FLC OF B737-400 MISHEARS CLRNC FOR DSCNT WHEN PASSING ACFT; ALT IS GIVEN AS WELL.

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WHILE DSNDING THROUGH APPROX FL240; ATC TOLD US TFC WAS XING R TO L AT FL200. WE HAD BEEN CLRED TO FL210. WE WERE TOLD ALSO TO EXPECT KARLA INTXN AT 11000 FT; 250 KTS. I READ BACK THIS INFO; THEN I USED #2 RADIO TO GET THE ATIS. A FEW MINS LATER; ATC ASKED US IF WE HAD BEEN CLRED TO FL210. I LOOKED AT OUR ALT WHICH WAS LEVEL AT FL200. I THEN LOOKED AT THE ALT SET IN THE PANEL AND SAW FL200 SET IN. THE LAST TIME I HAD POINTED TO IT; IT HAD FL210 SET IN IT. I BELIEVE THE CAPT INADVERTENTLY SET IN FL200 WHEN TOLD OF THE TFC AT FL200 WHILE I WAS ON THE #2 RADIO GETTING THE ATIS. THE TFC THAT HAD BEEN POINTED OUT TO US WAS SEEN PASSING US WHILE STILL DSNDING THROUGH FL240; SO IT WAS NO FACTOR. SUPPLEMENTAL INFO FROM ACN 400317: WE WERE DSNDING ON THE BYP2 STAR APPROX 40 MI E OF KARLA INTXN. XING TFC WAS POINTED OUT TO US 1000 BELOW; TRAVELING FROM OUR R TO L. WE SAW HIM WHILE WE CONTINUED OUR DSCNT TO FL200. I THOUGHT WE HAD BEEN CLRED TO FL200 BUT INSTEAD TO ONLY FL210. ATC WAS POINTING OUT TFC AT FL200; BUT I THOUGHT WE HAD BEEN CLRED TO FL200. NO ACTION WAS NECESSARY SINCE TFC HAD PASSED WHEN ATC POINTED OUT THE WRONG ASSIGNED ALT. THE ALT CHANGE WAS NOT NOTED BY THE FO BECAUSE HE WAS PICKING UP THE DFW ATIS AT THE TIME. MAYBE IF THE TFC'S ALT WAS NOT MENTIONED; I WOULDN'T HAVE HEARD FL200 AND READ IT BACK AS A CLRNC; THAT MIGHT HAVE HELPED. INSTEAD OF ATC TELLING US THE ALT OF THE TFC; THEY COULD JUST SAY '1000 FT BELOW.' ANYWAY; FORTUNATELY NO ACTION WAS NECESSARY AND IT WAS NOT A NEAR MISS.