Self-Regulatory Organizations; Midwest Clearing Corporation; Notice of Filing of a Proposed Rule Change Relating to the Processing of Basket Trades

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-33595; File No. SR-MCC-94-1]

Self-Regulatory Organizations; Midwest Clearing Corporation;

Notice of Filing of a Proposed Rule Change Relating to the Processing

of Basket Trades

February 8, 1994.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

(``Act''),\1\ notice is hereby given that on January 7, 1994, the

Midwest Clearing Corporation (``MCC'') filed with the Securities and

Exchange Commission (``Commission'') the proposed rule change 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.

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\1\15 U.S.C. 78s(b)(1) (1988).

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I. Self-Regulatory Organization's Statement of the Terms of Substance

of the Proposed Rule Change

Midwest Clearing Corporation (``MCC'') proposes to amend its rules

relating to the processing of trades in the Chicago Basket (``CXM''). A

detailed description of the CXM is contained in File No. SR-CHX-93-

18,\2\ and a detailed description of the current procedure for

processing CXM trades is contained in File No. SR-MCC-93-3.\3\

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\2\Securities Exchange Act Release No. 33053 (October 15, 1993),

58 FR 54610.

\3\Securities Exchange Act Release No. 33054 (October 15, 1993),

58 FR 54620.

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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 statutory basis for the proposed rule

change and discussed any comments it received on the proposal. 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.

(A) Self-Regulatory Organization's Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule Change

The purpose of the proposed rule change is to amend MCC's rules

relating to the processing of trades in the CXM. The CXM is a basket of

stocks that is comprised of the stocks included in the Chicago

Mercantile Exchange's MMI stock index futures contract and is comprised

of a fixed quantity of twenty-five shares of each of the stocks

included in that futures contract.

Basket trades are defined by MCC as trades in a group of securities

that an exchange or market place Self-Regulatory Organization (``SRO'')

has designated as eligible for execution in a single trade. MCC's

current rules relating to basket trades permit MCC to accept from an

exchange or market place SRO locked-in basket trade data. On T+1, MCC

reports the locked-in basket trades to participants on a basket

purchase and sales report. MCC separately combines, by participant, all

basket buy transactions and all basket sell transactions. Aggregate buy

side and aggregate sell side basket transactions are then ``burst''

into their component securities for clearance and settlement. The

continuous net settlement (``CNS'') system nets all component

securities. This results in an individual participant being either a

net buyer or a net seller in each of a basket's component securities.

The component securities are CNS eligible and are reflected on the

appropriate CNS purchase and sales report. ``Burst'' basket trades are

netted with all other transactions in the same component security

having the same settlement.

The proposed rule will provide an alternative clearing process for

trades in the CXM. The alternative must be elected on an account-by-

account basis (as opposed to a trade-by-trade basis). Under this

alternative, rather than aggregating all buy transactions and all sell

transactions in one account prior to the separation of the CXM into its

component stocks, MCC will separate each basket transaction, as

executed, into its component securities, by lot, without the

aggregation process. MCC will report this information to the electing

participant instead of the participant's aggregate net buy and

aggregate net sell basket information. This new alternative will make

it easier for participants to allocate the correct number of shares to

customers and will make it easier to identify trades for cancellation

and correction.

Because the proposed rule change will facilitate the prompt and

accurate clearance and settlement of securities transactions, it is

consistent with the requirements of Section 17A of the Act.

(B) Self-Regulatory Organization's Statement on Burden on Competition

MCC believes that no burden will be placed on competition as a

result of the proposed rule change.

(C) Self-Regulatory Organization's Statement on Comments on the

Proposed Rule Change Received from Members, Participants, or Others

No comments were received.

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 the self-regulatory organization consents,

the Commission will:

(A) By order approve the 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. Persons making written submissions

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 office of MCC. All submissions should refer to File No. SR-

MCC-94-1 and should be submitted by March 8, 1994.

For the Commission by the Division of Market Regulation,

pursuant to delegated authority.\4\

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\4\17 CFR 200.30-3(a)(12) (1993).

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Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 94-3477 Filed 2-14-94; 8:45 am]

BILLING CODE 8010-01-M