32902 Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices

1No Trust will hold Contracts relating to the

Shares of more than one issuer.

[FR Doc. 98–15979 Filed 6–15–98; 8:45 am]

BILLING CODE 4510–30–M

OFFICE OF PERSONNEL

MANAGEMENT

Federal Prevailing Rate Advisory

Committee; Open Committee Meetings

According to the provisions of section

10 of the Federal Advisory Committee

Act (Pub. L. 92–463), notice is hereby

given that meetings of the Federal

Prevailing Rate Advisory Committee

will be held on—

Thursday, June 18, 1998;

Thursday, June 25, 1998;

Thursday, July 9, 1998;

Thursday, July 16, 1998;

Thursday, July 23, 1998;

Wednesday, July 29, 1998;

Thursday, August 6, 1998;

Thursday, August 13, 1998;

Thursday, August 20, 1998;

Thursday, September 3, 1998;

Thursday, September 24, 1998.

The meetings will start at 10:00 a.m.

and will be held in Room 5A06A, Office

of Personnel Management Building,

1900 E Street, NW., Washington, DC.

The Federal Prevailing Rate Advisory

Committee is composed of a Chair, five

representatives from labor unions

holding exclusive bargaining rights for

Federal blue-collar employees, and five

representatives from Federal agencies.

Entitlement to membership on the

Committee is provided for in 5 U.S.C.

5347.

The Committee’s primary

responsibility is to review the Prevailing

Rate System and other matters pertinent

to establishing prevailing rates under

subchapter IV, chapter 53, 5 U.S.C., as

amended, and from time to time advise

the Office of Personnel Management.

These scheduled meetings will start

in open session with both labor and

management representatives attending.

During the meetings either the labor

members or the management members

may caucus separately with the Chair to

devise strategy and formulate positions.

Premature disclosure of the matters

discussed in these caucuses would

unacceptably impair the ability of the

Committee to reach a consensus on the

matters being considered and would

disrupt substantially the disposition of

its business. Therefore, these caucuses

will be closed to the public because of

a determination made by the Director of

the Office of Personnel Management

under the provisions of section 10(d) of

the Federal Advisory Committee Act

(Pub. L. 92–463) and 5 U.S.C.

552b(c)(9)(B). These caucuses may,

depending on the issues involved,

constitute a substantial portion of a

meeting.

Annually, the Chair compiles a report

of pay issues discussed and concluded

recommendations. These reports are

available to the public, upon written

request to the Committee’s Secretary.

The public is invited to submit

material in writing to the Chair on

Federal Wage System pay matters felt to

be deserving of the Committee’s

attention. Additional information on

this meeting may be obtained by

contacting the Committee’s Secretary,

Office of Personnel Management,

Federal Prevailing Rate Advisory

Committee, Room 5559, 1900 E Street,

NW., Washington, DC 20415 (202) 606–

1500.

Dated: June 10, 1998.

Phyllis G. Heuerman,

Acting Chair, Federal Prevailing Rate

Advisory Committee.

[FR Doc. 98–15971 Filed 6–15–98; 8:45 am]

BILLING CODE 6325–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–23247; 812–10888]

PaineWebber Incorporated; Notice of

Application

June 9, 1998.

AGENCY: Securities and Exchange

Commission (‘‘SEC’’).

ACTION: Notice of application for an

order under section 12(d)(1)(J) of the

Investment Company Act of 1940 (the

‘‘Act’’) for an exemption from section

12(d)(1), under section 6(c) of the Act

for an exemption from section 14(a), and

under section 17(b) of the Act for an

exemption from section 17(a) of the Act.

SUMMARY OF APPLICATION: PaineWebber

Incorporated (‘‘PaineWebber’’) requests

an order with respect to Exchangeable

Securities Trusts and future trusts that

are substantially similar and for which

PaineWebber will serve as a principal

underwriter (collectively, the ‘‘Trusts’’)

that would (i) permit other registered

investment companies, and companies

excepted from the definition of

investment company under sections

3(c)(1) and (c)(7) of the Act, to own a

greater percentage of the total

outstanding voting stock (the

‘‘Securities’’) of any Trust than that

permitted by section 12(d)(1), (ii)

exempt the Trusts from the initial net

worth requirements of section 14(a), and

(iii) permit the trusts to purchase U.S.

government securities from

PaineWebber at the time of a Trust’s

initial issuance of Securities.

