[Federal Register Volume 61, Number 162 (Tuesday, August 20, 1996)]
[Notices]
[Pages 43105-43107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21158]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-37555; File Nos. SR-MCC-96-04; SR-MSTC-96-04]


Self-Regulatory Organizations; Midwest Clearing Corporation; 
Midwest Securities Trust Company; Notice of Filing of Proposed Rule 
Changes Relating to Nominations for Board Membership, the Risk 
Assessment Committee, the Appeals Process, Audits and Financial 
Reports, and Temporary Sponsored Participants and Accounts

August 9, 1996.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that the Midwest Clearing 
Corporation (``MCC'') and Midwest Securities Trust Company (``MSTC'') 
filed with the Securities and Exchange Commission (``Commission'') on 
June 26, 1996, the proposed rule changes as described in Items I and II 
below, which items have been prepared primarily by MCC and MSTC, 
respectively. The Commission is publishing this notice to solicit 
comments on the proposed rule changes from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1) (1995).
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I. Self-Regulatory Organizations' Statement of the Terms of Substance 
of the Proposed Rule Changes

    MCC and MSTC respectively propose to (i) eliminate the sections of 
their by-laws that require the corporate secretary to mail copies of 
the list of nominees for the respective boards of directors to each 
participant of MSTC and MCC; \2\ (ii) amend their respective rules to 
remove any reference to their risk assessment committees; \3\ (iii) 
adjust some of the appeal time periods, the composition of the appeal 
panels, and eliminate a second level of internal appeals; \4\ (iv) 
eliminate their respective

[[Page 43106]]

