Securities Investor Protection Corporation, 66318-66320 [2013-26165]

Download as PDF 66318 Federal Register / Vol. 78, No. 214 / Tuesday, November 5, 2013 / Proposed Rules The Model LJ–200–1A10 is the first airplane manufactured by Learjet Inc. to utilize advanced composite materials in the construction of its fuselage and wings. In accordance with § 21.16, fuselage structure fabricated from monolithic carbon-fiber reinforced plastic (CFRP) prepreg material (reinforcement fiber pre-impregnated with a thermoplastic or thermoset resin matrix) constitutes a novel and unusual design feature for a large transportcategory airplane certificated under 14 CFR part 25. Discussion Existing regulations do not adequately ensure that composite structure offers passengers the same protection from an on-ground, post-crash fire condition as would a conventional aluminum structure. Learjet is introducing a new material that may have different toxicity characteristics than those of traditional materials. Service experience has shown that, in post-crash fires, traditional aluminum structural materials emit acceptable toxicity levels. Therefore, it is necessary to ensure that the material being utilized does not reduce the survivability of the passengers during a post-crash fire or provide levels of toxic fumes that would be lethal or incapacitating, preventing evacuation of the aircraft following a crash scenario. This proposed special condition is necessary to ensure a level of safety equivalent to that provided by 14 CFR part 25. Regulations applicable to burn requirements, including §§ 25.853 and 25.856(a), remain valid for this airplane but are not sufficient to address the potential hazard from toxic levels of gases that might be produced from carbon fiber/resin system materials during a post-crash fire. wreier-aviles on DSK5TPTVN1PROD with PROPOSALS Applicability As discussed above, these special conditions are applicable to the Model LJ–200–1A10. Should Learjet Inc. apply at a later date for a change to the type certificate to include another airplane model incorporating the same novel or unusual design feature, the special conditions would apply to that model as well. Conclusion This action affects only certain novel or unusual design features on one model of airplanes. It is not a rule of general applicability. List of Subjects in 14 CFR Part 25 Aircraft, Aviation safety, Reporting and recordkeeping requirements. The authority citation for these special conditions is as follows: VerDate Mar<15>2010 14:55 Nov 04, 2013 Jkt 232001 Authority: 49 U.S.C. 106(g), 40113, 44701, 44702, 44704. The Proposed Special Conditions Accordingly, the Federal Aviation Administration (FAA) proposes the following special conditions as part of the type certification basis for Learjet Inc. Model LJ–200–1A10 airplanes. The Learjet Model LJ–200–1A10 must show that toxic levels of gases produced from the composite-material system are in no way an additional threat to the passengers and their ability to evacuate when compared to an aluminumconstructed aircraft. Issued in Renton, Washington, on October 18, 2013. Jeffrey E. Duven, Acting Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. 2013–26406 Filed 11–4–13; 8:45 am] BILLING CODE 4910–13–P SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 300 [Release No. SIPA–171; File No. SIPC–2012– 01] Securities Investor Protection Corporation Securities and Exchange Commission. ACTION: Proposed rule. AGENCY: The Securities Investor Protection Corporation (‘‘SIPC’’) filed a proposed rule change with the Securities and Exchange Commission (‘‘Commission’’). The proposed rule change amends SIPC Rule 400, entitled ‘‘Rules Relating to Satisfaction of Customer Claims for Standardized Options,’’ which relates to the satisfaction of customer claims for standardized options under the Securities Investor Protection Act of 1970 (‘‘SIPA’’). The Commission is publishing the proposed rule change for public comment. Because SIPC rules have the force and effect as if promulgated by the Commission, those rules are published in Title 17 of the Code of Federal Regulations. DATES: Comments are to be received on or before November 26, 2013. ADDRESSES: Interested persons are invited to submit written data, views, and arguments concerning the foregoing by any of the following methods: SUMMARY: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/other.shtml); or PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 • Send an email to rule-comments@ sec.gov. Please include File Number SIPC–2012–01 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 letters should refer to File Number SIPC–2012–01. This file number should be included on the subject line if email 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/other.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 Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. 