[Federal Register Volume 64, Number 39 (Monday, March 1, 1999)]
[Proposed Rules]
[Pages 9948-9951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-4953]



[[Page 9948]]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-41090, International Series Release No. 1183, File No. 
S7-4-99]
RIN 3235-AH68


Exemption of the Securities of the Kingdom of Sweden under the 
Securities Exchange Act of 1934 for Purposes of Trading Futures 
Contracts on Those Securities

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission proposes for comment an amendment to Rule 3a12-
8 that would designate debt obligations issued by the Kingdom of Sweden 
as ``exempted securities'' for the purpose of marketing and trading of 
futures contracts on those securities in the United States. The 
amendment is intended to permit futures trading on the sovereign debt 
of Sweden.

DATES: Comments should be submitted by March 31, 1999.

ADDRESSES: All comments should be submitted in triplicate and addressed 
to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 
Fifth Street, NW, Washington, DC 20549. Comments also may be submitted 
electronically at the following E-mail address: [email protected]. 
All comments should refer to File No. S7-4-99; this file number should 
be included on the subject line if e-mail is used. Comment letters will 
be available for public inspection and copying at the Commission's 
Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. 
Electronically submitted comment letters will also be posted on the 
Commission's Internet web site (http://www.sec.gov).

FOR FURTHER INFORMATION CONTACT: Joshua Kans, Attorney, Office of 
Market Supervision (``OMS''), Division of Market Regulation 
(''Division''), Securities and Exchange Commission (Mail Stop 10-1), 
450 Fifth Street, N.W., Washington, D.C. 20549, at 202/942-0079.

SUPPLEMENTARY INFORMATION:

I. Introduction

    Under the Commodity Exchange Act (``CEA''), it is unlawful to trade 
a futures contract on any individual security unless the security in 
question is an exempted security (other than a municipal security) 
under the Securities Act of 1933 (``Securities Act'') or the Securities 
Exchange Act of 1934 (``Exchange Act''). Debt obligations of foreign 
governments are not exempted securities under either of these statutes. 
The Securities and Exchange Commission (``SEC'' or ``Commission''), 
however, has adopted Rule 3a12-8 (17 CFR 240.3a12-8) (``Rule'') under 
the Exchange Act to designate debt obligations issued by certain 
foreign governments as exempted securities under the Exchange Act 
solely for the purpose of marketing and trading futures contracts on 
those securities in the United States. As amended, the foreign 
governments currently designated in the Rule are Great Britain, Canada, 
Japan, Australia, France, New Zealand, Austria, Denmark, Finland, the 
Netherlands, Switzerland, Germany, the Republic of Ireland, Italy, 
Spain, Mexico and, most recently, Brazil, Argentina and Venezuela (the 
``Designated Foreign Governments''). As a result, futures contracts on 
the debt obligations of these countries may be sold in the United 
States, as long as the other terms of the Rule are satisfied.
    The Commission today is soliciting comments on a proposal to amend 
Rule 3a12-8 to add the debt obligations of the Kingdom of Sweden 
(``Sweden'') to the list of Designated Foreign Governments whose debt 
obligations are exempted by Rule 3a12-8. To qualify for the exemption, 
futures contracts on the debt obligations of Sweden would have to meet 
all the other existing requirements of the Rule.

