98-5254. Self-Regulatory Organizations; Emerging Markets Clearing Corporation; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Offering of Shares of Common Stock  

  • [Federal Register Volume 63, Number 40 (Monday, March 2, 1998)]
    [Notices]
    [Pages 10251-10253]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 98-5254]
    
    
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    SECURITIES AND EXCHANGE COMMISSION
    
    [Release No. 34-39694; File No. SR-EMCC-98-01]
    
    
    Self-Regulatory Organizations; Emerging Markets Clearing 
    Corporation; Notice of Filing and Order Granting Accelerated Approval 
    of a Proposed Rule Change Relating to the Offering of Shares of Common 
    Stock
    
    February 24, 1998.
        Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
    (``Act'').\1\ notice is hereby give that on February 18, 1998, the 
    Emerging Markets Clearing Corporation (``EMCC'') filed with the 
    Securities and Exchange Commission (``Commission'') the proposed rule 
    change (File No. SR-EMCC-98-01) 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 on the proposed 
    rule change from interested persons and to grant accelerated approval 
    of the proposal.
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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 relates to the sale of common stock of 
    EMCC.
    
    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 that it received on the proposed rule change. 
    The text of these statements may be examined at the
    
    [[Page 10252]]
    
    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 
    submitted by EMCC.
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    (A) Self-Regulatory Organizations's Statement of the Purpose of, and 
    Statutory Basis for, the Proposed Rule Change
    
        On May 30, 1997, EMCC filed with the Commission an application on 
    Form CA-1 for registration as a clearing agency. On February 13, 1998, 
    the Commission approved EMCC's application for registration 
    (``registration order'').\3\ As described in the registration order, 
    EMCC is owned by the International Securities Markets Association 
    (``ISMA''), the National Securities Clearing Corporation (``NSCC''), 
    and the Emerging Markets Traders Association (``EMTA''). The 
    registration order noted EMCC's intention to issue shares to those 
    entities that have participated in an contributed to EMCC's development 
    fund to finance EMCC's initial operations (``general shareholders'') 
    EMCC has determined to issue these shares at the present time so that 
    funds will be available to pay expenses related to its development. The 
    purpose of this proposed rule change is to obtain authorization for the 
    share issuance.\4\ After the issuance and sale of these EMCC shares, no 
    entity will be qualified to become EMCC member unless, in addition to 
    satisfying the other criteria for membership set forth in the rules, 
    such applicant becomes a shareholder of EMCC (participant 
    shareholder'') or an affiliate of a shareholder of EMCC.
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        \3\ Securities Exchange Act Release No. 39661 (February 13, 
    1998), 62 FR 8711 (order granting temporary registration as a 
    clearing agency).
        \4\ The thirty entities that will receive shares in this 
    issuance are listed on Exhibit A, Annex 1 to EMCC's rule filing. All 
    of these entities are either U.S. broker-dealers, U.K. broker-
    dealers, U.S. banks, or non-U.S. banks.
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        Each shareholder, both general and participant, will be required to 
    sign the shareholder agreement, which sets forth provisions regarding 
    the election of directors, restrictions on issuance and transfer of 
    shares, and voting requirements.\5\ The shareholder agreement provides 
    that no dividends will be paid on the shares. Pursuant to the 
    shareholder agreement, shareholders may sell or may transfer their 
    shares only in compliance with the shareholder agreement. There is a 
    fixed price of $5,000 per share for the issuance, sale, or transfer of 
    EMCC shares by a participant shareholderS although no assurance is 
    given that a transferee will be available to purchase EMCC shares at 
    the time of any proposed transfer. Any sale or transfer by a 
    participant shareholder may only be to entities that are already 
    general or participant shareholder of EMCC and that agree to execute 
    the shareholder agreement. In addition, any such sale may only occur if 
    prior to such sale or transfer EMCC receives a legal opinion, in a form 
    acceptable to it, to the effect that such sale or transfer is exempt 
    under the Securities Act of 1933.\6\
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        \5\ A vote of eighty percent of the outstanding shares is 
    required to terminate the shareholder agreement.
        \6\ 15 U.S.C. 77a.
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        As described in the registration order, EMCC's board of directors 
    is classified into four classes. The first three classes are each 
    composed of five participant directors. Only officers or partners of a 
    participant shareholder or of an affiliate or subsidiary of a 
    participant shareholder are eligible to serve as a participant 
    director. Shareholders are obligated to vote their shares for 
    participant directors selected by the nominating committee if no 
    participant nominees are submitted or for the participant directors 
    selected by a vote of the participants if there is a contested 
    election. The fourth class of directors (``Class IV'') consists of one 
    EMTA director, one ISMA director, two NSCC directors, and two directors 
    selected by the EMCC board. Shareholders are required to vote their 
    shares to elect the directors selected by ISMA, EMTA, NSCC, and EMCC's 
    board.
        Except upon written agreement of the holders of two-thirds of the 
    outstanding EMCC shares, shareholders may not vote (1) to amend or 
    change the EMCC certificate of incorporation, the by-laws of EMCC, or 
    the shareholder agreement or (2) to repurchase or to issue any EMCC 
    shares. However, if directed by a board resolution, shareholders must 
    vote (1) to amend or change the certificate of incorporation relating 
    to the establishment of a greater than majority requirement of quorum 
    and voting at meetings of the board of directors, the establishment of 
    a cumulative voting system for the election of directors, the 
    classification of directors, shareholder rights to fix consideration 
    for no par shares, shareholder rights to fix compensation of directors, 
    and shareholder rights to elect and to remove officers and (2) to 
    adopt, to amend, or to repeal any by-law except those which the board 
    is prohibited from adopting, amending, or repealing pursuant to the by-
    laws. Shareholders may not vote to change the manner in which a Class 
    IV director is elected or to reduce the number of Class IV directors 
    except with the unanimous consent of ISMA, EMTA, and NSCC.
        In conjunction with this issuance of shares, EMCC is amending its 
    articles of incorporation in order to permit certain actions to be 
    taken upon a two-thirds vote of the shareholders rather than upon 
    unanimous vote. A two-thirds vote will be required for: (1) any 
    amendment or change of the certificate of incorporation; (2) any 
    adoption, amendment, or repeal by the shareholders of by-laws of EMCC; 
    (3) any repurchase of any securities issued by EMCC; and (4) any 
    issuance of any securities by EMCC.
        EMCC believes that the proposed rule change is consistent with the 
    requirements of the Act and the rules and regulations thereunder and 
    specifically with the fair representation requirement of Section 
    17A(b)(3)(C).
    