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. FOR FURTHER INFORMATION CONTACT: Michael A. Macchiaroli, Associate Director, at (202) 551–5525; Thomas K. McGowan, Deputy Associate Director, at (202) 551–5521; Sheila Dombal Swartz, Special Counsel, at (202) 551–5545; or Kimberly N. Chehardy, Special Counsel, at (202) 551–5791, Office of Financial Responsibility, Division of Trading and Markets, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–7010. SUPPLEMENTARY INFORMATION: Pursuant to Section 3(e)(2)(A) of SIPA,1 notice is hereby given that SIPC filed with the Commission on November 7, 2012, a proposed rule change, as described in Item I below, which item has been substantially prepared by SIPC. On January 31, 2013, SIPC filed Amendment No. 1 to the proposed rule change.2 The Commission is publishing 1 15 U.S.C. 78ccc(e)(2)(A). No. 1 is a partial amendment which modifies the initial proposed changes to 2 Amendment E:\FR\FM\05NOP1.SGM 05NOP1 Federal Register / Vol. 78, No. 214 / Tuesday, November 5, 2013 / Proposed Rules wreier-aviles on DSK5TPTVN1PROD with PROPOSALS this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. I. SIPC’S Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, SIPC 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 above. SIPC has prepared the following summary of the purpose of and statutory basis for the proposed rule change.3 SIPC Rule 400, 17 CFR 300.400 (‘‘Rule 400’’ or ‘‘the Rule’’), was enacted to provide clarity in the treatment of customer claims based on ‘‘Standardized Options’’ positions, in the liquidation of broker-dealers under SIPA. Currently, Rule 400 generally provides for the closeout of open Standardized Options positions upon the commencement of a SIPA liquidation. Based upon the amounts realized upon closeout, the trustee calculates the value of customers’ Standardized Options positions, and credits or debits customers’ accounts by the appropriate amounts. The purpose of the proposed rule change is to amend SIPC Rule 400 in the following respects: (1) To provide trustees appointed under SIPA with greater flexibility in the distribution of Standardized Options upon the commencement of a SIPA liquidation proceeding; and (2) to modify the definition of Standardized Options under Rule 400(h), to include an option that is a ‘‘security’’ under SIPA and is issued by an SEC-registered securities clearing agency or a foreign securities clearing agency, i.e., an overthe-counter option (‘‘OTC Option’’). The proposed amendments create an alternative to closeout by allowing the SIPA trustee, with SIPC’s consent, to transfer some or all of such Standardized Options positions to another SIPC member for the accounts of customers. Under SIPC Rule 400(h), ‘‘Standardized Options’’ means options traded on a national securities exchange, an automated quotation system of a registered securities association, or a foreign securities exchange. The proposed amendments also would modify the definition of subsection (h) of Rule 400, by inserting the phrase ‘‘a ‘security’ under section 16(14) of the Act and is’’ prior to the words ‘‘issued by a securities clearing agency. . . .’’ 3 The Commission has modified the language in this section. VerDate Mar<15>2010 14:55 Nov 04, 2013 Jkt 232001 ‘‘Standardized Options’’ to include any other option that is a ‘‘security’’ under section 16(14) of SIPA and is issued by a registered securities clearing agency or foreign securities clearing agency.4 For example, the Options Clearing Corporation (‘‘OCC’’) proposed, and the Commission approved, a rule change to establish a legal and operational framework for OCC to provide central clearing for OTC Options.5 If OCC clears OTC Options, these options will be deemed ‘‘Standardized Options’’ and subject to closeout or transfer in a SIPA proceeding. In light of experience and knowledge gained from the liquidation of Lehman Brothers Inc. (‘‘Lehman’’) and other SIPA proceedings, SIPC has determined that allowing SIPA trustees the flexibility, subject to SIPC approval, of transferring customers’ options positions or of liquidating their positions, would be beneficial to the investing public and consistent with the customer protection purposes of SIPA. Moreover, because the OTC Options are similar to exchange-traded index options, and generally would be cleared by a securities clearing agency registered under Section 17A of the Exchange Act subject to the same basic rules and procedures used for the clearance of index options, there appears to be no practical basis to treat OTC Options differently under SIPA. Indeed, modifying the definition of ‘‘Standardized Options’’ under Rule 400(h) to include OTC Options would update, and therefore enhance, the protections afforded customers in the event of a liquidation of their brokerdealer. A. Past Experience The ability to transfer Standardized Options positions to another brokerage in lieu of an automatic closeout gives SIPA trustees more flexibility in distributing such customer assets after the commencement of a SIPA liquidation proceeding, and more closely approximates what the customer 4 Existing Rule 400 applies to options traded on foreign securities exchanges as well as U.S. exchanges. For consistency, amended Rule 400 will apply to OTC options issued by foreign securities clearing agencies as well as U.S.