[Federal Register Volume 64, Number 168 (Tuesday, August 31, 1999)]
[Notices]
[Page 47557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22552]
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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
