A 4602 May 21, 1997
P&S 4182

TO: ALL PARTICIPANTS

ATTENTION: MANAGING PARTNER/OFFICER, OPERATIONS PARTNER/OFFICER

SUBJECT: NEW DIRECTOR CATEGORY--THE "INDUSTRY DIRECTOR"

National Securities Clearing Corporation ("NSCC" or the "Corporation") has filed a rule change with the Securities and Exchange Commission consisting of amendments to NSCC's Shareholders Agreement and By-Laws to expand the Corporation's Board of Directors by one member through the creation of a new director category, "Industry Director".

NSCC's Shareholders Agreement provides for three categories of directors: Shareholder Directors, who represent each of NSCC's three shareholders (the New York Stock Exchange, the American Stock Exchange and the National Association of Securities Dealers); a Management Director, typically the NSCC President, who represents management; and, Participant Directors, who represent and are selected from NSCC's participants.

The Board of Directors has determined that it would be in the beneficial interests of the Corporation to create a new Board seat to be filled by a senior level securities industry official designated by the NSCC Board. Since such a seat would not necessarily fall within any of the existing director categories, NSCC has proposed that its Shareholders Agreement and By-Laws be amended to accommodate this new director category.

By this proposed rule change, NSCC will increase the number of its Board directorships from twenty to twenty-one, including three Shareholder Directors, one Management Director, sixteen Participant Directors and one Industry Director.

The text of the proposed rule change may be obtained by contacting the NSCC Legal Department at (212) 412-8634.

Written comments on the proposed rule filing may be addressed to David F. Hoyt, Assistant Secretary, National Securities Clearing Corporation, 55 Water Street, New York, New York 10041, and your comments will be forwarded to the Securities and Exchange Commission. You may also address your written comments to the Secretary of the Commission, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, D.C. 20549. We request that you provide NSCC with a copy of your comments.

Questions regarding the rule filing should be directed to Richard J. Paley, Associate Counsel, at (212) 412-8874.

Robert J. Woldow
Managing Director and General Counsel