[Federal Register Volume 64, Number 120 (Wednesday, June 23, 1999)]
[Notices]
[Pages 33540-33541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15911]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-41534; File No. SR-EMCC-99-4]
Self-Regulatory Organizations; Emerging Markets Clearing
Corporation; Notice of Filing of a Proposed Rule Change Regarding
Expansion of Eligible Instruments
June 16, 1999.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on March 26, 1999, the
Emerging Markets Clearing Corporation (``EMCC'') filed with the
Securities and Exchange Commission (``Commission'') the proposal rule
change (File No. SR-EMCC-99-04) as described in Items I, II, and III
below, which items have been prepared primarily by EMCC. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of
Substance of the Proposed Rule Change
The purpose of the proposed rule change is to expand the types of
instruments eligible for clearance and settlement at EMCC.
II. Self-Regulatory Organization's Statement of the Purpose of,
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 aspect of such
statement.\2\
---------------------------------------------------------------------------
\2\ The Commission has modified the text of the summaries
prepared by EMCC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of,
Statutory Basis for, the Proposed Rule Change
The purpose of the proposed rule change is to expand the types of
instruments eligible for processing by EMCC. To accomplish this, the
proposed rule change will amend the definition of ``eligible sovereign
debt,'' which is set forth in Rule 1, to mean any instruments which
either:
(1) Are issued by or on behalf of an emerging markets sovereign
issuer or an agency or instrumentality thereof (including, without
limitation, any central bank thereof); provided that, in the case of
any instrument issued by an agency or instrumentality, the credit
quality of those instruments is judged by one or more NRSROs or by
market participants generally on the basis of the credit quality of the
related sovereign issuer; or
(2) Have the timely payment of principal and interest guaranteed by
an issuer who meets the criteria set forth in (1).
As with all instruments that are EMCC eligible, these instruments
must also meet the existing criteria set forth in Rule 3, Section 1
that they must be eligible for settlement at a qualified securities
depository and that they must be U.S. dollar denominated.
The dollar denominated non-Brady sovereign debt of Brazil,
Argentina, and Mexico has been eligible at EMCC since August 1998.
Since that time, there have been two extreme market events affecting
emerging market debt generally, one in August/September 1998 and
another in January 1999. According to EMCC, it is the consensus of
current members that having non-Brady sovereign debt of Brazil,
Argentina, and Mexico eligible at EMCC during these events
significantly reduced settlement risk and increased safety and
soundness. EMCC also believes that these events demonstrated that
EMCC's risk management systems and procedures, as well as their
clearance and settlement systems and procedures, are well suited to
non-Brady sovereign debt, even during times of market stress and
extreme violability. EMCC staff and members attribute this primarily to
the facts that (1) the distinction between Brady and non-Brady
sovereign debt (i.e., whether or not it originated as part of a loan
restructuring) is not relevant to the market behavior of the
instruments and (2) the trading and settlement practices for both types
of sovereign instruments are virtually identical.
EMCC believes that the proposed rule change is consistent with the
requirements of section 17A of the Act \3\ and the rules and
regulations thereunder because the inclusion of dollar denominated
sovereign debt will help to reduce risk and respect to the
[[Page 33541]]
clearance and settlement of those specific instruments as well as will
help to reduce risk with respect to the emerging market marketplace
generally.
---------------------------------------------------------------------------
\3\ 15 U.S.C. 78g-1.
---------------------------------------------------------------------------
(B) Self-Regulatory Organization's Statement on Burden on Competition
EMCC does not believe that the proposed rule change will impose any
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 of 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
Within thirty-five days of the date of publication of this notice
in the Federal Register or within such longer period (i) as the
Commission may designate up to ninety days of such date if it funds
such longer period to be appropriate and publishes its reasons for so
finding or (ii) as to which the self-regulatory organization consents,
the Commission will:
(a) By order approve such proposed rule change or
(b) Institute proceedings to determine whether the proposed rule
change should be disapproved.
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 20549-0609.
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 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 Section, 450 Fifth Street, NW, Washington, DC 20549. Copies
of such filing also will be available for inspection and copying at the
principal office of EMCC. All submissions should refer to File No. SR-
EMCC-99-4 and should be submitted by July 14, 1999.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\4\
---------------------------------------------------------------------------
\4\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-15911 Filed 6-22-99; 8:45 am]
BILLING CODE 8010-01-M
