[Federal Register Volume 67, Number 27 (Friday, February 8, 2002)]
[Notices]
[Page 6064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-3046]



[[Page 6064]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45359; File No. SR-EMCC-2001-04]


Self-Regulatory Organizations; Emerging Markets Clearing 
Corporation; Order Approving a Proposed Rule Change Relating to 
Liability of Affiliated Entities

January 29, 2002.
    On October 11, 2001, the Emerging Markets Corporation (``EMCC'') 
filed with the Securities and Exchange Commission (``Commission'') 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ a proposed rule change (File No. EMCC-2001-04). Notice of 
the proposal was published in the Federal Register on December 20, 
2001.\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. 45154 (Dec. 14, 2001), 
66 FR 65767.
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I. Description

    The rule change addresses liability issues that may arise after the 
completion of the integration of EMCC, the Government Securities 
Clearing Corporation (``GSCC''), and the MBS Clearing Corporation 
(``MBSCC'') with The Depository Trust and Clearing Corporation 
(``DTCC'').\3\ For purposes of this notice, EMCC, GSCC, MBSCC, DTCC, 
The Depository Trust Company (``DTC''), and National Securities 
Clearing Corporation (``NSCC'') \4\ are collectively referred to as the 
``Synergy Companies.'' \5\
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    \3\ Securities Exchange Act Release Nos. 44987 (Oct. 25, 2001), 
66 FR 55218 (Nov. 1, 2001) (order approving integration of EMCC), 
44989 (Oct. 25, 2001), 66 FR 55220 (Nov. 1, 2001) (order approving 
integration of GSCC), and 44988 (Oct. 25, 2001), 66 FR 55222 (Nov. 
1, 2001) (order approving integration of MBSCC).
    \4\ DTC and NSCC are wholly-owned subsidiaries of DTCC.
    \5\ After the completion of the integration, EMCC, GSCC, and 
MBSCC shall each be a wholly-owned subsidiary of DTCC, and a single 
group of individuals shall serve as directors of each of the Synergy 
Companies. Following the integration, EMCC will continue to exist as 
a separate registered clearing agency. The retained earnings of EMCC 
existing at the time of (or as of the end of the last full calendar 
month preceding) the integration of EMCC with DTCC will, as a matter 
of DTCC policy, be dedicated to supporting the business of EMCC. 
EMCC will be managed and operated so as to be appropriately 
capitalized for its activities as a clearing agency.
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    An important aspect of the integration plan is to insulate EMCC, 
its members, and its clearing fund from the risks and obligations that 
may arise from the activities of the other Synergy Companies.\6\ The 
rule change will add a new Rule 9 to EMCC's Rules that provides that 
notwithstanding any affiliation between EMCC and any other entity, 
including any clearing agency, except as otherwise provided by written 
agreement between EMCC and such other entity, (1) EMCC shall not be 
liable for any obligations of such other entity and the clearing fund 
or other assets of EMCC shall not be available to such other entity and 
(2) such other entity shall not be liable for any obligations of EMCC 
and any assets of such other entity shall not be available to EMCC.
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    \6\ The integration plan attempts to similarly insulate GSCC and 
MBSCC. Securities Exchange Act Release Nos. 45357 (Jan. 29, 2002) 
(order approving GSCC's limitation of liability) and 45358 (Jan. 29, 
2002) (order approving MBSCC's limitation of liability). DTC and 
NSCC adopts rules similar to this proposed rule as part of their 
1999 integration with DTCC. Securities Exchange Act Release Nos. 
42013 (Oct. 15, 1999), 64 FR 57168 (Oct. 22, 1999), (order approving 
NSCC's limitation of liability) and 42014 (Oct 15, 1999), 64 FR 
57171 (Oct. 22, 1999) (order approving DTC's limitation of 
liability).
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II. Discussion

    Section 17A(b)(3)(F) of the Act \7\ requires that the rules of a 
clearing agency assure the safeguarding of securities and funds that 
are in the custody or control of the clearing agency or for which it is 
responsible. The Commission finds that the proposed rule change is 
consistent with EMCC's obligations under section 17A(b)(3)(F) because 
it should help ensure that EMCC's assets, including it participants 
fund, are not diminished as a result of its affiliation with the 
Synergy Companies.
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    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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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-2001-04) be, and hereby 
is, approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-3046 Filed 2-7-02; 8:45 am]
BILLING CODE 8010-01-M