-registered clearing agencies. 5 See Securities Exchange Act Release No. 67835 (Sept. 12, 2012), 77 FR 57602 (Sept. 18, 2012), (SR– OCC–2012–14); see also Securities Exchange Act Release No. 68434 (Dec. 14, 2012), 77 FR 75243 (Dec. 19, 2012) (approving proposed rule change). OCC also filed, and received accelerated approval of, a proposed rule change to reflect enhancements in its system for theoretical analysis and numerical simulations as applied to longer-tenor options. Securities Exchange Act Release No. 70719 (Oct. 18, 2013), 78 FR 63548 (Oct. 24, 2013), (SR–OCC–2013– 16). PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 66319 would expect to be in his account but for the failure of the broker-dealer. This is particularly true where the trustee, as in the Lehman case, was able promptly to effectuate bulk transfers of customer accounts to other brokerages enabling customers to re-gain access to their accounts in the form in which the accounts existed pre-liquidation, with comparatively minimal disruption. In such instances, customers generally are better served by having their options positions transferred with their other securities to their accounts at their new broker-dealer. The proposed amendments would provide clear authority for a SIPA trustee to transfer the Standardized Options positions, with SIPC’s consent. This greater flexibility in the treatment of open positions would enhance customer protection under exigent circumstances, and potentially avoid exacerbating the turmoil or harm to customers and/or the markets that could be caused by the forced liquidation of open positions. B. OTC Options In view of the potential clearing of OTC Options, modifying the definition of Standardized Options to include such options is appropriate and in keeping with the customer protection functions of SIPA. OTC Options will be ‘‘securities’’ for purposes of both the Securities Act of 1933 and the Exchange Act. They also will be a ‘‘security’’ under section 16(14) of SIPA, 15 U.S.C. 78lll(14), which provides that that the term ‘‘security’’ means ‘‘any put, call, straddle, option, or privilege on any security, or group or index of securities’’ (emphasis added). In a SIPA liquidation, customers would be protected against the loss of their OTC Options custodied with the SIPC member broker-dealer. Section 16(2) of SIPA, 15 U.S.C. 78lll(2), provides that ‘‘[t]he term ‘customer’ of a debtor means any person . . . who has a claim on account of securities received, acquired, or held by the debtor in the ordinary course of business. . . .’’ OTC Options will be created in the customers’ account and held there by the clearing member for the benefit of its customers in the same way that Standardized Options are held. A clearing agency will be the issuer of those options in precisely the same way that it is the issuer of listed options. Thus, the OTC Options created in the omnibus customers’ account of a clearing member at a clearing agency would be ‘‘received, acquired, or held’’ by the customer’s broker-dealer in the ordinary course of business. For example, OTC Options at OCC will be carried in a clearing member’s E:\FR\FM\05NOP1.SGM 05NOP1 66320 Federal Register / Vol. 78, No. 214 / Tuesday, November 5, 2013 / Proposed Rules clearing accounts. Proprietary positions will be carried in the clearing member’s firm account, and customer positions in its securities customers’ account. Positions in OTC Options will be margined at OCC in the omnibus customers’ account on the same basis as listed options. If a clearing member takes the other side of a transaction with its customer in an OTC Option, the transaction will result in the creation of a long or short position (as applicable) in the omnibus customers’ account and in the opposite position in the clearing member’s firm account. OCC indicates that it expects to clear the OTC Options subject to the same basic rules and procedures used for the clearance of index options. OCC will require that the transactions be cleared through a clearing member of OCC that is registered with the SEC as a brokerdealer, or one of the small number of clearing members that are ‘‘non-U.S. securities firms’’ as defined in OCC’s By-Laws. Further, the OTC Options that OCC will clear will be options on the S&P 500 Index.6 The OTC Options will be similar to exchange-traded index options called ‘‘FLEX Options’’ that currently are traded on the Chicago Board Options Exchange. While the OTC Options will allow for customization of certain terms, such as the type of option, exercise price, and expiration date, OTC Options will not be exchange traded. Rather, they will be bilateral trades that will be submitted to OCC for clearance. wreier-aviles on DSK5TPTVN1PROD with PROPOSALS II. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within thirty-five days of the date of publication of this notice in the Federal Register, or within such longer period (i) as the Commission may designate of not more than ninety days after such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which SIPC consents, the Commission shall: (A) By order approve such proposed rule change or (B) Institute proceedings to determine whether such proposed rule change should be disapproved. To allow public access to SIPC’s rules, SIPC rules that are approved by the Commission are published under Part 300 of 17 CFR Chapter II. III. Statutory Authority Pursuant to SIPA, 15 U.S.C. 78aaa et seq., and particularly, section 3(e) (15 U.S.C. 78ccc(e)), SIPC proposes to amend 300.400 of Title 17 of the Code of Federal Regulations in the manner set forth below. List of Subjects in 17 CFR Part 300 Brokers, Securities. 14:55 Nov 04, 2013 Jkt 232001 40 CFR Part 52 [EPA–R05–OAR–2012–0779; FRL–9902–34Region 5] Approval and Promulgation of Air Quality Implementation Plans; Ohio: Bellefontaine; Determination of Attainment for the 2008 Lead Standard Environmental Protection Agency (EPA). ACTION: Proposed rule. Text of the Amendments AGENCY: In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is proposed to be amended as follows: SUMMARY: PART 300—RULES OF THE SECURITIES INVESTOR PROTECTION CORPORATION 1. The authority citation for part 300 is revised to read as follows: ■ Authority: 15 U.S.C. 78ccc. 2. Section 300.400 is amended by: ■ a. In paragraph (b), adding the phrase ‘‘except to the extent that the trustee, with SIPC’s consent, or SIPC as trustee, as the case may be, has arranged or is able promptly to arrange, a transfer of some or all of such positions to another SIPC member’’ after the phrase ‘‘accounts of customers’’; ■ b. In paragraph (e), adding the phrase ‘‘except to the extent that such positions have been transferred as provided in paragraph (b) of this section’’ after the phrase ‘‘section 7(b)(1) of the Act’’; and ■ c. In paragraph (h), adding the phrase ‘‘, and any other option that is a security under section 16(14) of the Act, 15 U.S.C. 78lll(14), and is issued by a securities clearing agency registered under Section 17A of the Securities Exchange Act of 1934, 15 U.S.C. 78q–1, or a foreign securities clearing agency’’ after the phrase ‘‘foreign securities exchange’’. ■ Dated: October 29, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority in 17 CFR 200.30–3(f)(3). Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–26165 Filed 11–4–13; 8:45 am] BILLING CODE 8011–01–P 6 OCC is licensed by S&P to clear options on the S&P MidCap 400 Index and the S&P Small Cap 600 Index, and in the future, OCC may decide to clear OTC Options on other indices, or on individual equity securities. VerDate Mar<15>2010 ENVIRONMENTAL PROTECTION AGENCY PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 On April 19, 2013, the Ohio Environmental Protection Agency, submitted a request to EPA to make a determination under the Clean Air Act that the Bellefontaine nonattainment area has attained the 2008 lead (Pb) national ambient air quality standard (NAAQS). In this action, EPA is proposing to determine that the Bellefontaine nonattainment area (area) has attained the 2008 Pb NAAQS. This determination of attainment is based upon complete, quality-assured and certified ambient air monitoring data for the 2010–2012 design period showing that the area has monitored attainment of the 2008 Pb NAAQS. As a result of this determination, the requirements for the area to submit an attainment demonstration, together with reasonably available control measures, a reasonable further progress (RFP) plan, and contingency measures for failure to meet RFP and attainment deadlines will be suspended as long as the area continues to attain the 2008 Pb NAAQS. DATES: Comments must be received on or before December 5, 2013. ADDRESSES: Submit your comments, identified by Docket ID No. EPA–R05– OAR–2012–0779, by one of the following methods: 1. www.regulations.gov: Follow the on-line instructions for submitting comments. 2. Email: aburano.douglas@epa.gov. 3. Fax: (312) 408–2279. 4. Mail: Douglas Aburano, Chief, Attainment Planning and Maintenance Section, Air Programs Branch (AR–18J), U.S. Environmental Protection Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604. 5. Hand Delivery: Douglas Aburano, Chief, Attainment Planning and Maintenance Section, Air Programs Branch (AR–18J), U.S. Environmental Protection Agency, 77 West Jackson Boulevard, Chicago, Illinois 60604. Such deliveries are only accepted during the Regional Office normal hours of operation, and special arrangements should be made for deliveries of boxed E:\FR\FM\05NOP1.SGM 05NOP1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 214 (Tuesday, November 5, 2013)]
[Proposed Rules]
[Pages 66318-66320]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-26165]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 300