FILING DATES: The application was filed

on December 5, 1998. Applicant has

agreed to file an amendment, the

substance of which is incorporated in

this notice, during the notice period.

HEARING OR NOTIFICATION OF HEARING: An

order granting the application will be

issued unless the SEC orders a hearing.

Interested persons may request a

hearing by writing to the SEC’s

Secretary and serving PaineWebber with

a copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on July

1, 1998, and should be accompanied by

proof of service on PaineWebber, in the

form of an affidavit, or, for lawyers, a

certificate of service. Hearing requests

should state the nature of the writer’s

interest, the reason for the request, and

the issues contested. Persons may

request notification of a hearing by

writing to the SEC’s Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

PaineWebber, 1285 Avenue of the

Americas, New York, New York 10019.

FOR FURTHER INFORMATION CONTACT:

Brian T. Hourihan, Senior Counsel, at

(202) 942–0526, or Mary Kay Frech,

Branch Chief, at (202) 942–0564

(Division of Investment Management,

Office of Investment Company

Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee from SEC’s

Public Reference Branch, 450 Fifth

Street, N.W., Washington, D.C. 20549

(tel. (202) 942–8090).

Applicant’s Representations

1. Each Trust will be a limited-life,

grantor trust registered under the Act as

a non-diversified, closed-end

management investment company.

PaineWebber will serve as a principal

underwriter (as defined in section

2(a)(29) of the Act) of the Securities

issued to the public by each Trust.

2. Each Trust will, at the time of its

issuance of Securities, (i) enter into one

or more forward purchase contracts (the

‘‘Contracts’’) with a counterparty to

purchase a formulaically-determined

number of a specified equity security or

securities (the ‘‘Shares’’) of one

specified issuer,1 and (ii) in some cases,

purchase certain U.S. Treasury

securities (‘‘Treasuries’’), which may

include interest-only or principal-only

securities maturing at or prior to the

Trust’s dissolution. The Trusts will

purchase the Contracts from
Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices 32903

2A formula is likely to limit the Holder’s

participation in any appreciation of the underlying

Shares, and it may, in some cases, limit the Holder’s

exposure to any depreciation in the underlying

Shares. It is anticipated that the Holders will

receive a yield greater than the ordinary dividend

yield on the Shares at the time of the issuance of

the Securities, which is intended to compensate

Holders for the limit on the Holders’ participation

in any appreciation of the underlying Shares. In

some cases, there may be an upper limit on the

value of the Shares that a Holder will ultimately

receive.

3The contracts may provide for an option on the

part of a counterparty to deliver Shares, cash, or a

combination of Shares and cash to the Trust at the

termination of each Trust.

4A ‘‘majority of the Trust’s outstanding

Securities’’ means the lesser of (i) 67% of the

Securities represented at a meeting at which more

than 50% of the outstanding Securities are

represented, and (ii) more than 50% of the

outstanding Securities.

counterparties that are not affiliated

with either the relevant Trust or

PaineWebber. The investment objective

of each Trust will be to provide to each

holder of Securities (‘‘Holder’’) (i)

current cash distributions from the

proceeds of any Treasuries, and (ii)

participation in, or limited exposure to,

changes in the market value of the

underlying Shares.

3. In all cases, the Shares will trade

in the secondary market and the issuer

of the Shares will be a reporting

company under the Securities Exchange

Act of 1934. The number of Shares, or

the value of the Shares, that will be

delivered to a Trust pursuant to the

Contracts may be fixed (e.g., one Share

per Security issued) or may be

determined pursuant to a formula, the

product of which will vary with the

price of the Shares. A formula generally

will result in each Holder of Securities

receiving fewer Shares as the market

value of the Shares increases, and more

Shares as their market value decreases.2

At the dissolution of each Trust, each

Holder will receive the number of

Shares per Security, or the value of the

Shares, as determined by the terms of

the Contracts, that is equal to the

Holder’s pro rata interest in the Shares

or amount received by the Trust under

the Contracts.3

4. Securities issued by the Trusts will

be listed on a national securities

exchange or traded on The Nasdaq

Stock Market’s National Market. Thus,

the Securities will be ‘‘national market

system’’ securities subject to public

price quotation and trade reporting

requirements. After the Securities are

issued, the trading price of the

Securities is expected to vary from time

to time based primarily upon the price

of the underlying Shares, interest rates,

and other factors affecting conditions

and prices in the debt and equity

markets. PaineWebber currently

intends, but will not be obligated, to

make a market in the Securities of each

Trust.

