[Federal Register Volume 78, Number 177 (Thursday, September 12, 2013)]
[Notices]
[Pages 56261-56263]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-22164]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70336; File No. SR-CME-2013-13)


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Enhancements to CME's Price Quality Auction Process for CDS 
Index Products

September 6, 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 August 23, 2013, Chicago Mercantile Exchange Inc. (``CME'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II and III below, which 
Items have been prepared primarily by CME. CME filed the proposal 
pursuant to Section 19(b)(3)(A)(iii) \3\ of the Act, and Rule 19b-
4(f)(4)(ii) thereunder,\4\ so that the proposal was effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(4)(ii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CME is filing proposed rules changes that are limited to its 
business as a derivatives clearing organization. More specifically, the 
proposed rule changes would make amendments to its rules

[[Page 56262]]

regarding CME's current Price Quality Auction settlement process for 
CDS index products.

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 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 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 and currently offers clearing 
services for many different futures and swaps products. With this 
filing, CME proposes to make amendments that will affect its Price 
Quality Auction (``PQA'') settlement process for Credit Default Swaps 
(``CDS'') index products. Although these changes will be effective on 
filing, CME plans to operationalize the proposed changes on September 
9, 2013.
    The proposed change would be reflected in CME's Manual of 
Operations for CME Credit Default Swaps (``CDS Manual''). The change 
would allow CME to set the bid/ask spread for PQA submissions to a 
configurable level based on historical price analysis. The change is 
designed to make the configurable level more consistent with existing 
market conditions by reducing the acceptable range, which will in turn 
help ensure that settlement prices are not impacted by off market 
submissions. This change should help enhance the quality of the PQA 
process for determining settlement prices for CDS index products. The 
proposed parameter changes do not otherwise materially affect the PQA 
process.
    The changes that are described in this filing will only impact 
CME's processes for clearing CDS index products. Thus, these changes 
are limited to CME's business as a derivatives clearing organization 
clearing products under the exclusive jurisdiction of the Commodity 
Futures Trading Commission (``CFTC'') and do not materially impact 
CME's security-based swap clearing business in any way. CME notes that 
it has already submitted the proposed rule changes that are the subject 
of this filing to its primary regulator, the CFTC, in CME Submission 
13-295.
    CME believes the proposed rule changes are consistent with the 
requirements of the Exchange Act including Section 17A of the Exchange 
Act.\5\ The proposed rule changes are designed to enhance the quality 
of CME's PQA process for determining settlement prices for CDS index 
products and as such are designed to promote the prompt and accurate 
clearance and settlement of securities transactions and, to the extent 
applicable, derivatives agreements, contracts, and transactions, to 
assure the safeguarding of securities and funds which are in the 
custody or control of the clearing agency or for which it is 
responsible, and, in general, to protect investors and the public 
interest consistent with Section 17A(b)(3)(F) of the Exchange Act.\6\
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    \5\ 15 U.S.C. 78q-1.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    Furthermore, the proposed changes are limited in their effect to 
swaps products offered under CME's authority to act as a derivatives 
clearing organization. These products are under the exclusive 
jurisdiction of the CFTC. As such, the proposed CME changes are limited 
to CME's activities as a derivatives clearing organization clearing 
swaps that are not security-based swaps; CME notes that the policies of 
the CFTC with respect to administering the Commodity Exchange Act 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.
    Because the proposed changes are limited in their effect to swaps 
products offered under CME's authority to act as a derivatives clearing 
organization, the proposed changes are properly classified as effecting 
a change in an existing service of CME that:
    (a) Primarily affects the clearing operations of CME with respect 
to products that are not securities, including futures that are not 
security futures, and swaps that are not security-based swaps or mixed 
swaps; and
    (b) does not significantly affect any securities clearing 
operations of CME or any rights or obligations of CME with respect to 
securities clearing or persons using such securities-clearing service.
    As such, the changes are therefore consistent with the requirements 
of Section 17A of the Exchange Act \7\ and are properly filed under 
Section 19(b)(3)(A) \8\ and Rule 19b-4(f)(4)(ii) \9\ thereunder.
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    \7\ 15 U.S.C. 78q-1.
    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(4)(ii).
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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. The rule changes simply 
makes enhancements to CME's process for determining settlement prices 
for CDS index products.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \10\ of the Act and paragraph (f)(4)(ii) of Rule 19b-4 \11\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(4)(ii).
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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

     Use 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-2013-13 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary,

[[Page 56263]]

Securities and Exchange Commission, 100 F Street NE., Washington, DC, 
20549-1090.

All submissions should refer to File Number SR-CME-2013-13. 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 or 
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/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-2013-13 
and should be submitted on or before October 3, 2013.

    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. 2013-22164 Filed 9-11-13; 8:45 am]
BILLING CODE 8011-01-P