[Federal Register Volume 59, Number 19 (Friday, January 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1889]


[Federal Register: January 28, 1994]


=======================================================================
-----------------------------------------------------------------------

COMMODITY FUTURES TRADING COMMISSION


Common Banking and Settlement System of the Chicago Mercantile 
Exchange and the Board of Trade Clearing Corporation

    The Chicago Mercantile Exchange (``CME'') and the Board of Trade 
Clearing Corporation (``BOTCC'') have submitted to the Commodity 
Futures Trading Commission (``Commission'') a proposal to establish a 
common banking and settlement system, pursuant to Section 5a(a)(12)(A) 
of the Commodity Exchange Act (``Act''), 7 U.S.C. 7a(a)(12)(A), and 
Commission Regulation 1.41(b), 17 CFR 1.41(b) (CME and BOTCC together 
being the ``participating clearing organizations''). The proposal 
requires that participants be limited to entities that are themselves 
members of both the CME and BOTCC (``joint clearing members''), and 
provides for computing and transferring performance bond margin, 
settlement variation, and option premiums in respect of commodity 
futures and options contracts of such joint clearing members. The 
proposal also includes procedures governing the distribution of excess 
performance bond margin deposits between the CME and BOTCC in certain 
cases of suspension or expulsion of joint clearing members.
    Whereas, the common banking and settlement procedures provide for 
performance bond margin deposited by joint clearing members to be held 
in the joint names of the participating clearing organizations at one 
or more depositories;
    Whereas, the common banking and settlement procedures provide for 
the netting of daily settlement variation and option premium payments 
that joint clearing members pay to or receive from the participating 
clearing organizations;
    Whereas, the common banking and settlement procedures can be used 
to reallocate cash performance bond margin deposits of joint clearing 
members between the participating clearing organizations;
    Whereas, it is not intended that the common banking and settlement 
procedures result in a novation of the joint clearing members' 
obligations to either of the participating clearing organizations;
    Whereas, in the event of the suspension or expulsion of a joint 
clearing member, the common banking and settlement procedures prohibit 
any excess performance bond margin, or proceeds thereof, attributable 
to customer origin positions from being transferred between the CME and 
the BOTCC to satisfy any deficit or unsatisfied settlement obligations 
attributable to proprietary origin positions;
    Whereas, by letter dated September 29, 1993, the participating 
clearing organizations acknowledge that, in the event of the suspension 
or expulsion of a joint clearing member, the common banking and 
settlement procedures would permit the transfer of any excess 
performance bond margin, or proceeds thereof, between the CME and the 
BOTCC only if there was no shortfall in the funds required to meet the 
joint clearing member's customer segregated funds requirements for all 
of its customers, and, by letter dated December 13, 1993, the 
participating clearing organizations acknowledge that the proposed 
agreement among the joint clearing members and the participating 
clearing organizations is expressly subject to the terms of this Order;
    Whereas, by letter dated December 9, 1993, the participating 
clearing organizations have represented that, before implementation of 
the proposal, the agreement between the participating clearing 
organizations will be amended to make clear that, in the event of a 
default by a joint clearing member, the clearing organization at which 
the default occurred will transfer funds to the other clearing 
organization in accordance with its respective gross payment 
obligations if there is a deficit in payment flows to the other 
clearing organization resulting from the netting of payment obligations 
pursuant to the common banking and settlement procedures, and will 
otherwise satisfy its gross payment obligations to non-defaulting joint 
clearing members in accordance with the routine settlement schedule;
    Whereas, the proposal requires that participants be limited to 
entities that are themselves members of both the CME and BOTCC and does 
not permit participation by affiliated entities;
    Whereas, the Commission has reviewed the common banking and 
settlement proposal, the proposed agreement between the participating 
clearing organizations, the proposed agreement among the joint clearing 
members and the participating clearing organizations, the 
representations of the participating clearing organizations as to the 
operation of the common banking and settlement system, and such other 
documents as constitute the complete record in this matter 
(``Record'');
    Now Therefore, based on the Record in this matter, and provided 
that the common banking and settlement proposal submitted by the CME 
and the BOTCC is implemented consistently with the representations and 
agreements cited herein;
    It is Hereby Ordered, Pursuant to Sections 4d and 20 of the Act, 7 
U.S.C. 6d and 24, and consistent with the Bankruptcy Code, that, in the 
event of the suspension or expulsion of a joint clearing member by both 
the CME and the BOTCC, the clearing organization to which performance 
bond margin has been allocated may transfer any excess performance bond 
margin, or proceeds thereof, to the other clearing organization only if 
there is no shortfall in the funds required to meet the joint clearing 
member's customer segregated funds requirements for all of its 
customers for whom segregation must be maintained.
    It is Further Ordered, Pursuant to Section 5a(a)(12)(A) of the Act 
that the CME and the BOTCC's request for Commission approval of their 
proposal to establish a common banking and settlement system, including 
approval of proposed CME Rule 802, proposed amendments to CME Rule 832, 
proposed BOTCC Bylaws 118, 119, and 517, and proposed amendments to 
BOTCC Bylaws 503, 508, 604, and 804 is hereby granted.

    Issued in Washington, DC, this 21st day of December, 1993.

    By the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 94-1889 Filed 1-27-94; 8:45 am]
BILLING CODE 6351-01-P