Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to Portfolio Margining of Customer Securities, 17210-17212 [E7-6493]
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Federal Register / Vol. 72, No. 66 / Friday, April 6, 2007 / Notices
burden on competition; and (C) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) of the Act 8 and Rule
19b–4(f)(6) thereunder.9
A proposed rule change filed under
Rule 19b–4(f)(6) 10 normally may not
become operative prior to 30 days after
the date of filing. However, Rule 19b–
4(f)(6)(iii) 11 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay, and designate the proposed rule
change immediately operative.12 The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest.13 The Exchange has
stated that the amended and restated
certificate of incorporation of NYSE
Euronext as modified by this proposed
rule change must be filed with the
Delaware Secretary of State before the
closing of the Combination that is
scheduled for April 4, 2007. The
Commission notes that the proposed
modifications to the amended and
restated certificate of incorporation of
NYSE Euronext are technical changes
that are non-substantive. Accordingly,
the Commission designates that the
proposed rule change become operative
immediately.
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
8 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
10 Id.
11 17 CFR 240.19b–4(f)(6)(iii).
12 The Exchange also asked the Commission to
waive the five-business day pre-filing notice
requirement. See Rule 19b–4(f)(6)(iii), 17 CFR
240.19b–4(f)(6)(iii). The Commission is exercising
its authority to designate a shorter time, and notes
that the Exchange provided the Commission with
written notice of its intention to file the proposed
rule change on March 26, 2007.
13 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
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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–NYSEArca–2007–33 on the
subject line.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55565; File No. SR–OCC–
2007–04]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing and Order Granting
Accelerated Approval of a Proposed
Rule Change Relating to Portfolio
Margining of Customer Securities
April 2, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’), notice is hereby given that on
March 2, 2007, The Options Clearing
• Send paper comments in triplicate
Corporation (‘‘OCC’’) filed with the
to Nancy M. Morris, Secretary,
Securities and Exchange Commission
Securities and Exchange Commission,
(‘‘Commission’’) the proposed rule
100 F Street, NE., Washington, DC
change described in Items I, II, and III
20549–1090.
below, which items have been prepared
All submissions should refer to File
primarily by OCC. The Commission is
Number SR–NYSEArca–2007–33. This
publishing this notice and order to
file number should be included on the
solicit comments from interested
subject line if e-mail is used. To help the persons and to grant accelerated
Commission process and review your
approval of the proposal.
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
the Proposed Rule Change
Internet Web site (https://www.sec.gov/
The proposed rule change amends
rules/sro.shtml). Copies of the
OCC’s Rule 611, Segregation of Long
submission, all subsequent
Option Positions, to allow a clearing
amendments, all written statements
member to instruct OCC to unsegregate
with respect to the proposed rule
a long options position that is carried in
change that are filed with the
a customer’s portfolio margining
Commission, and all written
account.
communications relating to the
proposed rule change between the
II. Self-Regulatory Organization’s
Commission and any person, other than Statement of the Purpose of, and
those that may be withheld from the
Statutory Basis for, the Proposed Rule
public in accordance with the
Change
provisions of 5 U.S.C. 552, will be
In its filing with the Commission,
available for inspection and copying in
OCC included statements concerning
the Commission’s Public Reference
Room. Copies of such filing also will be the purpose of and basis for the
proposed rule change and discussed any
available for inspection and copying at
the principal office of the Exchange. All comments it received on the proposed
rule change. The text of these statements
comments received will be posted
may be examined at the places specified
without change; the Commission does
in Item IV below. OCC has prepared
not edit personal identifying
summaries, set forth in sections (A), (B),
information from submissions. You
and (C) below, of the most significant
should submit only information that
you wish to make available publicly. All aspects of these statements.
submissions should refer to File
(A) Self-Regulatory Organization’s
Number SR–NYSEArca–2007–33 and
Statement of the Purpose of, and
should be submitted on or before April
Statutory Basis for, the Proposed Rule
27, 2007.
Change
Paper Comments
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.14
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–6494 Filed 4–5–07; 8:45 am]
BILLING CODE 8010–01–P
14 17
PO 00000
CFR 200.30–3(a)(12).
