Rules of the Securities Investor Protection Corporation, 2779-2781 [2014-00556]

Download as PDF ehiers on DSK2VPTVN1PROD with RULES Federal Register / Vol. 79, No. 11 / Thursday, January 16, 2014 / Rules and Regulations regard, the Commission does not believe that this Amendment would require any new or additional ‘‘collection of information’’ as such term is defined in the PRA and will not impose any new burdens or costs upon municipal advisors. The Commission is sensitive to the costs and benefits of its rules. Section 3(f) of the Exchange Act requires the Commission, whenever it engages in rulemaking and is required to consider or determine whether an action is necessary or appropriate in the public interest, to consider, in addition to the protection of investors, whether the action would promote efficiency, competition, and capital formation.13 In addition, Section 23(a)(2) of the Exchange Act requires the Commission, when making rules under the Exchange Act, to consider the impact such rules would have on competition.14 Section 23(a)(2) of the Exchange Act prohibits the Commission from adopting any rule that would impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Exchange Act.15 As discussed above, the Amendment only stays the Rules and Forms to July 1, 2014 and makes conforming, nonsubstantive date changes. It does not substantively change the Rules and Forms. The temporary registration regime currently in effect serves as the economic baseline against which the costs and benefits, as well as the impact on efficiency, competition, and capital formation, of the Amendment are measured. In the Adopting Release, the Commission discussed the costs and benefits of the temporary registration regime and the current state of the municipal advisor market.16 Since the Commission is only staying the Rules and Forms until July 1, 2014 and making conforming, non-substantive date changes, and is not substantively changing any of the Rules or Forms, the Commission believes the discussion of the temporary registration regime in the Adopting Release applies and the Commission does not expect additional significant costs or effects on efficiency, competition, or capital formation to result from the stay. The Commission also continues to believe that the Rules and Forms, as stayed, will not result in a burden on competition not necessary 13 See 15 U.S.C. 78c(f). 15 U.S.C. 78w(a)(2). 15 See 15 U.S.C. 78w(a)(2). 16 See Adopting Release, supra note 4, at Section VIII.C. 14 See VerDate Mar<15>2010 14:19 Jan 15, 2014 Jkt 232001 2779 or appropriate in furtherance of the purposes of the Exchange Act. The Commission considered the alternatives of not staying the Rules and Forms, or providing a longer or shorter stay period. However, for the reasons discussed above, the Commission believes that providing the temporary stay until July 1, 2014 appropriately balances the goals of protecting municipal entities, enhancing the quality of municipal advice, and protecting investors in the municipal securities market through an effective municipal advisor registration regime while providing appropriate relief to industry participants that need additional time to understand the scope and application of the Rules and to implement effective compliance with the Rules. §§ 240.15Ba1–1 through 240.15Ba1–8 [Stayed] II. Statutory Authority and Text of Rule and Amendments Pursuant to the Exchange Act, and particularly Sections 15B (15 U.S.C. 78o–4,) and Section 36 (15 U.S.C. 78mm(a)), the Commission is amending § 240.15Ba1–8 as set forth below. ■ List of Subjects in 17 CFR Part 240 Reporting and recordkeeping requirements. [FR Doc. 2014–00740 Filed 1–13–14; 4:15 pm] Text of Rule and Amendments For the reasons set out above, Title 17, Chapter II of the Code of Federal Regulations is amended as follows: SECURITIES AND EXCHANGE COMMISSION PART 240—GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 1934 1. The general authority citation for part 240 continues to read as follows: ■ Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 78j–1, 78k, 78k–1, 78l, 78m, 78n, 78n–1, 78o, 78o–4, 78p, 78q, 78q–1, 78s, 78u–5, 78w, 78x, 78ll, 78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b–3, 80b–4, 80b–11, and 7201 et seq.; 18 U.S.C. 1350; and 12 U.S.C. 5221(e)(3) unless otherwise noted. * * * § 240.15Ba1–8 * * [Amended] 2. Section 240.15Ba1–8 is amended: a. In paragraph (a)(3)(ii), by removing the phrase ‘‘January 13, 2014’’ and adding in its place ‘‘July 1, 2014’’; ■ b. In paragraph (a)(6), by removing the phrase ‘‘January 13, 2014’’ and adding in its place ‘‘July 1, 2014’’; ■ c. In paragraph (a)(7)(ii), by removing the phrase ‘‘January 13, 2014’’ and adding in its place ‘‘July 1, 2014’’; ■ d. In paragraph (b)(2), by removing the phrase ‘‘January 13, 2014’’ and adding in its place ‘‘July 1, 2014’’. ■ ■ PO 00000 Frm 00019 Fmt 4700 Sfmt 4700 3. Sections 240.15Ba1–1 through 240.15Ba1–8 are stayed until July 1, 2014. ■ § 240.15Bc4–1 [Stayed] 4. Section 240.15Bc4–1 is stayed until July 1, 2014. ■ PART 249—FORMS, SECURITIES EXCHANGE ACT OF 1934 5. The general authority citation for part 249 continues to read as follows: ■ Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 5461 et seq.; and 18 U.S.C. 1350, unless otherwise noted. * * * * * §§ 249.1300, 249.1310, 249.1320, and 249.1330 [Stayed] 6. Sections 249.1300, 249.1310, 249.1320, and 249.1330 are stayed until July 1, 2014. Dated: January 13, 2014. By the Commission. Elizabeth M. Murphy, Secretary. BILLING CODE 8011–01–P 17 CFR Part 300 [Release No. SIPA–172; File No. SIPC– 2012–01] Rules of the Securities Investor Protection Corporation Securities and Exchange Commission. ACTION: Final rule. AGENCY: The Securities and Exchange Commission (‘‘Commission’’) is approving a proposed rule