[Federal Register Volume 66, Number 69 (Tuesday, April 10, 2001)]
[Notices]
[Page 18678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8739]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44140; File No. SR-EMCC-00-08]


Self-Regulatory Organizations; Emerging Markets Clearing 
Corporation; Order Approving a Proposed Rule Change To Permit Members 
To Satisfy Clearing Fund Obligations With Either Immediately Available 
Funds or Eligible Treasury Securities

March 30, 2001.
    On November 3, 2000, the Emerging Markets Clearing Corporation 
(``EMCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-EMCC-00-08) 
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 January 11, 2001.\2\ No comment letters were received. For 
the reasons discussed below, the Commission is approving the proposed 
rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 43808 (January 4, 2001), 
66 FR 2463.
---------------------------------------------------------------------------

I. Description

    Prior to this order, EMCC's Rule 4, section 5(B)(iii) required that 
members satisfy their obligation to make additional required deposits 
(``margin'') to the clearing fund in immediately available funds. EMCC 
Rule 4, section 8 permits the substitution of eligible collateral for 
clearing fund cash. Members may substitute on the same day a cash 
deposit is made eligible treasury securities \3\ or an eligible letter 
of credit \4\ for all or a portion of any such deposited cash provided 
the member maintains the requisite minimum ratios of cash to securities 
and/or letters of credit.\5\
---------------------------------------------------------------------------

    \3\ As defined in EMCC Rule 1, the term ``eligible treasury 
security'' means an unmatured, marketable debt security in book-
entry form that is a direct obligation of the United States 
Government.
    \4\ As defined in EMCC Rule 1, the term ``eligible letter of 
credit'' means a letter of credit that:
    (a) is issued by an approved letter of credit issuer;
    (b) contains the unqualified commitment of such issuer to pay a 
specified sum of money upon demand (properly drawn under the letter 
of credit) at any time prior to the expiration of the letter of 
credit;
    (c) is irrevocable and may be neither revoked nor amended to 
reduce its amount except upon the issuer's written notice to EMCC of 
its intent to revoke or amend, which must be given not less than 
five full business days prior to the date fixed for such revocation 
or amendment, and EMCC's consent to the revocation or amendment, 
which shall be given promptly upon EMCC's determination that the 
member either has substituted other collateral of at least equal 
value prior to such revocation or amendment or otherwise will have 
sufficient remaining value in its clearing fund deposit at the time 
of such revocation or amendment to satisfy its anticipated required 
fund deposit;
    (d) states that (1) it will be duly honored upon presentment of 
it to the issuing bank and (2) partial drawings are permitted; and
    (e) is in a form and contains such other terms and conditions as 
may be required by EMCC.
    \5\ EMCC Rule 4, sections 2 and 8(c).
---------------------------------------------------------------------------

    To accommodate the member requests, EMCC proposed changing Rule 4, 
section 5(b)(iii) to allow members the option of meeting clearing fund 
margin calls with either cash or eligible treasury securities. The 
proposed rule change increases operating efficiencies by transforming 
what is currently a two-step process into a single step process. 
Eligible treasury securities so deposited will be valued at 95% of 
their current market value as provided in EMCC Rule 4, section 8. 
Notwithstanding the change, EMCC retains the discretionary right to 
require additional deposits to be made in cash.

II. Discussion

    Section 17A(b)(3)(F) of the Act 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.\6\ The Commission believes that the 
approval of EMCC's rule change is consistent with this Section because 
this merely allows firms to meet a call for additional clearing fund 
collateral with a deposit of government securities valued at 95% of 
current market value instead of with a deposit of immediately available 
funds immediately followed by a substitution of government funds. The 
Commission also notes that EMCC has retained the right to require firms 
to meet calls for additional clearing fund in immediately available 
funds.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78q-1(b)(3)(F) (1988).
---------------------------------------------------------------------------

III. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposal is consistent with the requirements of the Act and in 
particular with the requirements of section 17A of the act and the 
rules and regulations thereunder.
    It is Therefore Ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-EMCC-00-08) be and hereby is 
approved.
    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\7\
---------------------------------------------------------------------------

    \7\ 17 CFR 200.30-3(9a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-8739 Filed 4-9-01; 8:45 am]
BILLING CODE 8010-01-M