II. Background

    Rule 3a12-8 was adopted in 1984 \1\ pursuant to the exemptive 
authority in Section 3(a)(12) of the Exchange Act in order to provide a 
limited exception from the CEA's prohibition on futures overlying 
individual securities.\2\ As originally adopted, the Rule provided that 
the debt obligations of Great Britain and Canada would be deemed to be 
exempted securities, solely for the purpose of permitting the offer, 
sale, and confirmation of ``qualifying foreign futures contracts'' on 
such securities. The securities in question were not eligible for the 
exemption if they were registered under the Securities Act or were the 
subject of any American depositary receipt so registered. A futures 
contract on the covered debt obligation under the Rule is deemed to be 
a ``qualifying foreign futures contract'' if the contract is 
deliverable outside the United States and is traded on a board of 
trade.\3\
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    \1\ See Securities Exchange Act Release No. 20708 (``Original 
Adopting Release'') (March 2, 1984), 49 FR 8595 (March 8, 1984); 
Securities Exchange Act Release No. 19811 (``Original Porposing 
Release'') (May 25, 1983), 48 FR 24725 (June 2, 1983).
    \2\ In approving the Futures Trading Act of 1982, Congress 
expressed its understanding that neither the SEC nor the Commodity 
Futures Trading Commission (``CFTC'') had intended to bar the sale 
of futures on debt obligations of the United Kindgom of Great 
Britain and Northern Ireland to U.S. persons, and its expectation 
that administrative action would be taken to allow the sale of such 
futures contracts in the United States. See Original Proposing 
Release, supra note 1, 48 FR at 24725 (citing 128 Cong. Rec H7492 
(daily ed. September 23, 1982) (statements of Representatives 
Daschle and Wirth)).
    \3\ As originally adopted, the Rule required that the board of 
trade be located in the country that issued the underlying 
securities. This requirement was eliminated in 1987. See Securities 
Exchange Act Release No. 24209 (March 12, 1987), 52 FR 8875 (March 
20, 1987).
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    The conditions imposed by the Rule were intended to facilitate the 
trading of futures contracts on foreign government securities in the 
United States while requiring offerings of foreign government 
securities to comply with the federal securities laws. Accordingly, the 
conditions set forth in the Rule were designed to ensure that, absent 
registration, a domestic market in unregistered foreign government 
securities would not develop, and that markets for futures on these 
instruments would not be used to avoid the securities law registration 
requirements. In particular, the Rule was intended to ensure that 
futures on exempted sovereign debt did not operate as a surrogate means 
of trading the unregistered debt.\4\
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    \4\ The CFTC regulates the marketing and trading of foreign 
futures contracts. CFTC rules provide that any person who offers or 
sells a foreign futures contract to a U.S. customer must be 
registered under the CEA, unless otherwise specifically exempted.
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    Subsequently, the Commission amended the Rule to include the debt 
securities issued by Japan, Australia, France, New Zealand, Austria, 
Denmark, Finland, the Netherlands, Switzerland, Germany, Ireland, 
Italy, Spain, Mexico and, most recently, Brazil, Argentina and 
Venezuela.\5\
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    \5\ As originally adopted, the Rule applied only to British and 
Canadian government securities. See Original Adopting Release, supra 
note 1. In 1986, the Rule was amended to include Japanese government 
securities. See Securities Exchange Act Release No. 23423 (July 11, 
1986), 51 FR 25996 (July 18, 1986). In 1987, the Rule was amended to 
include debt securities issued by Australia, France and New Zealand. 
See Securities Exchange Act Release No. 25072 (October 29, 1987), 52 
FR 42277 (November 4, 1987. In 1988, the Rule was amended to include 
debt securities issued by Austria, Denmark, Finland, the 
Netherlands, Switzerland, and West Germany. See Securities Exchange 
Act Release No. 26217 (October 26, 1988), 53 FR 43860 (October 31, 
1988). In 1991 the Rule was again amended to (1) include debt 
securities offreed by the Republic of Ireland and Italy, (2) change 
the country designation of ``West Germany'' to the ``Federal 
Republic of Germany,'' and (3) replace all references to the 
informal names of the countries listed in the Rule with references 
to their official names. See Securities Exchange Act Release No. 
30166 (January 8, 1992), 57 FR 1375 (January 14, 1992). In 1994, the 
Rule was amended to include debt securities issued by Spain. See 
Securities Exchange Act Release No. 34908 (October 27, 1994), 59 FR 
54812 (November 2, 1994). In 1995, the Rule was amended to include 
the debt securities of Mexico. See Securities Exchange Act Release 
No. 36530 (November 30, 1995), 60 FR 62323 (December 6, 1995). In 
1996, the Rule was amended to include debt securities issued by 
Brazil, Argentina, and Venezuela. See Securities Exchange Act 
Release No. 36940 (March 7, 1996), 61 FR 10271 (March 13, 1996).

