SECURITIES AND EXCHANGE COMMISSION
(Release No. 34-39110; File No. SR-NSCC-97-07)

September 22, 1997

Self-Regulatory Organizations; National Securities Clearing
Corporation; Notice of a Proposed Rule Change Relating to Changes
in Membership Standards

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

of 1934 ("Act")<1>, notice is hereby given that on August 5, 1997,

the National Securities Clearing Corporation ("NSCC") 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 NSCC.  The Commission

is publishing this notice to solicit comments from interested

persons on the proposed rule change.

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

     The proposed rule change will amend NSCC's membership

standards to increase the minimum excess net capital requirements

imposed on members and applicants for membership.

II.  Self-Regulatory Organization's Statement of the Purpose of,
     and Statutory Basis for, the Proposed Rule Change

     In its filing with the Commission, NSCC included statements

concerning the purpose of and basis for the proposed rule change

and discussed any comments it received on the proposed rule

change.  The text of these statements may be examined at the

places specified in Item IV below.  NSCC has prepared summaries,

set forth in sections (A), (B), and (C) below, of the most

significant aspects of such statements.<2>

          (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 NSCC's

membership standards to increase the amount of net capital

required over the Commission's minimum net capital requirements

("excess net capital").<3>  Currently, the excess net capital

requirement for all members is $50,000.  The proposed amendments:

(i) will increase the excess net capital requirement for full

service members to $500,000 except for municipal securities

brokers' brokers<4> for which the excess net capital requirement

will be $100,000<5> and (ii) will increase the excess net capital

requirement for members that clear for other broker-dealers to

$1,000,000.

     NSCC's current excess net capital requirements were

implemented in 1976 when NSCC was formed.  The environment in

which NSCC members operate has changed significantly since that

time.  In terms of the change in the value of money alone,

$50,000 in 1976 dollars is worth nearly $150,000 today.  Trading

volumes and the average value of securities traded have increased

even more significantly.  The Commission also has changed its

minimum net capital requirements for most NSCC members during

this time period from $25,000 (i.e., one-half of NSCC's current

excess net capital requirement) to $250,000 (i.e., one-half of

NSCC's proposed excess net capital requirement).<6>

     As a result of the changing environment, it has been NSCC's

recent experience that when a member with less than $500,000 in

excess net capital has problems with even one transaction that

would not be considered large by today's standards, concerns

arise with respect to that member's ability to settle on a timely

basis and to post additional required collateral with NSCC.

Additionally, even though the size of the exposure due to the

failure of any one of these small firms is relatively small, NSCC

believes that the time and resources that it must spend

addressing problems related to small firms is disproportionate to

the magnitude of the potential loss and is unjustifiably

disruptive of NSCC's daily surveillance process.

     NSCC also believes that the owners or principals of an NSCC

member should have a meaningful amount of their own assets at

stake to absorb losses before a member's excess net capital falls

below regulatory minimums and the member is required to cease

doing business.  NSCC believes that this provides a strong

motivation for firms to implement appropriate risk management

controls on their own.  In today's environment, NSCC does not

believe that $50,000 is a meaningful amount and believes that

$500,000 is a more appropriate amount.<7>

     In addition, NSCC has recognized that members that clear for

other broker-dealers present special risks to the clearance and

settlement process.  These firms become legally responsible for

the settlement of transactions of other firms and generally do

not have complete control over those transactions.  Many of these

firms have surveillance procedures and other risk controls in

place and can cease clearing for a correspondent broker-dealer if

they perceive that a risk has developed.  But the clearing

arrangements of these firms and marketplace rules generally

require that the clearing firm (i.e., the NSCC member) take on

settlement responsibility for most of the correspondent broker-

dealer's transactions before the clearing firm has had a chance

to review such transactions.  This increases the possibility that

a clearing firm will be responsible for problematic or risky

transactions.  In light of the higher risk presented by these

firms, NSCC believes that they should be subject to higher

minimum capital standards.