[Release No. SIPA-171; File No. SIPC-2012-01]

Securities Investor Protection Corporation

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: The Securities Investor Protection Corporation (``SIPC'')
filed a proposed rule change with the Securities and Exchange
Commission (``Commission''). The proposed rule change amends SIPC Rule
400, entitled ``Rules Relating to Satisfaction of Customer Claims for
Standardized Options,'' which relates to the satisfaction of customer
claims for standardized options under the Securities Investor
Protection Act of 1970 (``SIPA''). The Commission is publishing the
proposed rule change for public comment. Because SIPC rules have the
force and effect as if promulgated by the Commission, those rules are
published in Title 17 of the Code of Federal Regulations.

DATES: Comments are to be received on or before November 26, 2013.

ADDRESSES: Interested persons are invited to submit written data,
views, and arguments concerning the foregoing by any of the following
methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/other.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SIPC-2012-01 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 letters should refer to File Number SIPC-2012-01. This
file number should be included on the subject line if email 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/other.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 Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. 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.

FOR FURTHER INFORMATION CONTACT: Michael A. Macchiaroli, Associate
Director, at (202) 551-5525; Thomas K. McGowan, Deputy Associate
Director, at (202) 551-5521; Sheila Dombal Swartz, Special Counsel, at
(202) 551-5545; or Kimberly N. Chehardy, Special Counsel, at (202) 551-
5791, Office of Financial Responsibility, Division of Trading and
Markets, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-7010.

SUPPLEMENTARY INFORMATION: Pursuant to Section 3(e)(2)(A) of SIPA,\1\
notice is hereby given that SIPC filed with the Commission on November
7, 2012, a proposed rule change, as described in Item I below, which
item has been substantially prepared by SIPC. On January 31, 2013, SIPC
filed Amendment No. 1 to the proposed rule change.\2\ The Commission is
publishing

[[Page 66319]]

this notice to solicit comments on the proposed rule change, as
modified by Amendment No. 1, from interested persons.
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\1\ 15 U.S.C. 78ccc(e)(2)(A).
\2\ Amendment No. 1 is a partial amendment which modifies the
initial proposed changes to subsection (h) of Rule 400, by inserting
the phrase ``a `security' under section 16(14) of the Act and is''
prior to the words ``issued by a securities clearing agency. . . .''
---------------------------------------------------------------------------

I. SIPC'S Statement of the Purpose of, and Statutory Basis for, the
Proposed Rule Change

In its filing with the Commission, SIPC 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 above.
SIPC has prepared the following summary of the purpose of and statutory
basis for the proposed rule change.\3\
---------------------------------------------------------------------------

\3\ The Commission has modified the language in this section.
---------------------------------------------------------------------------

SIPC Rule 400, 17 CFR 300.400 (``Rule 400'' or ``the Rule''), was
enacted to provide clarity in the treatment of customer claims based on
``Standardized Options'' positions, in the liquidation of broker-
dealers under SIPA. Currently, Rule 400 generally provides for the
closeout of open Standardized Options positions upon the commencement
of a SIPA liquidation. Based upon the amounts realized upon closeout,
the trustee calculates the value of customers' Standardized Options
positions, and credits or debits customers' accounts by the appropriate
amounts. The purpose of the proposed rule change is to amend SIPC Rule
400 in the following respects: (1) To provide trustees appointed under
SIPA with greater flexibility in the distribution of Standardized
Options upon the commencement of a SIPA liquidation proceeding; and (2)
to modify the definition of Standardized Options under Rule 400(h), to
include an option that is a ``security'' under SIPA and is issued by an
SEC-registered securities clearing agency or a foreign securities
clearing agency, i.e., an over-the-counter option (``OTC Option''). The
proposed amendments create an alternative to closeout by allowing the
SIPA trustee, with SIPC's consent, to transfer some or all of such
Standardized Options positions to another SIPC member for the accounts
of customers.
Under SIPC Rule 400(h), ``Standardized Options'' means options
traded on a national securities exchange, an automated quotation system
of a registered securities association, or a foreign securities
exchange. The proposed amendments also would modify the definition of
``Standardized Options'' to include any other option that is a
``security'' under section 16(14) of SIPA and is issued by a registered
securities clearing agency or foreign securities clearing agency.\4\
For example, the Options Clearing Corporation (``OCC'') proposed, and
the Commission approved, a rule change to establish a legal and
operational framework for OCC to provide central clearing for OTC
Options.\5\ If OCC clears OTC Options, these options will be deemed
``Standardized Options'' and subject to closeout or transfer in a SIPA
proceeding.
---------------------------------------------------------------------------

