[Federal Register Volume 77, Number 61 (Thursday, March 29, 2012)]
[Notices]
[Pages 19045-19047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7515]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66646; File No. SR-CME-2012-06]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing of Proposed Rule Change To Amend Certain Credit 
Default Swap Clearing Rules Regarding Guaranty Fund Allocations, 
Amendments to Daily Submission Deadline, Holiday Accrual Processing and 
PAI Payment Timeline

March 22, 2012.
    Pursuant to Section 19(b)(2) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that 
on March 9, 2012, Chicago Mercantile Exchange Inc. (``CME'') filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change described in Items I, II, and III below, which items have 
been prepared primarily by CME. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(2).
    \2\ 17 CFR 240.19b-4.

---------------------------------------------------------------------------

[[Page 19046]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CME proposes to amend rules related to its Credit Default Swap 
clearing rules regarding guaranty fund allocations, daily submission 
deadlines, and holiday accrual processing and PAI payment timeline. The 
text of the proposed rule change is available at CME's Web site at 
http://www.cmegroup.com/market-regulation/rule-filings.html.

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

    In its filing with the Commission, the self-regulatory organization 
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 IV below. The self-regulatory organization 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 currently offers clearing services for certain credit default 
swap (``CDS'') index products. CME proposes to amend certain rules in 
its rulebook that would generally affect its CDS clearing offering and 
also make corresponding amendments to certain sections of its Manual of 
Operations for CME Cleared Credit Default Swaps (``CDS Manual'').
    The proposed changes to text in the CME rulebook would amend 
current requirements found in CME Rule 8H07.1 applying to the 
allocation of the CDS guaranty fund among CDS clearing members. 
Currently the CDS Guaranty Fund is calculated monthly and is 
proportionally allocated to each CDS Clearing Member on the basis of 
its 90-day trailing average of its potential residual loss and 90-day 
trailing average of its gross notional open interest outstanding at 
CME. CME is proposing to change the measurement period from 90 days to 
30 days in order for the CDS Guaranty Fund to more quickly react to a 
CDS Clearing Member's current activity and to align the measurement 
period with the frequency of CDS Guaranty Fund calculations.
    The proposed changes also include a number of purely operational 
changes that would be reflected in the CDS Manual (and would not be 
reflected in CME's rulebook). The proposed operational amendments to 
the CDS Manual include: Changes to CME's daily submission deadlines for 
CDS; amendments to current CDS holiday accrual processing; adoption of 
changes to relating to price alignment interest (``PAI'') payments; and 
changes that relate to end of day valuation issues. These proposed 
changes are summarized below:
    1. Operations Timeline and Reports. CME would move up the trade 
submission deadline for current day trades from 7:59 p.m. ET to 6:59 
p.m. ET.
    2. Position Management, Money Calculations, and Collateral. No 
accrual processing would occur on bank holidays in the country in which 
the swap is denominated (Independence Day for U.S. Dollar denominated 
CDS contracts) and would be included in the processing for the next 
business day. CME would calculate and pay price alignment interest for 
CDS contracts on a daily basis as opposed to monthly.
    3. End of Day Valuations. The price quality auction used to arrive 
at the settlement price for CDS contracts would be amended to require 
bid prices for contracts only where the CDS Clearing Member maintains 
open interest and to limit the price quality cross mechanism to 
contracts where the CDS Clearing Member has open interest.
    CME notes that it has also submitted the proposed rule changes that 
are the subject of this filing to its primary regulator, the Commodity 
Futures Trading Commission (``CFTC'').
    CME believes the proposed rule changes are consistent with the 
requirements of the Act, particularly Section 17A of the Act. 
Currently, the only swaps CME clears are CFTC-regulated swaps and 
therefore the proposed rule changes will only directly affect CME's 
swaps clearing activities pursuant to its registration as a derivatives 
clearing organization under the Commodity Exchange Act (``CEA'') at 
this point in time. CME notes that the policies of the CEA with respect 
to clearing are comparable to a number of the policies underlying the 
Act, such as promoting market transparency for over-the-counter 
derivatives markets, promoting the prompt and accurate clearance of 
transactions, and protecting investors and the public interest. CME 
believes the proposed rule changes accomplish these objectives by more 
accurately aligning the allocation of its CDS Guaranty Fund to each CDS 
Clearing Member's current activity.

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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self- regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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. 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-2012-06 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-2012-06. 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 19047]]

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 and on CME's Web 
site at http://www.cmegroup.com/market-regulation/rule-filings.html. 
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-2012-06 and 
should be submitted on or before April 19, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\3\
---------------------------------------------------------------------------

    \3\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-7515 Filed 3-28-12; 8:45 am]
BILLING CODE 8011-01-P