change filed by the Securities Investor Protection Corporation (‘‘SIPC’’). The proposed rule change amends SIPC Rule 400 (‘‘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’’). Because SIPC rules have the force and effect as if promulgated by the Commission, the rules are published in Title 17 of the Code of Federal Regulations, where the rule change will be reflected. DATES: Effective Date: February 18, 2014. FOR FURTHER INFORMATION CONTACT: Michael A. Macchiaroli, Associate SUMMARY: E:\FR\FM\16JAR1.SGM 16JAR1 2780 Federal Register / Vol. 79, No. 11 / Thursday, January 16, 2014 / Rules and Regulations 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: The Commission is approving a proposed rule change filed by SIPC, amending Rule 400, 17 CFR 300.400 under SIPA. I. Background On November 7, 2012, SIPC filed a proposed rule change pursuant to section 3(e)(2)(A) of SIPA 1 with the Securities and Exchange Commission.2 SIPC subsequently submitted an amendment to the proposed rule change on January 31, 2013.3 Notice of the proposed rule change was published in the Federal Register on November 5, 2013.4 The Commission did not receive comments in response to the notice. The Commission is approving the proposed rule change under section 3(e)(2) of SIPA. II. Proposed Rule Change Rule 400 was enacted to provide clarity in the treatment of customer claims based on ‘‘Standardized Options’’ 5 positions in the liquidation of broker-dealers under SIPA. Currently, Rule 400 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 1 15 U.S.C. 78ccc(e)(2)(A). Letter from Josephine Wang, General Counsel and Secretary, SIPC, to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission (Nov. 7, 2012). 3 See Letter from Josephine Wang, General Counsel and Secretary, SIPC, to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission (Jan. 31, 2013) (‘‘Pursuant to discussions between SIPC and the Commission’s Division of Trading and Markets, SIPC hereby submits a partial amendment to the proposed amendments previously submitted.’’). ‘‘The partial amendment makes changes only 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 . . . .’’ Id. 4 See Notice of Filing a Proposed Rule Change Relating to Securities Investor Protection Corporation Rule 400, Release No. SIPA–171 (Oct. 29, 2013), 78 FR 66318 (Nov. 5, 2013). 5 The term Standardized Options is defined in paragraph (h) of Rule 400 as ‘‘options traded on a national securities exchange, an automated quotation system of a registered securities association, or a foreign securities exchange. 17 CFR 300.400(h). ehiers on DSK2VPTVN1PROD with RULES 2 See VerDate Mar<15>2010 14:19 Jan 15, 2014 Jkt 232001 the appropriate amounts. The amendments to Rule 400 are designed to: (1) Provide trustees appointed under SIPA with greater flexibility in the treatment of Standardized Options upon the commencement of a SIPA liquidation proceeding; and (2) modify the definition of Standardized Options to include options issued by a Commission-registered securities clearing agency or a foreign securities clearing agency, i.e., a cleared over-thecounter option (‘‘OTC Option’’). 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. SIPC stated that the ability to transfer Standardized Options positions to another brokerage in lieu of an automatic closeout gives SIPA trustees more flexibility in handling 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 regain 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. SIPC stated that 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. Under paragraph (h) of Rule 400, 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 amendments modify the definition of Standardized Options to include any other option that is a security under section 16(14) of SIPA PO 00000 Frm 00020 Fmt 4700 Sfmt 4700 and is issued by a registered securities clearing agency or foreign securities clearing agency.6 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.7 If OCC clears OTC Options, SIPC stated these options will be deemed Standardized Options subject to closeout or transfer in a SIPA proceeding. 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 Securities Exchange Act of 1934 (‘‘Exchange Act’’) 8 subject to the same basic rules and procedures used for the clearance of index options, SIPC stated there appears to be no practical basis to treat OTC Options differently under SIPA for purposes of Rule 400. Indeed, modifying the definition of Standardized Options under paragraph (h) of Rule 400 to include OTC Options would enhance the protections afforded customers in the event of a liquidation of their broker-dealer. II. Discussion and Commission Action Section 3(e)(2)(A) of SIPA provides that the SIPC Board of Directors must file with the Commission a copy of any proposed amendment to a SIPC rule.9 Section 3(e)(2)(B) of SIPA provides that within thirty-five days after the date of publication of the notice of filing of a proposed rule change, the Commission shall: (1) By order approve the proposed rule change; or (2) institute proceedings to determine whether the proposed rule change should be disapproved.10 Further, section 3(e)(2)(D) of SIPA provides that the Commission shall approve a proposed rule change if it finds that the proposed rule change is in the public interest and is consistent with the purposes of SIPA.11 6 Existing Rule 400 applies to options traded on foreign securities exchanges as well as U.S. exchanges. 7 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). 8 15 U.S.C. 78q–1. 9 15 U.S.C. 78ccc(e)(2)(A). 10 15 U.S.C. 78ccc(e)(2)(B). 