Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change Relating to Stock as Margin, 21039-21041 [E9-10448]

Download as PDF Federal Register / Vol. 74, No. 86 / Wednesday, May 6, 2009 / Notices 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Elizabeth M. Murphy, Secretary. [FR Doc. E9–10447 Filed 5–5–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION 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–Phlx–2009–37 on the subject line. Paper Comments [Release No. 34–59845; File No. SR–OCC– 2009–08] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change Relating to Stock as Margin • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. April 29, 2009. provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission’s Public Reference Room, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. 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–Phlx– 2009–37 and should be submitted on or before May 27, 2009. 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. mstockstill on PROD1PC66 with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934,1 notice is hereby given that on April 14, 2009, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission the proposed All submissions should refer to File rule change as described in Items I, II Number SR–Phlx–2009–37. This file and III below, which Items have been number should be included on the subject line if e-mail is used. To help the prepared primarily by OCC. The Commission is publishing this notice to Commission process and review your solicit comments on the proposed rule comments more efficiently, please use only one method. The Commission will change from interested persons and to post all comments on the Commission’s grant accelerated approval of the proposed rule change. Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the I. Self-Regulatory Organization’s submission, all subsequent Statement of the Terms of the Substance amendments, all written statements of the Proposed Rule Change with respect to the proposed rule The proposed rule change will revise change that are filed with the OCC’s eligibility requirements for the Commission, and all written deposit of stocks as margin. communications relating to the II. Self-Regulatory Organization’s proposed rule change between the Commission and any person, other than Statement of the Purpose of, and Statutory Basis for, the Proposed Rule those that may be withheld from the Change public in accordance with the A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change OCC is proposing to amend its rules to facilitate the deposit of common 7 17 1 15 VerDate Nov<24>2008 18:36 May 05, 2009 Jkt 217001 PO 00000 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). Frm 00141 Fmt 4703 Sfmt 4703 21039 stocks as margin collateral by: (1) Reducing the minimum price for stocks from $10 to $3 and (2) eliminating the 10% concentration test for certain Exchange-Traded Funds (‘‘ETFs’’). 1. Minimum Price Test Prior to this rule change, OCC Rule 604(b)(4) required that all stocks (‘‘Valued Securities’’) including common and preferred stocks, submitted as margin collateral had to have a market value greater than $10 per share. The dramatic fall in equity prices over the last several months has led to a significant increase in the number of stocks that are priced below $10. Approximately one year ago, eleven stocks in the S&P 500 were priced below $10. As of April 13, 2009, sixty-six stocks were priced below $10. Although OCC’s $10 minimum price requirement for stock collateral was intended to exclude stocks that might be volatile, illiquid, close to delisting, etc., it did so at the expense of excluding many stocks that if looked at individually would be deemed appropriate for margin collateral purposes. Under this filing, OCC will reduce the minimum market value for stocks from $10 to $3. OCC has performed an analysis of the impact of reducing the minimum share price for common stock and has concluded that such a change can be implemented for both option and non-option securities without materially increasing risk to OCC. OCC states that its approach to valuing Valued Securities is conservative because the current 30% haircut is high relative to the haircuts that will be applied upon implementation of its Collateral in Margins project.2 Moreover, OCC has examined the member accounts that hold the most volatile Valued Securities and found no instance where the amount of such holdings in any particular account was excessive. OCC nevertheless intends to closely monitor any account with a large amount of 2 Securities Exchange Act Release No. 58158 (July 15, 2008), 73 FR 42646 (July 15, 2008). Under the Collateral in Margins filing, OCC will be updating its margin requirement methodology and risk management system known as ‘‘STANS’’ to more accurately measure the risk in clearing members’ accounts. Some of the changes include providing OCC with greater flexibility to determine the amount of replacement collateral when securities deposited as margin are withdrawn and eliminating certain concentration limits and minimum share prices. OCC expects to fully implement the new Collateral in Margins methodology in the second quarter of 2010. In order to address current market conditions, OCC is proposing changes now to reduce the impact of the minimum price requirement and the 10% concentration test, both of which will be eliminated altogether for options securities when Collateral in Margins is implemented. E:\FR\FM\06MYN1.SGM 06MYN1 21040 Federal Register / Vol. 74, No. 86 / Wednesday, May 6, 2009 / Notices mstockstill on PROD1PC66 with NOTICES deposited Valued Securities that would be subject to a high haircut (i.e., greater than 40%) under STANS. Preferred stocks, which will not be included in the Collateral in Margin program, will remain subject to a minimum share price of greater than $10. 