[Federal Register Volume 77, Number 150 (Friday, August 3, 2012)]
[Notices]
[Pages 46533-46535]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-18970]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67533; File No. SR-CME-2012-31]


Self-Regulatory Organizations; Chicago Mercantile Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change To Make Clarifying Changes to CME Rule 819 and Certain 
Chapter 8F Rules

July 30, 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 July 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 make clarifying changes to CME Rule 819 and certain 
Chapter 8F Rules. The text of the proposed rule change is available at 
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, of the most significant aspects of these 
statements.\3\
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    \3\ The Commission has modified the text of the summaries 
prepared by CME.
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A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    CME proposes to make certain clarifying changes to CME Rule 819, 
8F002, 8F004 and 8F008. The proposed changes do not affect CME's credit 
default swap clearing (``CDS'') offering. The proposed effective date 
for the revisions is August 1, 2012.
    In order to clarify that the lien on collateral held by the CME 
clearing house includes both property of clearing members and customer 
performance bond, CME proposes to change language in both CME Rule 819 
and Rule 8F008. The clarifying language is intended to align CME Rules 
819 and 8F008 with current CME Rule 8H008, which governs CDS clearing 
and states, in pertinent part: ``Each CDS Clearing Member hereby grants 
to the Clearing House a first priority and unencumbered lien to secure 
all obligations of such CDS Clearing Member to the Clearing House 
against any property and collateral deposited with the Clearing House 
by the CDS Clearing Member.''
    In addition, CME proposes to revise CME Rule 8F004 in order to: (a) 
Clarify that the minimum capital requirements for firms that clear 
credit default swaps and/or interest rate swaps are not governed by 
Rule 8F004 but rather by current Rules 8G004 and 8H004; and (b)

[[Page 46534]]

make the minimum capital requirement $5 million for OTC Clearing 
Members that only clear agricultural swaps (and not other OTC 
Derivatives).
    Finally, CME proposes a technical amendment to the definition of 
``OTC Derivatives'' in CME Rule 8F002 to reflect that section 2(h) of 
the Commodity Exchange Act (``CEA'') no longer provides exemptive 
relief.
    CME notes that it has already certified the proposed changes that 
are the subject of this filing to its primary regulator, the Commodity 
Futures Trading Commission (``CFTC''), in CME Submission 12-241.
    CME believes the proposed changes are consistent with the 
requirements of the Exchange Act including Section 17A in that they 
make clarifying changes that will facilitate the prompt and accurate 
clearance and settlement of securities transactions and derivatives 
agreements, contracts and transactions and will help assure the 
safeguarding of securities and funds which are in the custody or 
control of the clearing agency and, in general, help to protect 
investors and the public interest.
    CME further notes that the proposed changes are limited to its 
business as a derivatives clearing organization under the CEA and 
therefore do not significantly affect any securities clearing 
operations of the clearing agency or any related rights or obligations 
of the clearing agency or persons using such service. CME notes that 
the policies of the CEA with respect to clearing are comparable to a 
number of the policies underlying the Exchange 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.

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-2012-31 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-2012-31. 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-2012-31 and 
should be submitted on or before August 24, 2012.

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

    Section 19(b) of the Act \4\ 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) \5\ 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 the public interest. 
The Commission finds that the proposed clarifications 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.\6\
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    \4\ 15 U.S.C. 78s(b).
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ 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 the CME's operations as a derivatives 
clearing organization for such products, are regulated by the CFTC 
under the CEA. Second, the proposed rule changes affect the futures and 
swaps that CME clears and therefore relate solely to its futures and 
swaps clearing activities and do not significantly relate to the CME's 
functions as a clearing agency for security-based swaps. Third, the 
clarifying changes will help promote the prompt and accurate clearance 
of transactions and therefore are designed to protect investors and the 
public interest.
    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.

[[Page 46535]]

V. Conclusion

    It is therefore ordered pursuant to Section 19(b)(2) of the Act 
that the proposed rule change (SR-CME-2012-31) be, and hereby 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. 2012-18970 Filed 8-2-12; 8:45 am]
BILLING CODE 8011-01-P