Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Cross-Margining, 16405-16407 [E8-6252]
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Federal Register / Vol. 73, No. 60 / Thursday, March 27, 2008 / Notices
were from industry participants, and
one was from DTC in response to the
other four comment letters. While all of
the four industry commenters generally
supported the proposal, two raised
issues or sought clarification about the
proposal.
The comment letters submitted by JP
Morgan and Edward Jones both
expressed their support for the: (1)
Extension of the deadline for reporting
on payment detail, (2) creation of the
conforming and non-conforming
securities classifications, (3) creation of
the exception processing fee for nonconforming securities, and (4)
evaluation and publication of paying
agent performance.
The comment letter written on behalf
of the Association of Global Custodians
expressed its support for the: (1)
Creation of the conforming and nonconforming securities classifications
and (2) evaluation and publication of
paying agent performance. Although the
commenter expressed support for the
extension of the deadline for reporting
payment detail, the commenter stated
that DTC should monitor paying agent
performance to determine if the
reporting of payment detail trends
toward last-minute reporting or if the
extended deadline does not correlate
with a reduced incidence of errors and
adjustments. Although the commenter
expressed support for the creation of the
exception processing fee for nonconforming securities, it suggested that
the aggregate net amount of the
exception processing fee should be
rebated to participants based on their
transactions in non-conforming
securities only rather than to
participants based on their transactions
in all Structured Securities.
The comment letter written on behalf
of the Securities Industry and Financial
Markets Association expressed support
for the: (1) Extension of the deadline for
reporting on payment detail and (2)
evaluation and publication of paying
agent performance. Although the
commenter expressed support for the
creation of the conforming and nonconforming securities classifications, it
requested guidance on the criteria to be
used to determine whether a Structured
Security is non-conforming, whether an
issue’s classification can be changed,
and when the classification
determination will be required to be
submitted to DTC. The commenter
questioned whether it was appropriate
to require the underwriter to sign the
classification attestation rather than
allowing the underwriter to rely on the
paying agent’s attestation.
While the Securities Industry and
Financial Markets Association
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16:08 Mar 26, 2008
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expressed support for the creation of the
exception processing fee, it questioned
whether the underwriter is the
appropriate party to pay the fee. It stated
its belief that the costs created by late
and erroneous submissions from
conforming issues should not be borne
by non-conforming issue underwriters.
The commenter also suggested that the
aggregate net amount of the exception
processing fee should be rebated to
participants based on their transactions
in non-conforming securities only rather
than to participants based on their
transactions in all Structured Securities.
In its comment letter, DTC stated that
the criteria for categorizing an issue as
‘‘non-conforming’’ would consist of a
general good-faith expectation, based on
information available at the time, as to
whether it is anticipated that DTC’s
deadlines for submission of rate
information will be met. It also stated
that both the paying agent and the
underwriter will be responsible to sign
the classification attestation and that
imposing the exception processing fee
on the underwriter is equitable and
consistent with DTC’s general practice.
Finally, the commenter confirmed that
while it will allocate exception
processing fee revenue pro rata to DTC
participants for whom DTC processed
any Structured Securities, it will review
the policy toward the end of 2008 to
determine whether future allocations
should be directed to participants based
only on their transactions in nonconforming securities.
IV. Discussion
The Commission finds that the
proposed rule change is consistent with
the requirements of the Act and the
rules and regulations thereunder
applicable to a registered clearing
agency. In particular, the Commission
believes the proposal is consistent with
the requirements of Section
17A(b)(3)(F),11 which, among other
things, requires that the rules of a
clearing agency are designed to remove
impediments to and perfect the
mechanisms of a national system for the
prompt and accurate clearance and
settlement of securities transactions.
The Commission finds that by enabling
more Structured Securities to be DTCeligible and by helping to make the
reporting of information about
Structured Securities more accurate and
timely, the proposed rule change, which
should make the communication of
payment rate information on Structured
Securities quicker and more efficient, is
consistent with this statutory obligation.
11 15
PO 00000
U.S.C. 78q–1(b)(3)(F).
