[Federal Register Volume 66, Number 162 (Tuesday, August 21, 2001)]
[Notices]
[Pages 43941-43942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-21018]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44707; File No. 600-30]


Self-Regulatory Organizations; Emerging Markets Clearing 
Corporation; Notice of Filing and Order Approving a Request for an 
Extension of Temporary Registration as a Clearing Agency

August 15, 2001.
    Pursuant to section 19(a) of the Securities Exchange Act of 1934 
(``Act'',)\1\ notice is hereby given that on July 27, 2001, the 
Emerging Markets Clearing Corporation (``EMCC'') filed with the 
Securities and Exchange Commission (``Commission'') an application 
requesting that the Commission extend EMCC's temporary registration as 
a clearing agency.\2\ The Commission is publishing this notice and 
order to solicit comments from interested persons and to extend EMCC's 
temporary registration as a clearing agency through March 31, 2002.
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    \1\ 15 U.S.C. 78s(a).
    \2\ Letter from Merrie Faye Witkin, Assistant Secretary, EMCC 
(July 26, 2001).
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    EMCC was created to facilitate the clearance and settlement of 
transactions in U.S. dollar denominated Brady Bonds.\3\ Since it began 
operations, EMCC has added certain sovereign debt to the list of 
eligible securities that may be cleared and settled at EMCC.\4\ EMCC 
began operating on April 6, 1998, with ten dealer members. As of 
December 31, 2000, EMCC has 21 members. Since EMCC's inception, it has 
maintained a comparison rate of over 89% on trade date, reaching 99% 
prior to settlement date.\5\
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    \3\ Brady bonds are restructured bank loans that were first 
issued pursuant to a plan developed by then U.S. Treasury Secretary 
Nicholas Brady to assist debt-ridden countries restructure their 
sovereign debt into commercially marketable securities. The plan 
provided for the exchange of bank loans for collateralized debt 
securities as part of an internationally supported sovereign debt 
restructuring. Typically, the principal and certain interest of 
these bonds is collateralized by U.S. Treasury zero coupon bonds and 
other high grade instruments.
    \4\ Securities Exchange Act Release Nos. 40363 (Aug. 25, 1998), 
63 FR 46263 (Aug. 31, 1998) and 41618 (July 14, 1999), 64 FR 39181 
(July 21, 1999).
    \5\ EMCC 2000 Annual Report.
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    On February 13, 1998, pursuant to sections 17A(b) and 19(a)(1) of 
the Act \6\ and Rule 17Ab2-1 promulgated thereunder,\7\ the Commission 
granted EMCC's application for registration as a clearing agency on a 
temporary basis under August 20, 1999.\8\ By subsequent orders dated 
August 12, 1999,\9\ and August 18, 2000,\10\ the Commission extended 
EMCC's registration as a clearing agency through August 20, 2000, and 
August 31, 2001, respectively.
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    \6\ 15 U.S.C. 78q-1(b) and 78s(a)(1).
    \7\ 17 CFR 240.17Ab2-1.
    \8\ Securities Exchange Act Release No. 39661 (Feb. 13, 1998), 
63 FR 8711 (Feb. 20, 1998) (``Registration Order'').
    \9\ Securities Exchange Act Release No. 41733 (Aug. 12, 1999), 
64 FR 44982 (Aug. 18, 1999).
    \10\ Securities Exchange Act Release No. 43182 (Aug. 18, 2000), 
65 FR 51880 (Aug. 25, 2000).
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    As part of EMCC's initial temporary registration, the Commission 
granted EMCC temporary exemption from section 17A(b)(3)(B) of the Act 
because EMCC did not provide for the admission of some of the 
categories of members required by that section.\11\ To date, EMCC's 
rules still only provide membership criteria for U.S. broker-dealers, 
United Kingdom broker-dealers, U.S. banks, and non-U.S. banks. As the 
Commission noted in the Registration Order, the Commission believes 
that it is appropriate for EMCC to limit the categories of members 
during its initial years of operations because no entity in a category 
not covered by EMCC's rules desires to be a member.\12\ Accordingly, 
the Commission is extending EMCC's temporary exemption for section 
17A(b)(3)(B).
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    \11\ Registration Order at 8716.
    \12\ EMCC has represented to the staff that it will modify its 
rules to provide admission criteria for other entities that wish to 
become EMCC members.
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    The Commission also granted EMCC a temporary exemption from 
sections 17A(b)(3)(A) and 17A(b)(3)(F) of the Act to permit EMCC to 
use, subject to certain limitations, ten percent of its clearing fund 
to collateralize a line of a credit at Euroclear to finance on an 
intraday basis the receipt by EMCC of eligible instruments from one 
member that EMCC will redeliver to another member.\13\ The Registration 
Order limited EMCC's use of clearing fund deposits for this intraday 
financing to the earlier of one year after EMCC commenced operations or 
the date on which EMCC begins its netting service. On April 2, and May 
17, 1999, the Commission approved rule changes that permitted EMCC to 
implement a netting service and that extended EMCC's ability to use 
clearing fund deposits for intraday financing at Euroclear until all 
EMCC members are netting members.\14\ Because not all of EMCC's members 
have become netting members, the Commission is extending EMCC's 
temporary exemption from section 17A(b)(3)(A) and (F).
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    \13\ Registration Order at 8720.
    \14\ Securities Exchange Act Release Nos. 41247 (Apr. 2, 1999), 
64 FR 17705 (Apr. 12, 1999) and 41415 (May 17, 1999), 64 FR 27841 
(May 21, 1999).
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    Finally, the Government Securities Clearing Corporation (``GSCC''), 
the Mortgage Backing Securities Clearing Corporation (``MBSCC''), and 
EMCC are currently taking steps toward integration of GSCC, MBSCC, and 
EMCC and the acquisitin of these clearing agencies by The Depository 
Trust and Clearing Corporation. Because EMCC's governance and 
organizational structure will be affected by the acquisition and 
integration, the Commission is extending EMCC's registration as a 
clearing agency on a temporary basis through March 31, 2002.
    Interested persons are invited to submit written data, views, and 
agruments concerning the foregoing application. Such written data, 
views, and arguments will be considered by the Commission in granting 
registration or instituting proceedings to determine whether 
registration should be denied in accordance with section 19(a)(1) of 
the Act.\15\ 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 amended 
application for registration and all written comments will be available 
for inspection at the Commission's Public Reference Room, 450 Fifth 
Street, NW., Washington, DC 20549. All submissions should refer to File 
No. 600-30 and should be submitted by September 11, 2001.
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    \15\ 15 U.S.C. 78s(a)(1).
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    It is therefore ordered, pursuant to section 19(a) of the Act, that 
EMCC's registration as a clearing agency (File No. 600-30) be and 
hereby is temporarily approved through March 31, 2002.

[[Page 43942]]

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(16).

Jonathan G. Katz,
Secretary.
[FR Doc. 01-21018 Filed 8-20-01; 8:45 am]
BILLING CODE 8010-01-M