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[[Page 9949]]

III. Discussion

    OM Stockholm AB of Sweden (``OM''), and its British affiliate OMLX, 
The London Securities and Derivatives Exchange Limited (``OMLX''), have 
proposed that the Commission amend 3a12-8 to include the sovereign debt 
of Sweden. OM and OMLX (which will be collectively referred to as 
``OM'') have stated that they are listing standardized futures 
contracts on Swedish government securities for trading on their 
respective markets, beginning with a futures contract on the ten-year 
Swedish government bond. The applicants wish to make those futures 
contracts available to U.S. investors.\6\
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    \6\ See Letters from Philip McBride Johnson, counsel for OM and 
OMLX, to Jonathan Katz, Secretary, Commission, dated June 11, 1998; 
Memorandum provided by OM and OMLX to the Division of Market 
Regulation on July 6, 1998; Letter from Philip Johnson to Michael 
Walinskas, Deputy Associate Director, Division, Commission, dated 
July 24, 1998; Letters from Philip Johnson to Joshua Kans, Attorney, 
Division, Commission, dated August 20, September 11 and October 2, 
1998; Letter from Philip Johnson to Michael Walinskas, dated 
December 7, 1998 (collectively ``OM petition'').
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    The Swedish National Debt Office has submitted a letter supporting 
OM's application to amend the Rule.\7\ The Commission in 1988 proposed 
adding Sweden to the list of countries designated under the Rule,\8\ 
but rejected the proposal because of opposition from the Swedish 
government.\9\
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    \7\ See Letter from Tomas Magnusson, Director and General 
Counsel, Swedish National Debt Office, to Jonathan Katz, Secretary, 
Commission, dated June 29, 1998.
    \8\ See Securities Exchange Act Release No. 25998 (August 16, 
1998), 53 FR 31709 (August 19, 1988).
    \9\ The Embassy of Sweden submitted two letters in response to 
the 1988 proposal, noting that currency controls prohibiting non-
residents from holding Swedish kronor-denominated securities would 
preclude development of a market for physically settled futures on 
such securities, and stating that in any case it was not in the 
Swedish government's interest that such a market develop. As a 
matter of international comity, the Commission chose not to add 
Sweden to the Rule. See Securities Exchange Act Release No. 26217 
(October 26, 1988), 53 FR 43860 (October 31, 1988).
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    Under the proposed amendment, the existing conditions set forth in 
the Rule (i.e., that the underlying securities not be registered in the 
United States, the futures contracts require delivery outside the 
United States, and the contracts be traded on a board of trade) would 
continue to apply. OM has represented that the securities underlying 
the futures contracts it will be listing are not registered in the 
United States,\10\ that delivery will occur through book entry 
registration in the Swedish Central Securities Depository, and that 
both OM and OMLX are ``boards of trade'' as defined by the CEA.\11\
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    \10\ A number of Swedish government debt securities denominated 
in U.S. dollars have been registered under the Securities Act. The 
Rule does not exempt futures contacts on those securities.
    \11\ See OM petition, supra note 6.
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    In the most recent determinations to amend the Rule to include 
Mexico, Brazil, Argentina, and Venezuela, the Commission considered 
primarily whether market evidence indicated that an active and liquid 
secondary trading market exists for the sovereign debt of those 
countries.\12\ Prior to the addition of those countries to the Rule, 
the Commission considered principally whether the particular sovereign 
debt had been rated in one of the two highest rating categories \13\ by 
at least two nationally recognized statistical rating organizations 
(``NRSROs'').\14\ The Commission continues to consider the existence of 
a high credit rating as indirect evidence of an active and liquid 
secondary trading market,\15\ as well as considering trading data as 
evidence of an active and liquid secondary trading market for the 
security, when determining whether to include a sovereign issuer in the 
list of Designated Foreign Governments.
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    \12\ See, e.g., Securities Exchange Act Release No. 36530 
(November 30, 1995), 60 FR 62323 (December 6, 1995) (amending the 
