
baskets and stock borrow baskets. The definition of ``class group'' in 
paragraph (b)(2) will be amended to state that OCC will treat any stock 
loan basket or stock borrow basket defined by a clearing member as 
within the class group identified by the clearing member even if the 
stock loan or borrow positions comprising the basket do not replicate 
the composition or weighting of the index group for the class group and 
even if the stocks underlying the identified stock loan or borrow 
positions are not even included in the index group. However, a stock 
loan or borrow basket that does not meaningfully replicate the 
composition and weighting of the index group for a class group will be 
subject to a very large haircut when OCC takes the basket into account 
in determining the additional margin requirement for the class 
group.\9\ OCC has developed the systems capacity to be able to analyze 
customized portfolios and assign appropriate haircuts to them on a 
large-volume, overnight basis. OCC believes that enabling hedge 
clearing members to use stock loan and borrow positions in OCC's NEO 
margin system will offer OCC additional margin in a desirable form 
because the assets, unlike cash, government securities, and letters of 
credit, will ``co-vary'' to some degree with the clearing members' 
short option positions on the opposite side of the market. In addition, 
including stock loan and borrow positions as offsets in the NEO system 
will allow clearing members to reduce their net additional margin 
requirements.
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    \9\ OCC's authority to determine haircuts is set forth in OCC 
Rule 602(c)(1)(ii)(C)(1).
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    Changes will be made to the definitions of ``marking price'' in 
Rule 602(b)(6) and ``margin interval'' in Rule 602(b)(8) to extend 
these concepts to stock loan and borrow baskets. A new sentence will be 
added to Rule 602(c)(1)(ii)(A) to state that if a clearing member 
defines two or more stock loan baskets or two or more stock borrow 
baskets in an account as within the same class group, OCC will take 
each basket into account separately, and calculate a ``haircut'' for 
each separately in determining additional margin for the class group.
    A new sentence will be added to Rule 602(c)(1)(ii)(B) to reflect 
that the daily mark-to-market payments between lending and borrowing 
clearing members that are described in Rule 2204 (currently Rule 2203) 
are the functional equivalent of premium margin deposited with OCC with 
respect to short option positions. Changes to Rule 602(c)(1)(C) will 
extend the description of the calculation of additional margin in the 
NEO margin system to stock loan and borrow baskets. Changes to Rules 
602(d) and (e) will extend those provisions to stock loan and borrow 
baskets. A new Rule 602(f)(8) will describe the way that OCC will 
proceed in certain special circumstances in which a hedge clearing 
member reduces or terminates a stock loan or borrow position which is 
completely or partly included in a stock loan basket or stock borrow 
basket. Interpretations .06 and .07 to Rule 602 will be modified to 
extend them to stock loan and borrow baskets.
    Rule 1001 will be amended to describe the way that stock loan and 
borrow baskets will be taken into account in determining hedge clearing 
members' contributions to the stock clearing fund and the non-equity 
securities clearing fund. These changes will parallel the changes to 
Article VIII of the By-Laws.
    Rule 1104 will be amended to delete a phrase that currently states 
that if a hedge clearing member is suspended the proceeds from the 
closing out of stock loan positions and stock borrow positions in the 
clearing member's customers' account will be subject to the special 
accounting for customer funds that is described in the Rule. Proceeds 
from the closing out of stock loan positions and stock borrow positions 
are correctly characterized as funds of the clearing member and not 
funds of the clearing member's customers because stock loan and borrow 
positions (even those that are carried in a customers' account so that 
they can provide additional margin offsets in that account) are 
correctly characterized as positions of the clearing member and not 
positions of the clearing member's customers.\10\
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    \10\ The interests of the clearing member's customers are 
nonetheless protected because the clearing member is required under 
Rule 15c3-3 of the Act, 17 CFR 240.15c3-3, to include in its 
calculations of the amount which it is required to maintain on 
deposit in its Reserve Bank Account ``Monies borrowed collateralized 
by securities carried for the account of customers'' (Item 2) and 
``Monies payable against customers' securities loaned'' (Item 3). 
This subject is discussed in Securities Exchange Act Release No. 
39738 (March 10, 1998), 63 FR 13082 [File No. SR-OCC-97-11].
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    A new Rule 2201 will be added to OCC's rules. Rule 2201(a) will 
describe the standing instructions regarding the hedge program that a 
hedge clearing member will be expected to maintain with OCC. Rule 
2201(b) will describe situations under which a hedge clearing member 
may provide OCC specific instructions that override the clearing 
member's standing instructions.
    Rule 2201(a)(iv) will require a hedge clearing member to provide 
OCC with a standing instruction as to the account from and to which the 
clearing member wishes its net daily mark-to-market payments to be 
made. The rule will state that the clearing member may specify either 
its firm account or its combined market-makers' or specialists' account 
for this purpose. OCC believes that funds deposited as collateral by a 
borrowing clearing member with a lending clearing member to secure its 
obligation to return the loaned stock do not constitute funds of the 
customers of

