[Federal Register Volume 78, Number 96 (Friday, May 17, 2013)]
[Notices]
[Pages 29163-29165]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-11760]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69564; File No. SR-CME-2013-06]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change Regarding an Expansion of CME Clearing's Category 3 
Collateral Limits

May 13, 2013.
    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 May 3, 2013, 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 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 issue the text copied below via a Clearing Advisory 
Notice to announce changes relating to the maximum limits for 
``Category 3'' collateral (as specified on CME's Web site) effective as 
of May 10, 2013. This text is also available at CME's Web site at 
http://www.cmegroup.com, at the principal office of CME, and at the 
Commission's Public Reference Room. The text is:

    As per the normal review of acceptable collateral and limits, 
CME Clearing is making the below change regarding the clearing 
member firm maximum limit for Category 3 collateral. The change is 
pending all regulatory review periods.
    Collateral accepted by CME Clearing is categorized as noted 
below. Currently, the maximum allowable limit for utilization of 
Category 3 Assets is the lesser of a) 40% of core margin 
requirements and concentration requirements per origin and asset 
account or b) $3 billion per Clearing Member Firm across all 
settlement accounts.
    Effective with the RTH cycle on Friday, May 10, 2013, the 
maximum allowable limit for utilization of Category 3 Assets will be 
the lesser of a) 40% of core margin requirements and concentration 
requirements per origin and asset account or b) $5 billion per 
Clearing Member Firm across all settlement accounts.
    Category 1 assets have no requirement type limits. Category 2 
assets have a maximum allowable limit of 40% of core margin 
requirements and concentration requirements per Clearing Member Firm 
across all settlement accounts.
    Please refer to the Web site link below for details on 
individual asset type limits and product class restrictions.

Category 1 Assets:
     U.S. Cash
     U.S. Treasuries
     IEF2 Money Market Fund Program
Category 2 Assets:
     U.S. Government Agencies
     Select Mortgage Backed Securities
     IEF5 Specialized Cash Program
     Letters of Credit
Category 3 Assets:
     Foreign Sovereign Debt (sub-limit of $1 billion per 
clearing member firm)
     Gold (sub-limit of $500 million per clearing member 
firm)
     IEF4 Specialized Collateral Program
     Stocks
     TIPS (sub-limit of $1 billion per clearing member firm)
    Please call CME Clearing for availability of Foreign Cash 
deposits.
    Please refer to the Web site http://www.cmegroup.com/clearing/financial-and-collateral-management/ for further detail regarding 
acceptable collateral, haircuts, and limits. For questions about 
requirements, please call Risk Management hotline at 312-634-3888 
and questions about collateral can be directed to the Financial Unit 
hotline at 312-207-2594.
* * * * *

II. Self-Regulatory Organizations 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 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 the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    As a derivatives clearing organization (``DCO'') registered with 
the Commodity Futures Trading Commission (``CFTC''), CME periodically 
reviews the acceptable collateral and limits associated with its 
clearing business. The changes announced in the Clearing Notice are 
part of this normal process. The changes relate to the maximum limit 
for certain ``Category 3'' collateral as specified on CME's Web site. 
Currently, the maximum allowable limit for utilization of the Category 
3 Assets is the lesser of (a) 40% of core margin requirements and 
concentration requirements per origin and asset account or (b) $3 
billion per Clearing Member Firm across all settlement accounts. The 
Notice would announce that, effective on Friday, May 10, 2013, the 
maximum allowable limit for utilization of Category 3 Assets will 
become the lesser of (a) 40% of core margin requirements and 
concentration requirements per origin and asset account or (b) $5 
billion per Clearing Member Firm across all settlement accounts. The 
purpose of the change is to increase the flexibility of CME clearing 
members to post additional Category 3 collateral in anticipation of an 
increase to the amount of initial margin posted at CME due to the 
CFTC's impending June 11, 2013 clearing mandate effective date.
    Although the changes could impact the makeup of the collateral used 
by any particular clearing member to meet its margin requirements, the 
changes would have no impact on the level of margin collected.\3\ 
Further, the changes will have no impact at all on the collection of 
margin in relation to CME's CDS clearing offering, because the CDS 
business has separate requirements that apply in particular to posting 
collateral in connection with CDS activities. The Notice would not 
change those separate CDS-specific requirements.
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    \3\ Historically, CME has aligned the size of its committed 
liquidity facility with the amount of Category 3 assets it was 
willing to accept as collateral. For example, in 2012 CME's 
committed liquidity facility was $3 billion and the amount of 
Category 3 collateral it accepted was also $3 billion. CME increased 
its committed liquidity facility and obtained a $5 billion liquidity 
facility for 2013. When CME increased its liquidity facility it did 
not immediately increase its Category 3 collateral limits in tandem. 
CME now plans to increase the limits on its acceptance of Category 3 
collateral in advance of the Category 2 clearing mandate. Since CME 
already increased its committed liquidity facility to $5 billion, 
this change does not impact its overall risk profile.
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    CME notes that it has also submitted the proposed rule changes that 
are the subject of this filing to its primary regulator, the CFTC, in 
CME Submission 13-155.
    CME believes the proposed rule change is consistent with the 
requirements of the Exchange Act, including Section 17A of the Act.\4\ 
Specifically, CME believes the changes are consistent with Section 
17A(b)(3)(F)

