Self-Regulatory Organizations; the Options Clearing Corporation; Notice of Filing of a Proposed Rule Change Relating to a New Customers' Lien Account, 12527-12529 [E5-1063]

Download as PDF 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). VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 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. E:\FR\FM\14MRN1.SGM 14MRN1 12528 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices account.6 OCC would continue to require full premium payment from the clearing firm for all options purchased whether or not the firm extends credit to a customer for the purchase. Where cross-margining accounts include products cleared by OCC as well as futures products cleared by CME or other derivatives clearing organizations other than OCC, under a cross-margining program OCC’s clearing function would occur in a separate customers’ lien account to be established for each such program. A corresponding account would be established at the participating derivatives clearing organizations. Liquidation of these accounts would be subject to a cross-margining agreement between or among OCC and the participating derivatives clearing organizations just as in the case of the existing cross-margining programs. These agreements or appropriate amendments to existing agreements would be separately filed with the Commission for approval. It is anticipated that a clearing member may establish a customers’ lien account corresponding to a cross-margining agreement among OCC, CME and the New York Clearing Corporation. Separate customers’ lien accounts would correspond to cross-margining agreements between OCC and other futures clearing organizations. As stated in the CBOE rule filing, the currently proposed program includes only the following eligible products: (i) All broad-based U.S. market index options (including stock index warrants) listed on a national securities exchange; (ii) marginable exchange-traded funds; and (iii) index futures contracts and futures options contracts to the extent they are cross-margined with listed index options. The following proposed revisions to OCC’s By-Laws and Rules are necessary to provide for the introduction of customers’ lien accounts. 6 Under Commission Rules 8c–1, 15c2–1, and 15c3–3, securities held for the account of a customer generally may not be subject to liens to secure obligations of the carrying broker-dealer in an amount that exceeds the amount of total customer indebtedness. To facilitate compliance with these customer protection rules, OCC’s rules require clearing members to carry positions of public securities customers in a customers’ account under which all long positions are considered ‘‘segregated’’ and therefore free of OCC’s lien, unless specifically designated as ‘‘unsegregated.’’ All long options positions in customers’ lien accounts, however, would automatically be considered unsegregated for purposes of OCC’s placing a lien on these positions. OCC has requested no-action relief from the Commission’s Division of Market Regulation which will permit OCC to treat these positions as unsegregated notwithstanding these provisions of Rules 8c–1, 15c2–1 and 15c3–3. VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 New Defined Term: OCC proposes to add a new defined term, ‘‘customers’ lien account,’’ in Article I of the ByLaws. The definition simply crossreferences the description of the account in Article VI, Section 3(i). Amendments to Article VI of the ByLaws: Article VI sets out the basic terms of option contracts and the general rules for the clearance of exchange transactions. Section 3 contains a description of each of the types of accounts that clearing members may establish and maintain with OCC. A new Section 3(i) would be added that would contain a description of the proposed ‘‘customers’ lien account,’’ including provisions setting forth OCC’s lien on all long positions, securities, margin, and other funds in such accounts and OCC’s right to close out positions in these accounts. As provided in the proposed amendment to Rule 611 below, positions in customers’ lien accounts would be deemed to be unsegregated. Section 3 would be further amended to correct the paragraph numbers of the Interpretations and Policies to Section 3. A minor, conforming amendment has been made to Section 4 of Article VI. Amendments to the Rules: OCC’s Rule 611 treats all long option positions in the regular securities customers’ account as ‘‘segregated’’ and therefore free of OCC’s lien except to the extent that a clearing member is entitled to ‘‘unsegregate’’ long positions that are part of a customer spread. Rule 611 would be amended to provide that all positions in customers’ lien accounts will be deemed to be ‘‘unsegregated.’’ Changes are being proposed in Chapter XI of the Rules to provide for the liquidation of a clearing member’s customers’ lien account in the event that the clearing member is suspended. In essence, a customers’ lien account would be treated in exactly the same manner as a combined market-maker account. Under these provisions, proceeds of long options or security futures in a customers’ lien account would be applied only to satisfy obligations arising from that account. OCC believes that the proposed rule change is consistent with the purposes and requirements of Section 17A of the Act because it provides for operational and economic efficiencies in customer margining and increases the safety of the clearing system by applying previously approved risk-based margining procedures to clearing accounts containing the transactions of eligible customers. The proposed rule change is not inconsistent with the existing rules of OCC, including any other rules proposed to be amended. