Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of a Proposed Rule Change Relating to Unsegregation of Long Option Positions, 12525-12527 [E5-1062]
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Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices
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 the filing also will be
available for inspection and copying at
the principal offices of Nasdaq. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NASD–2005–028 and
should be submitted on or before April
4, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.13
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–1058 Filed 3–11–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51319; File No. SR–NYSE–
2004–61]
Self-Regulatory Organizations; New
York Stock Exchange, Inc.; Order
Approving Proposed Rule Change and
Amendment Nos. 1 and 2 Thereto To
Rescind a Type of Order Known as an
Institutional XPress Order Through
Amendments to Exchange Rules 13, 60
and 72
March 4, 2005.
On October 28, 2004, the New York
Stock Exchange, Inc. (‘‘NYSE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
rescind a type of order known as an
Institutional XPress Order (‘‘XPress
Order’’) by amending NYSE Rules 13
(Definitions of Orders), 60
(Dissemination of Quotation) and 72
(Priority and Precedence of Bids and
Offers). On December 3, 2004, the
Exchange filed Amendment No. 1 to the
proposed rule change.3 The proposed
13 CFR
200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Partial Amendment dated December 3, 2004
(‘‘Amendment No. 1’’). In Amendment No. 1, the
Exchange changed the basis under which the
1 15
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rule change, as amended by
Amendment No. 1, was published for
notice and comment in the Federal
Register on December 29, 2004.4 The
Commission received no comment
letters on the proposal, as amended. On
January 25, 2005, the Exchange filed
Amendment No. 2 to the proposed rule
change.5 This order approves the
proposed rule change, as amended.
The Commission finds that the
proposed rule change, as amended, is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange,6 and, in particular,
the requirements of section 6 of the
Act 7 and the rules and regulations
thereunder. The Commission finds
specifically that the proposed rule
change, as amended, is consistent with
section 6(b)(5) of the Act 8 in that it is
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
According to the Exchange, the
XPress Order has not been widely used 9
and if the Hybrid Market initiative 10 is
approved and implemented, the need
for XPress Orders will be further
diminished. Therefore, the Commission
believes that it is consistent with the
Act to eliminate this type of order.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,11 that the
proposed rule change (SR–NYSE–2004–
61), as amended, be, and hereby is,
approved.
proposed rule change was filed from Section
19(b)(3)(A) of the Act to Section 19(b)(2) of the Act.
4 See Securities Exchange Act Release No. 50912
(December 22, 2004), 69 FR 78084.
5 See Partial Amendment dated January 25, 2005
(‘‘Amendment No. 2’’). In Amendment No. 2, the
Exchange made minor, technical corrections to the
proposed rule text. Accordingly, this Amendment is
not subject to notice and comment.
6 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
7 15 U.S.C. 78f.
8 15 U.S.C. 78f(b)(5).
9 Telephone conversation between Cyndi N.
Rodriguez, Special Counsel, Division of Market
Regulation, Commission, and Jeffrey S. Rosenstrock,
Special Counsel, Market Surveillance, NYSE, on
March 1, 2005. The NYSE also represented that the
proposed rule change would be implemented on or
about April 1, 2005. Id.
10 See Securities Exchange Act Release Nos.
50173 (August 10, 2004), 69 FR 50407 (August 16,
2004) and 50667 (November 15, 2004), 69 FR 67980
(November 22, 2004) (SR–NYSE–2004–05).
11 15 U.S.C. 78s(b)(2).
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12525
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.12
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–1057 Filed 3–11–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51331; File No. SR–OCC–
2002–16]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of a Proposed Rule Change
Relating to Unsegregation of Long
Option Positions
March 8, 2005.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
July 9, 2002, the Options Clearing
Corporation (‘‘OCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) and on December 12,
2002, and January 11, 2005, amended,
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 on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
OCC Rule 611 permits a clearing
member to issue instructions to OCC to
release from segregation a long option
position carried in a customers’ account
or firm non-lien account provided that
the clearing member is simultaneously
carrying in such account for such
customer a short position in option
contracts and the margin requirement of
the customer has been reduced as a
result of carrying the long option
position. The proposed rule change
would amend Rule 611 to permit a
clearing member to issue such spread
instructions where one leg of the spread
is a long option position and the other
is a position in a security futures
contract.