Rule to add Mexico because the Commission believed that as a whole, 
the market for Mexican sovereign debt was sufficiently liquid and 
deep for the purposes of the Rule); Securities Exchange Act Release 
No. 36940 (March 7, 1996), 61 FR 10271 (March 13, 1996) (amending 
the Rule to add Brazil, Argentina and Venezuela because the 
Commission believed that the market for the sovereign debt of those 
countries was sufficiently liquid and deep for the purposes of the 
Rule).
    \13\ The two highest categories used by Moody's Investor 
Services (``Moody's'') for long-term debt are ``Aaa'' and ``Aa.'' 
The two highest categories used by Standard & Poor's (``S&P'') for 
long-term debt are ``AAA'' and ``AA.''
    \14\ See, e.g., Securities Exchange Act Release No. 30166 
(January 6, 1992) 57 FR 1375 (January 14, 1992) (amending the Rule 
to include debt securities issued by Ireland and Italy--Ireland's 
long-term sovereign debt was rated Aa3 by Moody's and AA- by S&P, 
and Italy's long-term sovereign debt was rated Aaa by Moody's and 
AA+ by S&P); and Securities Exchange Act Release No. 34908 (October 
27, 1994), 59 FR 54812 (November 2, 1994) (amending the Rule to 
include Spain, which had long-term debt ratings of Aa2 from Moody's 
and AA from S&P).
    \15\ See, e.g., Securities Exchange Act Release No. 36213 
(September 11, 1995), 60 FR 48078 (September 18, 1995) (proposal to 
add Mexico to list of countries encompassed by rule); Securities 
Exchange Act Release No. 24428 (May 5, 1987), 52 FR 18237 (May 14, 
1987) (proposed amendment, which was not implemented, that would 
have extended the rule to encompass all countries rated in one of 
the two highest categories by at least two NRSROs).
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    Sweden meets the credit rating standard. Moody's Investors Service 
(``Moody's'') has assigned Sweden a long-term local currency credit 
rating of Aa1 and a long-term foreign currency credit rating of Aa2. 
Standard & Poor's (``S&P'') has assigned Sweden a long-term local 
currency credit rating of AAA and a long-term foreign currency credit 
rating of AA+.
    The Commission also observes that market data indicates that there 
exists an active and liquid trading market for Swedish issued debt 
instruments. As of September 30, 1998, the total Swedish public debt 
outstanding was equivalent to approximately US$179.4 billion (1409 
billion Swedish kronor (``SEK'')).\16\ The largest portion of this 
debt, Treasury bonds (Statsobligationslan) denominated in Swedish 
kronor, amounted to approximately US$95.7 billion (SEK 752 
billion).\17\ Treasury bills (Statsskuldvaxlar) denominated in Swedish 
kronor amounted to approximately US$25.7 billion (SEK 202 billion).\18\ 
Foreign currency-denominated debt amounted to approximately US$46.9 
billion (SEK 368 billion).\19\
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    \16\ Data regarding the amount of outstanding debt was obtained 
from ``Den Svenska Statsskulden: The Swedish Central Government 
Debt,'' September 30, 1998, available from the website of the 
Swedish national Debt Office (http://www.sndo.se). All U.S. dollar 
equivalents set forth in this release are based on a conversion rate 
of SEK 7.8565 for US$1.00 in effect as of September 30, 1998.
    The last four countries added to the list--Mexico, Brazil, 
Argentina and Venezuela--had lower amounts of public debt. See 
Securities Exchange Act Release No. 36530 (December 6, 1995), 60 FR 
62323 (December 6, 1995) (outstanding Mexican government debt 
amounted to approximately US$87.5 billion face value as of March 31, 
1995); Securities Exchange Act Release No. 36940 (March 7, 1996), 61 
FR 10271 (March 13, 1996) (public and publicly guaranteed debt of 
Brazil, Argentina and Venezuela amounted to approximately US$86 
billion, US$55 billion and US$74 billion, respectively, as of 
December 31, 1993).
    \17\ The outstanding Treasury bonds include approximately 
US$78.2 billion (SEK 614 billion) worth of benchmark bonds, 
approximately US$5.5 billion (SEK 42.9 billion) worth of non-
benchmark bonds, and approximately US$11.9 billion (SEK 93.7 
billion) worth of inflation linked bonds.
    \18\ Other types of Swedish currency-denominated debt included 
approximately US$6.9 billion (SEK 54.8 billion) worth of lottery 
bonds. A total of US$132.5 billion (SEK 1041 billion) in Swedish 
government debt was denominated in Swedish kronor.
    \19\ Foreign-currency denominated debt includes approximately 
US$36.4 billion (SEK 285.7 billion) worth of public issues, US$7.9 
billion (SEK 62.1 billion) worth of private placements, and US$3.8 
billion (SEK 30.1 billion) worth of commercial paper.

