[Federal Register Volume 79, Number 126 (Tuesday, July 1, 2014)]
[Notices]
[Pages 37371-37372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15324]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72465; File No. SR-CME-2014-26]


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

June 25, 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 June 18, 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)(2) \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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 modify the fee schedule applicable to its 
over-the-counter (``OTC'') interest rate swap (``IRS'') clearing 
offering.

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 (``CFTC'') 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 proposed fee change relates to the charges for customer back-
loaded trades. The proposed change applies to the OTC IRS Customer Fee 
Schedule. The proposed modification would specify that certain 
qualifying back-loaded trades would be eligible for rebated clearing 
fees provided that certain conditions and criteria are met. In order to 
be eligible for the clearing fee rebate, the following criteria would 
have to be satisfied: The entire back-loaded portfolio must have an 
aggregate gross notional equal to or greater than $500 billion (or U.S. 
Dollar equivalent); the customer notifies CME at least five (5) days in 
advance by contacting [email protected]; the participating back-
loaded trades are back-loaded within a period of twenty (20) business 
days or less; and, finally,

[[Page 37372]]

the back-loaded trades result in a net increase in customer open 
interest during the specified back-loading period.
    In addition, the proposed modification to the OTC IRS Fee Schedule 
also includes certain corrections to the current Fee Schedule for IRS 
Clearing Members dealing with end of day offsets for currencies. These 
corrections are intended to adjust the standard day offsets that are 
used to coincide more closely with market standard settlement 
conventions.
    The change that is described in this filing impacts fees that are 
limited to CME's business as a derivatives clearing organization 
clearing products under the exclusive jurisdiction of the CFTC and does 
not materially impact CME's security-based swap clearing business in 
any way. The fee change would become effective immediately but would be 
operationalized on July 1, 2014. CME notes that it has already 
submitted the proposed rule changes that is the subject of this filing 
to its primary regulator, the CFTC, in CME Submission 14-239.
    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 proposed rule changes establish or 
change a member due, fee or other charge imposed by CME under Section 
19(b)(3)(A)(ii) \6\ of the Exchange Act and Rule 19b-4(f)(2) \7\ 
thereunder. CME believes that the proposed fee change is consistent 
with the requirements of the Exchange Act and the rules and regulations 
thereunder and, in particular, to Section 17A(b)(3)(D) of the Exchange 
Act,\8\ because the proposed fee changes apply equally to all OTC IRS 
customers clearing IRS at CME and therefore the proposed changes 
provide for the equitable allocation of reasonable dues, fees and other 
charges among participants. CME also notes that it operates in a highly 
competitive market in which market participants can readily direct 
business to competing venues. As such, the proposed change is 
appropriately filed pursuant to Section 19(b)(3)(A)\9\ of the Act and 
Rule 19b-4(f)(2) \10\ thereunder.
---------------------------------------------------------------------------

    \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).
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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 fee change provides a 
waiver of fees for certain large qualifying back-loaded IRS legacy 
portfolios. Back-loaded transactions are defined as where the trade 
date for the transaction is prior to the cleared date and, thus, by 
definition, are transactions which have already occurred well before 
clearing. Back-loaded transactions promote the general goal of 
increasing central clearing of OTC derivatives products. Further, OTC 
IRS are swaps under the exclusive jurisdiction of the CFTC, and, as 
such, these proposed fee change does not affect the security-based swap 
clearing activities of CME in any way and therefore does not impose any 
burden on competition that is inappropriate in furtherance of the 
purposes of the Act.

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) \11\ of the Act and Rule 19b-4(f)(2) \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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comment

    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-2014-26 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-2014-26. 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-2014-26 and 
should be submitted on or before July 22, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2014-15324 Filed 6-30-14; 8:45 am]
BILLING CODE 8011-01-P