5. Each Trust will be internally

managed by three trustees and will not

have any separate investment adviser.

The trustees will have no power to vary

the investments held by each Trust. A

bank qualified to serve as a trustee

under the Trust Indenture Act of 1939,

as amended, will act as custodian for

each Trust’s assets and as paying agent,

registrar, and transfer agent with respect

to the Securities of each Trust. The bank

will have no other affiliation with, and

will not be engaged in any other

transaction with, any Trust. The day-today administration of each Trust will be

carried out by the bank.

6. The Trusts will be structured so

that the trustees are not authorized to

sell the Contracts or Treasuries under

any circumstances. The Trusts will hold

the Contracts until maturity, at which

time they will be settled according to

their terms. However, in the event of the

bankruptcy or insolvency of any

counterparty to a Contract with a Trust,

the obligations of the counterparty

under the Contract will be accelerated

and the available proceeds of the

Contract will be distributed to the

Security Holders.

7. The trustees of each Trust will be

selected initially by PaineWebber,

together with any other initial Holders,

or by the grantors of the Trust. The

Holders of each Trust will have the

right, upon the declaration in writing or

vote of more than two-thirds of the

outstanding Securities of the Trust, to

remove a trustee. Holders will be

entitled to a full vote for each Security

held on all matters to be voted on by

Holders and will not be able to

cumulate their votes in the election of

trustees. The investment objectives and

policies of each Trust may be changed

only with the approval of a ‘‘majority of

the Trust’s outstanding Securities’’ 4 or

any greater number required by the

Trust’s constituent documents. Unless

Holders so request, it is not expected

that the Trusts will hold any meetings

of Holders, or that Holders will ever

vote.

8. The Trusts will not be entitled to

any rights with respect to the Shares

until any Contracts requiring delivery of

the Shares to the Trust are settled, at

which time the Shares will be promptly

distributed to Holders. The Holders,

therefore, will not be entitled to any

rights with respect to the Shares

(including voting rights or the right to

receive any dividends or other

distributions) until receipt by them of

the Shares at the time the Trust is

dissolved.

9. Each Trust will be structured so

that its organizational and ongoing

expenses will not be borne by the

Holders, but rather, directly or

indirectly, by PaineWebber, the

counterparties, or another third party, as

will be described in the prospectus for

the relevant Trust. At the time of the

original issuance of the Securities of any

Trust, there will be paid to each of the

administrator, the custodian, and the

paying agent, and to each trustee, a onetime amount in respect of such agent’s

fee over its term. Any expenses of the

Trust in excess of this anticipated

amount will be paid as incurred by a

party other than the Trust itself (which

party may be PaineWebber).

Applicant’s Legal Analysis

A. Section 12(d)(1)

1. Section 12(d)(1)(A)(i) of the Act

prohibits any registered investment

company from owning more than 3% of

the total outstanding voting stock of any

other investment company, and any

investment company from owning in

the aggregate more than 3% of the total

outstanding voting stock of any

registered investment company. A

company that is excepted from the

definition of investment company under

section 3(c)(1) or (c)(7) of the Act is

deemed to be an investment company

for purposes of section 12(d)(1)(A)(i) of

the Act under sections 3(c)(1) and

(c)(7)(D) of the Act. Section 12(d)(1)(C)

of the Act similarly prohibits any

investment company, other investment

companies having the same investment

adviser, and companies controlled by

such investment companies from

owning more than 10% of the total

outstanding voting stock of any closedend investment company.

2. Section 12(d)(1)(J) of the Act

provides that the SEC may exempt

persons or transactions from any

provision of section 12(d)(1), if, and to

the extent that, the exemption is

consistent with the public interest and

protection of investors.