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 (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 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–2003–04 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–2003–04. 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 E:\FR\FM\14MRN1.SGM 14MRN1 Federal Register / Vol. 70, No. 48 / Monday, March 14, 2005 / Notices 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–2003–04 and should be submitted on or before April 4, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.7 Jill M. Peterson, Assistant Secretary. [FR Doc. E5–1063 Filed 3–11–05; 8:45 am] BILLING CODE 8010–01–P DEPARTMENT OF STATE [Public Notice 4971] Shipping Coordinating Committee; Notice of Meeting The Shipping Coordinating Committee (SHC) will conduct an open meeting at 9:30 a.m. on Tuesday, March 29, 2005, in Room 6319 of the United States Coast Guard Headquarters Building, 2100 2nd Street, SW., Washington, DC, 20593–0001. The primary purpose of the meeting is to prepare for the 9th session of the SubCommittee on Bulk Liquids and Gases (BLG) to be held at the International Maritime Organization (IMO) Headquarters in London, England from April 4th to April 8th, 2005. The primary matters to be considered include: —Evaluation of safety and pollution hazards of chemicals and preparation of consequential amendments; —Requirements for protection of personnel involved in the transport of cargoes containing toxic substances in all types of tankers; 7 17 CFR 200.30–3(a)(12). VerDate jul<14>2003 15:31 Mar 11, 2005 Jkt 205001 —Revision of the fire protection requirements of the International Bulk Chemical, International Gas Carrier, Bulk Chemical and Gas Carrier Codes; —Consideration of IACS unified interpretations; —Amendments to resolution MEPC.2 (VI); —Development of standards regarding rate of discharge for sewage; —Development of provisions for gasfuelled ships; —Review of the Offshore Support Vessel Guidelines; —Development of guidelines for uniform implementation of the 2004 Ballast Water Management Convention; —Clarification of the definition of fuel oil in the revised MARPOL Annex I; and —Guidelines for the application of the revised MARPOL Annex I requirements to Floating Production, Storage and Offloading vessels and Floating Storage Units. Hard copies of documents associated with the 9th session of BLG will be available at this meeting. To request further copies of documents please write to the address provided below. Members of the public may attend this meeting up to the seating capacity of the room. Interested persons may seek information by writing to Mr. Thomas J. Felleisen, Commandant (GMSO–3), U.S. Coast Guard Headquarters, 2100 Second Street, SW., Room 1214, Washington, DC 20593– 0001 or by calling (202) 267–0086. Dated: March 4, 2005. Clay Diamond, Executive Secretary, Shipping Coordinating Committee, Department of State. [FR Doc. 05–4969 Filed 3–11–05; 8:45 am] 12529 received and the draft U.S. positions for the Maritime Safety Committee will be discussed. Among other things, the items of particular interest are: —Adoption of amendments to SOLAS for bulk carrier safety, long range identification and tracking of ships, company and owner identification numbers, and subdivision and stability of ships; —Passenger ship safety. —Measures to enhance maritime security. —Goal-based new ship construction standards. —Formal safety assessment. —Voluntary IMO Member State Audit Scheme. —Reports of seven subcommittees— Stability, load lines and fishing vessel safety, Dangerous goods, solid cargoes and containers, Training and watchkeeping, Fire protection, Radiocommunications and search and rescue, Ship design and equipment, and Flag State implementation. Members of the public may attend this meeting up to the seating capacity of the room. Interested persons may seek information by writing to Mr. Howard Hime, Commandant (G–MS), U.S. Coast Guard Headquarters, 2100 2nd Street, SW., Room 1218, Washington, DC 20593–0001 or by calling (202) 267–2970. Dated: March 4, 2005. Clay Diamond, Executive Secretary, Shipping Coordinating Committee, Department of State. [FR Doc. 05–4970 Filed 3–11–05; 8:45 am] BILLING CODE 4970–09–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration BILLING CODE 4710–09–P Notice of Opportunity for Public Comment on Surplus Property Release at Craig Field Airport, Selma, AL DEPARTMENT OF STATE [Public Notice 4972] Shipping Coordinating Committee; Notice of Meeting The Shipping Coordinating Committee will conduct an open meeting at 9:30 a.m. on Friday, April 22, 2005, in Room 2415, at U.S. Coast Guard Headquarters, 2100 2nd Street, SW., Washington, DC 20593–0001. The purpose of this meeting will be to finalize preparations for the 80th Session of the Maritime Safety Committee, and associated bodies of the International Maritime Organization (IMO), which is scheduled for May 11– 20, 2005, at IMO Headquarters in London. At this meeting, papers Federal Aviation Administration (FAA), DOT. ACTION: Notice of intent to rule on land release request. SUMMARY: Under the provisions of Title 49 U.S.C. 47153(c), notice is being given that the FAA is considering a request from the Craig Field Airport and Industrial Authority to waive the requirement that a 0.969-acre parcel of surplus property, located at the Craig Field Airport, be used for aeronautical purposes. DATES: Comments must be received on or before April 13, 2005. ADDRESSES: Comments on this notice may be mailed or delivered in triplicate PO 00000 Frm 00092 Fmt 4703 AGENCY: Sfmt 4703 E:\FR\FM\14MRN1.SGM 14MRN1