\4\ Existing Rule 400 applies to options traded on foreign
securities exchanges as well as U.S. exchanges. For consistency,
amended Rule 400 will apply to OTC options issued by foreign
securities clearing agencies as well as U.S.-registered clearing
agencies.
\5\ See Securities Exchange Act Release No. 67835 (Sept. 12,
2012), 77 FR 57602 (Sept. 18, 2012), (SR-OCC-2012-14); see also
Securities Exchange Act Release No. 68434 (Dec. 14, 2012), 77 FR
75243 (Dec. 19, 2012) (approving proposed rule change). OCC also
filed, and received accelerated approval of, a proposed rule change
to reflect enhancements in its system for theoretical analysis and
numerical simulations as applied to longer-tenor options. Securities
Exchange Act Release No. 70719 (Oct. 18, 2013), 78 FR 63548 (Oct.
24, 2013), (SR-OCC-2013-16).
---------------------------------------------------------------------------

In light of experience and knowledge gained from the liquidation of
Lehman Brothers Inc. (``Lehman'') and other SIPA proceedings, SIPC has
determined that allowing SIPA trustees the flexibility, subject to SIPC
approval, of transferring customers' options positions or of
liquidating their positions, would be beneficial to the investing
public and consistent with the customer protection purposes of SIPA.
Moreover, because the OTC Options are similar to exchange-traded index
options, and generally would be cleared by a securities clearing agency
registered under Section 17A of the Exchange Act subject to the same
basic rules and procedures used for the clearance of index options,
there appears to be no practical basis to treat OTC Options differently
under SIPA. Indeed, modifying the definition of ``Standardized
Options'' under Rule 400(h) to include OTC Options would update, and
therefore enhance, the protections afforded customers in the event of a
liquidation of their broker-dealer.

A. Past Experience

The ability to transfer Standardized Options positions to another
brokerage in lieu of an automatic closeout gives SIPA trustees more
flexibility in distributing such customer assets after the commencement
of a SIPA liquidation proceeding, and more closely approximates what
the customer would expect to be in his account but for the failure of
the broker-dealer. This is particularly true where the trustee, as in
the Lehman case, was able promptly to effectuate bulk transfers of
customer accounts to other brokerages enabling customers to re-gain
access to their accounts in the form in which the accounts existed pre-
liquidation, with comparatively minimal disruption. In such instances,
customers generally are better served by having their options positions
transferred with their other securities to their accounts at their new
broker-dealer. The proposed amendments would provide clear authority
for a SIPA trustee to transfer the Standardized Options positions, with
SIPC's consent. This greater flexibility in the treatment of open
positions would enhance customer protection under exigent
circumstances, and potentially avoid exacerbating the turmoil or harm
to customers and/or the markets that could be caused by the forced
liquidation of open positions.

