Self-Regulatory Organizations; Options Clearing Corporation; Notice of Filing of Amendment No. 1 to Proposed Rule Change To Provide Specific Authority To Use an Auction Process as One of the Means To Liquidate a Defaulting Clearing Member's Accounts, 59750-59751 [2011-24673]

Download as PDF 59750 Federal Register / Vol. 76, No. 187 / Tuesday, September 27, 2011 / Notices PROCEDURAL SCHEDULE September 16, 2011 ............ October 3, 2011 ................... September 30, 2011 ............ October 17, 2011 ................. October 21, 2011 ................. November 10, 2011 ............. November 25, 2011 ............. December 2, 2011 ............... January 9, 2012 ................... Filing of Appeal. Deadline for the Postal Service to file the applicable administrative record in this appeal. Deadline for the Postal Service to file any responsive pleading. Deadline for notices to intervene (see 39 CFR 3001.111(b)). Deadline for Petitioner’s Form 61 or initial brief in support of petition (see 39 CFR 3001.115(a) and (b)). Deadline for answering brief in support of the Postal Service (see 39 CFR 3001.115(c)). Deadline for reply briefs in response to answering briefs (see 39 CFR 3001.115(d)). Deadline for motions by any party requesting oral argument; the Commission will schedule oral argument only when it is a necessary addition to the written filings (see 39 CFR 3001.116). Expiration of the Commission’s 120-day decisional schedule (see 39 U.S.C. 404(d)(5)). which have been prepared primarily by OCC. The Commission is publishing this notice to solicit comments on Amendment No. 1 to the proposed rule change from interested persons. [FR Doc. 2011–24709 Filed 9–26–11; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65370; File No. SR–OCC– 2011–08] Self-Regulatory Organizations; Options Clearing Corporation; Notice of Filing of Amendment No. 1 to Proposed Rule Change To Provide Specific Authority To Use an Auction Process as One of the Means To Liquidate a Defaulting Clearing Member’s Accounts September 21, 2011. 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 July 14, 2011, The Options Clearing Corporation (‘‘OCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change. The proposed rule change was published for comment in the Federal Register on August 3, 2011.3 On September 15, 2011, OCC filed Amendment No. 1 to the proposed rule change.4 The proposed rule change as amended by Amendment No. 1 is described in Items I, II, and III below, 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Securities Exchange Act Release No. 64982 (July 28, 2011), 76 FR 46867 (August 3, 2011). 4 The proposed rule change as originally filed would revise OCC Rule 1104 (margins deposited and contributions to the Clearing Fund) to clarify that the auction process is one way to liquidate a defaulting members accounts with respect to positions and collateral in a defaulting member’s accounts. Amendment No. 1 to the proposed rule change would also revise OCC Rule 1106 (open positions of a suspended clearing member) in a similar manner. Accordingly, as amended, the proposed rule change would clarify that the auction process is one way to liquidate a defaulting members accounts with respect to positions and collateral in a defaulting member’s accounts under both OCC Rule 1104 and OCC Rule 1106. Telephone conference between Stephen Szarmack, Vice President and Associate General Counsel, OCC, and Pamela Kesner, Special Counsel, Securities and Exchange Commission Division of Trading and Markets, on September 20, 2011. mstockstill on DSK4VPTVN1PROD with NOTICES 2 17 VerDate Mar<15>2010 16:35 Sep 26, 2011 Jkt 223001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The purpose of the proposed rule change is to provide OCC specific authority to use an auction process as one of the means to liquidate a defaulting clearing member’s accounts5. 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 The purpose of this rule change is to revise OCC’s rules to provide specific authority for OCC to use an auction process as one of the possible means by which OCC may liquidate a defaulting clearing member’s accounts. An auction is likely to be the most efficient and orderly procedure practicable for closing out clearing member portfolios in some circumstances. 5 The proposed rule change amends OCC Rules 1104 and 1106, which allow for liquidation upon the suspension of a clearing member. OCC Rule 1102 permits the Board of Directors or Chairman of OCC to suspend clearing members under a number of circumstances, including clearing member default. Telephone conference between Stephen Szarmack, Vice President and Associate General Counsel, OCC, and Pamela Kesner, Special Counsel, Securities and Exchange Commission Division of Trading and Markets, on September 20, 2011. PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 The liquidation of open long and short positions through exchange transactions is an obvious means of closing out the positions of a defaulting member. However, auctions are increasingly viewed as an efficient and cost effective alternative for liquidating some or all of a clearing member’s positions and collateral, especially where the positions are very large or in unstable market conditions. As compared to liquidating positions through exchange transactions, an auction may usually be expected to result in a shorter liquidation period and reduced execution risk. During Lehman Brothers Holdings Inc.’s liquidation, clearinghouses such as LCH.Clearnet and CME Clearing liquidated certain derivatives positions through auctions. Chapter XI of OCC’s Rules, which governs the liquidation of a clearing member’s accounts in the event of an insolvency, provides that margins deposited with the Corporation, contributions to the Clearing Fund and open positions of a suspended clearing member must be closed by OCC ‘‘in the most orderly manner practicable.’’ While OCC and its counsel believe that this language is broad enough to authorize a private auction, i.e., an auction limited to selected bidders, as a means of closing out open positions, OCC also believes that explicit authorization for a private auction procedure could reduce the likelihood of a legal challenge should such a procedure be utilized. The proposed change to OCC’s rules is consistent with Section 17A of the Act, as amended (the ‘‘Exchange Act’’), because it is designed to promote the prompt and accurate clearance and settlement of security transactions, and generally protect investors and the public interest, by making more explicit OCC’s ability to use an auction procedure to liquidate a defaulting clearing member’s accounts. The proposed rule change is not inconsistent with the existing rules of OCC, including any other rules proposed to be amended. E:\FR\FM\27SEN1.SGM 27SEN1 Federal Register / Vol. 76, No. 187 / Tuesday, September 27, 2011 / Notices (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 III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) As the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. mstockstill on DSK4VPTVN1PROD with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 1, including whether the proposed rule change is consistent with the Act and with respect to the following: • The Commission requests comment regarding the types of circumstances in which an auction would or would not be the most orderly procedure practicable for closing out clearing member portfolios. For example, in what circumstances would a private auction be a more or less orderly procedure than liquidating the defaulting member’s positions on a national securities exchange? • The Commission requests comment on whether a private auction limited to selected bidders could impose any burden on competition. In what ways, if any, would the effects on competition vary based the types of firms that are allowed to participate in an auction and the method used to select such participants? Comments may be submitted by any of the following methods: 16:35 Sep 26, 2011 All submissions should refer to File Number SR–OCC–2011–08. 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 (http://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 Web site viewing and printing in the Commission’s Public Reference Section, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 pm. Copies of such filings will also be available for inspection and copying at the principal office of OCC and on OCC’s Web site at http:// www.optionsclearing.com/components/ docs/legal/rules_and_bylaws/ sr_occ_11_08_a_1.pdf. 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–2011–08 and should be submitted on or before October 12, 2011. For the Commission by the Division of Trading and Markets, pursuant to delegated authority.6 Elizabeth M. Murphy, Secretary . [FR Doc. 2011–24673 Filed 9–26–11; 8:45 am] BILLING CODE 8011–01–P • Use the Commissions Internet comment form (http://www.sec.gov/ rules/sro.shtml) or VerDate Mar<15>2010 Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. Written comments relating to the proposed rule change have not been solicited or received. OCC will notify the Commission of any written comments received by OCC. Electronic Comments Send an e-mail to rulecomments@sec.gov. Please include File Number SR–OCC–2011–08 on the subject line. Jkt 223001 6 17 PO 00000 CFR 200.30–3(a)(12). Frm 00096 Fmt 4703 Sfmt 4703 59751 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65535; File No. SR–FINRA– 2011–045] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Revise the Series 7 Examination Program September 20, 2011. 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 September 7, 2011, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) (f/k/a National Association of Securities Dealers, Inc. (‘‘NASD’’)) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as ‘‘constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule’’ under Section 19(b)(3)(A)(i) of the Act 3 and Rule 19b–4(f)(1) thereunder,4 which renders the proposal effective upon receipt of this filing by 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 FINRA is filing revisions to the content outline and selection specifications for the General Securities Representative (Series 7) examination program.5 The proposed revisions update the material to reflect changes to the laws, rules and regulations covered by the examination and to better reflect the functions and associated tasks performed by a General Securities Representative and the relationships 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b–4(f)(1). 5 FINRA also is proposing corresponding revisions to the Series 7 question bank, but based upon instruction from the Commission staff, FINRA is submitting SR–FINRA–2011–045 for immediate effectiveness pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(1) thereunder, and is not filing the question bank for Commission review. See Letter to Alden S. Adkins, Senior Vice President and General Counsel, NASD Regulation, from Belinda Blaine, Associate Director, Division of Market Regulation, SEC, dated July 24, 2000. The question bank is available for Commission review. 2 17 E:\FR\FM\27SEN1.SGM 27SEN1

