[Federal Register Volume 79, Number 15 (Thursday, January 23, 2014)]
[Notices]
[Pages 3906-3907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01247]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71325; File No. SR-CME-2014-01]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Modifications to CME Rule 8G802.B.2

January 16, 2014.
    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 January 8, 2014, 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 Rule 
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)(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 make amendments to CME Rule 8G802.B.2 (``IRS 
Product Limited Recourse'') to clarify that a CME Bankruptcy Event is 
also a Termination Event for IRS.

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. The purpose of 
this proposed rule change is to make amendments to CME IRS rules that 
will clarify and harmonize CME rules across its IRS and CDS offerings. 
This filing does not involve any proposed changes to CME CDS rules. 
Although these changes will be effective on filing, CME plans to 
operationalize the proposed changes on January 16, 2014.
    Currently, CME's Chapter 8H rules, providing for limited recourse 
for CDS, provide that a CME Bankruptcy Event (as defined in the Rules) 
is also a CDS Termination Event (as defined in CME Rule 8H802.B.2). 
CME's Chapter 8G rules, providing for limited recourse for IRS, 
inadvertently do not similarly include a CME Bankruptcy Event as an IRS 
Termination Event (as defined in CME Rule 8H802.B.2). The intent under 
both rule chapters is for the limited recourse provisions to work 
similarly in the event of a CME Bankruptcy Event. In order to harmonize 
the provisions, CME is proposing a clarifying amendment to CME Rule 
8G802.B.2.
    The changes that are described in this filing 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 Submission 13-590.
    CME believes the proposed rule change is consistent with the 
requirements of the Exchange Act including Section 17A of the Exchange 
Act.\5\ The proposed rule change clarifies that a CME Bankruptcy Event 
is also a Termination Event for purposes of CME's IRS clearing 
offering. The purpose of the proposed changes is to clarify the limited 
recourse nature of CME's clearing offering and to harmonize CME's IRS 
rules with its CDS rules; these purposes 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 or mixed 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

[[Page 3907]]

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 change 
merely makes clarifying amendments for the purpose of harmonizing CME's 
IRS rules with its CDS rules.

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) \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. \12\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(4)(ii).
    \12\ 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:

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-2014-01 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-2014-01. 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-2014-01 
and should be submitted on or before February 13, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01247 Filed 1-22-14; 8:45 am]
BILLING CODE 8011-01-P