2. ETF Concentration Test OCC Rule 604(b)(4) provides that ‘‘equity and debt issues of any one issuer shall not be valued at an amount in excess of 10% of the margin requirement in the account for which such securities are deposited.’’ The main purpose of the concentration test is to protect OCC from undue exposure where a single security deposited as collateral by a member suffers a sudden and extreme fall in value or becomes illiquid. Under the concentration test, a clearing member that wants to satisfy its OCC margin requirement solely with Valued Securities must submit a portfolio that contains at least ten separate securities. The concentration test was developed before the advent of ETFs representing an ownership interest in large numbers of securities such as those based on the S&P 500, Nasdaq 100, and Russell 2000. OCC states that it has analyzed such assets from a risk perspective and has concluded that they should be accepted as margin without regard to the concentration limits but subject to certain conditions. First, the assets acceptable for this purpose should be limited to liquid, broad-based equity index ETFs. Secondly, the applicable STANS margin interval for each deposited ETF exempted from the 10% concentration test must be less than or equal to 30%. Because this interim proposal for limiting the applicability of the 10% concentration test is narrower than the corresponding change in the Collateral in Margins filing, OCC proposes to implement this interim proposal by adding an interpretation under Rule 604. By its terms, the interpretation will be superseded upon full implementation of the Collateral in Margins rule change, and OCC will thereafter remove it from the rule book. OCC states that the proposed changes to OCC’s rules are consistent with the purposes and requirements of Section 17A of the Act 3 because they are designed to promote the accurate and efficient clearance and settlement of transactions in securities and to safeguard assets within OCC’s custody or control. The changes accomplish this purpose by facilitating the expanded use of Valued Securities as margin collateral while implementing certain limitations and monitoring procedures designed to limit risk. The proposed rule change is not inconsistent with the existing 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 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 OCC has not solicited or received written comments with respect to the proposed rule change. OCC will notify the Commission of any comments it receives. III. Commission’s Findings and Order Granting Accelerated Approval of the Proposed Rule Change 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 and, in particular, the requirements of Section 17A of the Act.4 Specifically, the Commission finds that the proposed rule change is consistent with Section 17A(b)(3)(F) of the Act,5 which requires that the rules of a clearing agency be designed to assure the safeguarding of securities and funds that are in the custody or control of the clearing agency or for which it is responsible. Although OCC is reducing the minimum share price for stocks eligible to be deposited as margin, the Commission is satisfied with OCC’s analysis that such reduction is accompanied by sufficient riskmanagement controls to protect OCC from the risks associated with including such lower-priced stocks in members’ margin accounts. The Commission also finds that allowing certain ETFs and other fund shares to be deposited as margin collateral that otherwise could not be deposited because of OCC’s concentration restriction should not pose undue risks because such funds are broad based and highly liquid. Therefore, the proposed rule change should not adversely impact OCC’s ability to continue to assure that the securities and funds in its custody or control or for which it is responsible are properly safeguarded. 4 15 3 15 U.S.C. 78–1. VerDate Nov<24>2008 18:36 May 05, 2009 5 15 Jkt 217001 PO 00000 U.S.C. 78–1. U.S.C. 78q–1(b)(3)(F). Frm 00142 Fmt 4703 The Commission finds good cause, pursuant to Section 19(b)(2) of the Act,6 for approving the proposed rule change prior to the thirtieth day after the date of publication of notice in the Federal Register. The Commission believes that accelerating approval of this proposal should benefit OCC’s members and investors by permitting OCC to update its margin requirements without undue delay and in a manner that will expand the securities that members may deposit as margin collateral while it implements the Collateral in Margin project without compromising OCC’s ability to safeguard the funds and securities in its custody or control. 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 rulecomment@sec.gov. Please include File No. SR–OCC–2009–08 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File No. SR–OCC–2009–08. 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 6 15 Sfmt 4703 U.S.C. 78s(b)(2). E:\FR\FM\06MYN1.SGM 06MYN1 Federal Register / Vol. 74, No. 86 / Wednesday, May 6, 2009 / Notices between the hours of 10:00 a.m. to 3:00 p.m. Copies of such filing also will be available for inspection and copying at OCC’s principal office and on OCC’s Web site at https://www.theocc.com/ publications/rules/proposed_changes/ proposed_changes.jsp. 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 No. OCC–2009–08 and should be submitted on or before May 27, 2009. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act 7 that the proposed rule change (SR–OCC–2009– 08) be, and it hereby is, approved on an accelerated basis.8 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.9 Elizabeth M. Murphy, Secretary. [FR Doc. E9–10448 Filed 5–5–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59835; File No. SR– NYSEArca–2009–30] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Relating to the Adoption of Listing Standards for Managed Trust Securities and the Listing and Trading of Shares of the iShares® Diversified Alternatives Trust April 28, 2009. mstockstill on PROD1PC66 with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on April 9, 2009, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) 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 by the Exchange. On April 24, 2009, the Exchange filed Amendment No. 1 to the proposed rule change. The Commission is publishing 7 15 U.S.C. 78s(b)(2). approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 9 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 8 In VerDate Nov<24>2008 18:36 May 05, 2009 Jkt 217001 this notice to solicit comments on the proposed rule change, as amended, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its wholly owned subsidiary NYSE Arca Equities, Inc. (‘‘NYSE Arca Equities’’ or ‘‘Corporation’’), proposes new NYSE Arca Equities Rule 8.700 (‘‘Managed Trust Securities’’). The Exchange also proposes to list and trade shares (‘‘Shares’’) of the iShares® Diversified Alternatives Trust (‘‘Trust’’) pursuant to this rule. The Exchange also proposes to amend NYSE Arca Equities Rule 7.34 and its Listing Fees to add references to proposed NYSE Arca Equities Rule 8.700. The text of the proposed rule change is available on the Exchange’s Web site at https://www.nyse.com, at the Exchange’s principal office and at the Commission’s Public Reference Room.3 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 self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes new NYSE Arca Equities Rule 8.700 for the purpose of permitting the listing and trading, or trading pursuant to unlisted trading privileges (‘‘UTP’’) of Managed Trust Securities issued by a trust that is a commodity pool as defined in the Commodity Exchange Act (‘‘CEA’’) and regulations thereunder, and that is managed by a commodity pool operator (‘‘CPO’’) registered with the Commodity Futures Trading Commission (‘‘CFTC’’) and registered under the Securities Act of 1933, as amended. The trust would hold long and/or short positions in 3 E-mail from Sudhir Bhattacharyya, Vice President—Legal, NYSE Euronext, to Edward Y. Cho, Special Counsel, Division of Trading and Markets, Commission, dated April 21, 2009 (‘‘Exchange Confirmation’’). PO 00000 Frm 00143 Fmt 4703 Sfmt 4703 21041 exchange traded futures and/or currency forward contracts as selected by the trust’s advisor consistent with the trust’s objectives, which would only include exchange traded futures contracts involving commodities, currencies, stock indices, fixed income indices, interest rates and sovereign, private and mortgage or asset backed debt instruments as disclosed in the trust’s prospectus, as such may be amended from time to time. In addition, such shares would be issuable and redeemable continuously in specified aggregate amounts at net asset value (‘‘NAV’’).4 The Exchange also proposes to amend NYSE Arca Equities Rule 7.34 (Trading Sessions) to reference securities described in proposed Rule 8.700 in Rule 7.34(a)(3)(A) relating to hours of the Exchange’s Core Trading Session, in Rule 7.34(a)(4)(A) relating to trading halts for trading pursuant to UTP during the Exchange’s Opening Session, and in Rule 7.34(a)(5) relating to trading halts when the NAV and/or ‘‘Disclosed Portfolio’’ is not being disseminated to all market participants at the same time.5 In addition, the Exchange proposes to amend its listing fees by incorporating the securities described in proposed Rule 8.700 in the term ‘‘Derivative Securities Products.’’ Pursuant to this proposed rule change, the Exchange proposes to list and trade the Shares of the Trust. The 4 The Commission has previously approved NYSE Arca Equities rules to list and trade products based on or related to commodities. See Securities Exchange Act Release No. 57838 (May 20, 2008), 73 FR 30649 (May 28, 2008) (SR–NYSEArca–2008–09) (approving new NYSE Arca Equities Rule 8.204 ‘‘Commodity Futures Trust Shares’’ for to list and trade the AirShares EU Carbon Allowances Fund); Securities Exchange Act Release No. 54025 (June 21, 2006), 71 FR 36856 (June 28, 2006) (SR– NYSEArca–2006–12) (approving new NYSE Arca Equities Rule 8.203 ‘‘Commodity-Indexed Trust Shares’’ for trading pursuant to UTP the iShares GSCI Commodity-Indexed Trust); Securities Exchange Act Release No. 51067 (January 21, 2005), 70 FR 3952 (January 27, 2005) (SR–PCX–2004–132) (approving new NYSE Arca Equities Rule 8.201 ‘‘Commodity-Based Trust Shares’’ for trading pursuant to UTP the iShares COMEX Gold Trust); Securities Exchange Act Release No. 56041 (July 11, 2007), 72 FR 39114 (July 17, 2007) (SR–NYSEArca– 2007–43) (approving listing of shares of iShares COMEX Gold Trust pursuant to NYSE Arca Equities Rule 8.201); Securities Exchange Act Release No. 53875 (May 25, 2006), 71 FR 32164 (June 2, 2006) (SR–NYSEArca–2006–11) (approving new NYSE Arca Equities Rule 8.300 ‘‘Partnership Shares’’ for trading pursuant to UTP the United States Oil Fund, LP); Securities Exchange Act Release No. 53736 (April 27, 2006), 71 FR 26582 (May 5, 2006) (SR–PCX–2006–22) (approving new Commentary .02 to NYSE Arca Equities Rule 8.200 ‘‘Investment Shares’’ for trading pursuant to UTP the DB Commodity Index Tracking Fund); Securities Exchange Act Release No. 58162 (July 15, 2008), 73 FR 42391 (July 21, 2008) (SR–NYSEArca–2008–73) (approving new NYSE Arca Equities Rule 8.200 ‘‘Trust Issued Receipts’’). 5 See Exchange Confirmation, supra note 3. E:\FR\FM\06MYN1.SGM 06MYN1