Agencies

[Federal Register Volume 76, Number 187 (Tuesday, September 27, 2011)]
[Notices]
[Pages 59750-59751]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-24673]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65370; File No. SR-OCC-2011-08]


Self-Regulatory Organizations; Options Clearing Corporation; 
Notice of Filing of Amendment No. 1 to Proposed Rule Change To Provide 
Specific Authority To Use an Auction Process as One of the Means To 
Liquidate a Defaulting Clearing Member's Accounts

September 21, 2011.
    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 July 14, 2011, The Options Clearing Corporation (``OCC'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change. The proposed rule change was published for comment in the 
Federal Register on August 3, 2011.\3\ On September 15, 2011, OCC filed 
Amendment No. 1 to the proposed rule change.\4\ The proposed rule 
change as amended by Amendment No. 1 is described in Items I, II, and 
III below, which have been prepared primarily by OCC. The Commission is 
publishing this notice to solicit comments on Amendment No. 1 to the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 64982 (July 28, 2011), 
76 FR 46867 (August 3, 2011).
    \4\ The proposed rule change as originally filed would revise 
OCC Rule 1104 (margins deposited and contributions to the Clearing 
Fund) to clarify that the auction process is one way to liquidate a 
defaulting members accounts with respect to positions and collateral 
in a defaulting member's accounts. Amendment No. 1 to the proposed 
rule change would also revise OCC Rule 1106 (open positions of a 
suspended clearing member) in a similar manner. Accordingly, as 
amended, the proposed rule change would clarify that the auction 
process is one way to liquidate a defaulting members accounts with 
respect to positions and collateral in a defaulting member's 
accounts under both OCC Rule 1104 and OCC Rule 1106. Telephone 
conference between Stephen Szarmack, Vice President and Associate 
General Counsel, OCC, and Pamela Kesner, Special Counsel, Securities 
and Exchange Commission Division of Trading and Markets, on 
September 20, 2011.
---------------------------------------------------------------------------

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

    The purpose of the proposed rule change is to provide OCC specific 
authority to use an auction process as one of the means to liquidate a 
defaulting clearing member's accounts\5\.
---------------------------------------------------------------------------

    \5\ The proposed rule change amends OCC Rules 1104 and 1106, 
which allow for liquidation upon the suspension of a clearing 
member. OCC Rule 1102 permits the Board of Directors or Chairman of 
OCC to suspend clearing members under a number of circumstances, 
including clearing member default. Telephone conference between 
Stephen Szarmack, Vice President and Associate General Counsel, OCC, 
and Pamela Kesner, Special Counsel, Securities and Exchange 
Commission Division of Trading and Markets, on September 20, 2011.
---------------------------------------------------------------------------

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

    The purpose of this rule change is to revise OCC's rules to provide 
specific authority for OCC to use an auction process as one of the 
possible means by which OCC may liquidate a defaulting clearing 
member's accounts. An auction is likely to be the most efficient and 
orderly procedure practicable for closing out clearing member 
portfolios in some circumstances.
    The liquidation of open long and short positions through exchange 
transactions is an obvious means of closing out the positions of a 
defaulting member. However, auctions are increasingly viewed as an 
efficient and cost effective alternative for liquidating some or all of 
a clearing member's positions and collateral, especially where the 
positions are very large or in unstable market conditions. As compared 
to liquidating positions through exchange transactions, an auction may 
usually be expected to result in a shorter liquidation period and 
reduced execution risk. During Lehman Brothers Holdings Inc.'s 
liquidation, clearinghouses such as LCH.Clearnet and CME Clearing 
liquidated certain derivatives positions through auctions.
    Chapter XI of OCC's Rules, which governs the liquidation of a 
clearing member's accounts in the event of an insolvency, provides that 
margins deposited with the Corporation, contributions to the Clearing 
Fund and open positions of a suspended clearing member must be closed 
by OCC ``in the most orderly manner practicable.'' While OCC and its 
counsel believe that this language is broad enough to authorize a 
private auction, i.e., an auction limited to selected bidders, as a 
means of closing out open positions, OCC also believes that explicit 
authorization for a private auction procedure could reduce the 
likelihood of a legal challenge should such a procedure be utilized.
    The proposed change to OCC's rules is consistent with Section 17A 
of the Act, as amended (the ``Exchange Act''), because it is designed 
to promote the prompt and accurate clearance and settlement of security 
transactions, and generally protect investors and the public interest, 
by making more explicit OCC's ability to use an auction procedure to 
liquidate a defaulting clearing member's accounts. The proposed rule 
change is not inconsistent with the existing rules of OCC, including 
any other rules proposed to be amended.

[[Page 59751]]

(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 relating to the proposed rule change have not been 
solicited or received. OCC will notify the Commission of any written 
comments received by OCC.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) As the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1, including whether the proposed 
rule change is consistent with the Act and with respect to the 
following:
     The Commission requests comment regarding the types of 
circumstances in which an auction would or would not be the most 
orderly procedure practicable for closing out clearing member 
portfolios. For example, in what circumstances would a private auction 
be a more or less orderly procedure than liquidating the defaulting 
member's positions on a national securities exchange?
     The Commission requests comment on whether a private 
auction limited to selected bidders could impose any burden on 
competition. In what ways, if any, would the effects on competition 
vary based the types of firms that are allowed to participate in an 
auction and the method used to select such participants?
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commissions Internet comment form (http://www.sec.gov/rules/sro.shtml) or
    Send an e-mail to rule-comments@sec.gov. Please include File Number 
SR-OCC-2011-08 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 Number SR-OCC-2011-08. 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 (http://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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 pm. Copies of such filings will also be available for 
inspection and copying at the principal office of OCC and on OCC's Web 
site at http://www.optionsclearing.com/components/docs/legal/rules_and_bylaws/sr_occ_11_08_a_1.pdf.
    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-2011-08 
and should be submitted on or before October 12, 2011.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
---------------------------------------------------------------------------

    \6\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary .
[FR Doc. 2011-24673 Filed 9-26-11; 8:45 am]
BILLING CODE 8011-01-P