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[[Page 9950]]

    OM has submitted data indicating that secondary market trading in 
Treasury bonds amounted to approximately US$1.156 trillion (SEK 9079 
billion) in 1996, approximately US$1.343 trillion (SEK 10,550 billion) 
in 1997, and approximately US$593 billion (SEK 4662 billion) in the 
first six months of 1998.\20\ The average daily trading volume during 
that period ranged from approximately US$2.72 billion (SEK 21.4 
billion) for the month of July 1996 to approximately US$8.35 billion 
(SEK 65.6 billion) for the month of October 1997.\21\ OM adds that in 
1997, there were 109,128 transactions in benchmark Treasury bonds, 
27,525 transactions in non-benchmark Treasury bonds, and 1999 
transactions in inflation-linked Treasury bonds.\22\
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    \20\ OM petition, supra note 6. OM states that the statistics 
about secondary market trading in Swedish debt were derived from 
data specially prepared by the Swedish Central Securities 
Depository. Id.
    \21\ OM has submitted data stating that the average daily 
trading volume for Treasury bonds decreased to approximately US$2.11 
billion (SEK 16.6 billion) for the month of July 1998.
    \22\ OM states that secondary market trading for Swedish 
government debt is primarily conducted on a phone-based and screen-
based over-the-counter market conducted by a number of dealers, with 
transactions in Treasury bonds and Treasury bills registered at the 
PMX Exchange at the end of the trading day. OM petition, supra note 
6.
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    OM has also submitted data stating that secondary market trading in 
Treasury bills amounted to approximately US$439.4 billion (SEK 3452 
billion) in 1996, approximately US$487.6 billion (SEK 3831 billion) in 
1997, and approximately US$209.3 billion (SEK 1645 billion) in the 
first six months of 1998. The average daily trading volume during that 
period ranged from approximately US$1.18 billion (SEK 9.3 billion) for 
the month of May 1996 to approximately US$2.64 billion (SEK 20.7 
billion) for the month of March 1997. OM adds that in 1997, there were 
38,634 transactions in Treasury bills.\23\
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    \23\ OM states that secondary market trading in lottery bonds 
was equivalent to approximately US$512 million (SEK 4.03 billion) in 
1996, US$449 million (SEK 3.53 billion) in 1997, and US$213 million 
(SEK 1.67 billion) in the first half of 1998. OM has not provided 
secondary market trading data for other Swedish debt securities. 
According to OM, transaction data for Swedish government debt 
denominated in foreign currencies is extremely difficult to obtain. 
OM further contends that because a number of Swedish government debt 
securities denominated in U.S. dollars have been registered under 
the Securities Act of 1933, and therefore are not eligible for 
exemption under the Rule, secondary market data for securities 
denominated in non-kronor currencies is less significant. See id.
    OM states that it presently does not intend to list any futures 
on inflation-linked bonds, treasury bonds with repurchase 
agreements, lottery bonds or commercial papers. Id.
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    In light of the above data, the Commission preliminarily believes 
that the debt obligations of Sweden should be subject to the same 
regulatory treatment under the Rule as the debt obligations of the 
Designated Foreign Governments.

