[Federal Register Volume 64, Number 120 (Wednesday, June 23, 1999)]
[Notices]
[Pages 33540-33541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15911]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-41534; File No. SR-EMCC-99-4]


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

June 16, 1999.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on March 26, 1999, the 
Emerging Markets Clearing Corporation (``EMCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposal rule 
change (File No. SR-EMCC-99-04) as described in Items I, II, and III 
below, which items have been prepared primarily by EMCC. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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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 purpose of the proposed rule change is to expand the types of 
instruments eligible for clearance and settlement at EMCC.

II. Self-Regulatory Organization's Statement of the Purpose of, 
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 aspect of such 
statement.\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, 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to expand the types of 
instruments eligible for processing by EMCC. To accomplish this, the 
proposed rule change will amend the definition of ``eligible sovereign 
debt,'' which is set forth in Rule 1, to mean any instruments which 
either:
    (1) Are issued by or on behalf of an emerging markets sovereign 
issuer or an agency or instrumentality thereof (including, without 
limitation, any central bank thereof); provided that, in the case of 
any instrument issued by an agency or instrumentality, the credit 
quality of those instruments is judged by one or more NRSROs or by 
market participants generally on the basis of the credit quality of the 
related sovereign issuer; or
    (2) Have the timely payment of principal and interest guaranteed by 
an issuer who meets the criteria set forth in (1).
    As with all instruments that are EMCC eligible, these instruments 
must also meet the existing criteria set forth in Rule 3, Section 1 
that they must be eligible for settlement at a qualified securities 
depository and that they must be U.S. dollar denominated.
    The dollar denominated non-Brady sovereign debt of Brazil, 
Argentina, and Mexico has been eligible at EMCC since August 1998. 
Since that time, there have been two extreme market events affecting 
emerging market debt generally, one in August/September 1998 and 
another in January 1999. According to EMCC, it is the consensus of 
current members that having non-Brady sovereign debt of Brazil, 
Argentina, and Mexico eligible at EMCC during these events 
significantly reduced settlement risk and increased safety and 
soundness. EMCC also believes that these events demonstrated that 
EMCC's risk management systems and procedures, as well as their 
clearance and settlement systems and procedures, are well suited to 
non-Brady sovereign debt, even during times of market stress and 
extreme violability. EMCC staff and members attribute this primarily to 
the facts that (1) the distinction between Brady and non-Brady 
sovereign debt (i.e., whether or not it originated as part of a loan 
restructuring) is not relevant to the market behavior of the 
instruments and (2) the trading and settlement practices for both types 
of sovereign instruments are virtually identical.
    EMCC believes that the proposed rule change is consistent with the 
requirements of section 17A of the Act \3\ and the rules and 
regulations thereunder because the inclusion of dollar denominated 
sovereign debt will help to reduce risk and respect to the

[[Page 33541]]

clearance and settlement of those specific instruments as well as will 
help to reduce risk with respect to the emerging market marketplace 
generally.
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    \3\ 15 U.S.C. 78g-1.
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    EMCC does not believe that the proposed rule change will impose any 
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 proposed rule change have been 
solicited of 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

    Within thirty-five days of the date of publication of this notice 
in the Federal Register or within such longer period (i) as the 
Commission may designate up to ninety days of such date if it funds 
such longer period to be appropriate and publishes its reasons for so 
finding or (ii) as to which the self-regulatory organization consents, 
the Commission will:
    (a) By order approve such proposed rule change or
    (b) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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, NW, Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Section, 450 Fifth Street, NW, Washington, DC 20549. Copies 
of such filing also will be available for inspection and copying at the 
principal office of EMCC. All submissions should refer to File No. SR-
EMCC-99-4 and should be submitted by July 14, 1999.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\4\
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    \4\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15911 Filed 6-22-99; 8:45 am]
BILLING CODE 8010-01-M