[Federal Register Volume 69, Number 50 (Monday, March 15, 2004)]
[Notices]
[Pages 12187-12188]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5788]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49379; 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 9, 2004.
    Pursuant to Section 19(a) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on January 26, 2004, 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, 2005.
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    \1\ 15 U.S.C. 78s(a).
    \2\ Letter from Karen L. Saperstein, General Counsel, EMCC (Jan. 
23, 2004).
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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

[[Page 12188]]

thereunder,\4\ the Commission approved on a temporary basis until 
August 20, 1999, EMCC's application for registration as a clearing 
agency.\5\ By subsequent orders, the Commission has extended EMCC's 
registration as a clearing agency through March 31, 2004.\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); 47602 
(March 31, 2003), 68 FR 16848 (April 7, 2003).
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    EMCC was created to facilitate the clearance and settlement of 
transactions in U.S. dollar denominated Brady Bonds.\7\ EMCC began 
operating on April 6, 1998, with ten dealer members. 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\
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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, U.S. Treasury zero-coupon bonds and other 
high-grade instruments collateralize the principal and certain 
interest of these bonds.
    \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 a temporary exemption from Section 17A(b)(3)(B) of the Act 
\9\ because EMCC did not provide for the admission of some of the 
categories of members required by that section.\10\ 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.\11\ Accordingly, the Commission is extending EMCC's 
temporary exemption from Section 17A(b)(3)(B).
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    \9\ 15 U.S.C. 78q-1(b)(3)(B).
    \10\ Registration Order at 8716.
    \11\ 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) \12\ and 17A(b)(3)(F) \13\ 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.\14\ 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.\15\ 
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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    \12\ 15 U.S.C. 78q-1(b)(3)(A).
    \13\ 15 U.S.C. 78q-1(b)(3)(F).
    \14\ Registration Order at 8720.
    \15\ 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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    In addition, because EMCC is currently in the process of revising 
its foreign member program, including its membership application 
process and ongoing financial requirements, the Commission is extending 
EMCC's temporary registration so that EMCC can complete its revisions 
and Commission staff has time to assess the revised foreign member 
program.
    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 
permanent registration or in instituting proceedings to determine 
whether permanent registration should be denied in accordance with 
Section 19(a)(1) of the Act.\16\ 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 the Commission process and review your 
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 5, 2004.
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    \16\ 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, 2005.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(50)(i).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-5788 Filed 3-12-04; 8:45 am]
BILLING CODE 8010-01-P