IV. General Request for Comments

    The Commission seeks comments on the desirability of designating 
the debt securities of Sweden as exempted securities under Rule 3a12-8. 
Comments should address whether the trading or other characteristics of 
Sweden's sovereign debt warrant an exemption for purposes of futures 
trading. Commentators may wish to discuss whether there are any legal 
or policy reasons for distinguishing between Sweden and the Designated 
Foreign Governments for purposes of the Rule. The Commission also 
requests information regarding the potential impact of the proposed 
rule on the economy on an annual basis. If possible, commenters should 
provide empirical data to support their views. The Commission also 
seeks comments on the general application and operation of the Rule 
given the increased globalization of the securities markets since the 
Rule was adopted.

V. Costs and Benefits of the Proposed Amendments

    The Commission has considered the costs and benefits of the 
proposed amendment to the Rule, and the Commission preliminarily 
believes that the proposed amendment offers potential benefits for U.S. 
investors, with no direct costs. If adopted, the proposed amendment 
would allow U.S. and foreign boards of trade to offer in the United 
States, and U.S. investors to trade, a greater range of futures 
contracts on foreign government debt obligations. Moreover, the trading 
of futures on the sovereign debt of Sweden should provide U.S. 
investors with a vehicle for hedging the risks involved in the trading 
of the underlying sovereign debt of Sweden. The Commission does not 
anticipate that the proposed amendment would result in any direct cost 
for U.S. investors or others because the proposed amendment would 
impose no recordkeeping or compliance burdens, and merely would provide 
a limited purpose exemption under the federal securities laws. The 
restrictions imposed under the proposed amendment are identical to the 
restrictions currently imposed under the terms of the Rule and are 
designed to protect U.S. investors.
    The Commission requests comments on the costs and benefits of the 
proposed amendment to Rule 3a12-8. In particular, the Commission 
requests commentators to address whether the proposed amendment would 
generate the anticipated benefits, or impose any costs on U.S. 
investors or others.

VI. Effect of the Proposed Amendment on Competition, Efficiency and 
Capital Formation

    Section 23(a)(2) of the Exchange Act \24\ requires the Commission, 
in adopting rules under the Exchange Act, to consider the competitive 
effect of such rules, if any, and to refrain from adopting a rule that 
would impose a burden on competition not necessary or appropriate in 
furthering the purposes of the Exchange Act. Moreover, Section 3 of the 
Exchange Act \25\ as amended by the National Securities Markets 
Improvement Act of 1996 \26\ provides that whenever the Commission is 
engaged in a rulemaking and is required to consider or determine 
whether an action is necessary or appropriate in the public interest, 
the Commission shall consider, in addition to the protection of 
investors, whether the action will promote efficiency, competition and 
capital formation.
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    \24\ 15 U.S.C. 78w(a)(2).
    \25\ 15 U.S.C. 78c.
    \26\ Pub. L. No. 104-290, 110 Stat. 3416 (1996).
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    In light of the standards cited in Sections 3 and 23(a)(2) of the 
Exchange Act, the Commission preliminarily believes that the proposed 
amendment to the Rule will promote efficiency, competition and capital 
formation. The proposal is intended to expand the range of financial 
products available in the United States, and will make available to 
U.S. investors an additional product to use to hedge the risks 
associated with the trading of the underlying sovereign debt of Sweden. 
Insofar as the proposed amendment contains limitations, they are 
designed to promote the purposes of the Exchange Act by ensuring that 
futures trading on government securities of Sweden is consistent with 
the goals and purposes of the federal securities laws by minimizing the 
impact of the Rule on securities trading and distribution in the United 
States.
    The Commission requests comments as to whether the amendment to the 
Rule will have any anti-competitive effects.