B. OTC Options

In view of the potential clearing of OTC Options, modifying the
definition of Standardized Options to include such options is
appropriate and in keeping with the customer protection functions of
SIPA. OTC Options will be ``securities'' for purposes of both the
Securities Act of 1933 and the Exchange Act. They also will be a
``security'' under section 16(14) of SIPA, 15 U.S.C. 78lll(14), which
provides that that the term ``security'' means ``any put, call,
straddle, option, or privilege on any security, or group or index of
securities'' (emphasis added).
In a SIPA liquidation, customers would be protected against the
loss of their OTC Options custodied with the SIPC member broker-dealer.
Section 16(2) of SIPA, 15 U.S.C. 78lll(2), provides that ``[t]he term
`customer' of a debtor means any person . . . who has a claim on
account of securities received, acquired, or held by the debtor in the
ordinary course of business. . . .'' OTC Options will be created in the
customers' account and held there by the clearing member for the
benefit of its customers in the same way that Standardized Options are
held. A clearing agency will be the issuer of those options in
precisely the same way that it is the issuer of listed options. Thus,
the OTC Options created in the omnibus customers' account of a clearing
member at a clearing agency would be ``received, acquired, or held'' by
the customer's broker-dealer in the ordinary course of business.
For example, OTC Options at OCC will be carried in a clearing
member's

[[Page 66320]]

clearing accounts. Proprietary positions will be carried in the
clearing member's firm account, and customer positions in its
securities customers' account. Positions in OTC Options will be
margined at OCC in the omnibus customers' account on the same basis as
listed options. If a clearing member takes the other side of a
transaction with its customer in an OTC Option, the transaction will
result in the creation of a long or short position (as applicable) in
the omnibus customers' account and in the opposite position in the
clearing member's firm account.
OCC indicates that it expects to clear the OTC Options subject to
the same basic rules and procedures used for the clearance of index
options. OCC will require that the transactions be cleared through a
clearing member of OCC that is registered with the SEC as a broker-
dealer, or one of the small number of clearing members that are ``non-
U.S. securities firms'' as defined in OCC's By-Laws. Further, the OTC
Options that OCC will clear will be options on the S&P 500 Index.\6\
The OTC Options will be similar to exchange-traded index options called
``FLEX Options'' that currently are traded on the Chicago Board Options
Exchange. While the OTC Options will allow for customization of certain
terms, such as the type of option, exercise price, and expiration date,
OTC Options will not be exchange traded. Rather, they will be bilateral
trades that will be submitted to OCC for clearance.
---------------------------------------------------------------------------

\6\ OCC is licensed by S&P to clear options on the S&P MidCap
400 Index and the S&P Small Cap 600 Index, and in the future, OCC
may decide to clear OTC Options on other indices, or on individual
equity securities.
---------------------------------------------------------------------------

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

Within thirty-five days of the date of publication of this notice
in the Federal Register, or within such longer period (i) as the
Commission may designate of not more than ninety days after such date
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which SIPC consents, the
Commission shall:
(A) By order approve such proposed rule change or
(B) Institute proceedings to determine whether such proposed rule
change should be disapproved.
To allow public access to SIPC's rules, SIPC rules that are
approved by the Commission are published under Part 300 of 17 CFR
Chapter II.

III. Statutory Authority

Pursuant to SIPA, 15 U.S.C. 78aaa et seq., and particularly,
section 3(e) (15 U.S.C. 78ccc(e)), SIPC proposes to amend 300.400 of
Title 17 of the Code of Federal Regulations in the manner set forth
below.

List of Subjects in 17 CFR Part 300

Brokers, Securities.

Text of the Amendments

In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is proposed to be amended as follows:

PART 300--RULES OF THE SECURITIES INVESTOR PROTECTION CORPORATION

0
1. The authority citation for part 300 is revised to read as follows:

Authority: 15 U.S.C. 78ccc.

0
2. Section 300.400 is amended by:
0
a. In paragraph (b), adding the phrase ``except to the extent that the
trustee, with SIPC's consent, or SIPC as trustee, as the case may be,
has arranged or is able promptly to arrange, a transfer of some or all
of such positions to another SIPC member'' after the phrase ``accounts
of customers'';
0
b. In paragraph (e), adding the phrase ``except to the extent that such
positions have been transferred as provided in paragraph (b) of this
section'' after the phrase ``section 7(b)(1) of the Act''; and
0
c. In paragraph (h), adding the phrase ``, and any other option that is
a security under section 16(14) of the Act, 15 U.S.C. 78lll(14), and is
issued by a securities clearing agency registered under Section 17A of
the Securities Exchange Act of 1934, 15 U.S.C. 78q-1, or a foreign
securities clearing agency'' after the phrase ``foreign securities
exchange''.

Dated: October 29, 2013.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority in 17 CFR 200.30-3(f)(3).
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-26165 Filed 11-4-13; 8:45 am]
BILLING CODE 8011-01-P

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