Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of a Proposed Rule Change Regarding Initial and Minimum Net Capital Requirements for Futures Commission Merchants

[Federal Register Volume 63, Number 33 (Thursday, February 19, 1998)]
[Notices]
[Pages 8509-8510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4203]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-39648; File No. SR-OCC-97-12]


Self-Regulatory Organizations; The Options Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Regarding Initial and 
Minimum Net Capital Requirements for Futures Commission Merchants

February 11, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 15, 1997, The Options 
Clearing Corporation (``OCC'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change (File No. SR-OCC-
97-12) 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.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change will amend OCC's rules regarding its 
initial and minimum net capital requirements for clearing members that 
are also registered futures commission merchants (``FCMs'').

II. Self-Regulatory Organization's Statement of the Propose 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\
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    \2\ The Commission has modified the text of the summaries 
prepared by OCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to amend OCC's rules 
regarding its members that are also FCMs. Under the proposed rule 
change, the initial and minimum net capital \3\ of these members must 
exceed the greater of the following standards: OCC's current initial 
and minimum net capital requirements or that required by the clearing 
organization of the FCM member's designated self-regulatory 
organization (``DSRO'').\4\
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    \3\ OCC Rules 301 and 302 require initial and minimum net 
capital requirements of $1,000,000 and $750,000, respectively.
    \4\ According to OCC, the terms clearing organization and DSRO 
shall have the meanings ascribed to them in the General Regulation 
of the Commodity Exchange Act, 17 CFR 1.3(d) and 17 CFR 
1.3(ff)(1)(2), respectively. Letter from Robert C. Rubenstein, OCC 
(September 3, 1997).
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    The proposed rule change also will modify OCC's early warning 
notice provisions to require OCC members that are also FCMs to notify 
OCC if the member's capital falls below OCC's net capital requirements 
or if the member's capital falls below OCC's net capital requirements 
or if the member's capital falls below the minimum net capital 
requirements set by the clearing organization of the member's 
designated DSRO.\5\
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    \5\ This rule change assumes the prior effectiveness of OCC's 
proposed rule change File No. SR-OCC-97-05, which will amend OCC's 
by-laws and rules to provide for early warning notice of 
noncompliance with the financial requirements of a regulatory 
organization. Securities Exchange Act Release No. 38948 (August 19, 
1997) 62 FR 44998 [File No. SR-OCC-97-05] (filing of a proposed rule 
change relating to early warning notices). In the event that the 
filing is not approved prior to the approval of this rule change, 
then Rule 303 will read as follows:
    (a) A clearing member other than an exempt Non-U.S. clearing 
member shall notify the Corporation promptly, and in any event prior 
to 3:00 P.M. Central Time (4:00 P.M. Eastern Time) of the following 
business day if:
    (1) Such clearing member's net capital shall become less than 
the greater of $1,000,000 or (in the case of a clearing member not 
electing to operate pursuant to the alternative net capital 
requirements) ten percent of its aggregate indebtedness, or (in the 
case of a clearing member electing to operate pursuant to the 
alternative net capital requirements) five percent of its aggregate 
debit items, or (in the case of a clearing member that also 
registered as a futures commission merchant) the minimum net capital 
required by the clearing organization of the clearing member's 
designated self regulatory organization; or
    (2)-(6) [no change.]
    (b) [No changes from changes proposed in SR-OCC-97-05.]
    (Deleted text is bracketed and additions are in italics.)

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[[Page 8510]]

    OCC believes that the proposed rule change will increase its 
financial surveillance of its clearing members in situations where the 
clearing member's net capital falls below that level required by its 
futures clearing organization. OCC believes that this additional 
standard will enhance its membership criteria and afford OCC with 
greater protection without being unduly burdensome. This proposed 
additional standard will incorporate financial criteria within OCC's 
rules that are already applicable to clearing members registered as 
FCMs.
    The proposed rule change is consistent with the requirements of 
Section 17A of the Act and the rules and regulations promulgated 
thereunder because the proposed rule change is consistent with assuring 
the safeguarding of securities and funds which are in the custody and 
control of OCC and for which it is responsible.

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

    OCC does not believe that the proposed rule change will 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.

III. 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 up to ninety days of such date if it finds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which OCC consents, the Commission will:
    (A) By order approve the proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comment

    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, N.W., Washington, D.C. 20549. 
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, N.W., 
Washington, D.C. 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 number SR-OCC-97-12 and should be 
submitted by March 12, 1998.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
 Deputy Secretary.
[FR Doc. 98-4203 Filed 2-18-98; 8:45 am]
BILLING CODE 8010-01-M