[Federal Register Volume 64, Number 101 (Wednesday, May 26, 1999)]
[Notices]
[Pages 28542-28543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-13302]


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SECURITIES AND EXCHANGE COMMISSION

[Release 34-41427; File No. SR-MCC-99-01]


Self-Regulatory Organizations; Midwest Clearing Corporation; 
Notice of Filing of a Proposed Rule Change Regarding Sponsored Account 
Fund Contributions

May 19, 1999.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 26, 1999, the 
Midwest Clearing Corporation (``MCC'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change (File No. 
SR-MCC-99-01) as described in Items I, II, and III below, which items 
have been prepared primarily by MCC. The Commission is publishing this 
notice to solicit comments from interested persons on the proposed rule 
change.
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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 increase the minimum contribution 
that sponsored participants are required to make to MCC's sponsored 
account fund.

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

    In its filing with the Commission, MCC 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. MCC 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 MCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    MCC sponsors accounts (``sponsored accounts'') for certain eligible 
Chicago Stock Exchange specialists, floor brokers, and market makers 
(``sponsored participants'') to provide them with access to the 
clearance, settlement, and depository services of a qualified clearing 
agency.\3\ To cover any losses that MCC may incur from operating the 
sponsored accounts, MCC requires sponsored participants to contribute 
to a sponsored account fund. A sponsored participant's required 
contribution to the sponsored account fund currently is the greater of 
$15,000 (``minimum contribution'') or 110% of the amount calculated 
pursuant to the formula of NSCC and DTC (``alternative contribution'') 
\4\
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    \3\ MCC uses the services of two qualified clearing agencies on 
behalf of its sponsored participants: National Securities Clearing 
Corporation (``NSCC'') and The Depository Trust Company (``DTC'').
    \4\ The formula for the alternative contribution is based on the 
participant's use of MCC's services or those of a qualified clearing 
agency. The proposed rule change does not affect the alternative 
contribution calculation.
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    According to MCC, both NSCC and DTC require a minimum deposit of 
$10,000.\5\ Therefore, the current minimum amount a sponsored 
participant must contribute to the sponsored account fund is $22,000, 
which is based on the alternative contribution formula.
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    \5\ See Letter from Paul B. O'Kelly, Executive Vice President, 
Market Regulation and Legal, Chicago Stock Exchange (March 19, 
1999).
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    Under the proposed rule change, the minimum contribution will 
increase from $15,000 to $150,000. As a result, the new required 
contribution will be $150,000, which will be based on the minimum 
contribution amount. MCC believes the increase is necessary due to an 
increased volume of transactions cleared through the sponsored accounts 
and increased market volatility.
    The increase will be phased-in over a twelve-month period. To 
announce the actual phase-in dates, MCC will issue an administrative 
bulletin no later than thirty days after the Commission's order 
approving the proposal. The first phase-in date will be no more than 60 
days from the date the bulletin is published and will increase the 
minimum contribution to $50,000. The second and third phase-in dates 
will be six months and twelve months from the initial phase-in date and 
will increase the minimum contribution to $100,000 and $150,000, 
respectively.
    MCC believes the proposed rule change is consistent with Section 
17A(b)(3)F) \6\ of the Act and the rules and regulations thereunder 
because it will facilitate the prompt and accurate clearance and 
settlement of securities transactions and because it will assure the 
safeguarding of the securities and funds in MCC's custody or control or 
for which MCC is responsible.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    MCC 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

    MCC has neither solicited nor received written comments on the 
proposed rule change.

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 MCC consents, the Commission will:
    (A) By order approve such proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 fix six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, 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, NW, 
Washington, D.C. 20549. Copies of such

[[Page 28543]]

filing also will be available for inspection and copying at the 
principal office of MCC. All submissions should refer to File No. SR-
MCC-99-01 and should be submitted by June 16, 1999.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-13302 Filed 5-25-99; 8:45 am]
BILLING CODE 8010-01-M