3. PaineWebber believes, in order for

the Trusts to be marketed most

successfully, and to be traded at a price

that most accurately reflects their value,

that it is necessary for the Securities of

each Trust to be offered to large

investment companies and investment

company complexes. PaineWebber

states that these investors seek to spread

the fixed costs of analyzing specific

investment opportunities by making

sizable investments in those

opportunities. Conversely, PaineWebber

asserts that it may not be economically
32904 Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices

rational for the investors, or their

advisers, to take the time to review an

investment opportunity if the amount

that the investors would ultimately be

permitted to purchase is immaterial in

light of the total assets of the investment

company or investment company

complex. Therefore, PaineWebber

argues that these investors should be

able to acquire Securities in each Trust

in excess of the limitations imposed by

sections 12(d)(1)(A)(i) and 12(d)(1)(C).

PaineWebber requests that the SEC issue

an order under section 12(d)(1)(J)

exempting the Trusts from the

limitations.

4. PaineWebber states that section

12(d)(1) was designed to prevent one

investment company from buying

control of other investment companies

and creating complicated pyramidal

structures. PaineWebber also states that

section 12(d)(1) was intended to address

the layering of costs to investors.

5. PaineWebber believes that the

concerns about pyramiding and undue

influence generally do not arise in the

case of the Trusts because neither the

trustees nor the Holders will have the

power to vary the investments held by

each Trust or to acquire or dispose of

the assets of the Trusts. To the extent

that Holders can change the

composition of the board of trustees or

the fundamental policies of each Trust

by vote, PaineWebber argues that any

concerns regarding undue influence will

be eliminated by a provision in the

charter documents for the Trusts that

will require any investment companies

owning voting stock of any Trust in

excess of the limits imposed by sections

12(d)(1)(A)(i) and 12(d)(1)(C) to vote

their Securities in proportion to the

votes of all other Holders. PaineWebber

also believes that the concern about

undue influence through a threat to

redeem does not arise in the case of the

Trusts because the Securities will not be

redeemable.

6. Section 12(d)(1) also was designed

to address the excessive costs and fees

that may result from multiple layers of

investment companies. PaineWebber

believes that these concerns do not arise

in the case of the Trusts because of the

limited ongoing fees and expenses

incurred by the Trusts and because

generally these fees and expenses will

be borne, directly or indirectly, by

PaineWebber or another third party, not

by the Holders. In addition, the Holders

will not, as a practical matter, bear the

organizational expenses (including

underwriting expenses) of the Trusts.

PaineWebber asserts that the

organizational expenses effectively will

be borne by the counterparties in the

form of a discount in the price paid to

them for the Contracts, or will be borne

directly by PaineWebber, the

counterparties, or other third parties.

Thus, a Holder will not pay duplicative

charges to purchase securities in any

Trust. Finally, there will be no

duplication of advisory fees because the

Trusts will be internally managed by

their trustees.

7. PaineWebber believes that the

investment product offered by the

Trusts serves a valid business purpose.

The Trusts, unlike most registered

investment companies, are not marketed

to provide investors with either

professional investment asset

management or the benefits of

investment in a diversified pool of

assets. Rather, PaineWebber asserts that

the Securities are intended to provide

Holders with an investment having

unique payment and risk characteristics,

including an anticipated higher yield

than the ordinary dividend yield on the

Shares at the time of the issuance of the

Securities.

8. PaineWebber believes that the

purposes and policies of section 12(d)(1)

are not implicated by the Trusts and

that the requested exemption from

section 12(d)(1) is consistent with the

public interest and the protection of

investors.

B. Section 14(a)

1. Section 14(a) of the Act requires, in

pertinent part, that an investment

company have a net worth of at least

$100,000 before making any public

offering of its shares. The purpose of

section 14(a) is to ensure that

investment companies are adequately

capitalized prior to or simultaneously

with the sale of their securities to the

public. Rule 14a–3 exempts from

section 14(a) unit investment trusts that

meet certain conditions in recognition

of the fact that, once the units are sold,

a unit investment trust requires much

less commitment on the part of the

sponsor than does a management

investment company. Rule 14a–3

provides that a unit investment trust

investing in eligible trust securities shall

be exempt from the net worth

requirement, provided that the trust

holds at least $100,000 of eligible trust

securities at the commencement of a

public offering.