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16405
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of section 17A of the
Act 12 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,13 that the
proposed rule change (File No. SR–
DTC–2007–11), as modified by
Amendment No. 1, be, and hereby is,
approved.14
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.15
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–6256 Filed 3–26–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57543; File No. SR–OCC–
2008–03]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change Relating to
Cross-Margining
March 20, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
January 29, 2008, The Options Clearing
Corporation (‘‘OCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which items have been
prepared primarily by OCC. OCC filed
the proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 2 and
Rule 19b–4(f)(4) 3 thereunder so that the
proposal was effective upon filing with
the Commission. 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
The proposed rule change amends
Article VI, Clearance of Exchange
12 15
U.S.C. 78q–1.
U.S.C. 78s(b)(2).
14 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
15 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78s(b)(3)(A)(iii).
3 17 CFR 240.19b–4(f)(4).
13 15
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Federal Register / Vol. 73, No. 60 / Thursday, March 27, 2008 / Notices
Transactions, Section 24, CrossMargining With Participating CCOs,
paragraph (c) of OCC’s By-Laws so that
additional OCC-cleared products may be
more easily added in the future by
amending only the relevant CrossMargining Agreement and not the ByLaw provision.
pwalker on PROD1PC71 with NOTICES
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.4
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Existing cross-margining programs
between OCC and certain other
commodity clearing organizations (each
a ‘‘CCO’’) permit positions in index
futures and options on such futures
cleared by the CCO to be cleared in a
special proprietary or non-proprietary
cross-margining account (‘‘X-M
Account’’) at the CCO which is paired
with a corresponding X-M account
(proprietary or non-proprietary, as the
case may be) at OCC in which securities
options are cleared. A non-proprietary
X-M account is limited to options
market-makers and other ‘‘market
professionals.’’ The non-proprietary
cross-margining accounts are treated as
futures customer accounts in that they
are carried subject to the segregation
provisions of Section 4d of the
Commodity Exchange Act rather than as
securities accounts subject to the
Commission’s Rule 15c3–3 and other
customer protection rules under the Act.
Paired X-M Accounts may be
established by a ‘‘joint clearing
member’’ of OCC and the CCO or by a
‘‘pair of affiliated clearing members,’’
one of which is a clearing member of
OCC and the other of which is a clearing
member of the CCO. The paired X-M
Accounts are treated for margin
purposes as if they were a single
account, making it possible to margin
the paired X-M Accounts based on the
net risk of the potentially offsetting
positions within them.
4 The Commission has modified parts of these
statements.
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In referring to the types of cleared
contracts that may be carried in an XM Account at OCC, paragraph (c) of
Section 24 of Article VI of OCC’s ByLaws presently refers only to options.
The purpose of the proposed rule
change is to expand this reference to
include security futures, as defined in
the Act and in the CEA, on exchangetraded funds (‘‘ETFs’’) based on broadbased securities indices and any other
cleared contract, as defined in OCC’s
By-Laws, that has been approved for
cross-margining by OCC’s Board of
Directors.5 The precise types of
contracts that can be included in X-M
Accounts in any particular crossmargining program are identified in a
Cross-Margining Agreement between
OCC and the CCO. The existing crossmargining programs are limited to index
options and OCC-cleared options on
ETFs and index futures cleared by a
CCO. The immediate reason for
expanding the types of cleared products
that may be included in X-M Accounts
at OCC is to permit security futures on
ETFs based on broad-based securities
indices to be included.6 However, OCC
has determined to amend Article VI,
Section 24(c) to make it as broad as
possible so that additional OCC-cleared
products may be added in the future by
amending only the relevant CrossMargining Agreement and not this ByLaw provision.
The inclusion of security futures in
cross-margining is not novel. Under
Article VI, Section 25 of the By-Laws,
OCC’s own internal cross-margining
program for non-proprietary accounts
already includes OCC-cleared security
futures along with all other cleared
securities that may be cross-margined
against any OCC-cleared futures
products that are cleared by OCC in its
capacity as a derivatives clearing
organization regulated by the CFTC.
5 ‘‘Cleared contract’’ is defined in Article I of
OCC’s By-Laws to mean ‘‘a cleared security or a
commodity future or futures option that is cleared
by the Corporation.’’ The term ‘‘cleared security’’ is
defined as ‘‘an option contract (other than a futures
option), a security future or a BOUND.’’ In effect,
therefore, the term ‘‘cleared contract’’ includes any
derivative contract cleared by OCC.
