[Federal Register Volume 63, Number 168 (Monday, August 31, 1998)]
[Notices]
[Pages 46263-46264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23311]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-40363; International Series Release No. 1154; File No.
SR-EMCC-98-03]
Self-Regulatory Organizations; Emerging Markets Clearing
Corporation; Notice of Filing and Order Granting Accelerated Approval
of a Proposed Rule Change Regarding Expansion of Eligible Instruments
August 25, 1998.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 28, 1998, the
Emerging Markets Clearing Corporation (``EMCC'') filed with the
Securities and Exchange Commission (``Commission'') and on August 20,
1998, amended 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 on the proposed
rule change from interested persons and to grant accelerated approval.
---------------------------------------------------------------------------
\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 proposed rule change will amend EMCC's rules to expand EMCC
eligible instruments to include sovereign debt.
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\
---------------------------------------------------------------------------
\2\ The Commission has modified the text of the summaries
prepared by EMCC.
---------------------------------------------------------------------------
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
The proposed rule change expands the list of EMCC eligible
instruments to include debt issued by a sovereign issuer where: (1) the
debt is rated in one of the four highest rating categories
(``investment grade'') by at least two Nationally Recognized
Statistical Rating Organizations (``NRSRO'') \3\ or (2) the debt is
rated (a) in one of the four highest rating categories by one NRSRO and
some satisfactory transaction volume can be demonstrated or (b) in the
next highest rating category below investment grade by one NRSRO and
both substantial volume and transactions can be demonstrated to
indicate liquidity exists.\4\
---------------------------------------------------------------------------
\3\ NRSRO shall have the same meaning as used in Rule 15c3-
1(c)(2)(vi)(F).
\4\ It is EMCC's understanding that sovereign debt issued by
Brazil, Argentina, and Mexico currently meet one of the above
requirements.
---------------------------------------------------------------------------
The proposed rule change also will provide that if sovereign debt
fails to continue to meet one of the above requirements for a period of
one consecutive year, EMCC will specifically consider and determine
whether the sovereign debt should no longer qualify as an EMCC eligible
instrument. EMCC's rules are being modified to specifically provide
that if an instrument fails to qualify as an eligible instrument
transactions that had been accepted by the EMCC prior to such
determination will continue to be processed and will be treated as if
they were transactions in EMCC eligible instruments.\5\ Upon a
determination that an instrument fails to qualify as an eligible
instrument, no new transactions in such instrument will be accepted by
EMCC for processing.
---------------------------------------------------------------------------
\5\ Accordingly, the buy-in and sell-out provisions set forth in
Sections 7 and 8 in EMCC's Rule 8 will continue to apply to such
transactions.
---------------------------------------------------------------------------
EMCC believes that the proposed rule change is consistent with the
requirements of Section 17A of the Act and the rules and regulations
thereunder because it will facilitate 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 prosed 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)(F) of the Act \6\ requires that the rules of a
clearing agency be designed to assure the safeguarding of securities
and funds which are in the custody or control of the clearing agency or
for which it is responsible. The Commission believes that the proposal
is consistent with EMCC's obligations under Section 17A(b)(3)(F)
because EMCC will apply its existing risk controls, such as its daily
margining procedures, to issues of sovereign debt. EMCC's risk controls
previously have been approved for use in EMCC's clearance and
settlement of Brady Bonds, and EMCC has represented to the Commission
that the controls are applicable to sovereign debt.
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
The Commission finds good cause for approving the proposed rule
change prior to the thirtieth day after the publication of notice of
the filing. Approving prior to the thirtieth day after publication of
notice will allow EMCC to increase in a timely manner the number of
securities that can be processed through EMCC, a registered clearing
agency, instead of through riskier and less efficient means.
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 N.W., Washington,
D.C. 20549. 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, D.C. 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 No. SR-EMCC-98-03 and
should be submitted by September 21, 1998.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (File No. SR-
[[Page 46264]]
EMCC-98-03) be and hereby is approved on an accelerated basis.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\7\
---------------------------------------------------------------------------
\7\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jonathan G. Katz,
Secretary.
[FR Doc. 98-23311 Filed 8-28-98; 8:45 am]
BILLING CODE 8010-01-M