[[Page 29164]]

of the Act,\5\ which 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 and, to the extent 
applicable, derivative agreements, contracts, and transactions, to 
assure the safeguarding of securities and funds which are in the 
custody and control of the clearing agency or for which it is 
responsible, and to protect investors and the public interest. As a DCO 
registered with the CFTC, CME believes the proposed Advisory Notice 
will facilitate posting of collateral in relation to products that are 
subject to the CFTC's impending clearing mandates and that such changes 
are in compliance with applicable CFTC requirements related to such 
matters. In addition, although the changes could impact the makeup of 
the collateral used by any particular clearing member to meet its 
margin requirements for CFTC regulated products, the changes would have 
no impact on the overall level of margin collected. CME believes the 
Notice is consistent with the requirements of the Act because 
facilitating posting of collateral in compliance with applicable CFTC 
regulations promotes the prompt and accurate clearance and settlement 
of derivative agreements, contracts and transactions and facilitates 
the protection of investors and the public interest. Furthermore, the 
proposed Advisory Notice is limited to CME's business as a DCO and 
therefore does not significantly affect any securities operations of 
the clearing agency or any related rights or obligations of the 
clearing agency or persons using such service. For these reasons, CME 
believes the proposed rule is consistent with the requirements of 
Section 17A(b)(3)(F) of the Act.\6\
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    \4\ 15 U.S.C. 78q-1.
    \5\ 15 U.S.C. 78q-1(b)(3)(F).
    \6\ Id.
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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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml) or
     Send an email to [email protected]. Please include 
File Number SR-CME-2013-06 on the subject line.

Paper Comments

     Send paper comments 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-2013-06. 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 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 and on CME's 
Web site at http://www.cmegroup.com/market-regulation/files/sec_19b-4_13-06.pdf.
    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-2013-06 
and should be submitted on or before June 7, 2013.

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

    Section 19(b) of the Act \7\ 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 change is 
consistent with the requirements of the Act, in particular the 
requirements of Section 17A of the Act,\8\ 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,\9\ which requires, among other things, that 
the rules of a registered 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 because it will facilitate the posting of collateral in 
relation to products that are subject to the CFTC's impending clearing 
mandates.
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    \7\ 15 U.S.C. 78s(b).
    \8\ 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).
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
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    In its filing, CME requested that the Commission approve this 
proposed rule change on an accelerated basis for good cause shown. CME 
notes that the products affected by this filing, and the CME's 
operations as a DCO clearing such products, are regulated by the CFTC 
under the Commodity Exchange Act and are therefore limited to CME's 
business as a DCO and do not significantly affect any securities 
clearing operations of CME or any related rights or obligations of the 
clearing agency or persons using such service. CME believes the 
Advisory Notice simply increases the flexibility afforded to CME in 
executing its responsibilities as a DCO and does not have any negative 
impact on its overall risk profile. Additionally, CME has indicated 
that not approving this request on an accelerated basis would have a 
significant impact on the clearing business of CME as a DCO.
    The Commission finds that there is good cause, pursuant to Section 
19(b)(2) of the Act,\10\ for approving the proposed rule change prior 
to the thirtieth day after the date of publication of notice in the 
Federal Register because: (i) The proposed rule change does not

[[Page 29165]]

significantly affect any of CME's securities clearing operations or any 
related rights or obligations of CME or persons using such service; 
(ii) the products affected by this filing, and the CME's operations as 
a DCO clearing such products, are regulated by the CFTC under the 
Commodity Exchange Act; and (iii) CME has indicated that not providing 
accelerated approval would have a significant impact on its swaps 
clearing business as a designated clearing organization.
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    \10\ 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,\11\ that the proposed rule change (SR-CME-2013-06) be, and hereby 
is, approved on an accelerated basis.
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    \11\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11760 Filed 5-16-13; 8:45 am]
BILLING CODE 8011-01-P