Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendments Nos. 1 and 2 Thereto Relating to Short Sale Delivery Requirements, 70910 [E5-6457]
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Federal Register / Vol. 70, No. 225 / Wednesday, November 23, 2005 / Notices
standard of care and limitation of
liability with respect to its clearing
members.3
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52752A; File No. SR–
NASD–2004–044]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing of
Proposed Rule Change and
Amendments Nos. 1 and 2 Thereto
Relating to Short Sale Delivery
Requirements
November 17, 2005.
Correction
In FR Document No. E5–6306,
beginning on page 69614 for
Wednesday, November 16, 2005, in the
first sentence of the first paragraph of
the Notice the date should read March
10, 2004.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.1
Jonathan G. Katz,
Secretary.
[FR Doc. E5–6457 Filed 11–22–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–52783; File No. SR–OCC–
2003–13]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of Proposed Rule Change To
Establish a Comprehensive Standard
of Care and Limitation of Liability With
Respect to Clearing Members
November 16, 2005.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
November 5, 2003, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) and on
August 18, 2004, amended 2 the
proposed rule change as described in
Items I, II, and III below, which items
have been prepared by OCC. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
OCC is seeking to establish gross
negligence as its comprehensive
1 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 Letter from William H. Navin, Executive Vice
President, General Counsel, and Secretary, OCC
(August 17, 2005).
1 15
VerDate Aug<31>2005
17:33 Nov 22, 2005
Jkt 208001
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 these statements.4
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In 1980 in its release setting forth
standards for registration of clearing
agencies, the Division of Market
Regulation stated that it was ‘‘of the
view that clearing agencies should
undertake to perform their obligations
with a high degree of care.’’ 5 Later, in
1983 in its release registering nine
clearing agencies, the Commission
stated that it did ‘‘not believe sufficient
justification exists at this time to require
a unique federal standard of care for
registered clearing agencies.’’6 The
Commission has left to user-governed
clearing agencies the question of how to
allocate losses associated with, among
other things, clearing agency functions.
Along this line, in 1986 in its order
approving a proposed rule change of the
Midwest Securities Trust Company
(‘‘MSTC’’) to clarify the rights and
liabilities of the MSTC and its
participants with respect to certain
services, the Commission stated:
The Act does not specify the standard of
care that must be exercised by registered
clearing agencies and the Commission has
determined that imposition of a unique
Federal standard of care for registered
clearing agencies is not appropriate at this
time. [citing Securities Exchange Act Release
No. 20221, supra note 5] For those reasons
the Commission believes that the clearing
agency standard of care and the allocation of
rights and responsibilities between a clearing
3 OCC’s proposed rule change would not affect
the regulatory standards (e.g., section 17A of the
Act) that apply to OCC or the way in which OCC
conducts its clearing agency operations.
4 The Commission has modified the text of the
summaries prepared by OCC.
5 Securities Exchange Act Release No. 16900
(June 17, 1980), 45 FR 45167 (June 23, 1980).
6 Securities Exchange Act Release No. 20221
(September 23, 1983), 48 FR 45167 (October 3,
1983).
PO 00000
Frm 00129
Fmt 4703
Sfmt 4703
agency and its participants applicable to
clearing agency services generally may be set
by the clearing agency and its participants.
The Commission believes it should review
clearing agency proposed rule changes in this
area on a case-by-case basis and balance the
need for a high degree of clearing agency care
with the effect resulting liabilities may have
on clearing agency operations, costs, and
safeguarding of securities and funds.7
Because standards of care represent
an allocation of rights and liabilities
between a clearing agency and its users,
which are generally sophisticated
financial entities, the Commission has
continued to refrain from establishing a
unique federal standard of care and has
allowed clearing agencies and other selfregulatory organizations and their users
to establish their own standards of
care.8
With this proposed rule change, OCC
is seeking to establish a comprehensive
gross negligence standard of care and
limitation of liability with respect to its
clearing members and makes the
following representations. OCC states in
the filing that since its founding in
1973, it has performed its clearing
services with an exemplary level of care.
Its record of fulfilling its commitments
to its clearing members for over 30 years
reflects OCC’s commitment to serving
the best interests of its clearing
members. It has comprehensive systems
and operating procedures in place to
ensure that its clearing functions are
executed with the highest level of
accuracy. In addition to its own concern
for accuracy, it is subject to extensive
regulatory oversight by the Commission.
Furthermore, in its amendment to the
filing, OCC states that gross negligence
is the standard of care generally used by
other clearing agencies such as the
Fixed Income Clearing Corporation, the
decision to apply a gross negligence
standard of care to OCC is a conscious
allocation of risk between OCC and its
members, the filing was unanimously
approved by OCC’s directors, a majority
of whom are officers of clearing
members, and the proposed rule change
in no way will affect the very high level
of care to which OCC has always held
itself and to which it is held through the
regulatory oversight of the
Commission.9 As such, OCC believes
7 Securities Exchange Act Release No. 22940
(February 24, 1986), 51 FR 7169 (February 28,
1986).
8 See, e.g., Securities Exchange Act Release Nos.
51669 (May 9, 2005), 70 FR 25634 (May 13, 2005)
[File No. SR–NSCC–2004–09]; 48201 (July 21,
2003), 68 FR 44128 (July 25, 2003) [File No. SR–
GSCC–2002–10]; 37563 (August 14, 1996), 61 FR
43285 (August 21, 1996) [SR–PSE–96–21]; and
37421 (July 11, 1996), 61 FR 37513 (July 18, 1996)
[SR–CBOE–96–02].
9 Supra, letter from William H. Navin, n. 2.
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[Federal Register Volume 70, Number 225 (Wednesday, November 23, 2005)]
[Notices]
[Page 70910]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-6457]
[[Page 70910]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52752A; File No. SR-NASD-2004-044]
Self-Regulatory Organizations; National Association of Securities
Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendments
Nos. 1 and 2 Thereto Relating to Short Sale Delivery Requirements
November 17, 2005.
Correction
In FR Document No. E5-6306, beginning on page 69614 for Wednesday,
November 16, 2005, in the first sentence of the first paragraph of the
Notice the date should read March 10, 2004.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\1\
---------------------------------------------------------------------------
\1\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jonathan G. Katz,
Secretary.
[FR Doc. E5-6457 Filed 11-22-05; 8:45 am]
BILLING CODE 8010-01-P