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
12 17
1 15
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
14MRN1
12526
Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices
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 proposed rule change is
submitted by OCC in connection with
trading in security futures. The
Commission approved the basic rules
for the clearance of security futures by
OCC in File Nos. SR–OCC–2001–05 and
SR–OCC–2001–07.3 The proposed rule
change is submitted in light of joint
rules (‘‘joint margin rules’’) that were
adopted by the Commission and by the
Commodity Futures Trading
Commission (‘‘CFTC’’) on August 1,
2002,4 pursuant to section 7(c)(2) of the
Act and related provisions of the
Commodity Exchange Act governing the
setting of margin requirements for
security futures.
Rule 15c3–3 under the Act requires
broker-dealers to maintain customer
fully-paid and excess margin securities
in a control location free of any lien.5
Rules 8c–1 and 15c2–1 under the Act,
which govern hypothecation of
customer securities, also place
limitations on broker-dealers rights to
encumber customer securities.6 In order
to permit compliance by clearing
members with Rule 15c3–3 and with the
hypothecation rules, OCC’s Rule 611(a)
presently provides that long option
positions in a customers’ account
established under Article VI, section
3(e) of OCC’s By-Laws are deemed to be
segregated and therefore not subject to
OCC’s lien except to the extent that the
clearing member gives contrary
instructions to OCC in accordance with
the rule.7 Under paragraph (c) of Rule
611, a clearing member is entitled to
give an instruction to unsegregate such
a long position if the long position
constitutes the long leg of a spread
position, the short leg that constitutes
2 The Commission has modified parts of these
statements.
3 Securities Exchange Act Release Nos. 44434
(June 15, 2001), 66 FR 33283 and 44727 (August 20,
2001), 66 FR 45351.
4 Securities Exchange Act Release No. 46292, 67
FR 53146 [File No. S7–16–01].
5 17 CFR 240.15c3–3.
6 7 CFR 240.8c–1 and 15c2–1.
7 The provisions of Rule 611 also apply to long
option positions of certain ‘‘non-customers’’ carried
in a ‘‘firm non-lien account’’ under Article VI,
section 3(a) of OCC’s By-Laws. At present, no
clearing member carries such an account.
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the short leg of the spread position is
held by the same customer, and the
customer’s margin requirement has been
reduced to reflect the net risk of the
spread position. These provisions reflect
the Commission’s long-standing
interpretation that under those
circumstances the long leg of a customer
spread need not be treated as fully-paid
or excess margin securities for purposes
of Rule 15c3–3 and pledging it to OCC
will not violate Rule 15c3–3 or the
hypothecation rules.8
Section 7(c)(2)(B) of the Act requires
that the margin requirements for
security futures products be consistent
with the margin requirements for
comparable options contracts traded on
any exchange registered pursuant to
section 6(a) of the Act. OCC anticipates
that clearing members will be permitted
under the joint margin rules and
exchange and security futures market
rules adopted thereunder to reduce a
customer’s margin requirement when
the customer has offsetting positions in
security futures and options on the same
underlying interest. Accordingly, a
clearing member should be permitted
under OCC’s Rule 611 to unsegregate
long option positions in the customers’
account and firm non-lien account
when the customer holds an offsetting
long or short security futures position
and the clearing member has reduced
the customer’s margin requirement in
recognition of the spread. It should not
matter whether the other leg of the
spread is a security future or an option.9
The proposed change in OCC Rule
611(c) merely extends the same basic
rule applicable to permitted spread
positions in options contracts to any
permitted spread position where one leg
of the spread is a long option position
and the other is a position in a security
futures contract. The proposed rule is
drafted in such a way that its operation
is dependent on the joint margin rules
and the rules of the exchanges and
security futures markets adopted
thereunder. Only if a particular spread
8 The Commission staff has stated that ‘‘provision
by OCC of clearing-level spread margin treatment of
customer positions was consistent with Exchange
Act Rules 15c3–3, 15c2–1 and 8c-1’’ so long as the
conditions cited above are complied with.
Securities Exchange Act Release No. 31626 (Dec.
21, 1992), 57 FR 62588 [File No. OCC–92–14], n.10,
citing letter to Burton R. Rissman, Schiff Hardin &
Waite, from Lee A. Pickard, Director, Division of
Market Regulation (April 18, 1975).
9 Under OCC Rule 611(a), all positions in security
futures are deemed to be unsegregated because a
futures contract, which represents a potential
liability as well as a potential asset, is never
deemed to be fully-paid or to represent excess
margin securities. Accordingly, this rule filing
addresses only the case where long put or call
options are spread against long or short futures
contracts.
