[Federal Register Volume 79, Number 4 (Tuesday, January 7, 2014)]
[Notices]
[Pages 865-867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31602]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71211; File No. SR-CME-2013-37]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Changes To Amend CME Rule 971.C

December 31, 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 23, 2013, Chicago Mercantile Exchange 
Inc. (``CME'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule changes described in Items I, II and 
III below, which items have been prepared primarily by CME. The 
Commission is publishing this notice to solicit comments on the 
proposed rule changes from interested persons and to approve the 
proposed rule changes 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 Changes

    CME proposes to make amendments to CME Rule 971 as part of an 
industry wide initiative that is designed to further safeguard customer 
funds held at the futures commission merchant (``FCM'') level.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    In its filing with the Commission, the self-regulatory organization 
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 may be examined at the 
places specified in Item III 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 Changes

    CME is registered as a derivatives clearing organization with the 
Commodity Futures Trading Commission (``CFTC'') and operates a 
substantial business clearing futures and swaps contracts subject to 
the jurisdiction of the CFTC. CME proposes to make rule changes to CME 
Rule 971 in coordination with the National Futures Association 
(``NFA''). The proposed rule changes are part of a continuing futures 
industry effort to enhance the protection of customer funds held at the 
FCM level.
    In the fall of 2012, CME made a separate filing to introduce new 
provisions in CME Rule 971.C. Under these rule changes, FCM clearing 
members were required to provide the CME Audit Department, now named 
the Financial and Regulatory Surveillance Department (``FRS''), with 
view-only full access of segregated, secured, and Cleared Swaps 
Customer accounts at a bank or trust company.
    When the 2012 rule changes were implemented, CME and NFA had 
engaged a third party vendor, Alphametrix360, LLC, to facilitate CME's 
and NFA's view only internet based access to relevant account 
information. CME is proposing to make certain amendments to the text of 
Rule 971.C for the purpose of allowing clearing members to be able to 
submit account information through multiple mediums. These proposed 
changes simply delete the phrases ``view only full'' and ``via the 
internet'' in the current rule text to effect these changes.
    In addition, CME also proposes to make certain additional 
amendments to CME Rule 971.C to expand these reporting requirements to 
include all applicable customer depositories under CFTC Regulations. 
FRS will first expand its reporting requirement to include FCM customer 
carrying broker balances. Additionally, the expansion is anticipated to 
continue and subsequently will include Clearing House customer 
balances. The amended language provides FRS the flexibility to phase in 
these additional depositories, and is also intended to harmonize 
industry requirements as similar rules have been proposed and adopted 
by NFA effective as of September 6, 2013.\3\ NFA and CME have allocated 
implementation responsibilities for these changes and both have been 
working closely with the FCM community regarding the implementation of 
these changes.
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    \3\ See http://www.nfa.futures.org/news/PDF/CFTC/FR_4_081513.pdf.
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    CME would like to operationalize the proposed changes on December 
31, 2013, pending applicable regulatory reviews and approvals. CME 
believes it is appropriate to grant this filing on an accelerated basis 
because the proposed changes are part of an industry wide

[[Page 866]]

