From: Jim Nardone
Sent: May 5, 2006
Subject: File No. SR-NSCC-2006-03

The additional deposit requirements as indicated in said rule actually can create an cash issue for a smaller to medium size firm and could result in inability to satisfy their obligations thereby, quite possibility creating the exact situation, which this rule is intended to prevent. I know of a case, where a small profitable firm thru no fault of its own was forced to give up self-clearing because the deposit requirements became too onerous, basically being penalized for adding more business. These higher requirements are basically forcing the small to medium size firms to seek clearing thru the large mega brokers, who have access to large unsecured and secured lines of credit, effectively reducing competition. I would like to see some sort of general fund, quite similar to a SIPC or FDIC model ,which allows a level playing field for competitors large or small and affords the public more options. Additionally, this does not factor in firms which have unregulated entities and the potential liability those entities could create, similar to a REFCO situation. Maybe, firms with these type of non equity entities could be held to a higher deposit standard.