In the CASH SETTLEMENT area, using the PCC approach:

Money balances for ALL trades (listed and OTC; broker and institution) settled with one entity, PCC.

CONSIDERABLE PROGRESS TO DATE

National Coordinating Group for Depositories

Nationwide Network of Depository Committees

PCSE Institutional Clearing Program (ICP)

Major California Banks Now in PCC or Working toward Joining PCC

Memorandum of Understanding (Clearing and Depository
Participation)

PSD Implementation Committee 6 Full-time EDP Systems Specialists;

Considerable interest in PCSE clearing ("1st" or "2nd" level clearing)

All PCC clearing firms to be converted to PSD book-entry transfer.

JOINT APPROACH

The joint approach to clearing on the Pacific Coast is based on the
Pacific Clearing Corporation (PCC) using its net-by-net
over-the-counter and listed clearing system as the western part of
the National Clearing Corporation (NCC) over-the-counter clearing
system. The PCC system would be interfaced with the NCC
system, so that transactions entered in either one would be
effectively entered in both, as required by the system or elected
by the broker.

Advantages of the Joint Approach to OTC clearing are that it:

Accommodates regional differences in business hours, banking relationships, taxes, etc.

Provides for combined positions and clearing for OTC -
transactions and transactions on one or more stock
exchanges, in the same security.

Connects to the Pacific Securities Depository, which will
ultimately interface with Central Certificate Service and
other depositories as formed.

Permits local flexibility and creativity in developing new and improved services for brokers.

Can insulate local brokers from national changes.

Provides good response to local brokers by virtue of local control and responsibility.

"ONE AGENCY" APPROACH

The "one agency" approach is based on a uniform
over-the-counter clearing system established in all parts of the
country, including the Pacific Coast. The OTC clearing facilities on
the West Coast might be contiguous to the listed clearing facilities.
However, the broker's OTC transactions and OTC clearing
requirements would be entirely independent of any other clearing
facilities in which he participates.

Advantages to the "One Agency" Approach to OTC Clearing are that it:

JOINT APPROACH

INDUSTRY AND REGULATORY VIEWS ON INTERFACE

SIA

The Seven Criteria for the Establishment of a National Clearing and Depository System of the SIA state that all firms should be members of one national clearing entity interfaced with one national depository, processing transactions between members in a standard manner and developing only one position per security for a member, with standard fund payments and with regional facilities for the handling of securities. The Pacific Coast Stock Exchange has been informed by SIA that the Joint Approach is entirely consistent with SIA's objectives. In fact, PCC now has the only facility in the nation which provides the capability that SIA desires on a national scale.

Central Market System

The Martin Report, the SEC, the Congress, and the Exchanges have stated that they support a concept of multiple markets for listed securities. These markets would be linked together electronically to provide access for any order to the best available market. This interface of multiple, similar marketplaces parallels the joint approach for clearing as proposed by PCC.

National Coordinating Committee for Depositories

“Thus, as outlined, we endorse the concept of a nationwide system of interrelated regional depositories. This approach provides the opportunity to develop the depository concept more quickly, utilizing many existing facilities."

"A regional approach will be more responsive to local needs and capabilities.”

(Above quotes from John H. Perkins, Chairman of the National Coordinating Group for Comprehensive Securities Depositories, Testimony to the United States Senate Committee on Banking, Housing and Urban Affairs on September 8, 1972.)

The National Coordinating Committee for Depositories has committed itself to a system of linked regional depositories. These depositories will be connected so that a supply in one may be balanced against a demand in another, and the necessary interface to accomplish this between Pacific Securities Depository and Central Certificate Service is now a major effort to which both organizations have committed themselves. The maintenance of parallel progress and development between clearing systems and depository systems is essential for the efficient conduct of business by the industry in the future.