initiative that is specifically targeted at protecting investors and 
furthering the public interest through adoption of requirements that 
help safeguard customer funds held at the FCM level. Currently, CME 
receives relevant customer account information through one medium. The 
proposed changes would facilitate regulatory access to relevant 
customer account information through additional mediums. Obtaining 
access to additional data through these new mediums will enable CME to 
more effectively discharge its regulatory obligations. Having access to 
an expanded pool of customer account information will allow for a more 
effective daily confirmation of relevant funds; a failure to have such 
access yields a less effective process. CME's effective administration 
of its regulatory function in this regard will help to further 
safeguard customer assets and will ultimately benefit investors. 
Further, NFA and CME have allocated implementation responsibilities for 
the implementation of these changes in the futures industry and have 
been working closely with the FCM community to ensure these 
enhancements to the daily segregation monitoring system are adopted to 
further safeguard customer assets. NFA submitted corresponding rule 
changes to CFTC for a September 6, 2013 effective date. CME's proposed 
rule changes are intended to apply these changes to the firms for which 
CME is the DSRO to ensure that both NFA and CME can collect relevant 
balance information in the manner described above. CME believes this 
wider futures industry context in combination with the investor 
protection purpose of these proposed changes justifies treatment of 
this filing on an accelerated basis.
    CME has also made a filing with the CFTC, CME Submission 13-453, 
with respect to the proposed changes.
    CME believes the proposed changes are consistent with the 
requirements of the Exchange Act. First, CME, a derivatives clearing 
organization, is implementing the proposed changes in accordance 
Commodity Exchange Act (``CEA'') as part of an effort to harmonize 
futures industry requirements in conjunction with the National Futures 
Association, which has already adopted corresponding rules that went 
effective as of September 6, 2013. The CEA contains a number of 
provisions that are comparable to the policies underlying the Exchange 
Act, including, for example, promoting market transparency for 
derivatives markets, promoting the prompt and accurate clearance of 
transactions and protecting investors and the public interest.
    More importantly, CME believes the proposed changes are 
specifically designed to protect investors and the public interest. The 
proposed changes involve enhancements to requirements that provide a 
self-regulatory organization with access to the customer accounts held 
at banks for the purpose of discharging regulatory obligations. As 
such, the proposed enhancements are clearly designed to bolster 
safeguarding of customer funds held at the FCM level and protect 
investors. Further, the proposed changes are part of a larger, 
coordinated futures industry effort to safeguard customer funds. 
Because the proposed changes are designed to enhance regulatory 
requirements related to self-regulatory organization access to customer 
accounts and are also part of an industry-wide plan initiated for the 
purpose of further safeguarding investor funds, CME believes the 
changes are consistent with the requirements of the Exchange Act 
because they 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 CME 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.\4\
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    \4\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CME does not believe that the proposed rule changes will have any 
impact, or impose any burden, on competition. The rule changes merely 
amend existing language in CME's rulebook for the purpose of enhancing 
access to customer accounts for regulatory purposes as part of a larger 
industry effort to safeguard customer funds.

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

    CME has not solicited, and does not intend to solicit, comments 
regarding these proposed rule changes. 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 
changes are 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-2013-37 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-2013-37. 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 changes that are 
filed with the Commission, and all written communications relating to 
the proposed rule changes 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-2013-37 
and should be submitted on or before January 28, 2014.

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

    Section 19(b) of the Act \5\ directs the Commission to approve 
proposed rule changes of a self-regulatory organization

[[Page 867]]

if it finds that such proposed rule changes are consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to such organization. The Commission finds that the proposed 
rule changes are consistent with the requirements of the Act, in 
particular the requirements of Section 17A of the Act, and the rules 
and regulations thereunder applicable to CME.\6\ Specifically, the 
Commission finds that the proposed rule changes are consistent with 
Section 17A(b)(3)(F) of the Act,\7\ 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, derivatives agreements, 
contracts and transactions, and to protect investors and the public 
interest because the proposed changes involve enhancements to FCM 
clearing member reporting requirements that provide CME, in its 
capacity as a self-regulatory organization, with access to customer 
accounts held at depositories for the purpose of discharging its 
regulatory obligations and are designed to further safeguard customer 
assets in the custody or control of the FCM.
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    \5\ 15 U.S.C. 78s(b).
    \6\ 15 U.S.C. 78q-1. In approving these proposed rule changes, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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    In its filing, CME requested that the Commission approve these 
proposed rule changes on an accelerated basis for good cause shown 
because the proposed changes are part of an industry wide initiative 
that is specifically designed to protect investors and the public 
interest through adoption of requirements that help safeguard customer 
funds held at the FCM level.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\8\ for approving the proposed rule changes prior to the 30th 
day after the date of publication of notice in the Federal Register 
because, as a registered derivatives clearing organization, CME must 
make the rule changes discussed above as part of an industry wide 
initiative that is specifically designed to protect investors and the 
public interest through adoption of requirements that help safeguard 
customer funds held at the FCM level.
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    \8\ 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,\9\ that the proposed rule changes (SR-CME-2013-37) be, and hereby 
are, approved on an accelerated basis.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-31602 Filed 1-6-14; 8:45 am]
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