[Federal Register Volume 77, Number 91 (Thursday, May 10, 2012)]
[Notices]
[Pages 27502-27503]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-11241]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66912; File No. SR-CME-2012-17]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change To Amend Rules Regarding IRS Clearing Member Obligations 
and Qualifications

May 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 April 23, 2012, 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 substantially 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 the Terms of Substance 
of the Proposed Rule Change

    CME proposes to amend certain of its rules to comply with pending 
revisions to the CFTC Regulations. The text of the proposed rule change 
is available at the CME's Web site at http://www.cmegroup.com.

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

    CME is registered as a derivatives clearing organization with the 
Commodity Futures Trading Commission (''CFTC'') and operates a 
substantial business clearing futures and swaps contracts subject to 
the jurisdiction of the CFTC. CME proposes to amend certain of its 
rules to comply with certain mandatory revisions that are related to 
recent changes in CFTC Regulations that will become effective on May 7, 
2012. More specifically, CME proposes to adopt revisions to CME Rule 
8G04 (IRS Clearing Member Obligations and Qualifications).
    As described above, the CFTC adopted a number of new regulations 
designed to implement the core principles for derivatives clearing 
organizations (DCOs) in the Commodity Exchange Act, as amended by the 
Dodd-Frank Act. CFTC Regulation 39.12, which becomes effective on May 
7, 2012, provides for participant and product eligibility requirements. 
CFTC Regulation 39.12(a)(iii) provides that a DCO ``shall not set 
minimum capital requirements of more than $50 million for any person 
that seeks to become a clearing member in order to clear swaps.'' CFTC 
Regulation 39.12(a)(2)(ii) provides that ``[c]apital requirements shall 
be scalable to the risks posed by clearing members.'' CFTC Regulation 
39.12(a) provides that a DCO ``shall establish appropriate admission 
and continuing participation requirements for clearing members of the 
derivatives clearing organization that are objective, publicly 
disclosed, and risk-based.''
    In order to comply with these CFTC Regulations, CME plans to amend 
CME Rule 8G04. New CME Rule 8G04.1 sets minimum capital for an IRS 
Clearing Member at $50 million and defines ``capital'' consistent with 
Regulation 39.12(a)(2)(i). In order to scale the capital requirements 
of IRS Clearing Members to the risks posed by such IRS Clearing 
Members, new CME Rule 8G04.2 requires IRS Clearing Members to maintain 
capital of at least 20% of the aggregate performance bond requirement 
for its proprietary and customer IRS Contracts. New CME Rule 8G04.4 
requires IRS Clearing Members to provide nominations for certain 
members of the IRS Risk Committee and IRS Default Management Committee. 
The proposed amendments comport with CFTC DCO Core Principle C 
(Participant and Product Eligibility) and with CFTC Regulation 
39.12(a).
    The text of the proposed rule change is available at the CME's Web 
site at http://www.cmegroup.com. CME also made a filing, CME Submission 
12-123, with its primary regulator, the CFTC, with respect to the 
proposed rule changes.
    CME believes the proposed changes are consistent with the 
requirements of the Exchange Act. First, CME, a derivatives clearing 
organization, 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. Second, CME believes the 
proposed changes are specifically designed to promote the prompt and 
accurate clearance and settlement of derivative agreements, contracts, 
and transactions, and assure the safeguarding of securities and funds 
which are in the custody or control of CME, and, in general, protect 
investors and the public interest, because the rules changes establish 
objective and risk-based admission and continuing participation 
requirements for clearing members in compliance with applicable law.

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.

[[Page 27503]]

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-2012-17 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-2012-17. 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 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 
10:00 a.m. and 3:00 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-2012-17 and should be 
submitted on or before May 31, 2012.

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

    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.\4\ In particular, Section 17A(b)(3)(F) of the Act 
requires that the rules of the clearing agency be designed to promote 
the prompt and accurate clearance and settlement of securities 
transactions, and to the extent applicable, derivative agreements, 
contracts, and transactions.\5\
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    \3\ 15 U.S.C. 78s(b).
    \4\ 15 U.S.C. 78s(b)(2)(B).
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
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    The proposed change would allow CME to expand the base of potential 
clearing members by lowering the net capital threshold for membership, 
thereby promoting the prompt and accurate clearance and settlement of 
securities transactions, and derivative agreements, contracts, and 
transactions. It should also allow CME to comply with new CFTC 
regulatory requirements, thereby promoting the prompt and accurate 
clearance and settlement of derivative agreements, contracts, and 
transactions.
    In its filing, CME requested that the Commission approve this 
proposed rule change on an accelerated basis for good cause shown. CME 
cites as the reason for this request CME's operation as a DCO, which is 
subject to regulation by the CFTC under the CEA and, in particular, new 
CFTC regulations that become effective on May 7, 2012. Thus, 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 
as a registered DCO, CME is required to comply with the new CFTC 
regulations by the time they become effective on May 7, 2012.
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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-2012-17) is approved on an 
accelerated basis.\7\
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    \7\ In approving the proposed rule change, the Commission 
considered the proposal's impact on efficiency, competition and 
capital formation. 15 U.S.C. 78c(f).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-11241 Filed 5-9-12; 8:45 am]
BILLING CODE 8011-01-P