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In a rule filing submitted in 2003 and
subsequently approved by the
Commission,1 OCC created a
‘‘customers’ lien account’’ in which
clearing members are permitted to carry
positions and collateral that are carried
1 Securities Exchange Act Release No,. 50509
(October 8, 2004), 69 FR 61289 (October 15, 2004)
(OCC–2003–04).
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Federal Register / Vol. 72, No. 66 / Friday, April 6, 2007 / Notices
for customers at the firm level in
portfolio margining accounts. In a
regular customers account at OCC, all
long positions must be ‘‘segregated’’
(i.e., held free of OCC’s lien and
therefore given no value in determining
margin requirements) except when a
long position is part of a customer
spread. This practice was adopted to
comply with Commission Rule 15c3–3,
which requires that customers’ ‘‘fully
paid’’ and ‘‘excess margin’’ securities be
held free of lien. Because it is
anticipated that brokers will ordinarily
be extending credit in portfolio margin
accounts, the Commission approved
OCC’s rule filing effectively providing
that longs in such accounts need never
be treated as fully paid or excess margin
securities. The Division of Market
Regulation also issued a ‘‘no action’’
letter to the effect that no enforcement
action would be taken against brokerdealers under Rule 15c3–3 for failing to
segregate customer longs carried in
portfolio margin accounts.2
OCC has been informed by several
clearing members that a customers’ lien
account is not practical for them
because their customer trades are routed
to them from many sources and having
more than one customers’ account could
result in a large number of clearing
errors.3 OCC is therefore proposing an
alternative procedure (‘‘Proposed
Procedure’’) for clearing members that
are unable or that elect not to use a
customers’ lien account. Under the
Proposed Procedure, a clearing member
would be permitted to carry portfolio
margin positions in its regular securities
customers’ account at OCC. When the
clearing member submits instructions to
unsegregate customer longs that are part
of a spread position, it will also submit
instructions to unsegregate all longs that
are carried at the firm level in
customers’ portfolio margin accounts.
The result of the Proposed Procedure
will be that long options required to be
segregated in the customers’ account
will continue to be segregated and longs
that would be unsegregated in a
customers’ lien account will be
unsegregated in the regular customers’
account.
The lien language in both the regular
customers’ account and in the
customers’ lien account provides in
effect that to the extent that OCC has a
lien on property in the account, the lien
secures only other assets in that
particular account. This limitation not
2 Letter to William H. Navin, Executive Vice
President, General Counsel and Secretary, OCC
(July 14, 2005).
3 Information from Jean Cawley, Deputy General
Counsel (March 26, 2007).
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18:39 Apr 05, 2007
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only ensures that customer longs are not
pledged to secure proprietary
obligations of the firm in violation of the
hypothecation rules, but it is
conservative in that it does not allow
the longs to secure positions in other
customer accounts. Thus, to the extent
that regular clearing member customers
have unsegregated longs in the account,
those positions would be subject to a
lien securing the obligations of such
clearing member with respect to its
portfolio-margining customers whose
short positions may be included in the
account as well. Conversely, the longs
belonging to portfolio-margining
customers would collateralize the shorts
of regular customers.
OCC believes that the proposed
procedure is appropriate under Rule
15c3–3 and the hypothecation rules
(Rules 8c–1 and 15c–2) and is
appropriate as a matter of policy and
fairness. There is no requirement to
separate positions of portfolio margining
customers from positions of other
customers and the separate customers’
lien account was intended merely as a
convenience to avoid the need for daily
submission of instructions to
unsegregate long positions in portfolio
margining accounts. Clearing members
that are willing to accept that burden in
order to carry the positions in a regular
customers’ account should be permitted
to do so. OCC has requested
supplemental no-action relief from the
Commission staff in order to confirm the
applicability of the previous no-action
relief to long positions in customer’s
portfolio margining accounts that are
carried on an unsegregated basis in the
regular customers’ account at OCC
rather than in a customers’ lien account.
