[Federal Register Volume 79, Number 165 (Tuesday, August 26, 2014)]
[Notices]
[Pages 50962-50964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-20210]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72884; File No. SR-CME-2014-32]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 802.H

August 20, 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 August 7, 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-

[[Page 50963]]

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 contains certain clarifying amendments to CME Rule 
802.H.

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. With this 
filing, CME proposes to make rule changes that apply to CME's Base 
Guaranty Fund. More specifically, the proposed changes would make 
clarifying amendments to current CME Rule 802.H (Base Cooling Off 
Period and Multiple Defaults).
    CME previously amended CME Rule 802 on June 19, 2012 to establish a 
fixed $100 million amount for CME's contribution to the financial 
safeguards package associated with its Base Guaranty Fund (``Base CME 
Contribution''). That amendment inadvertently excluded the express 
language limiting CME's corporate contribution to the Base financial 
safeguards package during the Base Cooling-Off Period, similar to CME's 
structure for the CDS and IRS guaranty funds, which limit CME's 
obligation during the respective cooling off periods applicable to CDS 
and IRS. CME is now proposing to add the clarifying language into Rule 
802.H to harmonize the relevant rule text across the Base, IRS and CDS 
product classes and to provide clarity to the marketplace regarding 
CME's obligation to replenish its Base CME Contribution during a Base 
Cooling-Off Period.
    The proposed rule change that is described in this filing is 
limited to CME's Base Guaranty Fund and therefore is limited to its 
business as a derivatives clearing organization clearing products under 
the exclusive jurisdiction of the Commodity Futures Trading Commission 
(``CFTC'') and does not materially impact CME's security-based swap 
clearing business in any way. The proposed changes would become 
effective immediately but would be operationalized on August 20, 2014. 
CME notes that it has also submitted the proposed rule change that is 
the subject of this filing to its primary regulator, the CFTC, in CME 
Submission 14-277.
    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 changes would amend rule text that applies to 
CME's Base Guaranty Fund to harmonize the relevant rule text across 
CME's Base, IRS and CDS product classes. The proposed changes would 
provide clarity to the marketplace regarding CME's obligation to 
replenish its Base CME Contribution during a Base Cooling-Off Period. 
Because the proposed amendments would clarify the operation of CME's 
rules and default management procedures in connection with its Base 
Guaranty Fund, the changes should therefore be seen 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 to CME's Base 
Guaranty Fund, which means the proposed changes are limited in their 
effect to products that 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; 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 CME's 
Base Guaranty Fund, 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 \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 changes 
simply provide clarity to the marketplace regarding CME's obligation to 
replenish its Base CME Contribution during a Base Cooling-Off Period. 
Further, the changes are limited to CME's Base Guaranty Fund and, as 
such, do not affect the security-based swap clearing activities of CME 
in any way and therefore do 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.

[[Page 50964]]

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 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 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-2014-32 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-2014-32. 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 
a.m. and 3 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-2014-32 
and should be submitted on or before September 16, 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. 2014-20210 Filed 8-25-14; 8:45 am]
BILLING CODE 8011-01-P