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Notice

Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Relating to the Treatment of Multiple Accounts of the Same Type

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Start Preamble January 15, 2003.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] notice is hereby given that on October 17, 2002, The Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in items I, II, and III below, which items have been prepared primarily by OCC. 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

The proposed rule change amends OCC's by-laws and rules to make explicit OCC's existing interpretations as to the treatment of multiple accounts of the same type whether maintained under one or more clearing numbers in the event of the liquidation of the clearing member's accounts by OCC.

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

In its filing with the Commission, OCC included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in item IV below. OCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of such statements.[2]

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

The proposed rule change sets forth certain interpretations as to the treatment of multiple accounts of the same type whether maintained under one or more clearing member numbers in OCC's system in the event of a liquidation of the clearing member's accounts by OCC pursuant to chapter XI of OCC's rules, “Suspension of a Clearing Member.” These interpretations merely make more explicit OCC's existing interpretations and practices and do not represent any substantive change. OCC is formalizing them because it has become increasingly common for clearing members to maintain accounts under more than one clearing member number in OCC's clearing system.

OCC ordinarily assigns each clearing member a number which serves to identify the clearing member in OCC's system. Some clearing members have more than one clearing member number as a result of having acquired other clearing members or having requested separate numbers to identify particular divisions or sets of accounts for internal purposes. In other cases, OCC may assign additional clearing member numbers to a clearing member in order to permit the clearing member to maintain additional accounts that cannot be accommodated under the same number within OCC's system. For example, clearing members may be assigned an additional clearing member number in order to establish a JBO Account in addition to an existing combined market-maker account because OCC's current clearing system cannot accommodate both accounts under a single number.

The need for multiple clearing member numbers will be reduced when ENCORE, OCC's new clearing system currently under development, becomes fully operational. Even then, however, there may be reasons for a single clearing member to maintain more than one clearing member number.

OCC believes that this rule change is advisable in order to clarify that OCC's suspension and liquidation rules look only to the clearing member as a legal entity and disregard any separation of the clearing member's business into divisions or separate sets of accounts. (Of course, absent a contrary agreement or a situation where piercing the corporate veil is appropriate under applicable principles of corporate law, affiliated clearing members that are separate legal entities would retain their separate identity in a liquidation.)

OCC is also modifying the wording of the lead-in language of article VI, section 3 of its by-laws, “Maintenance of Accounts,” by changing the word “shall” to “may.” This change is appropriate to make clear that clearing members are not required to maintain every different type of account that is permitted under section 3. This change in wording also represents a clarification rather than a substantive change. Indeed, many clearing members at present maintain fewer than all of the permitted types of accounts because some account types are not needed for their particular business activities.

OCC believes that the proposed rule change is consistent with the requirements of section 17A of the Act and the rules and regulations thereunder because it promotes the prompt and accurate clearance and settlement of securities transactions by clarifying the application of OCC's liquidation rules to clearing members that maintain multiple clearing member numbers.

(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 were not and are not intended to be solicited with respect to the proposed rule change, and none have been received. Start Printed Page 3924

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

The foregoing rule change has become effective pursuant to section 19(b)(3)(A)(i) of the Act [3] and rule 19b-4(f)(1)[4] thereunder because it constitutes a stated policy, practice, or interpretation with respect to the meaning, enforcement, or administration of an existing rule. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.

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. Comments may also be submitted electronically at the following e-mail address: rule-comments@sec.gov. All comment letters should refer to File No. SR-OCC-2002-26. This file number should be included on the subject line if e-mail is used. To help us process and review comments more efficiently, comments should be sent in hardcopy or by e-mail but not by both methods. 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 the principal office of OCC. All submissions should refer to the File No. SR-OCC-2002-26 and should be submitted by February 18, 2003.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[5]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

2.  The Commission has modified parts of these statements.

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3.  15 U.S.C. 78s(b)(3)(A)(i).

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[FR Doc. 03-1711 Filed 1-24-03; 8:45 am]

BILLING CODE 8010-01-P