[[Page 30547]]

either the lending clearing member or the borrowing clearing member 
regardless of the accounts in which stock loan and stock borrow 
positions are carried. OCC believes that funds paid to adjust the 
collateral also do not constitute customer funds and therefore that 
cross-account netting of mark-to-market payments is appropriate and 
permissible.
    Rule 2202 (currently rule 2201) will be rewritten to describe the 
new stock loan initiation process, and in particular to reflect the 
elimination of any role of an OCC account at DTC in the stock loan 
initiation process. Rule 2202(c) (currently Rule 2201(e)) will be 
revised to state that the sole obligation of the lending clearing 
member with respect to the collateral which it holds shall be to ``act 
as agent for [OCC] in repaying an amount equal to the Collateral * * *, 
or in otherwise disposing of the Collateral in such other manner as the 
Corporation may direct in the event that the Borrowing Clearing Member 
has been suspended pursuant to Chapter XI of the Rules, if and when the 
Stock Loan is terminated as provided in the Rules.'' This language 
parallels new language in Rule 2208(c) which says that the actions of 
the borrowing clearing member to terminate a stock loan ``shall be 
undertaken as [OCC's] agent, and [OCC] shall have the authority to 
instruct the Borrowing Clearing Member to proceed in another manner in 
the event that the Lending Clearing Member has been suspended pursuant 
to Chapter XI of the Rules.''
    In each case, this language is intended to give OCC, if it must 
suspend a hedge clearing member, the express authority to instruct each 
hedge clearing member on the other side of the suspended clearing 
member's stock loans not to use the ordinary stock loan termination 
procedures but instead to use the collateral to buy in the loaned stock 
(if the suspended clearing member is the borrowing clearing member) or 
to sell out the loaned stock and apply the proceeds to the repayment of 
the collateral (if the suspended clearing member is the lending 
clearing member). These statements of express authority are necessary 
because under the revised process for terminating stock loans when 
neither hedge clearing member has been suspended, the borrowing 
clearing member and the lending clearing member will return the loaned 
stock and the collateral directly to each other's DTC account rather 
than to OCC's DTC account. In the absence of this expressly stated 
authority to instruct hedge clearing members that have not been 
suspended to proceed in another manner, it might be difficult under the 
revised hedge program for OCC to control the disposition of assets held 
by clearing members on the other side of stock loans from the suspended 
clearing member.
    Changes will be made to Rule 2203 (currently Rule 2202) to reflect 
the fact that a hedge clearing member may declare its stock loan and 
borrow positions margin-ineligible. The calculation of margin deposited 
with OCC margin for stock loan and borrow baskets will be described in 
Rule 602.
    Rule 2204 (currently Rule 2203) will be amended to provide for the 
netting across all of a hedge clearing member's accounts of the mark-
to-market payments due to and from the clearing member with respect to 
the clearing member's stock loan and stock borrow positions on each 
business day. OCC believes that the changes in Rule 2204 are 
appropriate for the same reason that underlies the changes in Rule 1104 
described above. Namely, that funds deposited as collateral by a 
borrowing clearing member with a lending clearing member to secure its 
obligation to return the loaned stock do not constitute funds of the 
customers of either the lending clearing member or the borrowing 
clearing member regardless of the accounts in which stock loan and 
stock borrow positions are carried. OCC believes that funds paid to 
adjust the collateral also do not constitute customer funds and 
therefore that cross-account netting of mark-to-market payments is 
appropriate and permissible.
    OCC will specify in Rule 2201(a)(iv) that a hedge clearing member 
may process the net daily payment to or from the hedge clearing member 
only through its firm account or its combined market-makers' or 
specialists' account. This requirement will eliminate any possibility 
that a net mark-to-market payment due from a hedge clearing member to 
OCC (which does not constitute customer funds) will be netted against 
funds such as premiums being paid to writers of options which are due 
