Federal Register / Vol. 66, No. 12 / Thursday, January 18, 2001 / Notices 4879

18 15 U.S.C. 78s(b)(2).

19 17 CFR 200.30–3(a)(12).

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

2Securities Exchange Act Release No. 43618

(November 27, 2000), 65 FR 75327.

3EMCC’s Rules define an IDB as ‘‘a broker-dealer

that conducts securities trading which matches

buyers and sellers who are banks or dealers, and

who is designated as such by the Corporation.’’

4See, e.g., Government Securities Clearing

Corporation Rule 4, Section 2(c).

5October, 1997 (Asia), August, 1998 (Russia), and

January, 1999 (Brazilian).

6 15 U.S.C. 78q–1(b)(3)(F) (1988).

7 17 CFR 200.30–3(a)(12).

available for inspection and copying at

the principal office of the Exchange. All

submissions should refer to File No.

SR–CBOE–00–10 and should be

submitted by February 8, 2001.

VI. Conclusion

For all of the aforementioned reasons,

the Commission finds that the proposed

rule change is consistent with the

requirements of the Act and the rules

and regulations thereunder applicable to

a national securities exchange.

It Is Therefore ordered, pursuant to

section 19(b)(2) of the Act,18 that the

proposed rule change (SR–CBOE–00–

10), as amended, is approved.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.19

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1485 Filed 1–17–01; 8:45 am]

BILLING CODE 8010–02–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 43824; File No. SR–EMCC–00–

05]

Self-Regulatory Organizations;

Emerging Markets Clearing

Corporation; Order Approving a

Proposed Rule Change Relating to

Increasing the Minimum Clearing Fund

Requirement for All EMCC Members to

$3,000,000 and Establishing Two Tiers

of Inter-Dealer Broker Membership

Standards

January 9, 2001.

On July 14, 2000, the Emerging

Markets Clearing Corporation (‘‘EMCC’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’) and on

August 16, 2000, and November 1, 2000,

amended a proposed rule change (File

No. SR–EMCC–00–05) pursuant to

section 19(b)(1) of the Securities

Exchange Act of 1934 (‘‘Act’’).1 Notice

of the proposal was published in the

Federal Register on December 1, 2000.2

No comment letters were received. For

the reasons discussed below, the

Commission is approving the proposed

rule change.

I. Description

The purpose of the rule change is to

(i) increase the minimum clearing fund

requirement for all EMCC members to

$3,000,000 from the current required

minimum of $1,000,000 and (ii) provide

two tiers of IDB membership standards.3

With respect to the increased

minimum clearing fund requirement,

EMCC’s risk advisory subgroup

reviewed EMCC’s two years of

operations, including trade files and

daily margin calculations. The

subcommittee concluded that, generally,

members’ calculated clearing fund

requirements did not go below

$3,000,000. Moreover, raising the

minimum requirement from $1,000,000

to $3,000,000 is consistent with the

clearing fund requirements imposed on

IDBs by other clearing corporations, 4

and it addresses the fact that IDB

members have a potential clearing fund

loss liability that could well exceed the

current $1,000,000 clearing fund

minimum. Accordingly, EMCC has

determined that it would be more

appropriate to have a greater amount of

IDB funds on hand to cover the

potential exposure than to have to

request such a deposit if needed due to

a loss. Therefore, EMCC has determined

that it is appropriate to increase all

members’, including IDBs’, minimum

clearing fund requirement to

$3,000,000.

The rule change also separates IDBs

into two membership categories based

on excess net capital or excess financial

resources. Those IDBs with excess net

capital, or excess financial resources for

a broker or dealer regulated by the

Securities and Futures Authority

Limited, of between $10,000,000 and

$20,000,000 will be margined using an

‘‘event factor’’ of 1.5 instead of the

factor of 1.25 currently used in EMCC’s

base margining formula. This factor is

representative of the volatilities

experienced during the last three

emerging market events.5 Those IDBs

with excess net capital or excess

financial resources of more than

$20,000,000 will be margined under the

current event factor of 1.25.

EMCC believes that the two-tier

membership standard will permit it to

better collateralize the risk posed by

IDBs with lower levels of capital. EMCC

recognizes that the clearing fund is a

key mitigant to market risk in the event

of member insolvency and feels that

margining those IDBs with less than

$20,000,000 excess regulatory capital at

an event factor of 1.5 should mitigate

the risk of their lower capital levels.

The effective date for these approved

changes will be thirty days following

the date the Commission approves the

filing for current members and will be

immediately for any applicant who

becomes a member after the rule change

is approved.

II. Discussion

Section 17A(b)(3)(F) of the Act

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 for which it is

responsible.6 The Commission believes

that the approval of EMCC’s rule change

is consistent with this Section. The

Commission believes it is prudent for

EMCC to have a greater amount of IDB

funds on hand to cover the potential

exposure than to have to request such a

deposit if needed and to increase all

members’, including IDBs’, minimum

clearing fund requirements to

$3,000,000. In addition, the Commission

believes that the two-tier membership

standard whereby EMCC will margin

IDBs with less than $20,000,000 excess

regulatory capital at an event factor of

1.5 will permit EMCC to better

collateralize the risk posed by IDBs with

lower levels of capital.

III. Conclusion

On the basis of the foregoing, the

Commission finds that the proposal is

consistent with the requirements of the

Act and in particular with the

requirements of section 17A of the Act

and the rules and regulations

thereunder.

It is Therefore Ordered, pursuant to

section 19(b)(2) of the Act, that the

proposed rule change (File No. SR–

EMCC–00–05) be and hereby is

approved.

For the Commission by the Division of

Market Regulation, pursuant to delegated

authority.7

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–1408 Filed 1–17–01; 8:45 am]

BILLING CODE 8010–01–M