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position involving a long option
qualifies for reduced margin treatment
under those rules could the option be
treated as unsegregated for purposes of
Rule 611. With approval of this
proposed rule change, consistency
between the joint margin rules and Rule
611(c) would be therefore assured.10
OCC believes that the proposed rule
change is consistent with the
requirements of section 17A of the Act
and the rules and regulations
thereunder because it promotes the
prompt and accurate clearance and
settlement of securities transactions,
fosters cooperation and coordination
with persons engaged in the clearance
and settlement of securities
transactions, and removes impediments
to and perfects the mechanism of a
national system for the prompt and
accurate clearance and settlement of
securities transactions.
(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 the self-regulatory
organization consents, the Commission
will:
(a) By order approve the 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
10 OCC has requested no action relief from the
Commission’s Division of Market Regulation that a
clearing member who gives an instruction to
unsegregate long option positions pursuant to this
amended rule will not be deemed to be in violation
of Rule 15c3–3 or the hypothecation rules.
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Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml) or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–OCC–2002–16 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51330; File No. SR–OCC–
2003–04]
Self-Regulatory Organizations; the
Options Clearing Corporation; Notice
of Filing of a Proposed Rule Change
Relating to a New Customers’ Lien
Account
March 8, 2005.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
• Send paper comments in triplicate
July 21, 2003, the Options Clearing
to Jonathan G. Katz, Secretary,
Corporation (‘‘OCC’’) filed with the
Securities and Exchange Commission,
Securities and Exchange Commission
450 Fifth Street, NW., Washington, DC
(‘‘Commission’’) and on December 20,
20549–0609.
2004, amended, the proposed rule
change as described in items I, II, and
All submissions should refer to File
III below, which items have been
Number SR–OCC–2002–16. This file
prepared primarily by OCC. The
number should be included on the
subject line if e-mail is used. To help the Commission is publishing this notice to
solicit comments on the proposed rule
Commission process and review your
change from interested persons.
comments more efficiently, please use
only one method. The Commission will I. Self-Regulatory Organization’s
post all comments on the Commission’s Statement of the Terms of Substance of
Internet Web site (https://www.sec.gov/
the Proposed Rule Change
rules/sro.shtml). Copies of the
The proposed rule change would
submission, all subsequent
amend OCC’s By-Laws and Rules to
amendments, all written statements
support the introduction of a new
with respect to the proposed rule
customers’ lien account that may be
change that are filed with the
carried at OCC by a clearing member.
Commission, and all written
communications relating to the
II. Self-Regulatory Organization’s
proposed rule change between the
Statement of the Purpose of, and
Commission and any person, other than Statutory Basis for, the Proposed Rule
those that may be withheld from the
Change
public in accordance with the
In its filing with the Commission,
provisions of 5 U.S.C. 552, will be
OCC included statements concerning
available for inspection and copying in
the purpose of and basis for the
the Commission’s Public Reference
proposed rule change and discussed any
Section, 450 Fifth Street, NW.,
comments it received on the proposed
Washington, DC 20549. Copies of such
rule change. The text of these statements
filing also will be available for
may be examined at the places specified
inspection and copying at the principal
in item IV below. OCC has prepared
office of OCC and on OCC’s Web site at
summaries, set forth in sections (A), (B),
https://www.optionsclearing.com. All
and (C) below, of the most significant
comments received will be posted
aspects of such statements.2
without change; the Commission does
(A) Self-Regulatory Organization’s
not edit personal identifying
Statement of the Purpose of, and
information from submissions. You
Statutory Basis for, the Proposed Rule
should submit only information that
you wish to make available publicly. All Change
submissions should refer to File
The proposed rule change would
Number SR–OCC–2002–16 and should
provide for the introduction of a new
be submitted on or before April 4, 2005. ‘‘customers’ lien account’’ that may be
carried at OCC by a clearing member.
For the Commission, by the Division of
The new account type would be used
Market Regulation, pursuant to delegated
authority.11
only to clear transactions of eligible
customers that an OCC clearing member
Jill M. Peterson,
has agreed to margin on a portfolio risk
Assistant Secretary.
basis or that a commodity clearing
[FR Doc. E5–1062 Filed 3–11–05; 8:45 am]
Paper Comments
BILLING CODE 8010–01–P
1 15
U.S.C. 78s(b)(1).
Commission has modified parts of these
statements.
2 The
11 17
CFR 200.30–3(a)(12).
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12527
organization has agreed to margin in
connection with a cross-margining
arrangement in accordance with rules
proposed by certain exchanges.
