[Federal Register Volume 67, Number 209 (Tuesday, October 29, 2002)]
[Notices]
[Page 66031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27488]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46714; File No. SR-EMCC-2002-01]


Self-Regulatory Organizations; Emerging Markets Clearing 
Corporation; Order Granting Approval of a Proposed Rule Change 
Expanding the Types of Instruments Eligible for Processing

October 23, 2002.

I. Introduction

    On January 10, 2002, the Emerging Markets Clearing Corporation 
(''EMCC'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change (File No. SR-EMCC-2001-01) 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'').\1\ Notice of the proposed rule change was published in the 
Federal Register on August 9, 2002.\2\ No comment letters were 
received. For the reasons discussed below, the Commission is granting 
approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ Securities Exchange Act Release No. 46311 (August 5, 2002), 
67 FR 51906.
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II. Description

    The purpose of the proposed rule change is to expand the types of 
instruments eligible for processing by EMCC to include emerging market 
corporate debt that meets certain criteria. EMCC will accomplish this 
by adding a new definition, ``eligible corporate debt,'' to Rule 1. 
``Eligible corporate debt'' will be defined as those instruments which:
    1. Are issued by or on behalf of an issuer domiciled in an emerging 
markets jurisdiction;
    2. The minimum amount of the debt issue outstanding or to be issued 
at the time of determination is $200,000,000, and the issuer has 
cumulatively issued at least $750,000,000 (or equivalent currency) of 
debt securities; and
    3. EMCC does or would include the sovereign debt of the 
jurisdiction where the issuer is domiciled in the list of EMCC eligible 
instruments.
    As with all instruments that are EMCC eligible, such instruments 
will also have to meet the existing criteria set forth in Rule 3 in 
that they will have to be eligible for settlement at a ``qualified 
securities depository''\3\ and must be U.S. dollar denominated. 
Accordingly, Section 1 of Rule 3 will be amended to include a reference 
to ``eligible corporate debt.''
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    \3\ A qualified securities depository is defined by EMCC Rules 
to be a securities depository which has entered into an agreement 
with EMCC pursuant to which it will effect book-entry transfers of 
EMCC Eligible Instruments to and by EMCC.
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    EMCC believes that the inclusion of dollar denominated emerging 
market corporate debt meeting the foregoing criteria will be beneficial 
to its members because it will help eliminate counterparty risk in 
these instruments when EMCC becomes the central counterparty. EMCC also 
believes that its current clearing fund formula will allow it to 
collect appropriate amounts of collateral to cover the risks posed by 
this class of securities.

III. Discussion

    Section 17A(b)(3)(F) of the Act requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions and 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.\4\ By 
expanding the types of instruments available for processing by EMCC, 
the proposed rule change will allow more of EMCC's members' trades to 
be processed through the facilities of EMCC which should promote the 
prompt and accurate clearance and settlement of such securities 
transactions. Furthermore, the Commission finds that EMCC's current 
risk management procedures, including its clearing fund formula, have 
been designed and are operated in such a manner that EMCC will be able 
to provide clearance and settlement services for eligible corporate 
debt in a manner that will provide for the safeguarding of securities 
and funds in its possession or control or for which it is responsible.
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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IV. Conclusion

    On the basis of the foregoing, the Commission finds that the 
proposed rule change 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 applicable.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-EMCC-2002-01) be and hereby 
is approved.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-27488 Filed 10-28-02; 8:45 am]
BILLING CODE 8010-01-P