Federal Register / Vol. 69, No. 3 / Tuesday, January 6, 2004 / Notices 711

12 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2The Commission has modified the text of the 

summaries prepared by EMCC.

3A 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.

4Securities Exchange Act Release No. 41415 (May 

17, 1999), 64 FR 27841 (May 21, 1999) [File No. SR–

EMCC–98–10]. 5 15 U.S.C. 78q–1(b)(3)(F).

SR–CHX–2002–09 and should be 

submitted by January 27, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.12

Jill M. Peterson, 

Assistant Secretary.

[FR Doc. 04–221 Filed 1–5–04; 8:45 am] 

BILLING CODE 8010–01–P

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.

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 (BuyIns) 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

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 nonEMCC 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.

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.

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.

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 

712 Federal Register / Vol. 69, No. 3 / Tuesday, January 6, 2004 / Notices 

6 17 CFR 200.30–3(a)(12).

1The amendment was technical in nature and did 

not require republication of the notice of filing.

2 15 U.S.C. 78s(b)(1).

3Securities Exchange Act Release No. 48796 

(November 17, 2003), 68 FR 65753.

4Securities Exchange Act Release No. 44301 (May 

11, 2001), 66 FR 28207 (May 22, 2001) [File No. SR–

GSCC–00–13].

5This amendment is also being proposed for the 

BCC cross-margining arrangement as discussed 

below.

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: rule-comments@sec.gov. 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.

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

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49003; File No. SR–FICC–

2003–10] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Approving Proposed Rule Change To 

Amend the Fixed Income Clearing 

Corporation’s Cross-Margining 

Agreements With the Chicago 

Mercantile Exchange, BrokerTec 

Clearing Company, and the Board of 

Trade Clearing Corporation and To 

Eliminate the Cross-Margining 

Agreement with the New York Clearing 

Corporation 

December 29, 2003. 

I. Introduction 

On October 6, 2003, the Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) and on 

December 11, 2003, amended 1 proposed 

rule change SR–FICC–2003–10 pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’).2 Notice 

of the proposal was published in the 

Federal Register on November 21, 

2003.3 For the reasons discussed below, 

the Commission is approving the 

proposed rule change.

II. Description 

FICC is seeking to amend its crossmargining agreements with the Chicago 

Mercantile Exchange (‘‘CME’’), 

BrokerTec Clearing Company (‘‘BCC’’), 

and the Board of Trade Clearing 

Corporation (‘‘BOTCC’’) and to 

eliminate its cross-margining agreement 

with the New York Clearing Corporation 

(‘‘NYCC’’). 

1. New Cross-Margining Agreement With 

CME 

Through its Government Securities 

Division (‘‘GSD’’), FICC has a crossmargining arrangement with CME.4

FICC is proposing to terminate its 

existing cross-margining agreement with 

CME and to enter into a new crossmargining agreement with the CME 

(‘‘New FICC–CME Agreement’’) to 

reflect the fact that, as of January 2, 

2004, the CME will begin clearing 

certain Treasury and Agency futures 

contracts and options on such futures 

contracts that are traded on the Chicago 

Board of Trade (‘‘CBOT’’) and that are 

currently cleared by BOTCC. Under the 

New FICC–CME Agreement, the FICC 

products that will be eligible for crossmargining will be Treasury securities 

that fall into the GSD’s offset classes A 

through G and GCF Repo Treasury 

securities with equivalent remaining 

maturities and non-mortgage-backed 

Agency securities that fall into the 

GSD’s offset classes e and f and GCF 

Repo non-mortgage-backed Agency 

securities with equivalent remaining 

maturities. The CME products that will 

be eligible for cross-margining will be of 

two types: (i) The products currently 

eligible under the existing arrangement 

between FICC and CME which are 

Eurodollar futures contracts with ranges 

in maturity from 3 months to 10 years 

and options on such future contracts 

cleared by CME and (ii) the CBOT 

products which are Two-Year Treasury 

Note Futures contracts and options 

thereon, Five-Year Treasury Note 

Futures contracts and options thereon, 

Ten-Year Treasury Note Futures 

contracts and options thereon, ThirtyYear Treasury Bond Futures contracts 

and options thereon, Five-Year Agency 

Note Futures contracts and options 

thereon, and Ten-Year Agency Note 

Futures contracts and options thereon to 

be cleared by CME.

No significant changes are being 

proposed to the existing FICC–CME 

cross-margining arrangement other than 

the addition of the CBOT products and 

certain FICC products as discussed in 

more detail below. The key aspects of 

the cross-margining arrangement, most 

notably, the calculation of the crossmargining reduction and the loss 

sharing provisions in the event of a 

participant default are not being 

amended. 

2. Key Proposed Changes to the Existing 

Cross-Margining Agreement Between 

FICC and CME 

The addition of the CBOT products 

has necessitated new definitions for 

‘‘CBOT Eligible Products,’’ ‘‘CME 

Eligible Products,’’ and ‘‘FICC Eligible 

Products,’’ as well as Offset Class tables 

for these products in Appendix B of the 

agreement. 

Appendix B of the FICC–CME 

Agreement is also being amended to 

include FICC’s GCF Repo Treasury and 

non-mortgage-backed Agency products 

in the cross-margining arrangement.5 By 

the effective date of the New FICC–CME 

Agreement, FICC will be margining its 

GCF Repo Treasury and non-mortgageVerDate jul<14>2003 00:51 Jan 06, 2004 Jkt 203001 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 E:\FR\FM\06JAN1.SGM 06JAN1