Risk Assessment Committees; \5\ (v) delete their respective rules 
relating to audits and financial reports; \6\ and (vi) delete their 
respective rules relating to Temporary Sponsored Accounts.\7\
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    \2\ MSTC proposes to amend Article III, Section 2 of its By-Laws 
and MCC proposes to amend Article 3, Section 3.2 of its By-Laws. The 
specific proposed amendments to MSTC's and MCC's respective rules 
are attached as exhibit A to MSTC's and MCC's respective proposed 
rule changes, which are available for inspection at the places 
specified in Item IV below.
    \3\ MSTC proposes to delete Article I, Rule 4 and to amend 
Article V, Rule 2. MCC proposes to delete Article I, Rule 4 and to 
amend Article VIII, Rule 2.
    \4\ MSTC proposes to amend Article VII, Rule 8, Section 3 and to 
delete Section 5, and MCC proposes to amend Article X, Rule 8, 
Section 3 and to delete Section 5.
    \5\ MSTC proposes to delete Article I, Rule 4, and MCC proposes 
to delete Article I, Rule 4.
    \6\ MSTC proposes to delete Article VII, Rule 5, and MCC 
proposes to delete Article X, Rule 5.
    \7\ MSTC proposes to delete Article VIII, Rules 1 through 5, and 
MCC proposes to amend Article XI, Rules 1, 2(a), 2(b), 2(c), 3(a), 
3(b), 3(c), 5(d), 7(a) through 7(e), 7(g), 7(i), 10(a), 11(a), 
11(d)(3) through 11(d)(6), 11(e) through 11(i), and delete Rules 
5(c), 7(f), and 7(h).
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II. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    In their filings with the Commission, MSTC and MCC included 
statements concerning the purpose of and basis for the proposed rule 
changes and discussed any comments they received on the proposed rule 
changes. The text of these statements may be examined at the places 
specified in Item IV below. MSTC and MCC have prepared summaries, set 
forth in sections (A), (B), and (C) below, of the most significant 
aspects of such statements.\8\
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    \8\ The Commission has modified the language in these sections.
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(A) Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    On December 26, 1995, MSTC and MCC filed proposed rule changes 
relating to MSTC's withdrawal from the securities depository business 
and MCC's withdrawal from the securities clearance and settlement 
business.\9\ Subsequent to the Commission's approval of the filings, 
MSTC commenced an orderly wind-down of its operations and a transition 
of all of its participants, including Temporary Sponsored Participants, 
to other service providers, and MCC ceased operations for all of its 
participants except its Sponsored Participants.
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    \9\ For a complete discussion of MCC's and MSTC's withdrawal 
from the clearing and depository businesses, refer to Securities 
Exchange Act Release No. 36684 (January 5, 1996), 61 FR 1195 (File 
Nos. SR-CHX-95-27, SR-DTC-95-22, SR-MCC-95-4, and SR-MSTC-95-10) 
(order approving MCC's and MSTC's withdrawal from the clearance and 
settlement and securities depository businesses).
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    Because MSTC no longer has any active participants, it is no longer 
appropriate to require MSTC to provide participants with information 
relating to the nomination and election of board members. Membership in 
the Chicago Stock Exchange (``CHX'') is a prerequisite to being 
accepted by MCC as a Sponsored Participant, and thus all of MCC's 
Sponsored Participants are CHX members. As CHX members, MCC's Sponsored 
Participants receive information relating to the nomination and 
election of the CHX board of governors pursuant to CHX rules. As a 
result, one purpose of the proposed rule changes is to amend MSTC's and 
MCC's By-Laws to eliminate the requirement that participants receive 
the list of nominations and to eliminate the provisions that give 
participants an opportunity to nominate additional persons.
    Another purpose of the proposed rule changes is to delete the 
provisions relating to MSTC's and MCC's respective Risk Assessment 
Committees from their rules. Again, because of MSTC's withdrawal from 
the securities depository business and MCC's withdrawal from the 
securities clearance and settlement business, MSTC and MCC believe that 
it is no longer necessary to maintain a Risk Assessment Committee that 
serves as an appellate review board and independent consultant to 
management. Because of the elimination of the Risk Assessment 
Committees, the rule changes also propose to (i) eliminate the 
requirement that MSTC and MCC consult with the Risk Assessment 
Committee before ceasing to act for a participant, (ii) amend MSTC's 
rules and MCC's rules to allow their respective boards to appoint a 
panel of board members to hear appeals, and (iii) replace subsequent 
references to the Risk Assessment Committee with references to a panel 
of board members.
    The proposed rule changes also amend MSTC's and MCC's appeal 
processes. These changes will conform MSTC's and MCC's appeal 
procedures to similar procedures currently used by the CHX for 
emergency suspensions. Because all MCC participants are also required 
to be CHX floor members, MCC desires to coordinate the CHX emergency 
suspension provision and the MCC ceasing to act provision. 
Specifically, the proposed rule changes will eliminate a second level 
of internal appeals and will adjust some of the time periods set forth 
in the rules.
    An additional purpose of the proposed rule changes is to delete 
MSTC's rules and MCC's rules relating to audits and financial reports 
of MSTC and MCC. Because MSTC and MCC have withdrawn from the 
securities depository business, and the securities clearance and 
settlement business, MSTC and MCC believe that it is no longer 
necessary to produce independent financial statements or maintain 
internal accounting controls. Currently, there are no internal 
operations at MSTC, and MCC no longer maintains independent positions 
of securities. MCC merely acts as a conduit for Sponsored Participants 
to enable them to hold their positions at NSCC. As a result, MCC 
believes that it is no longer necessary to produce independent 
financial statements or maintain internal accounting controls. However, 
MSTC's and MCC's financial statements will be reflected as part of the 
consolidated annual audited financials of their parent, the CHX.
    Finally, the proposed rule changes will delete in their entirety 
MSTC's and MCC's rules relating to Temporary Sponsored Participants and 
Accounts. As a result of MCC's withdrawal from the Securities clearance 
and settlement business and MSTC's winding-down of business activities 
and transition of participants, including Temporary Sponsored 
Participants, to other service providers, it is no longer necessary to 
sponsor Temporary Sponsored Participants or maintain Temporary 
Sponsored Accounts.
    MSTC and MCC believe that the proposed rule changes are consistent 
with Section 17A\10\ of the Act because the proposed changes will 
facilitate the prompt and accurate clearance and settlement of 
securities transactions and are designed to assure the safeguarding of 
securities and funds which are in their control or for which they are 
responsible.
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    \10\ 15 U.S.C. Sec. 78q-1 (1988).
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(B) Self-Regulatory Organizations' Statement on Burden on Competition

    MSTC and MCC believe that the proposed rule changes will not impose 
a burden on competition.

(C) Self-Regulatory Organizations' Statement on Comments on the 
Proposed Rule Changes Received From Members, Participants or Others

    MSTC and MCC have neither solicited nor receive any comments on the 
proposed rule changes.

III. Date of Effectiveness of the Proposed Rule Changes 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 MSTC and MCC consent, the Commission will:
    (A) By order approve such proposed rule changes or

[[Page 43107]]

    (B) Institute proceedings to determine whether the proposed rule 
changes should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549. 
Copies of the submissions, all subsequent amendments, all written 
statements with respect to the proposed rule changes that are filed 
with the Commission, and all written communications relating to the 
proposed rule changes 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 Room, 450 Fifth Street, 
N.W., Washington, D.C. 20549. Copies of such filings will also be 
available for inspection and copying at the principal offices of MSTC 
and MCC. All submissions should refer to file numbers SR-MSTC-96-04 and 
SR-MCC-96-04 and should be submitted by September 10, 1996.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12) (1995).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-21158 Filed 8-19-96; 8:45 am]
BILLING CODE 8010-01-M