from OCC to the hedge clearing member's customers' account (and which 
do constitute customer funds).
    Rules 2208 and 2209 (currently Rules 2207 and 2208, respectively) 
will be rewritten to reflect the changes in the procedures for 
terminating stock loans that are described above.
    Rule 2210(a) [currently Rule 2209(a)] will be rewritten to state 
that if DTC suspends one of the parties to a stock loan prior to the 
time at which OCC would have otherwise accepted a stock loan into the 
hedge program, OCC will not accept the stock loan. The rule also will 
state that OCC will accept any stock loan which complies with the 
completeness and accuracy requirements of Rule 2202(b) even if OCC 
suspends one of the hedge clearing members which is a party to the 
stock loan prior to the time at which OCC accepts the stock loan.
    Rule 2210(b) [currently Rule 2209(b)] will be rewritten for two 
purposes: (1) To clarify that OCC contemplates that the buy-in and 
sell-out procedures described in Rule 2211 (currently rule 2210) 
generally will be used to close out the stock loan and borrow positions 
of a suspended clearing member unless OCC determines that another 
manner of proceeding is more appropriate in the circumstances and (2) 
to eliminate language that states that proceeds of stock loan and 
borrow positions carried in market-maker and specialist accounts will 
be accounted for separately. The reason for these changes is the same 
as the reason for the changes in Rule 1104 described above. Namely, 
that stock loan and borrow positions, regardless of the account in 
which they are carried, are properly characterized as position of the 
hedge clearing member and not positions of the market-maker or 
specialist for whom the account is established.
    Old Rule 2210(c) [currently rule 2209(c)] will be deleted because 
OCC has concluded that it would be unlikely ever to match up stock, 
loan and borrow positions of hedge clearing members that were formerly 
counter-parties of a suspended clearing member in the manner described 
in the rule.
    The only substantive change in Rule 2221 (currently Rule 2210) will 
be to eliminate references to the separate treatment of stock loan and 
borrow positions carried in market-maker and specialist accounts. The 
reason for eliminating this separate treatment is described above in 
the discussion of Rule 2210(b).
4. Statutory Basis for the Proposed Rule Change
    OCC believes that the proposed rule change provides for the 
enhancement of the hedge program in a number of ways that should 
increase the attractiveness of the hedge program to the stock lending 
community and thereby lead to increased use of the hedge program. 
Because OCC believes that its hedge program facilitates the prompt and 
accurate clearance and settlement of stock loans and provides enhanced 
safeguarding of related securities and funds, OCC believes that the 
proposed rule change is consistent with the requirements of the Section 
17A of the

[[Page 30548]]

Act\11\ and the rules and regulations thereunder. In addition, OCC 
believes that the hedge program reduces exposure to counterparty 
default by allowing for the substitution of OCC's AAA credit rating for 
that of each stock loan counterparty, by using increased payment 
netting, by reducing duplicative collateralization requirements, and by 
applying advanced clearing and risk management systems to the stock 
loan market. OCC therefore believes that the proposed changes are 
consistent with the purposes and requirements of the Act.
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    \11\ 15 U.S.C. 78q-1.
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(B) Self-Regulatory Organization's Statement on Burden on 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

    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 
finding or (ii) as to which OCC 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, including whether the proposed rule 
change is consistent with the Act. 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 bare 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. 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-98-03 and should be 
submitted by June 25, 1998.

    For the Commission by the Division of Market Regulations, 
pursuant to delegated authority.\12\
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    \12\ 17 CAR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-14830 Filed 6-3-98; 8:45 am]
BILLING CODE 8010-01-M