Agencies

[Federal Register Volume 70, Number 48 (Monday, March 14, 2005)]
[Notices]
[Pages 12527-12529]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-1063]


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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 July 21, 2003, the Options 
Clearing Corporation (``OCC'') filed with the Securities and Exchange 
Commission (``Commission'') and on December 20, 2004, 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

    The proposed rule change would amend OCC's By-Laws and Rules to 
support the introduction of a new customers' lien account that may be 
carried at OCC by a clearing member.

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\
---------------------------------------------------------------------------

    \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 would provide for the introduction of a 
new ``customers' lien account'' that may be carried at OCC by a 
clearing member. The new account type would be used only to clear 
transactions of eligible customers that an OCC clearing member has 
agreed to margin on a portfolio risk basis or that a commodity clearing 
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 cross-margining 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

[[Page 12528]]

account.\6\ OCC would continue to require full premium payment from the 
clearing firm for all options purchased whether or not the firm extends 
credit to a customer for the purchase.
---------------------------------------------------------------------------

    \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 Commission-regulated 
derivative products.
    \6\ Under Commission Rules 8c-1, 15c2-1, and 15c3-3, securities 
held for the account of a customer generally may not be subject to 
liens to secure obligations of the carrying broker-dealer in an 
amount that exceeds the amount of total customer indebtedness. To 
facilitate compliance with these customer protection rules, OCC's 
rules require clearing members to carry positions of public 
securities customers in a customers' account under which all long 
positions are considered ``segregated'' and therefore free of OCC's 
lien, unless specifically designated as ``unsegregated.'' All long 
options positions in customers' lien accounts, however, would 
automatically be considered unsegregated for purposes of OCC's 
placing a lien on these positions. OCC has requested no-action 
relief from the Commission's Division of Market Regulation which 
will permit OCC to treat these positions as unsegregated 
notwithstanding these provisions of Rules 8c-1, 15c2-1 and 15c3-3.
---------------------------------------------------------------------------

    Where cross-margining accounts include products cleared by OCC as 
well as futures products cleared by CME or other derivatives clearing 
organizations other than OCC, under a cross-margining program OCC's 
clearing function would occur in a separate customers' lien account to 
be established for each such program. A corresponding account would be 
established at the participating derivatives clearing organizations. 
Liquidation of these accounts would be subject to a cross-margining 
agreement between or among OCC and the participating derivatives 
clearing organizations just as in the case of the existing cross-
margining programs. These agreements or appropriate amendments to 
existing agreements would be separately filed with the Commission for 
approval. It is anticipated that a clearing member may establish a 
customers' lien account corresponding to a cross-margining agreement 
among OCC, CME and the New York Clearing Corporation. Separate 
customers' lien accounts would correspond to cross-margining agreements 
between OCC and other futures clearing organizations.
    As stated in the CBOE rule filing, the currently proposed program 
includes only the following eligible products: (i) All broad-based U.S. 
market index options (including stock index warrants) listed on a 
national securities exchange; (ii) marginable exchange-traded funds; 
and (iii) index futures contracts and futures options contracts to the 
extent they are cross-margined with listed index options.
    The following proposed revisions to OCC's By-Laws and Rules are 
necessary to provide for the introduction of customers' lien accounts.
    New Defined Term: OCC proposes to add a new defined term, 
``customers' lien account,'' in Article I of the By-Laws. The 
definition simply cross-references the description of the account in 
Article VI, Section 3(i).
    Amendments to Article VI of the By-Laws: Article VI sets out the 
basic terms of option contracts and the general rules for the clearance 
of exchange transactions. Section 3 contains a description of each of 
the types of accounts that clearing members may establish and maintain 
with OCC. A new Section 3(i) would be added that would contain a 
description of the proposed ``customers' lien account,'' including 
provisions setting forth OCC's lien on all long positions, securities, 
margin, and other funds in such accounts and OCC's right to close out 
positions in these accounts. As provided in the proposed amendment to 
Rule 611 below, positions in customers' lien accounts would be deemed 
to be unsegregated. Section 3 would be further amended to correct the 
paragraph numbers of the Interpretations and Policies to Section 3.
    A minor, conforming amendment has been made to Section 4 of Article 
VI.
    Amendments to the Rules: OCC's Rule 611 treats all long option 
positions in the regular securities customers' account as 
``segregated'' and therefore free of OCC's lien except to the extent 
that a clearing member is entitled to ``unsegregate'' long positions 
that are part of a customer spread. Rule 611 would be amended to 
provide that all positions in customers' lien accounts will be deemed 
to be ``unsegregated.''
    Changes are being proposed in Chapter XI of the Rules to provide 
for the liquidation of a clearing member's customers' lien account in 
the event that the clearing member is suspended. In essence, a 
customers' lien account would be treated in exactly the same manner as 
a combined market-maker account. Under these provisions, proceeds of 
long options or security futures in a customers' lien account would be 
applied only to satisfy obligations arising from that account.
    OCC believes that the proposed rule change is consistent with the 
purposes and requirements of Section 17A of the Act because it provides 
for operational and economic efficiencies in customer margining and 
increases the safety of the clearing system by applying previously 
approved risk-based margining procedures to clearing accounts 
containing the transactions of eligible customers. The proposed rule 
change is not inconsistent with the existing rules of OCC, including 
any other rules proposed to be amended.

(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 
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-2003-04 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-2003-04. 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

[[Page 12529]]

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-2003-04 and should be submitted on or before April 4, 2005. For 
the Commission, by the Division of Market Regulation, pursuant to 
delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(a)(12).

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-1063 Filed 3-11-05; 8:45 am]
BILLING CODE 8010-01-P
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