    (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. EMCC will notify the Commission of any written 
    comments received by EMCC.
    
    III. Date of Effectiveness of the Proposed Rule Change and Timing for 
    Commission Action
    
        Section 17A(b)(3)(C) of the Act requires that the rules of a 
    clearing agency assure the fair representation of its shareholders or 
    members and participants in the selection of its directors.\7\ The 
    Commission believes that EMCC's proposal is consistent with its 
    obligations under the Act. EMCC's procedures for the election of 
    directors, which the Commission approved in the registration order, 
    provides that other than Class IV directors only participant 
    shareholders may serve on the board of directors. The rule change 
    allows for participants to become shareholders and thus enhance their 
    ability to participate in the governance of EMCC. Therefore, the 
    Commission believes that EMCC's proposal is consistent with its 
    obligations to assure the fair representation of participants.
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        \7\ 15 U.S.C. 78q-1(b)(3)(C).
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        EMCC has requested that the Commission find good cause for
    
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    approving the proposed rule change prior to the thirtieth day after the 
    date of publication of notice of the filing. The Commission finds good 
    cause for approving the proposed rule change prior to the thirtieth day 
    after publication of notice because it will permit EMCC to proceed with 
    its issuance of shares to general shareholders scheduled for February 
    24, 1998.
    
    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 Fifth Street, NW., Washington, DC 20549. 
    Copies of the submission, all subsequent amendments, all written 
    statements with respect to the proposed rule change that are filed with 
    the Commission, and all written communications relating to the proposed 
    rule change between the Commission and any person, other than those 
    that may be withheld from the public in accordance with the provisions 
    of 5 U.S.C. 552, will be available for inspection and copying in the 
    Commission's Public Reference Room, 450 Fifth Street, NW., Washington, 
    DC 20549. Copies of such filing will also be available for inspection 
    and copying at the principal office of EMCC. All submissions should 
    refer to the file number SR-EMCC-98-01 and should be submitted by March 
    23, 1998.
        It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
    that the proposed rule change (File No. SR-EMCC-98-01) 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. 98-5254 Filed 2-27-98; 8:45 am]
    BILLING CODE 8010-01-M
    
    
    

Document Information

Published:
03/02/1998
Department:
Securities and Exchange Commission
Entry Type:
Notice
Document Number:
98-5254
Pages:
10251-10253 (3 pages)
Docket Numbers:
Release No. 34-39694, File No. SR-EMCC-98-01
PDF File:
98-5254.pdf