In SR–OCC–2003–04, Rule 611 was
amended to provide that ‘‘all positions
in cleared securities that are carried in
a customers’ lien account shall be
deemed to be unsegregated for purposes
of this Rule 611.’’ Although OCC’s rules
do not specifically require that positions
in a portfolio margin account at the firm
level be carried in a customers’ lien
account at OCC, the rule filing indicated
that they would be. In approving SR–
OCC–2003–04 creating the customers’
lien account and amending Rule 611,
the Commission stated:
Under the portfolio margining
methodology program, all long positions in
the customers’ lien account will be available
as an offset to all short positions, regardless
of the identity of the customer. This should
provide for a greater diversification benefit to
OCC’s clearing members in the calculation of
their margin. However, because all positions
in the customers’ lien account will be
unsegregated and will be therefore subject to
OCC’s lien, the long positions in the account
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17211
will be available to OCC in the event a
clearing member fails to settle its obligations
relating to a short position. Accordingly,
because the proposed rule change is designed
to ensure that transactions in securities
which are eligible for the new portfolio
margining approved by the Commission will
be cleared and settled by OCC in a manner
that will not reduce the adequacy of
collateral available to OCC, the proposed rule
change should not adversely affect OCC’s
ability to assure the safeguarding of securities
and funds which are in OCC’s custody or
control or for which OCC is responsible.
The Commission’s rationale for
approving SR–OCC–2003–04 should
apply to the Proposed Procedure as
well. Rule 611 would simply be
amended to provide an additional basis
by which a clearing member may give
instructions to release long options from
segregation—namely when they are
carried for a customer in a porfolio
margin account.
The proposed rule change is
consistent with the purpose and
requirements of Section 17A of the Act
because it fosters cooperation and
competition with persons engaged in
the clearance and settlement of
securities transactions, removes
impediments to and perfects the
mechanism of a national system for the
prompt and accurate clearance and
settlement of securities transactions,
and in general protects investors and the
public interest by facilitating the
implementation of portfolio margining
programs previously approved by the
Commission. 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 will 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
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder and
particularly with the requirements of
Section 17A(b)(3)(F) 4 of the Act, which
4 15
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U.S.C. 78q–1(b)(3)(F).
06APN1
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Federal Register / Vol. 72, No. 66 / Friday, April 6, 2007 / Notices
requires that the rules of a clearing
agency be designed to provide for the
safeguarding of securities and funds
which are in its possession or control or
for which it is responsible. The
proposed rule change will allow OCC’s
clearing members and their customers to
benefit from the portfolio margining
program, which includes having greater
liquidity and more efficient use of
collateral, in a manner that is consistent
with OCC’s overall risk management
process.
The Commission finds good cause for
approving the proposed rule change
prior to the thirtieth day after the date
of publication of notice of filing because
such approval will allow OCC’s
members to immediately participate in
the expanded portfolio margining pilot
scheduled to be implemented on April
2, 2007.
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:
pwalker on PROD1PC71 with NOTICES
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–2007–04 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–OCC–2007–04. 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
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
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18:39 Apr 05, 2007
Jkt 211001
the Commission’s Public Reference
Section, 100 F Street, NE., 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–2007–04 and should
be submitted on or before April 27,
2007.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act, that the
proposed rule change (File No. SR–
OCC–2007–04) be and hereby is
approved on an accelerated basis.
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.5
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–6493 Filed 4–5–07; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–55552; File No. SR–Phlx–
2006–87]
Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.;
Notice of Filing of Proposed Rule
Change, and Amendment Nos. 1 and 2
Thereto, Relating to Options Exchange
Officials
March 29, 2007.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
14, 2006, the Philadelphia Stock
Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change. On February 23,
2007, the Exchange filed Amendment
No.1 to the proposed rule change. On
March 15, 2007, the Exchange filed
Amendment No. 2 to the proposed rule
change. The proposed rule change is
described in Items I, II, and III, below,
which Items have been prepared
substantially by the Phlx. The
Commission is publishing this notice to
solicit comments on the proposed rule
5 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00122
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change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Phlx proposes to amend various
rules related to dispute resolution,
requests for relief from the requirements
of certain rules, trading halts and order
and decorum, by transferring the
responsibilities from Exchange Floor
Officials 3 to a new category of Exchange
staff that would be known as an Options
Exchange Official (‘‘OEO’’), as described
more fully below. OEOs would replace,
and assume all authority and
responsibility currently handled by,
Floor Officials. Thus, Floor Officials
would cease to exist on the Exchange.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://www.phlx.com, at the Phlx,
and at the Commission’s public
reference room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Phlx 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. The Phlx has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to establish a new category of
Exchange staff, the OEO.4 The purpose
of Amendment No. 1, which replaces
the previous filing in its entirety, is to
clarify that OEOs would replace, and
assume all authority and responsibility
currently handled by, Floor Officials,
and to make other technical
amendments to the previously
submitted rule text. Amendment No. 2
3 See
Exchange By–Law Article VIII.
jurisdiction would be limited to the
Exchange’s options trading floor and systems.