     Currently, twenty-nine NSCC members do not meet the proposed

$500,000 standard for full service members.  For this reason,

NSCC proposes that the new standard become effective on the later

of (a) one year from the date of publication in the Federal

Register of the notice of the filing of this rule change or (b)

the date of Commission approval of this rule change.  NSCC

believes that this effective date will give those firms

sufficient time to obtain appropriate capital infusions or make

other clearing arrangements.

     In addition, two NSCC members that clear for other broker-

dealers do not meet the $1,000,000 standard.  Therefore, NSCC

proposes that this new standard become effective on the later of

(a) six months from the date of publication in the Federal

Register of the notice of the filing of this rule change or (b)

the date of Commission approval of this rule change.  NSCC

believes that this effective date will give those firms

sufficient time to obtain appropriate capital infusions.

     During the interim period, if any, between Commission

approval of this rule change and its effective date, NSCC will

not consider applicants that do not meet the new minimum capital

standards other than those firms applying for membership in

connection with the agreement between NSCC and the Stock Clearing

Corporation of Philadelphia ("SCCP") under which SCCP has agreed

to cease operations as a clearing corporation.

     In view of the facts that (i) the costs of surveillance and

of collateral collection procedures in both time and resources

falls on NSCC and all of its members and that these costs are

disproportionately high relative to the size of the potential

loss for members with less than $500,000 in excess net capital,

(ii) the default or insolvency of any settling member potentially

imposes burdens and costs on NSCC and all of its members, and

(iii) the changes proposed by this filing are meant to reduce

these burdens and costs, NSCC believes that this filing is

consistent with Section 17A of the Act<8> and the rules and

regulations thereunder.

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

     NSCC does not believe that the proposed rule change will

impose a burden on competition.  In fact, NSCC believes that the

proposed rule change will rectify a burden on competition that

has slowly developed due to changing circumstances by having the

costs of risk management more equitably borne by all NSCC members

and by requiring all firms to have a meaningful amount of capital

at risk.  NSCC believes the increased capital requirements better

reflect current marketplace realities.

          (C)  Self-Regulatory Organization's Statement on
          Comments on the Proposed Rule Change Received from
          Members, Participants or Others

     No written comments relating to the proposed rule change

have been solicited or received.  NSCC will notify the Commission

of any written comments received by NSCC.

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 NSCC consents, the

Commission will:

                    (A)  by order approve such 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,

N.W., Washington, D.C. 20549.  Copies of the submission, 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 in the

Commission's Public Reference Section, 450 Fifth Street, N.W.,

Washington, D.C.  20549.  Copies of such filing also will be

available for inspection and copying at the principal office of

NSCC.  All submissions should refer to File No. SR-NSCC-97-07 and

should be submitted by [insert date 21 days from the date of

publication in the Federal Register].

     For the Commission by the Division of Market Regulation,

pursuant to delegated authority.<9>


                              Jonathan G. Katz
                              Secretary

_______________________________
     1    15 U.S.C. 78s(b)(1).
          
     2    The  Commission has modified the text of the  summaries
          prepared by NSCC.
          
     3    The  minimum net capital requirements are set forth  in
          Rule 15c3-1(a) under the Act.  17 CFR 240.15c3-1(a).
          
     4    "Municipal  securities brokers' broker" is  defined  in
          Rule  15c3-1(a)(8)  under the Act.   17  CFR  240.15c3-
          1(a)(8).
          
     5    NSCC   believes  that  this  is  consistent  with   the
          Commission's  approach of maintaining separate  capital
          rules for municipal securities brokers' brokers.
          
     6    See 17 CFR 240.15c3-1(a)(2)(i).
          
     7    Under the proposed rule change, NSCC will maintain  its
          current right to impose higher capital requirements  on
          members  depending  on the circumstances  and  type  of
          business that the member is in.
          
     8    15 U.S.C. 78q-1.
          
     9    17 CFR 200.30-3(a)(12).