2. PaineWebber argues that, while the

Trusts are classified as management

companies, they have characteristics of

unit investment trusts. Investors in the

Trusts, like investors in a unit

investment trust, will not be purchasing

interests in a managed pool of

securities, but rather in a fixed and

disclosed portfolio that is held until

maturity.

PaineWebber believes that the makeup of each Trust’s assets, therefore, will

be ‘‘locked-in’’ for the life of the

portfolio, and there is no need for an

ongoing commitment on the part of the

underwriter.

3. PaineWebber states that, in order to

ensure that each Trust will become a

going concern, the Securities of each

Trust will be publicly offered in a firm

commitment underwriting, registered

under the Securities Act of 1933, and

resulting in net proceeds to each Trust

of at least $10,000,000. Prior to the

issuance and delivery of the Securities

of each Trust to the underwriters, the

underwriters will enter into an

underwriting agreement pursuant to

which they will agree to purchase the

Securities subject to customary

conditions to closing. The Underwriters

will not be entitled to purchase less

than all of the Securities of each Trust.

Accordingly, PaineWebber states that

either the offering will not be completed

at all or each Trust will have a net worth

substantially in excess of $100,000 on

the date of the issuance of the

Securities. PaineWebber also does not

anticipate that the net worth of the

Trusts will fall below $100,000 before

they are terminated.

4. Section 6(c) of the Act provides that

the SEC may exempt persons or

transactions if, and to the extent that,

the exemption is necessary or

appropriate in the public interest and

consistent with the protection of

investors and the purposes fairly

intended by the policy and provisions of

the Act. PaineWebber requests that the

SEC issue an order under section 6(c)

exempting the Trust from the

requirements of section 14(a).

PaineWebber believes that the

exemption is appropriate in the public

interest and consistent with the

protection of investors and policies and

provisions of the Act.

C. Section 17(a)

1. Sections 17(a)(1) and (2) of the Act

generally prohibit the principal

underwriter, or any affiliated person of

the principal underwriter, of a

registered investment company from

selling or purchasing any securities to or

from that investment company. The

result of these provisions is to preclude

the Trusts from purchasing Treasuries

from PaineWebber.

2. Section 17(b) of the Act provides

that the SEC shall exempt a proposed

transaction from section 17(a) if

evidence establishes that the terms of

the proposed transaction are reasonable

and fair and do not involve

overreaching, and the proposed

transaction is consistent with the
Federal Register / Vol. 63, No. 115 /Tuesday, June 16, 1998 / Notices 32905

1 15 U.S.C. 78s(b)(1).

2Securities Exchange Act Release No. 39110

(September 22, 1997), 62 FR 50978.

3Letters from William C. Alsover, President,

Centennial Securities Company (October 29, 1997);

John G. Woodhead, President, Phelps & Woodhead,

Inc. (January 8, 1998); Ronald E. Berti, SecretaryTreasurer, Wall Street Equities, Inc. (January 15,

1998); and Robert P. VanderWal, President,

Peninsular Securities Company (March 2, 1998).

policies of the registered investment

company involved and the purposes of

the Act. PaineWebber requests an

exemption from sections 17(a)(1) and (2)

to permit the Trusts to purchase

Treasuries from PaineWebber.

3. PaineWebber states that the policy

rationale underlying section 17(a) is the

concern that an affiliated person of an

investment company, by virtue of this

relationship, could cause the investment

company to purchase securities of poor

quality from the affiliated person or to

overpay for securities. PaineWebber

argues that it is unlikely that it would

be able to exercise any adverse

influence over the Trusts with respect to

purchases of Treasuries because

Treasuries do not vary in quality and are

traded in one of the most liquid markets

in the world. Treasuries are available

through both primary and secondary

dealers, making the Treasury market

very competitive. In addition, market

prices on Treasuries can be confirmed

on a number of commercially available

information screens. PaineWebber

argues that because it is one of a limited

number of primary dealers in

Treasuries, it will be able to offer the

Trusts prompt execution of their

Treasury purchases at very competitive

prices.

4. PaineWebber states that it is only

seeking relief from section 17(a) with

respect to the initial purchase of the

Treasuries and not with respect to an

ongoing course of business.