OCC, in conjunction with the Chicago
Board Options Exchange (‘‘CBOE’’),
American Stock Exchange, New York
Stock Exchange (‘‘NYSE’’), Chicago
Mercantile Exchange (‘‘CME’’), Chicago
Board of Trade and various member
firms, is seeking to establish a program
under which eligible customers may
elect to establish accounts, limited to
specified derivative products, that
would be margined on a risk-based or
portfolio margining basis rather than
under the ‘‘strategy-based’’ method
currently set forth in the exchanges’
margin rules. The proposed program is
described in detail in a proposed rule
change filed by CBOE (‘‘CBOE Rule
Filing’’) in which CBOE proposes to
amend its margin rules to provide for
the program.3 The proposed program
would permit eligible customers to
establish risk-based margin accounts
that would be limited to specified
derivative products subject to regulation
by the Commission, and it would also
provide for accounts in which
derivative products regulated by the
Commission may be cross-margined
with related futures products regulated
exclusively by the Commodity Futures
Trading Commission (the ‘‘CFTC’’).
Under the current proposal, a crossmargining account of an eligible
customer would be treated as a
securities account for regulatory
purposes.4 A single ‘‘customers’ lien
account’’ created under the proposed
new paragraph (i) of Article VI, Section
3 of OCC’s By-Laws would be used to
clear all transactions of eligible
customers under a portfolio margining
program or cross-margining program so
long as the products included in the
account are all cleared by OCC.5 OCC
would have a lien on all positions and
assets in a customers’ lien account as
security for the OCC clearing member’s
obligations to OCC relating to the
3 Securities Exchange Act Release No. 50886
(December 20, 2004), 69 FR 77275 (December 27,
2004) [File No. SR–CBOE–2002–03]. A similar
proposed rule change was filed by NYSE. Securities
Exchange Act Release No. 50885 (December 20,
2004), 69 FR 77287 (December 27, 2004) [File No.
SR–NYSE–2002–19].
4 CBOE plans to submit a request to the CFTC for
an exemption from the segregation requirements
and from other provisions of the CEA to the extent
necessary to permit futures contracts to be carried
in securities accounts subject to regulation by the
Commission.
5 OCC is registered as a derivatives clearing
organization under the Commodity Exchange Act
and is therefore able to clear CFTC-regulated
derivative products as well as Commissionregulated derivative products.
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]]>Agencies
[Federal Register Volume 70, Number 48 (Monday, March 14, 2005)]
[Notices]
[Pages 12525-12527]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1062]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51331; File No. SR-OCC-2002-16]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing of a Proposed Rule Change Relating to Unsegregation of
Long Option Positions
March 8, 2005.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on July 9, 2002, the Options
Clearing Corporation (``OCC'') filed with the Securities and Exchange
Commission (``Commission'') and on December 12, 2002, and January 11,
2005, amended, 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 on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
OCC Rule 611 permits a clearing member to issue instructions to OCC
to release from segregation a long option position carried in a
customers' account or firm non-lien account provided that the clearing
member is simultaneously carrying in such account for such customer a
short position in option contracts and the margin requirement of the
customer has been reduced as a result of carrying the long option
position. The proposed rule change would amend Rule 611 to permit a
clearing member to issue such spread instructions where one leg of the
spread is a long option position and the other is a position in a
security futures contract.
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
[[Page 12526]]
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\
---------------------------------------------------------------------------
\2\ The Commission has modified parts of these statements.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The proposed rule change is submitted by OCC in connection with
trading in security futures. The Commission approved the basic rules
for the clearance of security futures by OCC in File Nos. SR-OCC-2001-
05 and SR-OCC-2001-07.\3\ The proposed rule change is submitted in
light of joint rules (``joint margin rules'') that were adopted by the
Commission and by the Commodity Futures Trading Commission (``CFTC'')
on August 1, 2002,\4\ pursuant to section 7(c)(2) of the Act and
related provisions of the Commodity Exchange Act governing the setting
of margin requirements for security futures.
---------------------------------------------------------------------------
\3\ Securities Exchange Act Release Nos. 44434 (June 15, 2001),
66 FR 33283 and 44727 (August 20, 2001), 66 FR 45351.
\4\ Securities Exchange Act Release No. 46292, 67 FR 53146 [File
No. S7-16-01].