11 15 U.S.C. 78ccc(e)(2)(D). E:\FR\FM\16JAR1.SGM 16JAR1 Federal Register / Vol. 79, No. 11 / Thursday, January 16, 2014 / Rules and Regulations The Commission finds, pursuant to section 3(e)(2)(D) of SIPA, that the proposed rule change is in the public interest and consistent with the purposes of SIPA. First, as noted above, SIPC has determined that allowing SIPA trustees the flexibility, subject to SIPC approval, to transfer customers’ options positions or to liquidate their positions, would be beneficial to the investing public and consistent with the customer protection purposes of SIPA. The ability to transfer Standardized Options positions to another brokerage instead of being required to close them out gives SIPA trustees more flexibility in handling customer assets after the commencement of a SIPA liquidation proceeding. Second, SIPA noted that modifying the definition of Standardized Options under paragraph (h) of Rule 400 to include OTC Options would enhance the protections afforded customers in the event of a liquidation of their broker-dealer. This modification also clarifies that—like exchange-traded options—OTC Options would be deemed Standardized Options subject to closeout or transfer in a SIPA liquidation proceeding. Accordingly, the Commission finds that the proposed SIPC rule change is in the public interest and is consistent with the purposes of the SIPA. It is therefore ordered by the commission, pursuant to section 3(e)(2) of SIPA, that the above mentioned proposed rule change is approved. In accordance with section 3(e)(2) of SIPA, the approved rule change shall be given the force and effect as if promulgated by the Commission. § 300.400 III. Statutory Authority [CBP Dec. 14–01] Pursuant to SIPA, 15 U.S.C. 78aaa et. seq., and particularly, section 3(e) (15 U.S.C. 78ccc(e)), SIPC is amending section 300.400 of Title 17 of the Code of Federal Regulations in the manner set forth below. RIN 1515–AD95 List of Subjects in 17 CFR Part 300 AGENCIES: Text of the Amendments ehiers on DSK2VPTVN1PROD with RULES In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is amended as follows: Authority: 15 U.S.C. 78ccc. * * * VerDate Mar<15>2010 * * 14:19 Jan 15, 2014 Jkt 232001 [FR Doc. 2014–00556 Filed 1–15–14; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF HOMELAND SECURITY U.S. Customs and Border Protection DEPARTMENT OF THE TREASURY 19 CFR Part 12 Import Restrictions Imposed on Certain Archaeological and Ecclesiastical Ethnological Material From Bulgaria This final rule amends the U.S. Customs and Border Protection (CBP) regulations to reflect the imposition of import restrictions on certain archaeological and ecclesiastical ethnological material from the Republic of Bulgaria. These restrictions are being imposed pursuant to an agreement between the United States and Bulgaria that has been entered into under the authority of the Convention on Cultural Property Implementation Act in accordance with the 1970 United SUMMARY: PART 300—RULES OF THE SECURITIES INVESTOR PROTECTION CORPORATION 1. The authority citation for part 300 is revised to read as follows: Dated: January 9, 2014. By the Commission. Elizabeth M. Murphy, Secretary. U.S. Customs and Border Protection, Department of Homeland Security; Department of the Treasury. ACTION: Final rule. Brokers, Securities. ■ [Amended] 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’’. ■ ■ PO 00000 Frm 00021 Fmt 4700 Sfmt 4700 2781 Nations Educational, Scientific and Cultural Organization (UNESCO) Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property. The final rule amends CBP regulations by adding Bulgaria to the list of countries for which a bilateral agreement has been entered into for imposing cultural property import restrictions. The final rule also contains the designated list that describes the types of archaeological and ecclesiastical ethnological material to which the restrictions apply. DATES: Effective January 15, 2014. FOR FURTHER INFORMATION CONTACT: For legal aspects, George Frederick McCray, Chief, Cargo Security, Carriers and Restricted Merchandise Branch, Regulations and Rulings, Office of International Trade, (202) 325–0082. For operational aspects: Virginia McPherson, Chief, Interagency Requirements Branch, Trade Policy and Programs, Office of International Trade, (202) 863–6563. SUPPLEMENTARY INFORMATION: Background The value of cultural property, whether archaeological or ethnological in nature, is immeasurable. Such items often constitute the very essence of a society and convey important information concerning a people’s origin, history, and traditional setting. The importance and popularity of such items regrettably makes them targets of theft, encourages clandestine looting of archaeological sites, and results in their illegal export and import. The United States shares in the international concern for the need to protect endangered cultural property. The appearance in the United States of stolen or illegally exported artifacts from other countries where there has been pillage has, on occasion, strained our foreign and cultural relations. This situation, combined with the concerns of museum, archaeological, and scholarly communities, was recognized by the President and Congress. It became apparent that it was in the national interest for the United States to join with other countries to control illegal trafficking of such articles in international commerce. The United States joined international efforts and actively participated in deliberations resulting in the 1970 United Nations Educational, Scientific and Cultural Organization (UNESCO) Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property (823 U.N.T.S. 231 (1972)). U.S. E:\FR\FM\16JAR1.SGM 16JAR1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 11 (Thursday, January 16, 2014)]
[Rules and Regulations]
[Pages 2779-2781]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00556]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 300

