[Federal Register: August 31, 1999 (Volume 64, Number 168)]
[Notices]               
[Page 47557]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31au99-158]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41781; File No. SR-MCC-99-01]

 
Self-Regulatory Organizations; Midwest Clearing Corporation; 
Order Approving a Proposed Rule Change Relating to Sponsored Account 
Fund Deposits

August 23, 1999.
    On February 26, 1999, the Midwest Clearing Corporation (``MCC'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change (File No. SR-MCC-99-01) 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 May 26, 1999.\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. 41427 (May 19, 1999), 64 
FR 28542.
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I. Description

    MCC sponsors accounts (``sponsored accounts'') at qualified 
clearing agencies \3\ 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 the qualified clearing agencies. 
To cover any losses that MCC may incur from maintaining the sponsored 
accounts, MCC requires sponsored participants to contribute to MCC's 
sponsored account fund. A sponsored participant's required contribution 
to MCC's 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''). According 
to MCC, both NSCC and DTC require a minimum deposit of $10,000.\4\ 
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.\5\
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    \3\ MCC uses the services of two qualified clearing agencies on 
behalf of its sponsored participants: the National Securities 
Clearing Corporation (``NSCC'') and The Depository Trust Company 
(``DTC'')
    \4\ Letter from Paul B. O'Kelly, Executive Vice President, 
Market Regulation and Legal, Chicago Stock Exchange (March 19, 
1999).
    \5\ Using NSCC's and DTC's minimum deposit of $10,000 each, 
MCC's alternative contribution formula is as follows: 110% of 
$10,000 + 110% of $100,000 = $22,000.
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    The proposed rule change increases the minimum contribution from 
$15,000 to $150,000. 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 increase the minimum contribution to $10,000 and 
$150,000, respectively.

II. Discussion

    Section 17A(b)(3)(F) \6\ of the Act requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible. The Commission finds that increasing the 
sponsored account fund deposit is consistent with MCC's obligations 
under Section 17A(b)(3)(F) of the Act because the additional funds 
should increase the likelihood that MCC will have sufficient funds to 
settle the securities transactions of a sponsored participant that 
becomes insolvent.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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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-MCC-99-01) be, and hereby 
is, approved.

    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. 99-22552 Filed 8-30-99; 8:45 am]
BILLING CODE 8010-01-M