---------------------------------------------------------------------------
Rule 15c3-3 under the Act requires broker-dealers to maintain
customer fully-paid and excess margin securities in a control location
free of any lien.\5\ Rules 8c-1 and 15c2-1 under the Act, which govern
hypothecation of customer securities, also place limitations on broker-
dealers rights to encumber customer securities.\6\ In order to permit
compliance by clearing members with Rule 15c3-3 and with the
hypothecation rules, OCC's Rule 611(a) presently provides that long
option positions in a customers' account established under Article VI,
section 3(e) of OCC's By-Laws are deemed to be segregated and therefore
not subject to OCC's lien except to the extent that the clearing member
gives contrary instructions to OCC in accordance with the rule.\7\
Under paragraph (c) of Rule 611, a clearing member is entitled to give
an instruction to unsegregate such a long position if the long position
constitutes the long leg of a spread position, the short leg that
constitutes the short leg of the spread position is held by the same
customer, and the customer's margin requirement has been reduced to
reflect the net risk of the spread position. These provisions reflect
the Commission's long-standing interpretation that under those
circumstances the long leg of a customer spread need not be treated as
fully-paid or excess margin securities for purposes of Rule 15c3-3 and
pledging it to OCC will not violate Rule 15c3-3 or the hypothecation
rules.\8\
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\5\ 17 CFR 240.15c3-3.
\6\ 7 CFR 240.8c-1 and 15c2-1.
\7\ The provisions of Rule 611 also apply to long option
positions of certain ``non-customers'' carried in a ``firm non-lien
account'' under Article VI, section 3(a) of OCC's By-Laws. At
present, no clearing member carries such an account.
\8\ The Commission staff has stated that ``provision by OCC of
clearing-level spread margin treatment of customer positions was
consistent with Exchange Act Rules 15c3-3, 15c2-1 and 8c-1'' so long
as the conditions cited above are complied with. Securities Exchange
Act Release No. 31626 (Dec. 21, 1992), 57 FR 62588 [File No. OCC-92-
14], n.10, citing letter to Burton R. Rissman, Schiff Hardin &
Waite, from Lee A. Pickard, Director, Division of Market Regulation
(April 18, 1975).
---------------------------------------------------------------------------
Section 7(c)(2)(B) of the Act requires that the margin requirements
for security futures products be consistent with the margin
requirements for comparable options contracts traded on any exchange
registered pursuant to section 6(a) of the Act. OCC anticipates that
clearing members will be permitted under the joint margin rules and
exchange and security futures market rules adopted thereunder to reduce
a customer's margin requirement when the customer has offsetting
positions in security futures and options on the same underlying
interest. Accordingly, a clearing member should be permitted under
OCC's Rule 611 to unsegregate long option positions in the customers'
account and firm non-lien account when the customer holds an offsetting
long or short security futures position and the clearing member has
reduced the customer's margin requirement in recognition of the spread.
It should not matter whether the other leg of the spread is a security
future or an option.\9\
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\9\ Under OCC Rule 611(a), all positions in security futures are
deemed to be unsegregated because a futures contract, which
represents a potential liability as well as a potential asset, is
never deemed to be fully-paid or to represent excess margin
securities. Accordingly, this rule filing addresses only the case
where long put or call options are spread against long or short
futures contracts.
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The proposed change in OCC Rule 611(c) merely extends the same
basic rule applicable to permitted spread positions in options
contracts to any permitted spread position where one leg of the spread
is a long option position and the other is a position in a security
futures contract. The proposed rule is drafted in such a way that its
operation is dependent on the joint margin rules and the rules of the
exchanges and security futures markets adopted thereunder. Only if a
particular spread position involving a long option qualifies for
reduced margin treatment under those rules could the option be treated
as unsegregated for purposes of Rule 611. With approval of this
proposed rule change, consistency between the joint margin rules and
Rule 611(c) would be therefore assured.\10\
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\10\ OCC has requested no action relief from the Commission's
Division of Market Regulation that a clearing member who gives an
instruction to unsegregate long option positions pursuant to this
amended rule will not be deemed to be in violation of Rule 15c3-3 or
the hypothecation rules.
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OCC believes that the proposed rule change is consistent with the
requirements of section 17A of the Act and the rules and regulations
thereunder because it promotes the prompt and accurate clearance and
settlement of securities transactions, fosters cooperation and
coordination with persons engaged in the clearance and settlement of
securities transactions, and removes impediments to and perfects the
mechanism of a national system for the prompt and accurate clearance
and settlement of securities transactions.
(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 the self-regulatory organization consents,
the Commission will:
(a) By order approve the 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
[[Page 12527]]
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml) or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-OCC-2002-16 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW.,
Washington, DC 20549-0609.
All submissions should refer to File Number SR-OCC-2002-16. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). 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 and
on OCC's Web site at https://www.optionsclearing.com. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-OCC-2002-16 and should be
submitted on or before April 4, 2005.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-1062 Filed 3-11-05; 8:45 am]
BILLING CODE 8010-01-P
