[Federal Register Volume 69, Number 3 (Tuesday, January 6, 2004)]
[Notices]
[Pages 711-712]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-219]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49011; File No. SR-EMCC-2003-07]


Self-Regulatory Organizations; Emerging Markets Clearing 
Corporation; Notice of Filing and Order Granting Accelerated Approval 
on a Temporary Basis of a Proposed Rule Change Relating to Buy-In and 
Sell-Out Procedures

December 30, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on December 22, 2003, the 
Emerging Markets Clearing Corporation (``EMCC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared primarily by EMCC. The Commission is publishing this notice 
and order to solicit comments from interested persons and to grant 
accelerated approval temporarily through June 30, 2004, to the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change would (a) revise EMCC Rule 7, Sections 18 
(Buy-Ins) and 19 (Sell-Outs) to shorten the time period when a buy-in 
and sell-out may be initiated and when it may be executed and (b) make 
conforming, technical changes to EMCC Rule 1 (Definitions and 
Descriptions) and Rule 7.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, EMCC included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. EMCC has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.\2\
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    \2\ The Commission has modified the text of the summaries 
prepared by EMCC.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    When EMCC was formed, it was recognized that its buy-in and sell-
out procedures should be similar to those of the International 
Securities Market Association (``ISMA'') because of EMCC's 
understanding that ISMA's procedures are generally followed by emerging 
market trading parties for transactions settled outside EMCC. The 
reason for this was to preclude EMCC members from being subject to a 
buy-in or sell-out by a non-EMCC member and not be able to retransmit 
the buy-in or sell-out to an EMCC member in the same time frame. 
Accordingly, EMCC's buy-in and sell-out rules followed the time periods 
that would be used by non-EMCC members for these processes.
    EMCC recently learned that the ISMA buy-in and sell-out time frames 
will be changed effective January 1, 2004. If EMCC does not make 
corresponding changes to its rules by that date, it is possible that to 
avoid potential buy-in and sell-out exposure EMCC members will no 
longer submit transactions to EMCC. If EMCC members were to submit such 
transactions, they could be adversely affected due to the differences 
in buy-in time frames for ex-clearing trades. Accordingly, in order not 
to jeopardize the use of EMCC for trade processing and to not expose 
its members to risk, EMCC seeks to change its rules to conform to the 
industry change that is expected to become effective January 1, 2004. 
Basically, the change will shorten the time period when a buy-in and 
sell-out may be initiated and when it may be executed.\3\ EMCC 
understands that the emerging markets securities industry is favorably 
disposed to EMCC's proposed rule change.
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    \3\ A copy of the proposed rule language which sets out the 
timing for buy-ins and sell-outs is attached as an exhibit to EMCC's 
filing.
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    In addition to the above proposed changes, EMCC also seeks to make 
technical corrections to its Rule 1 (Definitions and Descriptions) and 
Rule 7 with regard to several rule and section references regarding 
buy-in and sell-out provisions. Rules 7 and 8 were revised in 1999,\4\ 
but some references to those rules and to specific sections therein 
were not amended to reflect those changes. This filing will correct 
that oversight.
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    \4\ Securities Exchange Act Release No. 41415 (May 17, 1999), 64 
FR 27841 (May 21, 1999) [File No. SR-EMCC-98-10].
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    EMCC believes that the proposed rule change is consistent with the 
requirements of the Act and the rules and regulations thereunder 
because it will promote the prompt and accurate clearance and 
settlement of securities transactions.

B. Self-Regulatory Organization's Statement on Burden on Competition

    EMCC does not believe that the proposed rule change will have an 
impact on or impose a burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments relating to the proposed rule change have been 
solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder and particularly with the requirements of section 
17A(b)(3)(F) \5\ of the Act, which requires that the rules of a 
clearing agency be designed to promote the prompt and accurate 
clearance and settlement of securities transactions. Because this 
proposed rule change aligns EMCC's buy-in and sell-out procedures with 
those of ISMA, EMCC should avoid any abrupt stoppage of the use of its 
services thereby enabling EMCC to continue to provide for the prompt 
and accurate clearance and settlement of transactions in emerging 
markets securities.
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    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    EMCC has requested that the Commission find good cause for 
approving the proposed rule change prior to the thirtieth day after the 
date of publication of notice of filing. The Commission finds good 
cause for approving the proposed rule change prior to the thirtieth day 
after the date of publication of notice of filing because by so 
approving EMCC will be able to conform its buy-in and sell-out 
procedures to the new industry guidelines generally used in 
transactions cleared outside EMCC when those industry guidelines become 
effective January 1, 2004. This will help to avoid confusion and other 
adverse

[[Page 712]]

consequences among EMCC's participants.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 5th Street NW, Washington, DC 20549-0069. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-EMCC-2003-07. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review comments more efficiently, comments should be sent in hardcopy 
or by e-mail but not by both methods. Copies of the submission, all 
subsequent amendments, all written statements with respect to the rule 
filing that are filed with the Commission, and all written 
communications relating to the rule filing 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, will be available for 
inspection and copying in the Commission's Public Reference Room in 
Washington, DC. Copies of such filing will also be available for 
inspection and copying at EMCC's principal office and on EMCC's Web 
site at http://www.e-m-c-c.com/legal/index.html. All submissions should 
refer to File No. SR-EMCC-2003-07 and should be submitted January 27, 
2004.
    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (File No. SR-EMCC-2003-07) be, and hereby 
is, approved on an accelerated basis through June 30, 2004.
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    \6\ 17 CFR 200.30-3(a)(12).
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    For the Commission by the Division of Market Regulation, pursuant 
to delegated authority.\6\

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-219 Filed 1-5-04; 8:45 am]
BILLING CODE 8010-01-P