CHICAGO - A subsidiary of the Chicago Stock Exchange is offering a depository Service - the first of its kind - for registered municipal and corporate bonds with a par value of less than $1,000.

Under the Baby Bond Safekeeping Program, administered by the Midwest Securities Trust Company, holders of so-called baby or mini-bonds of less than $1,000 in par value are able to obtain services such as safekeeping of certificates, book-entry settlement, and automated payment of interest and redemption proceeds.

The program is the first of its kind implemented by a U.S. depository, according to Robert McGrail, chief operating officer of the Midwest Securities Trust.

A spokesman for the Depository Trust Company of New York, Midwest Securities Trust's major competitor, said that Depository Trust will offer similar services for mini-bonds in the first half of next year.

Typically, institutions and their investors holding smaller denomination bonds have to make provisions for certificate safekeeping and physical trade settlement of their own holding because depositories were unable to process bonds with denominations of less than $1,000, McGrail said.

Midwest Securities' safekeeping program enables broker-dealers and other financial institutions to provide improved service to their mini-bond customers, McGmil said.

"We are certain this [program] will create significant efficiencies for our brokerage firm customers," McGrail said.

Midwest Securities worked with industry leaders for six to eight months in designing the program, which began on Nov. 19, McGrail said. "A couple of thousand of securities" were entered into the Program in the first five days of its inception" he said.

Frances A. Walton, managing director of public finance at Lebenthal & Co. Inc., called the program "unusual" and "exciting." Currently, many smaller denomination bonds are issued in the form of zero coupon bonds or capital appreciation bonds to avoid making special provisions for safekeeping and other services, Walton said.

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