Richard B. Nesson
Executive Vice President and General Counsel
The Depository Trust Company
55 Water Street
New York, NY 10041

Dear Mr. Nesson:

This is in response to your letter of November 19, 1996, to John Cassidy of the Federal Reserve Bank of New York in which you request confirmation of the ability of the Depository Trust Company ("DTC") to purchase and hold a 50 percent membership interest in International Depository & Clearing LLC ("IDC"), a de novo New York limited liability company that would be owned jointly by DTC and the National Securities Clearing Corporation ("NSCC").

As detailed in your letter and its attachments, IDC would provide research, marketing assistance, and similar support services to DTC, NSCC, and their affiliates, with a cross-border focus. For example, IDC would provide developmental expertise, information, monitoring, marketing, and similar support to DTC's Institutional Delivery system and to the Global Clearing Network operated by the International Securities Clearing Corporation, a wholly-owned subsidiary of NSCC. IDC would also provide assistance to DTC participants and NSCC members in foreign jurisdictions and coordinate services and relationships with foreign institutions and vendors.

Your letter indicates that the operating agreement for IDC limits its activities to those that are permissible for both DTC and NSCC, that the activities in which IDC will be permitted to engage cannot change without DTC's consent, and that either DTC or NSCC can veto any IDC activity.

Based on your letter, we understand that DTC's potential exposure to loss will be limited by the structure of the proposed investment. As a legal matter, DTC's financial risk will be limited to its investment in IDC, and DTC will have no liability for the debts, obligations, or other liabilities of IDC. DTC also will not be exposed to the liabilities of IDC as an accounting matter, as DTC does not expect to obtain a controlling interest in IDC, and therefore DTC's interest in IDC will not be consolidated on its books. We also understand that, should DTC obtain an interest of greater than 50 percent at some time in the future, DTC would retain the controls discussed above over the management of IDC and therefore would not be exposed to liability for the acts of the other members of IDC.

Based on the above factors, staff would not recommend that the Board find the proposed investment is barred for a state member bank by section 16 of the Glass-Steagall Act. This letter is limited to the facts as we understand them and differing facts could lead to a differing result.

Very truly yours,

(signed) Oliver Ireland

Oliver Ireland