Agencies

[Federal Register Volume 74, Number 86 (Wednesday, May 6, 2009)]
[Notices]
[Pages 21039-21041]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10448]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59845; File No. SR-OCC-2009-08]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change Relating to Stock as Margin

April 29, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934,\1\ notice is hereby given that on April 14, 2009, The Options 
Clearing Corporation (``OCC'') filed with the Securities and Exchange 
Commission 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 and to grant accelerated approval of the 
proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The proposed rule change will revise OCC's eligibility requirements 
for the deposit of stocks as margin.

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.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    OCC is proposing to amend its rules to facilitate the deposit of 
common stocks as margin collateral by: (1) Reducing the minimum price 
for stocks from $10 to $3 and (2) eliminating the 10% concentration 
test for certain Exchange-Traded Funds (``ETFs'').
1. Minimum Price Test
    Prior to this rule change, OCC Rule 604(b)(4) required that all 
stocks (``Valued Securities'') including common and preferred stocks, 
submitted as margin collateral had to have a market value greater than 
$10 per share. The dramatic fall in equity prices over the last several 
months has led to a significant increase in the number of stocks that 
are priced below $10. Approximately one year ago, eleven stocks in the 
S&P 500 were priced below $10. As of April 13, 2009, sixty-six stocks 
were priced below $10. Although OCC's $10 minimum price requirement for 
stock collateral was intended to exclude stocks that might be volatile, 
illiquid, close to delisting, etc., it did so at the expense of 
excluding many stocks that if looked at individually would be deemed 
appropriate for margin collateral purposes.
    Under this filing, OCC will reduce the minimum market value for 
stocks from $10 to $3. OCC has performed an analysis of the impact of 
reducing the minimum share price for common stock and has concluded 
that such a change can be implemented for both option and non-option 
securities without materially increasing risk to OCC. OCC states that 
its approach to valuing Valued Securities is conservative because the 
current 30% haircut is high relative to the haircuts that will be 
applied upon implementation of its Collateral in Margins project.\2\ 
Moreover, OCC has examined the member accounts that hold the most 
volatile Valued Securities and found no instance where the amount of 
such holdings in any particular account was excessive. OCC nevertheless 
intends to closely monitor any account with a large amount of

[[Page 21040]]

deposited Valued Securities that would be subject to a high haircut 
(i.e., greater than 40%) under STANS. Preferred stocks, which will not 
be included in the Collateral in Margin program, will remain subject to 
a minimum share price of greater than $10.
---------------------------------------------------------------------------

    \2\ Securities Exchange Act Release No. 58158 (July 15, 2008), 
73 FR 42646 (July 15, 2008). Under the Collateral in Margins filing, 
OCC will be updating its margin requirement methodology and risk 
management system known as ``STANS'' to more accurately measure the 
risk in clearing members' accounts. Some of the changes include 
providing OCC with greater flexibility to determine the amount of 
replacement collateral when securities deposited as margin are 
withdrawn and eliminating certain concentration limits and minimum 
share prices.
    OCC expects to fully implement the new Collateral in Margins 
methodology in the second quarter of 2010. In order to address 
current market conditions, OCC is proposing changes now to reduce 
the impact of the minimum price requirement and the 10% 
concentration test, both of which will be eliminated altogether for 
options securities when Collateral in Margins is implemented.
---------------------------------------------------------------------------

