[Federal Register Volume 68, Number 66 (Monday, April 7, 2003)]
[Notices]
[Page 16848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8390]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47602; 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

March 31, 2003.
    Pursuant to Section 19(a) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on February 24, 2003, the 
Emerging Markets Clearing Corporation (``EMCC'') filed with the 
Securities and Exchange Commission (``Commission'') a request 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, 2004.
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    \1\ 15 U.S.C. 78s(a).
    \2\ Letter from Merrie Faye Witkin, Senior Counsel and Assistant 
Secretary, EMCC (Feb. 24, 2003).
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    On February 13, 1998, pursuant to Sections 17A(b) and 19(a)(1) of 
the Act \3\ and Rule 17Ab2-1 promulgated thereunder,\4\ the Commission 
granted EMCC's application for registration as a clearing agency on a 
temporary basis until August 20, 1999.\5\ By subsequent orders, the 
Commission extended EMCC's registration as a clearing agency through 
March 31, 2003.\6\
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    \3\ 15 U.S.C. 78q-1(b) and 78s(a)(1).
    \4\ 17 CFR 240.17Ab2-1.
    \5\ Securities Exchange Act Release No. 39661 (Feb. 13, 1998), 
63 FR 8711 (Feb. 20, 1998) (``Registration Order'').
    \6\ Securities Exchange Act Release Nos. 41733 (Aug. 12, 1999), 
64 FR 44982 (Aug. 18, 1999); 43182 (Aug. 18, 2000), 65 FR 51880 
(Aug. 25, 2000); and 44707 (Aug, 15, 2001), 66 FR 43941 (Aug. 21, 
2001); 45648 (Mar. 26, 2002), 67 FR 15438 (Apr. 1, 2002).
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    EMCC was created to facilitate the clearance and settlement of 
transactions in U.S. dollar denominated Brady Bonds.\7\ Since it began 
operations, EMCC has added certain emerging market sovereign debt and 
corporate debt to the list of eligible securities that may be cleared 
and settled at EMCC.\8\ EMCC began operating on April 6, 1998, with ten 
dealer members.
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    \7\ 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.
    \8\ Securities Exchange Act Release Nos. 40363 (Aug. 25, 1998), 
63 FR 46263 (Aug. 31, 1998); 41618 (July 14, 1999), 64 FR 39181 
(July 21, 1999); and 46714 (Oct. 23, 2002), 67 FR 66031 (Oct. 29, 
2002).
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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.\9\ 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 to date no entity in a 
category not covered by EMCC's rules has expressed an interest in 
becoming a member.\10\ Accordingly, the Commission is extending EMCC's 
temporary exemption from Section 17A(b)(3)(B).
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    \9\ Registration Order at 8716.
    \10\ 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 credit at Euroclear used to finance on an 
intraday basis the receipt by EMCC of eligible instruments from one 
member that EMCC will redeliver to another member.\11\ 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.\12\ 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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    \11\ Registration Order at 8720.
    \12\ 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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    Interested persons are invited to submit written data, views, and 
arguments 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.\13\ Persons making written submissions should file six copies 
thereof with the Secretary, Securities and Exchange Commission, 450 5th 
Street, NW, Washington, DC 20549-0609. Comments may also be submitted 
electronically at the following e-mail address: [email protected]. 
All comment letters should refer to File No. 600-30. This file number 
should be included on the subject line if e-mail is used. To help us 
process and review comments more efficiently, comments should be sent 
in hardcopy or by e-mail but not by both methods. Copies of the amended 
application for registration, all written statements with respect to 
the application that are filed with the Commission, all written 
communications relating to the application between the Commission and 
any person, other than those that may be withheld from the public in 
accordance with provisions of 5 U.S.C. 552, 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 April 28, 
2003.
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    \13\ 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, 2004.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(50)(i).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-8390 Filed 4-4-03; 8:45 am]
BILLING CODE 8010-01-P