While acting in a similar capacity to Equity
Exchange Officials, OEOs would not share any
responsibilities or authority with Equity Exchange
Officials. See Securities Exchange Act Release No.
54538 (September 28, 2006), 71 FR 59184 (October
6, 2006) (SR–Phlx–2006–43) (Order approving the
Exchange’s new electronic equity trading system,
XLE).
4 OEO
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]]>Agencies
[Federal Register Volume 72, Number 66 (Friday, April 6, 2007)]
[Notices]
[Pages 17210-17212]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-6493]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-55565; File No. SR-OCC-2007-04]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Order Granting Accelerated Approval of a Proposed
Rule Change Relating to Portfolio Margining of Customer Securities
April 2, 2007.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), notice is hereby given that on March 2, 2007, The Options
Clearing Corporation (``OCC'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change described in Items
I, II, and III below, which items have been prepared primarily by OCC.
The Commission is publishing this notice and order to solicit comments
from interested persons and to grant accelerated approval of the
proposal.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change amends OCC's Rule 611, Segregation of Long
Option Positions, to allow a clearing member to instruct OCC to
unsegregate a long options position that is carried in a customer's
portfolio margining account.
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.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In a rule filing submitted in 2003 and subsequently approved by the
Commission,\1\ OCC created a ``customers' lien account'' in which
clearing members are permitted to carry positions and collateral that
are carried
[[Page 17211]]
for customers at the firm level in portfolio margining accounts. In a
regular customers account at OCC, all long positions must be
``segregated'' (i.e., held free of OCC's lien and therefore given no
value in determining margin requirements) except when a long position
is part of a customer spread. This practice was adopted to comply with
Commission Rule 15c3-3, which requires that customers' ``fully paid''
and ``excess margin'' securities be held free of lien. Because it is
anticipated that brokers will ordinarily be extending credit in
portfolio margin accounts, the Commission approved OCC's rule filing
effectively providing that longs in such accounts need never be treated
as fully paid or excess margin securities. The Division of Market
Regulation also issued a ``no action'' letter to the effect that no
enforcement action would be taken against broker-dealers under Rule
15c3-3 for failing to segregate customer longs carried in portfolio
margin accounts.\2\
---------------------------------------------------------------------------
\1\ Securities Exchange Act Release No,. 50509 (October 8,
2004), 69 FR 61289 (October 15, 2004) (OCC-2003-04).
\2\ Letter to William H. Navin, Executive Vice President,
General Counsel and Secretary, OCC (July 14, 2005).
---------------------------------------------------------------------------
OCC has been informed by several clearing members that a customers'
lien account is not practical for them because their customer trades
are routed to them from many sources and having more than one
customers' account could result in a large number of clearing
errors.\3\ OCC is therefore proposing an alternative procedure
(``Proposed Procedure'') for clearing members that are unable or that
elect not to use a customers' lien account. Under the Proposed
Procedure, a clearing member would be permitted to carry portfolio
margin positions in its regular securities customers' account at OCC.
When the clearing member submits instructions to unsegregate customer
longs that are part of a spread position, it will also submit
instructions to unsegregate all longs that are carried at the firm
level in customers' portfolio margin accounts. The result of the
Proposed Procedure will be that long options required to be segregated
in the customers' account will continue to be segregated and longs that
would be unsegregated in a customers' lien account will be unsegregated
in the regular customers' account.
---------------------------------------------------------------------------
\3\ Information from Jean Cawley, Deputy General Counsel (March
26, 2007).
