[Federal Register Volume 79, Number 107 (Wednesday, June 4, 2014)]
[Notices]
[Pages 32340-32342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-12885]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72272; File No. SR-CME-2014-21]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to IRS Coupon Blending

May 29, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on May 16, 2014, 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) \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 the proposed rule change that is limited to its 
business as a derivatives clearing organization. More specifically, the 
proposed rule change would adopt new CME Rule 90008 to allow market 
participants the

[[Page 32341]]

ability to reduce the number of open positions and/or the gross 
notional of their interest rate swap (``IRS'') positions through 
compression by coupon blending.

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 DCO with the Commodity Futures Trading 
Commission (``CFTC'') and offers clearing services for many different 
futures and swaps products. The proposed rule change that is the 
subject of this filing is limited to CME's business as a DCO offering 
clearing services for CFTC-regulated swaps products.
    CME is proposing to adopt new CME Rule 90008 to allow market 
participants the ability to reduce the number of open positions and/or 
the gross notional of their interest rate swap (``IRS'') positions 
through compression by coupon blending. CME is offering coupon blending 
for market participants interested in reducing the number of IRS 
contracts cleared at CME.
    Under the new rule, a market participant interested in coupon 
blending would inform CME or its IRS Clearing Member that it wishes to 
exercise coupon blending and then CME would conduct a process that 
would take IRS contracts executed at the same or different fixed rates 
and replace them with zero or more IRS Contracts that have Fixed 
Rate(s) equal to the blended rate(s) determined through the coupon 
blending process. The process would result in either a reduction in the 
number of transactions, a reduction in the aggregate gross notional of 
the combined IRS Contracts or both. Coupon blending would be available 
to all participants on a voluntary basis and could be automated at a 
market participant's request.
    The change that is described in this filing is limited to CME's 
business as a DCO clearing products under the exclusive jurisdiction of 
the CFTC and does not materially impact CME's security-based swap 
clearing business in any way. CME notes that it has also certified the 
proposed rule change that is the subject of this filing to its primary 
regulator, the CFTC, in a separate filing, CME Submission No. 14-157. 
This change will be effective on filing.
    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 change would allow market participants the ability 
to reduce the number of open positions and/or the gross notional of 
their IRS positions through compression by coupon blending. This new 
process will result in either a reduction in the number of 
transactions, a reduction in the aggregate gross notional of the 
combined IRS Contracts or both. This tool will be available to all 
market participants for cleared OTC IRS trades and these processes will 
enhance the risk management tools available in connection with CME's 
OTC IRS offering. These risk management enhancements 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 change is limited in its 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 change is limited to 
CME's activities as a DCO 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 change is limited in its effect to IRS 
products offered under CME's authority to act as a DCO, the proposed 
change is 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 change is 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 would 
provide market participants with the ability to reduce the number of 
open positions and/or the gross notional of their IRS positions through 
compression by coupon blending. This new process will enhance risk 
management in connection with CME's IRS clearing offering and could 
result in either a reduction in the number of already effected 
transactions, a reduction in the aggregate gross notional of the 
combined IRS Contracts or both, but should not be seen to impact 
competition.

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) \10\ of the Act 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

[[Page 32342]]

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).
    \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 No. SR-CME-2014-21 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC, 20549-1090.

All submissions should refer to File Number SR-CME-2014-21. 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 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-2014-21 and 
should be submitted on or before June 25, 2014.

    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. 2014-12885 Filed 6-3-14; 8:45 am]
BILLING CODE 8011-01-P