[Release No. SIPA-172; File No. SIPC- 2012-01]


Rules of the Securities Investor Protection Corporation

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
approving a proposed rule change filed by the Securities Investor 
Protection Corporation (``SIPC''). The proposed rule change amends SIPC 
Rule 400 (``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''). Because SIPC 
rules have the force and effect as if promulgated by the Commission, 
the rules are published in Title 17 of the Code of Federal Regulations, 
where the rule change will be reflected.

DATES: Effective Date: February 18, 2014.

FOR FURTHER INFORMATION CONTACT: Michael A. Macchiaroli, Associate

[[Page 2780]]

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: The Commission is approving a proposed rule 
change filed by SIPC, amending Rule 400, 17 CFR 300.400 under SIPA.

I. Background

    On November 7, 2012, SIPC filed a proposed rule change pursuant to 
section 3(e)(2)(A) of SIPA \1\ with the Securities and Exchange 
Commission.\2\ SIPC subsequently submitted an amendment to the proposed 
rule change on January 31, 2013.\3\ Notice of the proposed rule change 
was published in the Federal Register on November 5, 2013.\4\ The 
Commission did not receive comments in response to the notice. The 
Commission is approving the proposed rule change under section 3(e)(2) 
of SIPA.
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    \1\ 15 U.S.C. 78ccc(e)(2)(A).
    \2\ See Letter from Josephine Wang, General Counsel and 
Secretary, SIPC, to Elizabeth M. Murphy, Secretary, Securities and 
Exchange Commission (Nov. 7, 2012).
    \3\ See Letter from Josephine Wang, General Counsel and 
Secretary, SIPC, to Elizabeth M. Murphy, Secretary, Securities and 
Exchange Commission (Jan. 31, 2013) (``Pursuant to discussions 
between SIPC and the Commission's Division of Trading and Markets, 
SIPC hereby submits a partial amendment to the proposed amendments 
previously submitted.''). ``The partial amendment makes changes only 
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 . . . .'' Id.
    \4\ See Notice of Filing a Proposed Rule Change Relating to 
Securities Investor Protection Corporation Rule 400, Release No. 
SIPA-171 (Oct. 29, 2013), 78 FR 66318 (Nov. 5, 2013).
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II. Proposed Rule Change