Consequently, investors will know

before they purchase a Trust’s Securities

the Treasuries that will be owned by the

Trust and the amount of the cash

payments that will be provided

periodically by the Treasuries to the

Trust and distributed to Holders.

PaineWebber also asserts that whatever

risk there is of overpricing the

Treasuries will be borne by the

counterparties and not by the Holders

because the cost of the Treasuries will

be calculated into the amount paid on

the Contracts. PaineWebber argues that,

for this reason, the counterparties will

have a strong incentive to monitor the

price paid for the Treasuries, because

any overpayment could result in a

reduction in the amount that they

would be paid on the Contracts.

5. PaineWebber believes that the

terms of the proposed transaction are

reasonable and fair and do not involve

overreaching on the part of any person,

that the proposed transaction is

consistent with the policy of each of the

Trusts, and that the requested

exemption is appropriate in the public

interest and consistent with the

protection of investors and purposes

fairly intended by the policies and

provisions of the Act.

Applicant’s Conditions

PaineWebber agrees that the order

granting the requested relief will be

subject to the following conditions:

1. Any investment company owning

voting stock of any Trust in excess of

the limits imposed by section 12(d)(1) of

the Act will be required by the Trust’s

charter documents to vote its Trust

shares in proportion to the vote of all

other Holders.

2. The trustees of each Trust,

including majority of the trustees who

are not interested persons of the Trust,

(i) will adopt procedures that are

reasonably designed to provide that the

conditions set forth below have been

complied with; (ii) will make and

approve such changes as deemed

necessary; and (iii) will determine that

the transactions made pursuant to the

order were effected in compliance with

such procedures.

3. The Trusts (i) will maintain and

preserve in an easily accessible place a

written copy of the procedures (and any

modifications to such procedures), and

(ii) will maintain and preserve for the

longer of (a) the life of the Trusts and

(b) six years following the purchase of

any Treasuries, the first two years in an

easily accessible place, a written record

of all Treasuries purchased, whether or

not from PaineWebber, setting forth a

description of the Treasuries purchased,

the identity of the seller, the terms of

the purchase, and the information or

materials upon which the

determinations described below were

made.

4. The Treasuries to be purchased by

each Trust will be sufficient to provide

payments to Holders of Securities that

are consistent with the investment

objectives and policies of the Trust as

recited in the Trust’s registration

statement and will be consistent with

the interests of the Trust and the

Holders of its Securities.

5. The terms of the transactions will

be reasonable and fair to the Holders of

the Securities issued by each Trust and

will not involve overreaching of the

Trust or the Holders of Securities of the

Trust on the part of any person

concerned.

6. The fee, spread, or other

remuneration to be received by

PaineWebber will be reasonable and fair

compared to the fee, spread, or other

remuneration received by dealers in

connection with comparable

transactions at such time, and will

comply with section 17(e)(2)(C) of the

Act.

7. Before any Treasuries are

purchased by the Trust, the Trust must

obtain such available market

information as it deems necessary to

determine that the price to be paid for,

and the terms of, the transaction is at

least as favorable as that available from

other sources. This will include the

Trust obtaining and documenting the

competitive indications with respect to

the specific proposed transaction from

two other independent government

securities dealers. competitive quotation

information must include price and

settlement terms. These dealers must be

those who, in the experience of the

Trust’s trustees, have demonstrated the

consistent ability to provide

professional execution of Treasury

transactions at competitive market

prices. They also must be those who are

in a position to quote favorable prices.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–15891 Filed 6–15–98; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40081; File No. SR–NSCC–

97–07]

Self-Regulatory Organizations;

National Securities Clearing

Corporation; Order Approving a

Proposed Rule Change Relating to

Changes in Membership Standards

June 10, 1998.

On August 5, 1997, the National

Securities Clearing Corporation

(‘‘NSCC’’) filed with the Securities and

Exchange Commission (‘‘Commission’’)

a proposed rule change (File No. SR–

NSCC–97–07) 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 September 29, 1997.2 Four comment

letters were received.3 For the reasons

discussed below, the Commission is

approving the proposed rule change.

I. Description

The rule change revises NSCC’s

financial membership standards