[Federal Register Volume 79, Number 91 (Monday, May 12, 2014)]
[Notices]
[Pages 27010-27012]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10770]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72097; File No. SR-CME-2014-16]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Changes 
Making Changes in the Position Limits and Accountability Levels of CME 
Cleared OTC FX Spot, Forward and Swap Contracts

May 6, 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 April 22, 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 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 proposed rule changes that are limited to its 
business as a derivatives clearing organization (``DCO''). More 
specifically, the proposed rule changes contain amendments to position 
limits and position accountability levels of certain CME Cleared Over-
the-Counter Foreign Exchange Spot, Forward and Swap Contracts.

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

[[Page 27011]]

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 DCO with the Commodity Futures Trading 
Commission and offers clearing services for many different futures and 
swaps products. The proposed rule changes that are the subject of this 
filing are limited to CME's business as a DCO offering clearing 
services for CFTC-regulated swaps products.
    CME currently lists 73 foreign exchange futures contracts and 31 
companion option contracts for trading via open outcry and CME Globex 
and for submission for clearing through CME ClearPort. In addition, CME 
lists certain cleared-only OTC FX contracts on 38 different currency 
pairs. These CME Cleared OTC FX Spot, Forward and Swap Contracts are 
non-deliverable foreign currency forward contracts and, as such, are 
considered to be ``swaps'' under applicable regulatory definitions.\5\ 
CME currently aggregates the position limits/accountability levels of 
exchange-traded FX futures and options with the position limits/
accountability levels of cleared only OTC FX products on the same 
currency pair.
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    \5\ See Commodity Futures Trading Commission and Securities and 
Exchange Commission Joint Final Rule Defining ``Swap,'' ``Security-
Based Swap,'' and ``Security-Based Swap Agreement''; Mixed Swaps; 
Security-Based Swap Agreement Recordkeeping; Final Rule, 77 FR 
48207, 48255 (August 13, 2012).
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    The proposed rule changes make amendments to the Position Limit, 
Position Accountability and Reportable Level Table and Header Notes 
located in the Interpretations and Special Notices Section of Chapter 5 
of the CME Rulebook. The amendments reflect changes in the position 
limits and accountability levels of CME Cleared OTC FX Spot, Forward 
and Swap Contracts. The proposed amendments would establish independent 
position accountability levels for all CME Cleared OTC FX Spot, Forward 
and Swap Contracts that will be distinct from the position limits and 
position accountability levels of the Exchange's FX futures and options 
contracts, which shall remain unchanged. In addition, the amendments 
provide that CME will group Cleared OTC FX Spot, Forward and Swap 
Contracts for the same currency pair as a single product group. For 
each OTC FX currency pair, CME will define position accountability on 
an ``all months combined futures-equivalent contract'' basis and spot 
or single month position accountability for CME Cleared OTC FX Spot, 
Forward and Swap Contracts will cease to exist. Lastly, CME will 
aggregate and net position accountability levels for each OTC FX 
currency pair by trading account holder.
    The changes that are described in this filing are limited to CME's 
business as a DCO clearing products under the exclusive jurisdiction of 
the CFTC and do not materially impact CME's security-based swap 
clearing business in any way. The changes will be effective on filing. 
CME notes that it has also certified the proposed rule changes that are 
the subject of this filing to its primary regulator, the Commodity 
Futures Trading Commission (``CFTC''), in a separate filing, CME 
Submission No. 14-103R. The text of the CME proposed rule amendments is 
attached, with additions underlined and deletions in brackets.
    CME believes the proposed rule changes are consistent with the 
requirements of the Exchange Act including Section 17A of the Exchange 
Act.\6\ CME is amending the CME Rulebook to establish independent 
position accountability levels for all CME Cleared OTC FX Spot, Forward 
and Swap Contracts that will be distinct from the position limits and 
position accountability levels of the Exchange's FX futures and options 
contracts and to provide that CME will group CME Cleared OTC FX Spot, 
Forward and Swap Contracts for the same currency pair as a single 
product group. CME will also aggregate and net position accountability 
levels for each OTC FX currency pair by trading account holder under 
the proposed changes. The proposed changes will enhance CME's self-
regulatory function 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.\7\
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    \6\ 15 U.S.C. 78q-1.
    \7\ 15 U.S.C. 78q-1(b)(3)(F).
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    Furthermore, the proposed changes are limited in their effect to 
products offered under CME's authority to act as a DCO. The products 
that are the subject of this filing are under the exclusive 
jurisdiction of the CFTC. As such, the proposed CME changes are limited 
to CME's activities as a DCO clearing swaps that are not security-based 
swaps and forwards that are not security forwards; 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 OTC FX 
products offered under CME's authority to act as a DCO, 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, swaps that are not security-based swaps or mixed 
swaps; and forwards that are not security forwards; 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 \8\ and are properly filed under 
Section 19(b)(3)(A) \9\ and Rule 19b-4(f)(4)(ii) \10\ thereunder.
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    \8\ 15 U.S.C. 78q-1.
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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 changes 
simply establish independent position accountability levels for all CME 
Cleared OTC FX Spot, Forward and Swap Contracts that will be distinct 
from the position limits and position accountability levels of the 
Exchange's FX futures and options contracts.

[[Page 27012]]

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) \11\ of the Act and paragraph (f)(4)(ii) of Rule 19b-4 \12\ 
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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2014-16 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549.

All submissions should refer to File Number SR-CME-2014-16. 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-2014-16 and 
should be submitted on or before June 2, 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. 2014-10770 Filed 5-9-14; 8:45 am]
BILLING CODE 8011-01-P