    Rule 400 was enacted to provide clarity in the treatment of 
customer claims based on ``Standardized Options'' \5\ positions in the 
liquidation of broker-dealers under SIPA. Currently, Rule 400 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 amendments to Rule 400 are 
designed to: (1) Provide trustees appointed under SIPA with greater 
flexibility in the treatment of Standardized Options upon the 
commencement of a SIPA liquidation proceeding; and (2) modify the 
definition of Standardized Options to include options issued by a 
Commission-registered securities clearing agency or a foreign 
securities clearing agency, i.e., a cleared over-the-counter option 
(``OTC Option'').
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    \5\ The term Standardized Options is defined in paragraph (h) of 
Rule 400 as ``options traded on a national securities exchange, an 
automated quotation system of a registered securities association, 
or a foreign securities exchange. 17 CFR 300.400(h).
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    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. 
SIPC stated that the ability to transfer Standardized Options positions 
to another brokerage in lieu of an automatic closeout gives SIPA 
trustees more flexibility in handling 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 regain 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. SIPC stated that 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.
    Under paragraph (h) of Rule 400, 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 amendments 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.\6\ 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.\7\ If OCC clears OTC Options, 
SIPC stated these options will be deemed Standardized Options subject 
to closeout or transfer in a SIPA proceeding.
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    \6\ Existing Rule 400 applies to options traded on foreign 
securities exchanges as well as U.S. exchanges.
    \7\ 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).
---------------------------------------------------------------------------

    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 Securities Exchange Act of 1934 
(``Exchange Act'') \8\ subject to the same basic rules and procedures 
used for the clearance of index options, SIPC stated there appears to 
be no practical basis to treat OTC Options differently under SIPA for 
purposes of Rule 400. Indeed, modifying the definition of Standardized 
Options under paragraph (h) of Rule 400 to include OTC Options would 
enhance the protections afforded customers in the event of a 
liquidation of their broker-dealer.
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    \8\ 15 U.S.C. 78q-1.
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II. Discussion and Commission Action

    Section 3(e)(2)(A) of SIPA provides that the SIPC Board of 
Directors must file with the Commission a copy of any proposed 
amendment to a SIPC rule.\9\ Section 3(e)(2)(B) of SIPA provides that 
within thirty-five days after the date of publication of the notice of 
filing of a proposed rule change, the Commission shall: (1) By order 
approve the proposed rule change; or (2) institute proceedings to 
determine whether the proposed rule change should be disapproved.\10\ 
Further, section 3(e)(2)(D) of SIPA provides that the Commission shall 
approve a proposed rule change if it finds that the proposed rule 
change is in the public interest and is consistent with the purposes of 
SIPA.\11\
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    \9\ 15 U.S.C. 78ccc(e)(2)(A).
    \10\ 15 U.S.C. 78ccc(e)(2)(B).
    \11\ 15 U.S.C. 78ccc(e)(2)(D).

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[[Page 2781]]

    The Commission finds, pursuant to section 3(e)(2)(D) of SIPA, that 
the proposed rule change is in the public interest and consistent with 
the purposes of SIPA. First, as noted above, SIPC has determined that 
allowing SIPA trustees the flexibility, subject to SIPC approval, to 
transfer customers' options positions or to liquidate their positions, 
would be beneficial to the investing public and consistent with the 
customer protection purposes of SIPA. The ability to transfer 
Standardized Options positions to another brokerage instead of being 
required to close them out gives SIPA trustees more flexibility in 
handling customer assets after the commencement of a SIPA liquidation 
proceeding. Second, SIPA noted that modifying the definition of 
Standardized Options under paragraph (h) of Rule 400 to include OTC 
Options would enhance the protections afforded customers in the event 
of a liquidation of their broker-dealer. This modification also 
clarifies that--like exchange-traded options--OTC Options would be 
deemed Standardized Options subject to closeout or transfer in a SIPA 
liquidation proceeding. Accordingly, the Commission finds that the 
proposed SIPC rule change is in the public interest and is consistent 
with the purposes of the SIPA.
    It is therefore ordered by the commission, pursuant to section 
3(e)(2) of SIPA, that the above mentioned proposed rule change is 
approved. In accordance with section 3(e)(2) of SIPA, the approved rule 
change shall be given the force and effect as if promulgated by the 
Commission.

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 is amending section 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 amended as follows:

PART 300--RULES OF THE SECURITIES INVESTOR PROTECTION CORPORATION

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

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


Sec.  300.400  [Amended]

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2. Section 300.400 is amended by:
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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'';
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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
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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: January 9, 2014.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2014-00556 Filed 1-15-14; 8:45 am]
BILLING CODE 8011-01-P

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