[Federal Register Volume 59, Number 95 (Wednesday, May 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-12042]
[[Page Unknown]]
[Federal Register: May 18, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34041; File Nos. SR-MCC-94-03 and SR-MSTC-94-03]
Self-Regulatory Organizations; Midwest Clearing Corporation and
Midwest Securities Trust Company; Filing of Proposed Rule Changes
Establishing More Definitive Standards for Retention of Participants'
Fund Deposits
May 11, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act 1934
(``Act''),\1\ notice is hereby given that on February 7, and January
31, 1994, respectively, the Midwest Clearing Corporation (``MCC'') and
the Midwest Securities Trust company (``MSTC'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
changes as described in Items I, II, and III below, which Items have
been prepared primarily by MCC and MSTC, self-regulatory organizations.
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) (1988).
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I. Self-Regulatory Organizations' Statement of the Terms of Substance
of the Proposed Rule Changes
MCC proposes to modify MCC rules, Article IX (Property Held for
Participants), rule 2 (Participants' Fund), Section 11 (Ceasing To Be a
Participant) and MSTC proposes to modify MSTC Rules, Article VI
(Property Held for Participants), Rule 2 (Participants' Fund), Section
12 (Ceasing to be a Participant). The proposals relate to the retention
of deposits in the MCC and MSTC Participants' Funds.
II. Self-Regulatory Organizations' Statement of the Purpose of and
Statutory Basis for, the Proposed Rule Changes
In their filings with the Commission, MCC and MSTC 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. MCC and MSTC have prepared summaries, set
forth in sections (A), (B) and (C) below, of the most significant
aspects of such statements.
(A) Self-Regulatory Organizations' Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
The purpose of the proposed rule changes is to establish more
definitive standards for the retention of deposits to the MCC and MSTC
Participants' Funds when a participant ceases to be a participant. For
example, when the issuer of a security pays dividends, MCC participants
that have long positions in the security are credited, and MCC
participants that have short positions are debited. Occasionally,
however, an issuer will fail to disseminate dividend information in a
timely manner. When the dividend information is ultimately
disseminated, participants that had short positions on the date the
dividend amounts should have been debited are charged the appropriate
debits. If a participant that had such a short position has ceased to
be participant, MCC has the right to collect the dividend from the ex-
participant because the dividend represents an amount chargeable
against the ex-participant's contributions as a result of transactions
conducted while it was an MCC participant. If MCC has refunded all of
the ex-participant's Participants' Fund deposit, MCC will be at risk.
MSTC faces similar risks. For example, if a participant has on
deposit with MSTC a nontransferable security that becomes transferable
after the participant ceases to be an MSTC participant, MSTC may be at
risk if it ends up with a negative position in that security.
Accordingly, if MCC and MSTC retain Participants' Fund deposits or
obtain an appropriate guarantee, MCC and MSTC will reduce the risk from
such occurrences as the late receipt of dividend information or the
conversion of a security from nontransferable to transferable. At this
time, however, there is no clear provision in MCC's or MSTC's rules
relating to the length of time that MCC or MSTC may retain a
participant's Participant's Fund deposit. Based on their experience,
MCC and MSTC believe that absent an acceptable guarantee or
substitution by another participant. it will be appropriate for them to
retain the greater of (i) 25% of the participant's average
Participants' Fund requirement over the previous twelve months or (ii)
$100,000 or the participant's entire deposit if the participant as a
Participants' Fund deposit of less than $100,000. MCC and MSTC are
proposing that they be permitted to retain Participant's Fund deposits
for a period of up to four years.
MCC and MSTC believe that the proposed rule changes are consistent
with the Act and in particular with Section 17A of the Act because they
promote the prompt and accurate clearance and settlement of securities
transactions and provide MCC and MSTC better control over their
Participants' Funds.
(B) Self-Regulatory Organizations' Statement on Burden on Competition
MCC and MSTC do not believe that the proposed rule changes will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
(C) Self-regulatory Organizations' Statement on Comments on the
Proposed Rule Changes Received From Members, Participants, or Others
MCC and MSTC have neither solicited nor received any comments.
III. Date of Effectiveness of the Proposed Rule changes and Timing for
Commission Act
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 the self-regulatory organizations consent,
the Commission will:
(A) By order approve such proposed rule changes or
(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 forging. Persons making written submission
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington DC 20549. Copies
of the submissions, 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 at the
principal offices of FCC and MSTEC. All submissions should refer to
File Nos. SR-MCC-94-03 and SR-MSTC-94-03 and should be submitted by
June 8, 1994.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\2\
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\2\17 CFR 200.30-3(a) (12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc.94-12042 Filed 5-17-94; 8:45 am]
BILLING CODE 8010-01-M