VII. Administrative Requirements

    Pursuant to section 605(b) of the Regulatory Flexibility Act, 5 
U.S.C. 605(b), the Chairman of the Commission has certified that the 
amendment proposed herein would not, if adopted,

[[Page 9951]]

have a significant economic impact on a substantial number of small 
entities. This certification, including the reasons therefor, is 
attached to this release as Appendix A. We encourage written comments 
on the Certification. Commentators are asked to describe the nature of 
any impact on small entities and provide empirical data to support the 
extent of the impact.
    The Paperwork Reduction Act does not apply because the proposed 
amendment does not impose recordkeeping or information collection 
requirements, or other collections of information which require the 
approval of the Office of Management and Budget under 44 U.S.C. 3501, 
et seq.

VIII. Statutory Basis

    The amendment to Rule 3a12-8 is being proposed pursuant to 15 
U.S.C. 78a et seq., particularly sections 3(a)(12) and 23(a), 15 U.S.C. 
78c(a)(12) and 78w(a).

List of Subjects in 17 CFR Part 240

    Reporting and recordkeeping requirements, Securities.

Text of the Proposed Amendment

    For the reasons set forth in the preamble, the Commission is 
proposing to amend Part 240 of Chapter II, Title 17 of the Code of 
Federal Regulations as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

    1. The authority citation for Part 240 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee, 
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k, 
78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 
78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 
80b-11, unless otherwise noted.
* * * * *
    2. Section 240.3a12-8 is amended by removing the word ``or'' at the 
end of paragraph (a)(1)(xviii), removing the ``period'' at the end of 
paragraph (a)(1)(xix) and adding ``; or'' in its place, and adding 
paragraph (a)(1)(xx), to read as follows:


Sec. 240.3a12-8  Exemption for designated foreign government securities 
for purposes of futures trading.

    (a) * * *
    (1) * * *
    (xx) The Kingdom of Sweden.
* * * * *
    By the Commission.

    Dated: February 23, 1999.
Margaret H. McFarland,
Deputy Secretary.
    Note: Appendix A to the Preamble will not appear in the Code of 
Federal Regulations.

Appendix A--Regulatory Flexibility Act Certification

    I, Arthur Levitt, Jr., Chairman of the Securities and Exchange 
Commission, hereby certify, pursuant to 5 U.S.C. Sec.  605(b), that 
the proposed amendment to Rule 3a12-8 (``Rule'') under the 
Securities Exchange Act of 1934 (``Exchange Act''), which would 
define the government debt securities of the Kingdom of Sweden 
(``Sweden'') as exempted securities under the Exchange Act for the 
purpose of trading futures on such securities, will not have a 
significant economic impact on a substantial number of small 
entities for the following reasons. First, the proposed amendment 
imposes no record-keeping or compliance burden in itself and merely 
allows, in effect, the marketing and trading in the United States of 
futures contracts overlying the government debt securities of 
Sweden. Second, because futures contracts on the nineteen countries 
whose debt obligations are designated as ``exempted securities'' 
under the Rule, which already can be traded and marketed in the 
U.S., still will be eligible for trading under the proposed 
amendment, the proposal will not affect any entity currently engaged 
in trading such futures contracts. Third, because those primarily 
interested in trading such futures contracts are large, 
institutional investors, neither the availability nor the 
unavailability of these futures products will have a significant 
economic impact on a substantial number of small entities, as that 
term is defined for broker-dealers in 17 CFR 240.0-10.
Arthur Levitt, Jr.
Chairman.
    Dated: February 23, 1999.

[FR Doc. 99-4953 Filed 2-26-99; 8:45 am]
BILLING CODE 8010-01-P