[Federal Register Volume 63, Number 231 (Wednesday, December 2, 1998)]
[Notices]
[Pages 66617-66618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32041]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-40705; File No. SR-EMCC-98-08]


Self-Regulatory Organizations; Emerging Markets Clearing 
Corporation Order Approving a Proposed Rule Change Relating to the 
Offering of Shares of Common Stock

November 24, 1998.
    On August 17, 1998, Emerging Markets Clearing Corporation 
(``EMCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-EMCC-98-08) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposal was published in the Federal 
Register on September 21, 1998.\2\ No comment letters were received. 
For the reasons discussed below, the Commission is approving the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 40433 (September 11, 
1998), 63 FR 50271.
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I. Description

    Pursuant to the rule change EMCC has reclassified 2,000 shares of 
previously authorized EMCC common stock as Class A common stock 
(``Class A stock'') and has created a second class of common stock. In 
addition, the rule change amends EMCC's shareholder agreement to 
reflect the changes to the common stock.
    On March 2, 1998, the Commission authorized EMCC to issue 2,000 
shares of common stock (``original stock'').\3\ On July 31, 1998, EMCC 
filed an amendment to its certificate of incorporation to reclassify 
the original stock as Class A stock and to authorized the issuance of 
non-voting Class B stock. The creation and offering of the Class B 
stock is intended to permit EMCC to raise additional capital which EMCC 
will use in part to fund the development of EMCC projects.
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    \3\ Securities Exchange Act Release No. 39694 (March 2, 1998), 
63 FR 10251 [File No. SR-EMCC-98-01].
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    Under the rule change, EMCC will offer the shares of Class B stock 
to the same entities that were offered the opportunity to purchase the 
original stock.\4\ The purchase price of the Class B stock is $1,000 
per share with a minimum purchase requirement of $25,000. EMCC is 
offering the Class B shares to prospective buyers through an offering 
letter.\5\
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    \4\ The original stock was offered to the entities that 
contributed to the development fund for the organization and initial 
operation of EMCC.
    \5\ Each prospective purchaser of the original stock was 
provided with a copy of EMCC's Form CA-1 (excluding the confidential 
documents). EMCC will provide the prospective purchasers of the 
Class B stock with updates to the Form CA-1 as appropriate.
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    The Class B stock is non-voting and is subject to repurchase upon 
the determination of EMCC's Board. However, EMCC has no obligation to 
repurchase Class B shares owned by a member that terminates its EMCC 
membership prior to the repurchase of all Class B shares. All 
purchasers of Class A and Class B stock will be required to enter into 
an amended version of EMCC's shareholders agreement. No dividends will 
be paid on either the Class A or Class B stock and shareholders may 
sell or transfer their shares only in compliance with EMCC's amended 
shareholder agreement.
    EMCC's amended shareholder agreement replaces the shareholder 
agreement written for the original offering.\6\ The changes to the 
shareholder agreement reflect (i) the creation and offering of the 
Class B stock, (ii) the conditions under which EMCC may repurchase the 
Class B stock, and (iii) the fact that EMTA has not yet been issued any 
shares of EMCC stock. In addition, the amended shareholder agreement 
permits EMCC to issue EMTA 300 Class A shares prior to, concurrent 
with, or after the closing of

[[Page 66618]]

the issuance of Class A stock to all other persons. A further 
modification reflects that the issuance of the original stock did not 
occur prior to the previously established deadline of June 30, 1998, 
and provides that the issuance and sale of Class A stock must be 
completed by December 31, 1998. Each purchaser of Class A or Class B 
shares will be obligated to enter into the amended shareholder 
agreement.
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    \6\ The signatories of the amended shareholder agreement are the 
National Securities Clearing Corporation (``NSCC''), the 
International Securities Markets Association (``ISMA''), and the 
Emerging Markets Traders Association (``EMTA'').
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    After the Class A stock has been issued, EMCC will amend its 
articles of incorporation to permit the following actions to be taken 
upon a two-thirds vote of the shareholders instead of the current 
requirement of unanimity: (i) any amendment or change to EMCC's 
certificate of incorporation; (ii) any adoption, amendment or repeal by 
the shareholders of by-laws of the corporation; (iii) any repurchase of 
any securities issued by the corporation; and (iv) any issuance of any 
securities by the corporation.

II. Discussion

    Section 17A(b)(3)(A) of the Act \7\ requires that a clearing agency 
be so organized and have the capacity to facilitate the prompt and 
accurate clearance and settlement of securities transactions. The 
Commission believes that the rule change is consistent with EMCC's 
obligations under Section 17A(b)(3)(A) because the additional capital 
raised by the issuance of the stock should enable EMCC to increase the 
efficiency of its clearance and settlement of securities transactions. 
In addition, the amendments to EMCC's articles of incorporation make 
more efficient EMCC's ability to take corporate actions that may be 
necessary to facilitate the clearance and settlement of securities 
transactions.
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    \7\ 15 U.S.C. 78q-1(b)(3)(A).
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III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change is consistent with the requirements of the Act and 
in particular with Section 17A of the Act \8\ and the rules and 
regulations thereunder.
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    \8\ 15 U.S.C. 78q-1.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-EMCC-98-08) be and hereby is 
approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-32041 Filed 12-1-98; 8:45 am]
BILLING CODE 8010-01-M