---------------------------------------------------------------------------
The lien language in both the regular customers' account and in the
customers' lien account provides in effect that to the extent that OCC
has a lien on property in the account, the lien secures only other
assets in that particular account. This limitation not only ensures
that customer longs are not pledged to secure proprietary obligations
of the firm in violation of the hypothecation rules, but it is
conservative in that it does not allow the longs to secure positions in
other customer accounts. Thus, to the extent that regular clearing
member customers have unsegregated longs in the account, those
positions would be subject to a lien securing the obligations of such
clearing member with respect to its portfolio-margining customers whose
short positions may be included in the account as well. Conversely, the
longs belonging to portfolio-margining customers would collateralize
the shorts of regular customers.
OCC believes that the proposed procedure is appropriate under Rule
15c3-3 and the hypothecation rules (Rules 8c-1 and 15c-2) and is
appropriate as a matter of policy and fairness. There is no requirement
to separate positions of portfolio margining customers from positions
of other customers and the separate customers' lien account was
intended merely as a convenience to avoid the need for daily submission
of instructions to unsegregate long positions in portfolio margining
accounts. Clearing members that are willing to accept that burden in
order to carry the positions in a regular customers' account should be
permitted to do so. OCC has requested supplemental no-action relief
from the Commission staff in order to confirm the applicability of the
previous no-action relief to long positions in customer's portfolio
margining accounts that are carried on an unsegregated basis in the
regular customers' account at OCC rather than in a customers' lien
account.
In SR-OCC-2003-04, Rule 611 was amended to provide that ``all
positions in cleared securities that are carried in a customers' lien
account shall be deemed to be unsegregated for purposes of this Rule
611.'' Although OCC's rules do not specifically require that positions
in a portfolio margin account at the firm level be carried in a
customers' lien account at OCC, the rule filing indicated that they
would be. In approving SR-OCC-2003-04 creating the customers' lien
account and amending Rule 611, the Commission stated:
Under the portfolio margining methodology program, all long
positions in the customers' lien account will be available as an
offset to all short positions, regardless of the identity of the
customer. This should provide for a greater diversification benefit
to OCC's clearing members in the calculation of their margin.
However, because all positions in the customers' lien account will
be unsegregated and will be therefore subject to OCC's lien, the
long positions in the account will be available to OCC in the event
a clearing member fails to settle its obligations relating to a
short position. Accordingly, because the proposed rule change is
designed to ensure that transactions in securities which are
eligible for the new portfolio margining approved by the Commission
will be cleared and settled by OCC in a manner that will not reduce
the adequacy of collateral available to OCC, the proposed rule
change should not adversely affect OCC's ability to assure the
safeguarding of securities and funds which are in OCC's custody or
control or for which OCC is responsible.
The Commission's rationale for approving SR-OCC-2003-04 should
apply to the Proposed Procedure as well. Rule 611 would simply be
amended to provide an additional basis by which a clearing member may
give instructions to release long options from segregation--namely when
they are carried for a customer in a porfolio margin account.
The proposed rule change is consistent with the purpose and
requirements of Section 17A of the Act because it fosters cooperation
and competition with persons engaged in the clearance and settlement of
securities transactions, removes impediments to and perfects the
mechanism of a national system for the prompt and accurate clearance
and settlement of securities transactions, and in general protects
investors and the public interest by facilitating the implementation of
portfolio margining programs previously approved by the Commission. 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 will 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
The Commission finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder and particularly with the requirements of Section
17A(b)(3)(F) \4\ of the Act, which
[[Page 17212]]
requires that the rules of a clearing agency be designed to provide for
the safeguarding of securities and funds which are in its possession or
control or for which it is responsible. The proposed rule change will
allow OCC's clearing members and their customers to benefit from the
portfolio margining program, which includes having greater liquidity
and more efficient use of collateral, in a manner that is consistent
with OCC's overall risk management process.
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
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The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the date of publication of
notice of filing because such approval will allow OCC's members to
immediately participate in the expanded portfolio margining pilot
scheduled to be implemented on April 2, 2007.
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-2007-04 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-OCC-2007-04. 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 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, 100 F Street,
NE., 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-2007-04 and should be submitted on
or before April 27, 2007.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-OCC-2007-04) be and hereby
is approved on an accelerated basis.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\5\
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\5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-6493 Filed 4-5-07; 8:45 am]
BILLING CODE 8010-01-P