2. ETF Concentration Test
    OCC Rule 604(b)(4) provides that ``equity and debt issues of any 
one issuer shall not be valued at an amount in excess of 10% of the 
margin requirement in the account for which such securities are 
deposited.'' The main purpose of the concentration test is to protect 
OCC from undue exposure where a single security deposited as collateral 
by a member suffers a sudden and extreme fall in value or becomes 
illiquid. Under the concentration test, a clearing member that wants to 
satisfy its OCC margin requirement solely with Valued Securities must 
submit a portfolio that contains at least ten separate securities. The 
concentration test was developed before the advent of ETFs representing 
an ownership interest in large numbers of securities such as those 
based on the S&P 500, Nasdaq 100, and Russell 2000.
    OCC states that it has analyzed such assets from a risk perspective 
and has concluded that they should be accepted as margin without regard 
to the concentration limits but subject to certain conditions. First, 
the assets acceptable for this purpose should be limited to liquid, 
broad-based equity index ETFs. Secondly, the applicable STANS margin 
interval for each deposited ETF exempted from the 10% concentration 
test must be less than or equal to 30%.
    Because this interim proposal for limiting the applicability of the 
10% concentration test is narrower than the corresponding change in the 
Collateral in Margins filing, OCC proposes to implement this interim 
proposal by adding an interpretation under Rule 604. By its terms, the 
interpretation will be superseded upon full implementation of the 
Collateral in Margins rule change, and OCC will thereafter remove it 
from the rule book.
    OCC states that the proposed changes to OCC's rules are consistent 
with the purposes and requirements of Section 17A of the Act \3\ 
because they are designed to promote the accurate and efficient 
clearance and settlement of transactions in securities and to safeguard 
assets within OCC's custody or control. The changes accomplish this 
purpose by facilitating the expanded use of Valued Securities as margin 
collateral while implementing certain limitations and monitoring 
procedures designed to limit risk. The proposed rule change is not 
inconsistent with the existing rules of OCC including any rules 
proposed to be amended.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78-1.
---------------------------------------------------------------------------

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

    OCC has not solicited or received written comments with respect to 
the proposed rule change. OCC will notify the Commission of any 
comments it receives.

III. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    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 and, in 
particular, the requirements of Section 17A of the Act.\4\ 
Specifically, the Commission finds that the proposed rule change is 
consistent with Section 17A(b)(3)(F) of the Act,\5\ which requires that 
the rules of a clearing agency be designed to assure the safeguarding 
of securities and funds that are in the custody or control of the 
clearing agency or for which it is responsible. Although OCC is 
reducing the minimum share price for stocks eligible to be deposited as 
margin, the Commission is satisfied with OCC's analysis that such 
reduction is accompanied by sufficient risk-management controls to 
protect OCC from the risks associated with including such lower-priced 
stocks in members' margin accounts. The Commission also finds that 
allowing certain ETFs and other fund shares to be deposited as margin 
collateral that otherwise could not be deposited because of OCC's 
concentration restriction should not pose undue risks because such 
funds are broad based and highly liquid. Therefore, the proposed rule 
change should not adversely impact OCC's ability to continue to assure 
that the securities and funds in its custody or control or for which it 
is responsible are properly safeguarded.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78-1.
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\6\ for approving the proposed rule change prior to the 
thirtieth day after the date of publication of notice in the Federal 
Register. The Commission believes that accelerating approval of this 
proposal should benefit OCC's members and investors by permitting OCC 
to update its margin requirements without undue delay and in a manner 
that will expand the securities that members may deposit as margin 
collateral while it implements the Collateral in Margin project without 
compromising OCC's ability to safeguard the funds and securities in its 
custody or control.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

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-comment@sec.gov. Please include 
File No. SR-OCC-2009-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File No. SR-OCC-2009-08. 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

[[Page 21041]]

between the hours of 10:00 a.m. to 3:00 p.m. Copies of such filing also 
will be available for inspection and copying at OCC's principal office 
and on OCC's Web site at https://www.theocc.com/publications/rules/proposed_changes/proposed_changes.jsp. 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 No. OCC-2009-08 and should be submitted on or 
before May 27, 2009.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\7\ that the proposed rule change (SR-OCC-2009-08) be, and it hereby 
is, approved on an accelerated basis.\8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).

    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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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-10448 Filed 5-5-09; 8:45 am]
BILLING CODE 8010-01-P
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