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85-39 NASDAQ National Market System Grows to 1,998 Securities With 23 Voluntary Additions on June 4, 1985

TO: All NASD Members and Level 2 and Level 3 Subscribers

On Tuesday, June 4, 1985, 23 issues are scheduled to join the NASDAQ National Market System bringing the total number of issues in NASDAQ/NMS to 1,998. These issues, which will begin trading under real-time trade reporting, are entering the NASDAQ/NMS pursuant to the Securities and Exchange Commission's criteria for voluntary designation.

The issues scheduled to join NASDAQ/NMS on Tuesday, June 4, 1985, are:

Symbol

Company

Location

ABPI

American Businessphones, Inc.

Irvine, CA

BPHC

Bay Pacific Health Corporation

San Bruno, CA

BRLYS

Bradley Real Estate Trust

Boston, MA

CHAR

Chaparral Resources, Inc.

Denver, CO

CSTP

Congress Street Properties, Inc.

Jackson, MS

CSCS

Continental Steel Corp.

Kokomo, IN

DIVHF

Divi Hotels, N.V.

Netherlands Antilles

ETCC

Environmental Testing and Certification Corporation

Edison, NJ

AJGC

Gallagher (Arthur J.) & Co.

Rolling Meadows, IL

HHHC

Hanover Companies, Incorporated

Glen Oaks, NY

MKCO

Kamenstein (M.), Inc.

White Plains, NY

KING

King World Productions, Inc.

Summit, NJ

LIBAV

Liberty Homes, Inc. Class A

Goshen, IN

LIBBV

Liberty Homes, Inc. Class B

Goshen, IN

MMIM

MMI Medical, Inc.

Pomona, CA

MCCS

Medco Containment Services, Inc.

Elm wood Park, NJ

MCRS

Micros Systems, Inc.

Beltsville, MD

MILT

Miltope Group, Inc.

New York, NY

OLGR

Oilgear Company (The)

Milwaukee, WI

RANG

Rangaire Corporation

Cleburne, TX

RESM

Restaurant Management Services, Inc.

Macon, GA

USBP

USABANCORP, Inc.

Johnstown, PA

UNNB

University National Bank & Trust Company

Palo Alto, CA

The following issues may be included in the NASDAQ/NMS prior to the next regularly scheduled phase-in date:

Pending Additions

Symbol

Company

Location

CYPMV

Cyprus Minerals Company

Englewood, CO

MDIN

Medalist Industries, Inc.

Mequon, WI

The following changes to the list of NASDAQ/NMS securities occurred since May 10, 1985:

NASDAQ/NMS Symbol And/Or Name Changes

New/Old Symbol

New/Old Security Name

Date of Change

ALGI/AVMC

American Locker Group, Inc./ AVM Corporation

5/15/85

OGIL/OGIL

The Ogilvey Group, Inc./ Ogilvey & Mather International, Inc.

5/15/85

VUBN/UTBN

Valley Utah Bancorporation/ Utah Bancorporation

5/17/85

CNRD/CNRD

Canrad, Inc./Canrad-Hanover, Inc.

5/20/85

JIFY/AVEC

Jiffy Industries, Inc./ Advanced Energy Corporation

5/24/85

NASDAQ/NMS Deletions

Symbol

Security Name

Date

CCUPC

Compucorp

5/16/85

CSYN

Computer Synergy

5/20/85

MECCQ

Miller Technology & Communications Corporation

5/22/85

UDCO

Universal Development Corporation

5/23/85

Any questions regarding this notice should be directed to Donald Bosic, Assistant Director, NASDAQ Operations, at (202) 728-8043. Questions pertaining to trade reporting rules should be directed to Steve Hickman, Market Surveillance, at(202) 728-8202.

Sincerely,

Gordon S. Macklin
President

Division of Market Regulation

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington. D.C. 20549

May 3, 1985

Mr. David Marcus
Executive Vice President
Mew York Stock Exchange, Inc.
55 Water Street
New York, MY 10041

Mr. John E. Pinto, Jr.
Senior Vice President
National Association of Securities Dealers, Inc.
1735 K Street, N.W.
Washington, D.C. 20006

Dear Messrs. Marcus and Pinto:

It has cone to our attention that certain broker-dealers have entered into agreements with their clearing entities that nay be in violation of the Commission's hypothecation rules. Securities Exchange Act Rules 8c-l and 15c2-l (17 CFR ยงยง240.8c-l and 15c2-1).

Paragraph (a) (2) of each rule prohibits "...the direct or indirect hypothecation by a broker or dealer, or his arranging for or permitting, directly, or indirectly, the continued hypothecation of any securities carried for the account of any customer under circumstances... that will permit such securities to be commingled with securities carried for the account of any person other than a bona fide customer of such broker or dealer under a lien for a loan made to such broker or dealer...." This provision is, of course, primarily designed to prevent a broker-dealer from pledging his customers' securities and his own securities to secure the same loan.

Broker-dealers that do business with clearing banks or other entities normally maintain two borrowings with the same lender. The customer loan is used to finance the extension of credit by the broker-dealer to its customers. Customer securities are pledged under the customer bank loan. The firm bank loan is used to finance firm activities and is collateralized by firm securities.

While most broker-dealers provide separate collateral for each loan, we understand that some broker-dealers have entered into clearing agreements whereby the clearing organization has recourse to all securities and other property within that organization's possession or control. This "cross-lien" language wakes customer securities available to the clearing entity if the broker-dealer defaults on the firm loan and thus constitutes a violation of the hypothecation rules.

The Commission specifically prohibited this practice when it adopted the hypothecation rules. In Securities Exchange Act Release No. 2690 the Commission noted that in order to avoid such violations of Rules 8c-l and 15c2-l, "brokers who pledge customers' securities with any pledgee from whom they are also borrowing on their own securities must see to it that the pledgee, whether it be a bank, another broker or any other lender, does not obtain a general or so-called "cross-lien" on customers' securities as additional collateral for other loans which it has made to the broker on his own securities or those of his partners or other broker-dealers. In other words, where a broker pledges customers' securities as well as his own securities with a single pledgee to secure several loans, one or more of which are made against the broker's own securities, it will be necessary that the pledgee does not have a lien upon customers' securities for any loan except other loans also made against securities carried for the account of customers of the same broker."

Any lien of a clearing corporation or other department of a national securities exchange or a registered national securities association for a loan made and to be repaid on the same calendar day which is incidental to the clearing of transactions in securities or loans through the entity is not subject to these restrictions. See, paragraph (e) of the Rule relating to so-called one-way liens.

Furthermore, the lender, unless he is a broker-dealer subject to these Rules, does not have a right to rehypothecate customers' securities.

It should also be noted that where a bank has access to securities carried for the account of customers, the broker-dealer must ensure that the bank may assert no lien against these securities by virtue of a loan to the broker-dealer which is purportedly unsecured or is secured by firm assets other than firm securities.

Please bring these matters to the attention of your members and your examination staff. If you have any questions, please feel free to call.

Sincerely,

Michael A. Macchiaroli
Assistant Director


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