[Federal Register Volume 77, Number 5 (Monday, January 9, 2012)]
[Notices]
[Pages 1114-1116]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-98]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66083; File No. SR-CME-2011-19]


Self-Regulatory Organizations; Chicago Mercantile Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change To Comply With New CFTC DCO Regulations

January 3, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 20, 2011, the Chicago Mercantile Exchange Inc. (``CME'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change described in Items I and II below, which items 
have been prepared primarily by CME. The Commission is publishing this 
Notice and Order to solicit comments on the proposed rule change from 
interested persons and to approve the proposed rule change on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of Terms of Substance of 
the Proposed Rule Change

    CME proposes to amend certain of its rules to comply with new CFTC 
Regulations 39.16(d) (Insolvency of a clearing member) and 39.15(d) 
(Transfer of customer positions), respectively. The text of the 
proposed rule change is below. The italicized text indicates additions. 
Bracketed text indicates deletions.

CME Rulebook

Rule 100--Rule 441--No Change.

Chapter 4. Enforcement of Rules

Rule 442. NOTIFICATION OF SIGNIFICANT EVENTS

    Each Member shall provide immediate[ly] notice to [fy] the Market 
Regulation Department (and each Member that is a Member Firm or a 
Clearing member shall also provide immediate notice to the Clearing 
House), in writing upon becoming aware of any of the following events 
relating to such Member:
    1. any suspension, expulsion, revocation or restriction of such 
Member's trading privileges or any fine in excess of $25,000, through 
an adverse determination, voluntary settlement or otherwise, by any 
court, commodity or securities exchange or related clearing 
organization, the Securities and Exchange Commission, the Commodity 
Futures Trading Commission or the securities commission or equivalent 
authority of any state, territory, the District of Columbia or foreign 
country, the National Futures Association, the Financial Industry 
Regulatory Authority, Inc. or any self-regulatory or regulatory 
organization;
    2. any indictment of the Member or any of its officers for, any 
conviction of the Member or any of its officers of, or any confession 
of guilt or plea of guilty or nolo contendere by the Member or any of 
its officers to 1) any felony or 2) any misdemeanor involving, arising 
from, or related to the purchase or sale of any commodity, security, 
futures contract, option or other financial instrument or involving or 
arising from fraud or moral turpitude; and/or
    3. any filing of a [involuntary] bankruptcy petition or insolvency, 
receivership or equivalent proceeding of which the member is a subject. 
[that has been filed against such Member, or i] In the case of a 
voluntary bankruptcy, insolvency, receivership or equivalent 
proceeding, the Member also shall notify the Market Regulation 
Department, and the Clearing House in the case of a Member that is a 
Member Firm or Clearing Member) when such Member [has filed or has] 
forms[ed] a definite intention to file such proceeding [for 
bankruptcy].
    Nothing in this Rule shall limit or negate any other reporting 
obligations that any member may have to the Exchange or any other 
regulator or person.
* * * * *

Rule 443-Rule 852--No Change.

Chapter 8. Clearing House and Performance Bonds

Rule 853. TRANSFERS OF TRADES AND CUSTOMER ACCOUNTS

853.A. Transfers of Trades

    1. Subject to the limitations of Rule 854, existing trades may be 
transferred either on the books of a clearing member or from one 
clearing member to another clearing member provided:
    i[1]. The transfer merely constitutes a change from one account to 
another account provided the underlying beneficial ownership in said 
accounts remains the same; or
    ii[2]. An error has been made in the clearing of a trade and the 
error is discovered and the transfer is completed within two business 
days after the trade date.
    [B]2. Subject to the limitations of Rule 854, Exchange staff may, 
upon request by the clearing member(s), approve a

[[Page 1115]]

transfer of existing trades either on the books of the same clearing 
member, or from the books of one clearing member to the books of 
another clearing member if the transfer is in connection with, or as a 
result of, a merger, asset purchase, consolidation or similar non-
recurring transaction between two or more entities where one or more 
entities become the successor in interest to one or more other 
entities.
    3[C]. Exchange staff may, with the consent of the clearing 
member(s) involved, permit the transfer of existing trades if, in 
staff's opinion, the situation so requires and such transfer is in the 
best interests of the Exchange.
    4[D]. Provided that the transfer is permitted pursuant to Sections 
1[A]., 2[B]. or 3[C]. above, transactions in all physically delivered 
futures contracts except for FX futures contracts must be recorded and 
carried on the books of the receiving firm at the original trade dates; 
all other transactions may be recorded and carried at either the 
original trade date or the transfer date. Futures transactions may be 
transferred using either the original trade price or the most recent 
settlement price; options transactions may be transferred using either 
the original trade price or a trade price of zero.
    [E]5. All transfers shall be reported to the Clearing House in a 
form acceptable to the Exchange for the type of transactions involved. 
The proper indicator must be included in the transfer such that the 
transactions, including the transaction(s) to reverse an error, clear 
as transfers. The clearing members involved shall maintain a full and 
complete record of all transactions together with all pertinent 
memoranda.

