[Federal Register Volume 63, Number 168 (Monday, August 31, 1998)]
[Notices]
[Pages 46263-46264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23311]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40363; International Series Release No. 1154; File No. 
SR-EMCC-98-03]


Self-Regulatory Organizations; Emerging Markets Clearing 
Corporation; Notice of Filing and Order Granting Accelerated Approval 
of a Proposed Rule Change Regarding Expansion of Eligible Instruments

August 25, 1998.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 28, 1998, the 
Emerging Markets Clearing Corporation (``EMCC'') filed with the 
Securities and Exchange Commission (``Commission'') and on August 20, 
1998, amended the proposed rule change as described in Items I and II 
below, which items have been prepared primarily by EMCC. The Commission 
is publishing this notice and order to solicit comments on the proposed 
rule change from interested persons and to grant accelerated approval.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The proposed rule change will amend EMCC's rules to expand EMCC 
eligible instruments to include sovereign debt.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, EMCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. EMCC has prepared summaries set forth in sections (A), 
(B), and (C) below, of the most significant aspects of such 
statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by EMCC.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    The proposed rule change expands the list of EMCC eligible 
instruments to include debt issued by a sovereign issuer where: (1) the 
debt is rated in one of the four highest rating categories 
(``investment grade'') by at least two Nationally Recognized 
Statistical Rating Organizations (``NRSRO'') \3\ or (2) the debt is 
rated (a) in one of the four highest rating categories by one NRSRO and 
some satisfactory transaction volume can be demonstrated or (b) in the 
next highest rating category below investment grade by one NRSRO and 
both substantial volume and transactions can be demonstrated to 
indicate liquidity exists.\4\
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    \3\ NRSRO shall have the same meaning as used in Rule 15c3-
1(c)(2)(vi)(F).
    \4\ It is EMCC's understanding that sovereign debt issued by 
Brazil, Argentina, and Mexico currently meet one of the above 
requirements.
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    The proposed rule change also will provide that if sovereign debt 
fails to continue to meet one of the above requirements for a period of 
one consecutive year, EMCC will specifically consider and determine 
whether the sovereign debt should no longer qualify as an EMCC eligible 
instrument. EMCC's rules are being modified to specifically provide 
that if an instrument fails to qualify as an eligible instrument 
transactions that had been accepted by the EMCC prior to such 
determination will continue to be processed and will be treated as if 
they were transactions in EMCC eligible instruments.\5\ Upon a 
determination that an instrument fails to qualify as an eligible 
instrument, no new transactions in such instrument will be accepted by 
EMCC for processing.
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    \5\ Accordingly, the buy-in and sell-out provisions set forth in 
Sections 7 and 8 in EMCC's Rule 8 will continue to apply to such 
transactions.
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    EMCC believes that the proposed rule change is consistent with the 
requirements of Section 17A of the Act and the rules and regulations 
thereunder because it will facilitate the prompt and accurate clearance 
and settlement of securities transactions.

B. Self-Regulatory Organization's Statement on Burden on Competition

    EMCC does not believe that the proposed rule change will have an 
impact on or impose a burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    No written comments relating to the prosed rule change have been 
solicited or received. EMCC will notify the Commission of any written 
comments received by EMCC.

III. Date of Effectiveness of the Proposed Rule Change and Timing 
for Commission Action

    Section 17A(b)(3)(F) of the Act \6\ requires that the rules of a 
clearing agency be designed to assure the safeguarding of securities 
and funds which are in the custody or control of the clearing agency or 
for which it is responsible. The Commission believes that the proposal 
is consistent with EMCC's obligations under Section 17A(b)(3)(F) 
because EMCC will apply its existing risk controls, such as its daily 
margining procedures, to issues of sovereign debt. EMCC's risk controls 
previously have been approved for use in EMCC's clearance and 
settlement of Brady Bonds, and EMCC has represented to the Commission 
that the controls are applicable to sovereign debt.
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    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission finds good cause for approving the proposed rule 
change prior to the thirtieth day after the publication of notice of 
the filing. Approving prior to the thirtieth day after publication of 
notice will allow EMCC to increase in a timely manner the number of 
securities that can be processed through EMCC, a registered clearing 
agency, instead of through riskier and less efficient means.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments, concerning the foregoing, including whether the proposed 
rule change is consistent with the Act. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street N.W., Washington, 
D.C. 20549. Copies of the submission, all subsequent amendments, all 
written statements with respect to the rule filing that are filed with 
the Commission, and all written communications relating to the rule 
filing between the Commission and any person, other than those that may 
be withheld from the public in accordance with provisions of 5 U.S.C. 
552, will be available for inspection and copying in the Commission's 
Public Reference Room in Washington, D.C. Copies of such filing will 
also be available for inspection and copying at the principal office of 
EMCC. All submissions should refer to the File No. SR-EMCC-98-03 and 
should be submitted by September 21, 1998.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-

[[Page 46264]]

EMCC-98-03) be and hereby is approved on an accelerated basis.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 98-23311 Filed 8-28-98; 8:45 am]
BILLING CODE 8010-01-M