[Federal Register Volume 62, Number 197 (Friday, October 10, 1997)]
[Notices]
[Pages 53041-53042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-26902]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-39201; File No. SR-OCC-97-09]
Self-Regulatory Organizations; The Options Clearing Corporation;
Order Approving a Proposed Rule Change Seeking To Amend the Valuation
Rate Applied to Equity Securities and Corporate Debt Deposited as
Margin Collateral
October 3, 1997.
On May 21, 1997, The Options Clearing Corporation (``OCC'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change (File No. SR-OCC-97-09) pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'').\1\ Notice of the proposal
was published in the Federal Register on August 18, 1997.\2\ No comment
letters were received. For the reasons discussed below, the Commission
is approving the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ Securities Exchange Act Release No. 38923 (August 11, 1997),
62 FR 44025.
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I. Description
OCC currently operates a program to accept deposits of equity
securities and corporate debt as margin collateral (``valued securities
program'') under its rule 604(d).\3\ The proposed rule change
[[Page 53042]]
amends OCC Rule 604(d)(1) to increase the valuation rate that OCC
applies to equity and corporate debt securities deposited with OCC
under the valued securities program from 60 percent to 70 percent.
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\3\ For a detailed description of the valued securities program,
refer to Securities Exchange Act Release Nos. 33893 (April 14,
1994), 59 FR 18427 [File No. SR-OCC-92-13] (order granting
accelerated approval to proposed rule change) and 31169 (September
10, 1992), 57 FR 43041 [File No. SR-OCC-92-13] (notice of filing of
proposed rule change).
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OCC Rule 604(d) permits OCC's clearing members to deposit as margin
collateral common and preferred stock and corporate bonds which meet
certain standards. Common and preferred stock must have a market value
of greater than $10 per share and must either be (i) traded on a
national securities exchange and have last sale reports collected and
disseminated pursuant to a consolidated transaction reporting plan or
(ii) traded in the over-the-counter market and designated as National
Market System Securities pursuant to Commission Rule 11Aa2-1.\4\
Corporate bonds must (i) be listed on a national securities exchange
and not be in default, (ii) have a current market value that is readily
determinable on a daily basis, and (iii) be rated in one of the four
highest rating categories by a nationally recognized statistical rating
organization.\5\
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\4\ 17 CFR 240.11Aa2-1.
\5\ An issue that is suspended from trading in its primary
market, or subject to special margin requirements under the rules of
its primary market because of volatility, lack of liquidity or
similar characteristics may not be deposited with OCC. OCC Rule
604(d)(1).
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II. Discussion
Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a
clearing agency be designed to assure the safeguarding of securities
and funds in its custody or control or for which it is responsible. The
Commission believes that the effective functioning of the valued
securities program since its inception in 1985 and OCC's various
financial safeguards and risk monitoring systems, taken as a whole,\7\
suggest that an increase from 60 percent to 70 percent in the valuation
rate for debt and equity securities deposited as margin collateral
should not detract from OCC's ability to safeguard funds and securities
in its custody or control or for which it is responsible.
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\6\ 15 U.S.C. 78q-1(b)(3)(F).
\7\ OCC financial safeguards include, for example, the valued
securities program's eligibility standards for equity and corporate
debt securities and OCC's authority to collect intraday margin calls
as needed.
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III. Conclusion
On the basis of the foregoing, the Commission finds that the
proposal is consistent with the requirements of the Act and in
particular with the requirements of Section 17A of the Act and the
rules and regulations thereunder.
It Is Therefore Ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-OCC-97-09) be, and hereby
is, approved.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\8\
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\28\ 7 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-26902 Filed 10-9-97; 8:45 am]
BILLING CODE 8010-01-M
