Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Notices 30543

11 17 CFR 200.30–3(a)(1).

1 15 U.S.C. 79s(b)(1).

2The Commission has modified the text of the

summaries prepared by DTC and NSCC.

3For a more complete description of Direct

Clearing, refer to Securities Exchange Act Release

No. 32221 (April 26, 1993), 58 FR 26570 [File No.

SR–NSCC–93–03].

4Securities Exchange Act Release No. 31861

(February 16, 1993), 58 FR 9582 [File No SR–

NSCC–93–03].

5Securities Exchange Act Release No. 34629

(September 9, 1994), 59 FR 46680 [File No. SR–

NSCC–94–12].

6 DTC’s proposed procedures are attached as

Exhibit 2 to DTC’s filing which is available for

inspection and copying at the Commission’s public

reference room and through DTC.

7The current version of NSCC Rule 31 was

approved by the Commission in 1996. Securities

Exchange Act Release No. 37631 (September 3,

1996), 61 FR 47534 [File No. SR–NSCC–96–08].

8 15 U.S.C. 78q–1.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.11

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–14778 Filed 6–3–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40045; File Nos. SR–DTC–

98–09, SR–NSCC–98–05]

Self-Regulatory Organizations; The

Depository Trust Company; National

Securities Clearing Corporation;

Notice of a Proposed Rule Change

Relating to Direct Clearing Services

and New York Window Services

May 29, 1998.

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

Securities Exchange Act of 1934

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

May 13, 1998, The Depository Trust

Company (‘‘DTC’’) and the National

Securities Clearing Corporation filed

with the Securities and Exchange

Commission (‘‘Commission’’) proposed

rule changes as described in Items I, II,

and III below, which Items have been

prepared primarily by DTC and NSCC.

The Commission is publishing this

notice to solicit comments from

interested persons on the proposed rule

changes.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Changes

Under the proposed rule changes,

NSCC will discontinue providing its

Direct Clearing Services (‘‘Direct

Clearing’’) and New York Window

Services (‘‘Window’’). DTC will begin to

offer its participants most of the services

currently offered by NSCC through

Direct Clearing and the Window and

will call the service the ‘‘New York

Window Services.’’

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Changes

In its filing with the Commission,

DTC and NSCC included statements

concerning the purpose of and basis for

the proposed rule changes and

discussed any comments they received

on the proposed rule changes. The text

of these statements may be examined at

the places specified in Item IV below.

DTC and NSCC have 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

Changes

Direct Clearing is a physical securities

processing service which NSCC has

provided since its inception to NSCC

participants that do not have offices in

New York City. The principal services

of Direct Clearing include (i) processing

of over-the-window receives and

deliveries, (ii) processing transfers of

physical securities certificates, and (iii)

processing deliveries to designated

agents in connection with

reorganizations and other corporate

actions. In the course of providing these

and other Direct Clearing services,

NSCC may have custody of participants’

physical securities certificates including

overnight custody for one or more

days.3

The Window was originally approved

by the Commission as a pilot project for

NSCC in 1993 4 and became a

permanent service in 1994.5 The

principal services of the Window are

similar to those of Direct Clearing, but

they initially were provided to NSCC

participants located in New York City.

NSCC organized the Window in order to

centralize redundant services provided

at many of its participants’ offices that

were based in New York City.

NSCC has proposed to discontinue

providing Direct Clearing and the

Window in order to focus its resources

on the core businesses of NSCC. The

proposed arrangements between NSCC

and DTC should assist in eliminating

redundant services and facilities and

thereby should result in greater

efficiencies while offering the current

users of Direct Clearing and the Window

the ability to receive similar services

from DTC.

Under the proposals, DTC will adopt

new procedures for the operation of its

New York Window Services.6 DTC’s

proposed procedures are substantially

the same as NSCC’s Rule 31 7 except

that DTC’s proposed procedures do not

include provisions similar to section 4

of NSCC Rule 31, which relates to

money settlement through the Window.

Currently, it is anticipated that NSCC

will discontinue providing Direct

Clearing and the Window and DTC will

begin offering its New York Window

Services on July 10, 1998.

DTC and NSCC believe that the

proposed rule changes are consistent

with the requirements of Section 17A of

the Act 8 and the rules and regulations

thereunder because the proposed

arrangements should provide for more

efficient clearing and depository

services and thereby should facilitate

the prompt and accurate clearance and

settlement of such transactions. In

addition, DTC believes that the

proposed rule changes will be

implemented consistently with its

obligation under Section 17A to

safeguard securities and funds in its

custody and control or for which it is

responsible.

(B) Self-Regulatory Organization’s

Statement on Burden on Competition

The proposed arrangements would

impose no burden on competition.

Securities depositories registered under

Section 17A of the Act are utilities

created to serve members of the

securities industry for the purpose of

providing certain services that are

ancillary to the businesses in which

industry members compete with one

another.

After consummation of the proposed

arrangements between DTC and NSCC,

securities industry members will

continue to have access to high-quality,

low-cost depository services provided

under the mandate of the Act.

(C) Self-Regulatory Organizations’

Statement on Comments on the

Proposed Rule Changes Received from

Members, Participants or Others

Written comments from DTC

participants, NSCC participants, and

others have not been solicited or

received. NSCC and DTC have worked

closely, however, with a users’ group

composed of many of the users of Direct

Clearing and the Window in evaluating

and planning the proposed transaction.
30544 Federal Register / Vol. 63, No. 107 /Thursday, June 4, 1998 / Notices

9 17 CFR 200.30–3(a)(12).

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

2The Commission has modified the text of the

summaries prepared by OCC.

III. Date of Effectiveness of the

Proposed Rule Changes 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 DTC or NSCC consents,

the Commission will:

(A) By order approve such proposed

rule changes or

(B) Institute proceedings to determine

whether the proposed rules 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

changes are consistent with the Act.

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

changes that are filed with the

Commission, and all written

communications relating to the

proposed rule changes 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 DTC and NSCC. All

submissions should refer to File Nos.

SR–DTC–98–09 and SR–NSCC–98–05

and should be submitted by June 25,

1998.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.9

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–14829 Filed 6–3–98; 8:45 am]

BILLING CODE 8010–01–M

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.

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

(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 ByLaws to terminate all outstanding stock

loans relating to that stock).