[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62787-62788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24556]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70605; File No. SR-CME-2013-21]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Related to Its IRS Margin Methodology

October 3, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on September 30, 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. CME filed the 
proposal pursuant to Section 19(b)(3)(A) of the Act,\3\ 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 for 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).
    \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 proposes to make an adjustment to one particular component of 
its current IRS margin model. The proposed change is reflected in an 
Advisory Notice issued to market participants (included below). 
Italicized text indicates additions; bracketed text indicates 
deletions.
* * * * *
    To: Clearing Member Firms; Chief Financial Officers; Back Office 
Managers; Margin Managers
    From: CME Clearing
    Notice: #13-444
    Notice Date: September 26, 2013
    Effective Date: October 01, 2013
    Please note CME Clearing will deploy SGD denominated swaps to the 
Production environment Tuesday, October 1st. This deployment will 
include:
     SGD margin data files and VWAP index support
     To account for negative zero rates that Singapore dollar 
Swap Offer Rate (SOR) has experienced, CME will shift the data by 4% 
before computing the returns.
    CME has concurrently filed a change with the CFTC which will be 
effective in accordance with the CFTC Regulation 40.6 timeframes.
    Please contact the CME Client Services Team at 
[email protected] or 312.338.7712 with any questions/concerns.
* * * * *

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 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. 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

    CME currently offers clearing for a variety of swaps products under 
the exclusive jurisdiction of the Commodity Futures Trading Commission 
(``CFTC''), including, specifically, clearing for over-the-counter 
(``OTC'') interest rate swaps (``IRS''). CME proposes to make certain 
changes to its current IRS margin model in relation to Singapore Dollar 
(``SGD'') IRS.
    The current CME IRS margin model utilizes historical inputs. In 
August 2011, the Singapore Dollar Swap Offer Rate (``SOR'') turned 
negative due to inflows into the Singapore dollar. Inputs into the IRS 
margin model are undefined for negative rate environments. The proposed 
change will solve for the negative SOR inputs from the August 2011 
timeframe. The changes are being communicated to market participants 
via advisory notices. The text of the most recent advisory notice, 
which announces the intended October 1, 2013 production date for the 
change, is the subject of this filing. Prior advisory notices also 
discussed this change in the context of providing market participants 
with notice of the change for the purpose of announcing a testing 
environment.
    There are no CME rulebook changes associated with the changes. The 
changes do not materially affect the CME IRS margin model. The changes 
only affect CME's interest rate swap clearing offering and do not 
materially impact CME's security-based swap clearing business. CME also 
notes that it has also submitted the proposed rule changes that are the 
subject of this filing to its primary regulator, the CFTC, in a 
separate filing. The changes became effective with the CFTC as of 
September 23, 2013. The changes are effective on filing but will become 
operational on October 1, 2013.
    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 involve enhancements to CME's current 
IRS margin methodology and are therefore 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

[[Page 62788]]

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\ The proposed rule changes accomplish these objectives 
because the proposed rule changes help to adjust CME's IRS margin 
methodology to address the fact that the Singapore Dollar Swap Offer 
Rate (``SOR'') turned negative due to inflows into the Singapore dollar 
and as such the changes contribute to the safeguarding of securities 
and funds in CME's custody or control or for which CME is responsible 
and the protection of investors.
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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 proposed rule changes 
simply involve enhancements to CME's current IRS margin methodology.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    CME has not solicited 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 upon filing pursuant 
to Section 19(b)(3)(A)(iii) of the Act \10\ and Rule 19b-4(f)(4)(ii) 
\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)(iii).
    \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 Number SR-CME-2013-21 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-2013-21. 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 (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-2013-21 
and should be submitted on or before November 12, 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. 2013-24556 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P