6 The Chicago Mercantile Exchange Inc. (‘‘CME’’)
also clears security futures contracts, which are
reported to OCC under the terms of the Associated
Clearinghouse Agreement between the
organizations. Securities Exchange Act Release No.
46653 (October 11, 2002), 67 FR 64689 (October 21,
2002) (File No. SR–OCC–2002–07). Under the terms
of the OCC–CME cross-margining agreement, such
CME-cleared security futures are eligible contracts
for purposes of cross-margining. However, OCC will
not treat security futures on broad-based indices as
eligible contracts until the CFTC issues an order
providing relief from certain provisions of Section
4d(a) of the Commodity Exchange Act to permit the
inclusion of such contracts as eligible contracts for
purposes the OCC–CME cross-margining program.
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Fmt 4703
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Unlike the other cross-margining
accounts, the internal cross-margining
accounts are not limited to index
options, index futures, and OCC-cleared
ETF options. OCC has broad authority to
designate any cleared contract as
eligible for these accounts provided the
contract has sufficient price correlation
with other eligible contracts to provide
significant risk reduction when
positions are on opposite sides of the
market. As a result, no rule change is
needed to allow OCC to include futures
on ETFs in these accounts. Moreover,
cross-margining of all OCC-cleared
securities with OCC-cleared futures and
futures options occurs automatically in
the firm account and other proprietary
accounts because OCC’s By-Laws permit
any OCC-cleared contract to be carried
in these accounts.
The proposed rule change is
consistent with the purposes and
requirements of Section 17A of the Act
because it enhances the utility of
existing cross-margining programs by
permitting the inclusion of products
that did not exist at the time the crossmargining programs were established.
Cross-margining enhances the safety of
the clearing system while providing
lower clearing margin costs to
participants. Therefore, expanding the
positions that may be included in X–M
Accounts is beneficial to the clearing
system and its participants. The
proposed rule change is not inconsistent
with the other rules of OCC, including
any 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
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(iii) of the Act 7 and Rule
19b–4(f)(4) 8 promulgated thereunder
because the proposal effects a change in
an existing service of OCC that (A) does
not adversely affect the safeguarding of
securities or funds in the custody or
7 15
8 17
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(4).
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Federal Register / Vol. 73, No. 60 / Thursday, March 27, 2008 / Notices
control of OCC or for which it is
responsible and (B) does not
significantly affect the respective rights
or obligations of OCC or persons using
the service. At any time within sixty
days of the filing of the proposed rule
change, the Commission could
summarily abrogate such rule change if
it appears to the Commission that such
action was 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,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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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–2008–03 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–2008–03. 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
Room, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office of OCC. All
comments received will be posted
without change; the Commission does
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16:08 Mar 26, 2008
Jkt 214001
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–2008–03 and should
be submitted on or before April 17,
2008.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.9
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8–6252 Filed 3–26–08; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57547; File No. SR–OCC–
2008–05]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing and Immediate Effectiveness
of a Proposed Rule Change Relating to
Flexibly Structured Foreign Currency
Options
March 21, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
February 13, 2008, The Options Clearing
Corporation (‘‘OCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which items have been
prepared primarily by OCC. OCC filed
the proposed rule change pursuant to
Section 19(b)(3)(A)(i) of the Act 2 and
Rule 19b–4(f)(1) 3 thereunder so that the
proposal was effective upon filing with
the Commission. 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
The proposed rule change would
modify OCC’s description of its pro rata
assignment procedure to eliminate the
reference to the procedure’s application
to exercises of physical delivery,
flexibly structured Foreign Currency
Options (‘‘FCOs’’).
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78s–1(b)(3)(A)(i).
3 17 CFR 240.19b–4(f)(1).
1 15
PO 00000
Frm 00163
Fmt 4703
Sfmt 4703
16407
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.4
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
OCC’s pro rata assignment procedure
is applied to options on the S&P 100
Index as well as to flexibly structured
and cross-rate FCOs settled by physical
delivery.5 However, the Philadelphia
Stock Exchange, Inc. (‘‘Phlx’’) has
delisted all such FCOs and open interest
in all such contracts has expired.
