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Notice

Self-Regulatory Organizations; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change by The Options Clearing Corporation Relating to Clearing Member Qualifications

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Information about this document as published in the Federal Register.

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Start Preamble June 29, 2001.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934,[1] notice is hereby given that on June 26, 2001, The Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission the proposed rule change as described in Items I and II, below, which Items have been prepared by OCC. The Commission is publishing this notice and order to solicit comments on the proposed rule change from interested persons and to grant accelerated approval.

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

The proposed rule change will eliminate from Article V, Section 1 of OCC's by-laws the requirement that applicants for membership in OCC “propose to engage upon acceptance in the clearance of options transactions for the applicant's firm account or for the accounts of customers.”

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. The text of these statements may be examined at the places specified in Item IV below. OCC has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements.[2]

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

OCC wishes to delete from Article V, Section 1 of its by-laws the requirement that applicants for OCC membership “propose to engage upon acceptance in the clearance of options transactions for the applicant's firm account or for the accounts of customers.” OCC's by-laws currently contain a membership category designated as “Hedge Clearing Member” for clearing members who want to participate in OCC's stock loan/hedge program.[3] OCC has always intended to allow this membership category to be available to firms wanting to participate in this program that do not plan to clear options transactions but meet all other OCC membership criteria. However, OCC overlooked the requirement in Article V, Section 1 when filing the stock loan/hedge program rule changes.[4]

OCC believes that deleting the requirement that members engage in the clearance of options transactions will allow broader participation in the stock loan/hedge program because many firms engaged in the stock loan business do not conduct an options business. Deleting this requirement will also allow OCC to admit firms that intend to clear security futures but not security options.[5]

OCC believes that the proposed rule change is consistent with Section 17A of the Act because it fosters cooperation and coordination with persons engaged in the clearance and settlement of securities transactions and removes impediments to and perfects the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions.

B. Self-Regulatory Organization's Statement on Burden on Competition

OCC believes that the proposed rule change will not impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others

OCC did not solicit or receive written comments with respect to the proposed rule change.

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

Section 17A(b)(3)(F) of the Act [6] requires that the rules of a clearing agency be designed to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions and to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible. The Commission finds that the proposed rule change is consistent with OCC's obligations under Section 17A of the Act. Under the proposal, OCC will continue to employ its monitoring and risk reduction procedures, which were subject to prior Commission review and approval, with respect to members that participate in the stock loan/hedge program but do not clear options transactions. Furthermore, the rule change will allow OCC to admit additional applicants to participate in its stock loan/hedge program. This should help to perfect the mechanism of a national system for the prompt and Start Printed Page 35823accurate clearance and settlement of securities transactions because it will bring more stock loan transactions currently conducted by industry participants outside registered clearing agencies into OCC. This should add efficiencies and safety to such transactions.

OCC has requested that the Commission find good cause for approving the proposed rule change prior to the thirtieth day after the date of publication of the notice of filing. The Commission finds good cause for approving the proposed rule change prior to the thirtieth day after the date of publication of the notice of filing in the Federal Register because by so approving it will be possible for more stock loan transactions to be immediately processed through OCC.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing will also be available for inspection and copying at OCC's principal office. All submissions should refer to File No. SR-OCC-2001-06 and should be submitted by July 30, 2001.

It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act, that the proposed rule change (File No. SR-OCC-2001-06) be, and hereby is, approved on an accelerated basis.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.7

Jonathan G. Katz,

Secretary.

End Signature End Preamble

Footnotes

2.  The Commission has modified the text of the summaries prepared by OCC.

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3.  Under the stock/loan hedge program, OCC administers stock loan and borrow transactions between participating clearing members and allows certain stock loan and borrow positions resulting from such transactions to constitute hedges against stock option positions overlying the same stocks for purposes of OCC's margin calculation.

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4.  See Securities Exchange Act Release No. 40083 (June 11, 1998), 63 FR 33424 (June 18, 1998); Securities Exchange Act Release No. 32638 (July 15, 1993), 58 FR 39264 (July 22, 1993).

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5.  OCC will not admit to membership any applicant that is seeking to clear only security futures until its rules for the clearance and settlement of security futures have been approved by the Commission.

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6.  15 U.S.C. 78q-1(b)(3)(F).

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[FR Doc. 01-17002 Filed 7-6-01; 8:45 am]

BILLING CODE 8010-01-M