APPENDIX XIII

NATIONAL CLEARING CORPORATION

May 26, 1972

Mr. Kenneth D. Stephens
Assistant Counsel

Securities Industry Study
Banking, Housing and Urban

Affairs Committee

U.S. Senate

Washington, DC 20510

Dear Ken:

Now that NCC has been operational in New York for a few months, I thought you would be interested in the results shown in the following attach

ments.

The first chart compares the shares represented by trades entered into the continuous net process with shares delivered into clearing. There is, of course, a week's lag in deliveries as charted, because of the settlement cycle. Please note that the "netting effect" on deliveries (percentage shown above) now is running about 70% and should be sustained at that level (or even higher) as more firms are added to the system. The second chart shows the "netting effect" in terms of dollar value.

Note also can be taken of the industry trends shown in the enclosed weekly report of select American Stock Exchange member firms, and in the monthly "fails" comparison prepared by the New York Stock Exchange. We are convinced that the system already is beginning to generate a favorable impact on fails.

As of May 26, 216 firms in New York, four in Boston, and three in Philadelphia are participating in NCC's continuous net settlement process. We expect to have our New York membership fully converted this June and are making plans to expand Boston and Philadelphia area services rapidly.

An analysis of recent industry indicators (fails, error inputs to clearing, transfers, FACS, etc.)shows that securities processing was under very good control through the higher trading volume period earlier this year and remains so now. Accordingly, the Operations Committee of the Amex Board of Governors has directed that this Industry Condition Report be published monthly instead of weekly for the present. Indicators will continue to be reviewed daily and weekly and the Report will be rescheduled weekly if a volume surge occurs or any indication appears that securities processing is deteriorating. The monthly schedule for publication will be the third Thursday to correspond with the Policy Meeting of the Board.

Industry Trends
Weekly Fails

Processing

Total dollar fails for the 62 firms surveyed dropped 14% to
$596 million ... as volume continued to decline ... ETDs
fell 0.1 to 0.9 day since the fails decreased faster than
the sales that generated them.

...

...

Amex dollar fails of these firms fell 5% to $42 million
lowest level since January ETDS remained constant at
0.7 day since the drop in fails paralleled the decline in
sales of the prior week First time ETDs remained this

...

low two weeks in a row since monitoring was started in 1969.

NYSE dollar fails decreased 9% to $170 million

corresponding to declining volume.

Listed Bond dollar fails dropped 7% to $117 million ...
reaching the year's midpoint level.

OTC dollar fails plunged 21% to $267 million ... lowest
level this year.

Combined Amex and NYSE average daily share volume in-
creased 1% last week; Amex rose 4% while NYSE declined
1% to a new 1972 low point Amex volume was 29% of
NYSE volume, up slightly from the previous week.

...