Accordingly, OCC proposes to modify
the description of its pro rata
assignment procedure to eliminate the
reference to its application to exercises
of physical delivery, flexibly structured
FCOs. While Phlx has proposed to trade
flexibly structured FCOs that are settled
in cash, exercises for these FCOS are to
be assigned in accordance with OCC’s
standard assignment procedures.6 The
modified description of the pro rata
assignment procedure is set forth in
Exhibit 5 to File No. SR–OCC–2008–05.7
The proposed change is consistent
with Section 17A of the Act because it
promotes the prompt and accurate
clearance and settlement of securities
transactions, and fosters cooperation
and coordination with persons engaged
in the clearance and settlement of
securities transactions by updating the
description of OCC’s pro rata
assignment procedure. The proposed
rule change is not inconsistent with the
existing rules of OCC, including any
other rules proposed to be amended.
4 The Commission has modified parts of these
statements.
5 See Securities Exchange Act Release Nos. 56845
(November 27, 2007), 72 FR 67991 (December 3,
2007) (File No. SR–OCC–2007–014), 48908
(December 11, 2003), 68 FR 74689 (December 24,
2003) (File No. SR–OCC–2003–05), and 38165
(January 14, 1997), 62 FR 3070 (January 21, 1997)
(File No. SR–OCC–96–19).
6 See Securities Exchange Act Release No. 57265
(February 4, 2008), 73 FR 7622 (February 8, 2007)
(File No. SR–Phlx–2007–68).
7 SR–OCC–2008–05 can be found on OCC’s Web
site at https://www.optionsclearing.com/
publications/rules/proposed_changes/
sr_occ_08_05.pdf.
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]]>Agencies
[Federal Register Volume 73, Number 60 (Thursday, March 27, 2008)]
[Notices]
[Pages 16405-16407]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-6252]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57543; File No. SR-OCC-2008-03]
Self-Regulatory Organizations; The Options Clearing Corporation;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Cross-Margining
March 20, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on January 29, 2008, The
Options Clearing Corporation (``OCC'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I, II, and III below, which items have been prepared
primarily by OCC. OCC filed the proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(4) \3\
thereunder so that the proposal was effective upon filing with the
Commission. 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).
\2 \ 15 U.S.C. 78s(b)(3)(A)(iii).
\3 \ 17 CFR 240.19b-4(f)(4).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The proposed rule change amends Article VI, Clearance of Exchange
[[Page 16406]]
Transactions, Section 24, Cross-Margining With Participating CCOs,
paragraph (c) of OCC's By-Laws so that additional OCC-cleared products
may be more easily added in the future by amending only the relevant
Cross-Margining Agreement and not the By-Law provision.
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.\4\
---------------------------------------------------------------------------
\4 \ 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
Existing cross-margining programs between OCC and certain other
commodity clearing organizations (each a ``CCO'') permit positions in
index futures and options on such futures cleared by the CCO to be
cleared in a special proprietary or non-proprietary cross-margining
account (``X-M Account'') at the CCO which is paired with a
corresponding X-M account (proprietary or non-proprietary, as the case
may be) at OCC in which securities options are cleared. A non-
proprietary X-M account is limited to options market-makers and other
``market professionals.'' The non-proprietary cross-margining accounts
are treated as futures customer accounts in that they are carried
subject to the segregation provisions of Section 4d of the Commodity
Exchange Act rather than as securities accounts subject to the
Commission's Rule 15c3-3 and other customer protection rules under the
Act. Paired X-M Accounts may be established by a ``joint clearing
member'' of OCC and the CCO or by a ``pair of affiliated clearing
members,'' one of which is a clearing member of OCC and the other of
which is a clearing member of the CCO. The paired X-M Accounts are
treated for margin purposes as if they were a single account, making it
possible to margin the paired X-M Accounts based on the net risk of the
potentially offsetting positions within them.
