SUBJECT: INTERPRETATION CONCERNING THE RELEASE OF CLEARING DATA TO REGULATORY AND SELF-REGULATORY ORGANIZATIONS

National Securities Clearing Corporation ("NSCC") has filed a rule change with the Securities and Exchange Commission ("SEC") pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934, as amended, regarding a modification to NSCC’s Interpretation concerning the Release of Clearing Data to Regulatory and Self-Regulatory Organizations.

The purpose of the proposed rule change is to modify NSCC’s Interpretation concerning the Release of Clearing Data to Regulatory and Self-Regulatory Organizations to accommodate a request by the Municipal Securities Rulemaking Board ("MSRB") as described below.

The MSRB’s Rules require brokers, dealers, and municipal securities dealers (collectively, "dealers") to report inter-dealer municipal securities transaction data to the MSRB. In connection with this requirement, NSCC currently provides the MSRB with inter-dealer municipal securities transaction data based on trades submitted to NSCC by dealers for automated comparison. The MSRB uses the data to maintain a surveillance database and to make public reports on price and volume of frequently traded issues.

The MSRB has amended its Rules to require dealers also to report customer (i.e., institutional and retail) municipal securities transaction data to the MSRB for transactions effected after January 1, 1998. In connection with this requirement, the MSRB has asked NSCC to act as a conduit to enable dealers that are NSCC participants to use existing telecommunications links between NSCC and the MSRB to pass through the required customer municipal securities transaction data. NSCC does not intend to edit, validate, or otherwise alter the information to be received from dealers and transmitted to the MSRB.

NSCC’s Interpretation concerning the Release of Clearing Data to Regulatory and Self-Regulatory Organizations is set forth in Addendum H to NSCC’s Rules and Procedures.

Addendum H limits the release of municipal securities clearing data to regulatory and self-regulatory organizations who have demonstrated the necessity for obtaining the data in furtherance of their regulatory purpose.

The proposed rule change adds a statement to Addendum H, consistent with the interpretation, to the effect that NSCC has determined to facilitate the provision of inter-dealer and customer municipal securities transaction data to the MSRB, who has advised NSCC that the provision of this data serves regulatory purposes, namely to provide transparency in the municipal securities market and to assist compliance by participants with the MSRB’s Rules.

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 SEC. 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 Anthony H. Davidson, Associate Counsel, at (212) 412-8692. Questions regarding NSCC’s interface with the MSRB’s transaction reporting program should be directed to Martin R. Simoneau, Systems Project Manager, at (212) 412-8594.

Robert J. Woldow
Managing Director and General Counsel