[Federal Register Volume 77, Number 134 (Thursday, July 12, 2012)]
[Notices]
[Pages 41207-41209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-16992]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67362; File No. SR-CME-2012-27]


Self-Regulatory Organizations; Chicago Mercantile Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change To Amend Rules Relating to Interest Rate Swaps Clearing

July 6, 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 June 25, 2012, 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 the Terms of Substance 
of the Proposed Rule Change

    CME proposes to amend certain rules relating to its interest rate 
swap (``IRS'') cleared only offering. The proposed changes make certain 
clarifying amendments and corrections to Chapter 8G of the CME 
Rulebook. The text of the proposed rule changes is available on the 
CME's Web site at http://www.cmegroup.com, at the principal office of 
CME, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the 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 changes and 
discussed any comments it received on the proposed rule changes. The 
text of these statements and comments may be examined at the places 
specified in Item III below. CME has prepared summaries, set forth in 
sections A, B, and C below,

[[Page 41208]]

of the most significant aspects of these statements.

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

    CME proposes to make certain clarifying rule amendments related to 
its IRS offering. The first proposed change would correct an 
inadvertent omission in Rule 8G07 resulting from a previous filing. The 
new language makes clear that the methodology for allocating the IRS 
Guaranty Fund \3\ among IRS Clearing Members \4\ is based on the 30-day 
trailing average of an IRS Clearing Member's potential residual loss 
(``PRL'').
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    \3\ CME's Rulebook defines a ``Guaranty Fund Deposit'' as 
``[t]he amount required to be deposited with the [CME] Clearing 
House by the clearing member as a guaranty of its obligations to the 
Clearing House.''
    \4\ CME's Rulebook defines a ``Clearing Member'' as ``[a] firm 
meeting the requirements of, and approved for, clearing membership 
at the Exchange. The term `clearing member' as used in the Rules 
shall include all clearing member categories set forth in Rule 900, 
unless otherwise specified.''
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    The second proposed change makes corrections to CME Rule 8G26, 
which currently refers to an IRS Advisory Committee that has never been 
formed. The IRS Advisory Committee referenced in Rule 8G26 has been 
superseded by other CME IRS working groups.
    CME also notes that it is making certain updates to its Manual of 
Operations for IRS in connection with these proposed changes. These 
changes can be summarized as follows:
     Eligible maturity dates for IRS denominated in Canadian 
Dollars, Japanese Yen, Swiss Francs and Australian Dollars are being 
extended to 31 years from the clearing date, primarily to accommodate 
forward-starting 30 year swaps;
     The earliest weekly submission time for submission of IRS 
is being extended from 1:15 a.m. Eastern Time Monday to 6 p.m. Eastern 
Time Sunday;
     The daily end-of-day report sent to IRS clearing members 
is being updated to include listed futures and FX pricing information 
and changed to align the tenors of certain curves to enhance the 
reporting applicable to CME's portfolio margining of futures of IRS; 
and
     Several sample reports, field descriptions and product 
tables have been removed to simplify the IRS Manual; and
     Certain typographical and grammatical corrections.
    CME notes that it has also submitted the proposed rule changes that 
are the subject of this filing to the Commodity Futures Trading 
Commission (``CFTC''), in CME Submission 12-204.
    CME believes the proposed rule changes are consistent with the 
requirements of the Act, including Section 17A,\5\ and the rules and 
regulations thereunder, because they involve improvements to CME's IRS 
offering for investors that help to: (i) Promote the prompt and 
accurate clearance and settlement of securities transactions and 
derivatives agreements, contracts and transactions; (ii) assure the 
safeguarding of securities and funds that are in CME's custody or 
control; and (iii) protect investors and the public interest. CME also 
observes that the proposed rule changes are limited to the clearing of 
swaps, and thus relate solely to the CME's swaps clearing activities 
pursuant to its registration as a derivatives clearing organization 
under the Commodity Exchange Act (``CEA''), and do not significantly 
affect any of CME's securities clearing operations, or any related 
rights or obligations of CME or persons using such service. CME further 
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.
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    \5\ 15 U.S.C. 78q-1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CME does not believe that the proposed rule changes 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 these proposed rule changes. 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 
changes are 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 by sending an email to [email protected]. Please 
include File No. SR-CME-2012-27 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 20549-0609.
    All submissions should refer to File Number SR-CME-2012-27. 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 inspection and 
copying 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-2012-27 and 
should be submitted on or before August 2, 2012.

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

    Section 19(b) of the Act \6\ 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. In particular, Section 17A(b)(3)(F) \7\ of the Act 
requires, among other things, that the rules of a clearing agency be 
designed to promote the prompt and accurate clearance and settlement of 
securities transactions, assure the safeguarding of securities and 
funds that are in the custody or control of the clearing agency, or for 
which it is responsible, and protect investors and

[[Page 41209]]

the public interest. The Commission finds that the proposed 
clarifications to the manner in which CME allocates guaranty fund 
obligations among its members are consistent with the requirements of 
Section 17A(b)(3)(F) of the Act because the clarifications should allow 
CME's Members to better monitor their financial status and risk-
management procedures. This, in turn, should enhance CME's ability to 
safeguard the securities and funds in its custody or control, or for 
which it is responsible.\8\
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    \6\ 15 U.S.C. 78s(b).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
    \8\ See 15 U.S.C. 78q-1. In approving these proposed rule 
changes, the Commission has considered the proposed rule changes' 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).
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    In its filing, CME requested that the Commission approve these 
proposed rule changes prior to the thirtieth day after the date of 
publication of the notice of the filing. CME has articulated three 
reasons for so granting approval. First, CME notes that the products 
covered by this filing, and CME's operations as a derivatives clearing 
organization for such products, are regulated by the CFTC under the 
CEA. Second, CME observes that the proposed rule changes relate solely 
to interest rate swap clearing, and therefore relate solely to CME's 
swaps clearing activities, and do not significantly relate to the CME's 
functions as a clearing agency for security-based swaps. Third, CME 
contends that not approving this request on an accelerated basis will 
have a significant impact on the swaps clearing business of CME as a 
designated clearing organization.
    The Commission finds good cause for granting approval of the 
proposed rule changes prior to the thirtieth day after publication of 
the notice of filing because: (i) The proposed rule changes do not 
significantly affect any of CME's securities clearing operations or any 
related rights or obligations of CME or persons using such service; 
(ii) CME has indicated that not providing accelerated approval would 
have a significant impact on its business as a designated clearing 
organization; and (iii) the activity relating to CME's non-security 
clearing operations for which CME is seeking approval is subject to 
regulation by another federal regulator.

V. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
that the proposed rule change (SR-CME-2012-27) be, and hereby is, 
approved on an accelerated basis.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-16992 Filed 7-11-12; 8:45 am]
BILLING CODE 8011-01-P