[Federal Register Volume 78, Number 246 (Monday, December 23, 2013)]
[Notices]
[Pages 77512-77514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-30438]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71088; File No. SR-CME-2013-32]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Modifications to the OTC IRS Fee Schedule and Changes to the 
IRS Manual of Operations

December 17, 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 December 5, 2013, Chicago Mercantile Exchange 
Inc. (``CME'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change 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) of the Act,\3\ and Rules 
19b-4(f)(2) and 19b-4(f)(4)(ii) \4\ thereunder 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).
    \4\ 17 CFR 240.19b-4(f)(2) and 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 a proposed rule change that is limited to its 
business as a derivatives clearing organization. More specifically, the 
proposed rule change would modify the fee schedule applicable to its 
over-the-counter (``OTC'') interest rate swap (``IRS'') clearing 
offering and also make separate changes to the Manual of Operations for 
CME Cleared Interest Rate Swaps (``IRS Manual'').

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 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 modify the fee schedule (the ``Fee Schedule'') 
that applies to over-the-counter (``OTC'') Interest Rate Swaps 
(``IRS'') cleared at CME. The fees for clearing members clearing IRS 
are being modified to a $250 per ticket fee. In addition, the volume 
discounts and alternative fee schedules that are included in the 
current OTC IRS fee schedule are being deleted. CME will also waive the 
clearing member fee for back-loaded trades and trades associated with 
customer terminations as defined in the fee schedule. Finally, the 
alternate customer fee schedule is being revised to remove maintenance 
fees and a non-substantive change is being made to simplify the fee 
table from a matrix specifying each currency to a single table 
referring to the transaction currency.
    Separately, CME is also proposing certain conforming changes to its 
IRS Manual. The IRS Manual changes can be summarized as follows:

[[Page 77513]]

     Chapter 3 (The Clearing System; Getting Started)--Changed 
reference of ``platforms'' to ``SEFs'' throughout.
     Chapter 4 (Trade Entry, Messaging, and Management)--Added 
requirement that IRS Clearing Members pre-approve any trades submitted 
to clearing from a swap execution facility consistent with the CFTC's 
September 26, 2013 Division of Clearing and Risk and the Division of 
Market Oversight staff guidance on swaps straight-through processing. 
CME will also require that trades submitted from a platform must be 
explicitly accepted or pass credit limits at CME for each account. 
Additionally, CME is enabling functionality for transfers for IRS 
Clearing Members to initiate transfers directly through the clearing 
system and is making conforming changes deeming a member that initiates 
a transfer to have consented to such transfer.
     Chapter 6 (Account Configuration, Money Calculations and 
Collateral)--Added ISDA ACT/ACT(ISMA) as an eligible day count 
fraction.
    CME plans to operationalize the proposed fee changes on December 1, 
2013. The IRS Manual changes will become effective immediately upon 
filing.
    The changes that are described in this filing impact fees and make 
certain other adjustments to CME's IRS Manual (as described above) that 
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 change that is the subject 
of this filing to its primary regulator, the CFTC, in CME Submissions 
13-495, 13-520 and 13-520S (which included a supplemental, confidential 
attachment related to filing 13-520).
    CME believes the proposed rule change is consistent with the 
requirements of the Exchange Act including Section 17A of the Exchange 
Act.\5\ More specifically, the first aspect of the proposed rule change 
establishes or changes a member due, fee or other charge imposed by CME 
under Section 19(b)(3)(A)(ii) \6\ of the Securities Exchange Act of 
1934 and Rule 19b-4(f)(2) \7\ thereunder. CME believes that the 
proposed fee change is consistent with the requirements of the 
Securities Exchange Act of 1934 and the rules and regulations 
thereunder and, in particular, to 17A(b)(3)(D),\8\ in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among participants. The proposed changes apply equally to market 
participants clearing IRS at CME. CME notes that it operates in a 
highly competitive market in which market participants can readily 
direct business to competing venues.
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    \5\ 15 U.S.C. 78q-1.
    \6\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \7\ 17 CFR 240.19b-4(f)(2).
    \8\ 15 U.S.C. 78q-1(b)(3)(D).
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    Second, the proposed rule change also includes additional 
conforming changes to CME's IRS Manual to facilitate its IRS clearing 
offering. The changes conform certain definitions and are also designed 
to be in accordance with recent CFTC guidance regarding straight 
through processing of swaps and therefore are designed to promote 
central clearing of swaps under the CFTC's jurisdiction. As such, CME 
believes the changes 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.\9\ 
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.
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    \9\ 15 U.S.C. 78q-1(b)(3)(F).
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    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 also 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 \10\ and are properly filed under 
Section 19(b)(3)(A) \11\ and Rule 19b-4(f)(4)(ii) \12\ thereunder.
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    \10\ 15 U.S.C. 78q-1.
    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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 
modify CME's current IRS fee schedule and make conforming changes to 
CME's IRS Manual that correspond to CFTC guidance on straight through 
processing of swaps.

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 upon filing pursuant 
to Section 19(b)(3)(A) \13\ of the Act and paragraphs (f)(2) and 
(f)(4)(ii) of Rule 19b-4 \14\ 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.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2) and 17 CFR 240.19b-4(f)(4)(ii).
    \15\ 15 U.S.C. 78s(b)(3)(C).
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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:

[[Page 77514]]

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-2013-32 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-2013-32. 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/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-2013-32 
and should be submitted on or before January 13, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30438 Filed 12-20-13; 8:45 am]
BILLING CODE 8011-01-P