853.B. Transfers of Customer Accounts

    1. Subject to the limitations of Rule 853.A, after receipt of a 
signed instruction from a Clearing Member (the ``Carrying Clearing 
Member'') to transfer all or a portion of a customer account to another 
Clearing Member (the ``Receiving Clearing Member''), and provided that 
such instruction contains the customer's name and account number (and, 
if the transfer is not of the entire account, a description of which 
portion is to be transferred), and provided that the Receiving Clearing 
Member agrees to accept the account, the Exchange shall promptly 
transfer the account (or the relevant portion thereof), without 
requiring any close-out or rebooking of positions in connection with 
the transfer, provided that:
    i. The transferred positions will satisfy Exchange performance bond 
requirements at the Receiving Clearing Member; and
    ii. Any remaining positions in the customer account at the Carrying 
Clearing Member will satisfy Exchange performance bond requirements.
* * * * *

Rule 854-End--No Change.

II. Self-Regulatory Organization's Statement of Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, CME included statements 
concerning the purpose 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 III below. CME has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    CME proposes to amend certain of its rules to comply with new CFTC 
Regulations 39.16(d) (Insolvency of a clearing member) and 39.15(d) 
(Transfer of customer positions). The new CFTC regulations were part of 
a comprehensive set of principle-based regulations adopted by the CFTC 
that establish certain standards of compliance for derivatives clearing 
organizations (``DCOs'') like CME.
    New CFTC Regulation 39.16(d), which becomes effective on January 9, 
2011, requires each DCO to have a rule that requires clearing members 
to provide prompt notice to the DCO if the clearing member becomes the 
subject of a bankruptcy petition, receivership proceeding, or the 
equivalent. New CFTC Regulation 39.15(d), also effective on January 9, 
2012, requires each DCO to have rules providing that the DCO will 
promptly transfer all or a portion of a customer's account from one 
clearing member to another, provided that the conditions in the 
Regulation are satisfied. In order to comply with these CFTC 
requirements, CME proposes to amend current CME Rules 442 and Rule 853 
as set forth above. CME will consider whether any future changes would 
be necessary to the language of CME Rule 853 to the extent CME begins 
clearing securities products. The proposed effective date for these 
revisions is January 4, 2012.
    CME also made a filing, CME Submission 11-491, with its primary 
regulator, the Commodity Futures Trading Commission, with respect to 
the proposed rule changes.
    CME believes the proposed changes are consistent with the 
requirements of the Exchange Act. CME, a DCO, is required to implement 
the proposed changes to comply with recent changes to CFTC regulations. 
CME notes that the policies of the Commodity Exchange Act (``CEA'') 
with respect to clearing are comparable to a number of the policies 
underlying the Exchange Act, such as promoting market transparency for 
derivatives markets, promoting the prompt and accurate clearance of 
transactions and protecting investors and the public interest.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CME does not believe that the proposed rule change will have any 
impact, or impose any burden, on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    CME has not solicited, and does not intend to solicit, comments 
regarding this proposed rule change. CME has not received any 
unsolicited written comments from interested parties.

III. 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. Comments may be submitted by any of 
the following methods:
     Electronic comments may be submitted by using the 
Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml), or send an email to [email protected]. Please include 
File No. SR-CME-2011-19 on the subject line.
     Paper comments should be sent in triplicate to Elizabeth 
M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, 
NE., Washington, DC, 20549-1090.
    All submissions should refer to File Number SR-CME-2011-19. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 between the Commission and any person, other 
than

[[Page 1116]]

those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of CME. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CME-2011-19 and should be 
submitted on or before January 30, 2012.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    In its filing, CME requested that the Commission approve this 
request on an accelerated basis for good cause shown. CME cites the 
reason for granting this request on an accelerated basis as CME's 
operations as a DCO, subject to regulation by the CFTC under the CEA. 
These rule changes are being made according to regulations promulgated 
by the CFTC, which were previously subject to notice and comment. Not 
approving this request on an accelerated basis will have a significant 
impact on CME's operations as a DCO.
    Section 19(b) of the Act \3\ directs the Commission to approve a 
proposed rule change of a self-regulatory organization if it finds that 
such proposed rule change is consistent with the requirements of the 
Act and the rules and regulations thereunder applicable to such 
organization. The Commission finds that the proposed rule changes are 
consistent with the requirements of the Act, in particular the 
requirements of Section 17A of the Act,\4\ and the rules and 
regulations thereunder applicable to CME. Specifically, the Commission 
finds that the proposed rule change is consistent with Section 
17A(b)(3)(F) of the Act which requires, among other things, that the 
rules of a clearing agency be designed to assure the safeguarding of 
securities and funds which are in the custody and control of the 
clearing agency because it should allow CME to enhance its risk 
management efforts, both in motoring the financial status of clearing 
members and porting customer accounts among clearing members.\5\
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    \3\ 15 U.S.C. 78s(b).
    \4\ 15 U.S.C. 78q-1. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\6\ for approving the proposed rule change prior to the 30th 
day after the date of publication of notice in the Federal Register 
because the proposed rule change institutes the regulations of another 
regulatory agency, and those regulations were subject to notice and 
comment.
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    \6\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule change (SR-CME-2011-19) is approved on an 
accelerated basis.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-98 Filed 1-6-12; 8:45 am]
BILLING CODE 8011-01-P