In referring to the types of cleared contracts that may be carried
in an X-M Account at OCC, paragraph (c) of Section 24 of Article VI of
OCC's By-Laws presently refers only to options. The purpose of the
proposed rule change is to expand this reference to include security
futures, as defined in the Act and in the CEA, on exchange-traded funds
(``ETFs'') based on broad-based securities indices and any other
cleared contract, as defined in OCC's By-Laws, that has been approved
for cross-margining by OCC's Board of Directors.\5\ The precise types
of contracts that can be included in X-M Accounts in any particular
cross-margining program are identified in a Cross-Margining Agreement
between OCC and the CCO. The existing cross-margining programs are
limited to index options and OCC-cleared options on ETFs and index
futures cleared by a CCO. The immediate reason for expanding the types
of cleared products that may be included in X-M Accounts at OCC is to
permit security futures on ETFs based on broad-based securities indices
to be included.\6\ However, OCC has determined to amend Article VI,
Section 24(c) to make it as broad as possible so that additional OCC-
cleared products may be added in the future by amending only the
relevant Cross-Margining Agreement and not this By-Law provision.
---------------------------------------------------------------------------
\5 \ ``Cleared contract'' is defined in Article I of OCC's By-
Laws to mean ``a cleared security or a commodity future or futures
option that is cleared by the Corporation.'' The term ``cleared
security'' is defined as ``an option contract (other than a futures
option), a security future or a BOUND.'' In effect, therefore, the
term ``cleared contract'' includes any derivative contract cleared
by OCC.
\6 \ The Chicago Mercantile Exchange Inc. (``CME'') also clears
security futures contracts, which are reported to OCC under the
terms of the Associated Clearinghouse Agreement between the
organizations. Securities Exchange Act Release No. 46653 (October
11, 2002), 67 FR 64689 (October 21, 2002) (File No. SR-OCC-2002-07).
Under the terms of the OCC-CME cross-margining agreement, such CME-
cleared security futures are eligible contracts for purposes of
cross-margining. However, OCC will not treat security futures on
broad-based indices as eligible contracts until the CFTC issues an
order providing relief from certain provisions of Section 4d(a) of
the Commodity Exchange Act to permit the inclusion of such contracts
as eligible contracts for purposes the OCC-CME cross-margining
program.
---------------------------------------------------------------------------
The inclusion of security futures in cross-margining is not novel.
Under Article VI, Section 25 of the By-Laws, OCC's own internal cross-
margining program for non-proprietary accounts already includes OCC-
cleared security futures along with all other cleared securities that
may be cross-margined against any OCC-cleared futures products that are
cleared by OCC in its capacity as a derivatives clearing organization
regulated by the CFTC. Unlike the other cross-margining accounts, the
internal cross-margining accounts are not limited to index options,
index futures, and OCC-cleared ETF options. OCC has broad authority to
designate any cleared contract as eligible for these accounts provided
the contract has sufficient price correlation with other eligible
contracts to provide significant risk reduction when positions are on
opposite sides of the market. As a result, no rule change is needed to
allow OCC to include futures on ETFs in these accounts. Moreover,
cross-margining of all OCC-cleared securities with OCC-cleared futures
and futures options occurs automatically in the firm account and other
proprietary accounts because OCC's By-Laws permit any OCC-cleared
contract to be carried in these accounts.
The proposed rule change is consistent with the purposes and
requirements of Section 17A of the Act because it enhances the utility
of existing cross-margining programs by permitting the inclusion of
products that did not exist at the time the cross-margining programs
were established. Cross-margining enhances the safety of the clearing
system while providing lower clearing margin costs to participants.
Therefore, expanding the positions that may be included in X-M Accounts
is beneficial to the clearing system and its participants. The proposed
rule change is not inconsistent with the other rules of OCC, including
any 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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(4) \8\ promulgated
thereunder because the proposal effects a change in an existing service
of OCC that (A) does not adversely affect the safeguarding of
securities or funds in the custody or
[[Page 16407]]
control of OCC or for which it is responsible and (B) does not
significantly affect the respective rights or obligations of OCC or
persons using the service. At any time within sixty days of the filing
of the proposed rule change, the Commission could summarily abrogate
such rule change if it appears to the Commission that such action was
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\7\ 15 U.S.C. 78s(b)(3)(A)(iii).
\8\ 17 CFR 240.19b-4(f)(4).
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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-2008-03 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-2008-03. 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 Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of OCC. 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-2008-03 and should be
submitted on or before April 17, 2008.
For the Commission by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-6252 Filed 3-26-08; 8:45 am]
BILLING CODE 8011-01-P
