[Federal Register Volume 79, Number 212 (Monday, November 3, 2014)]
[Notices]
[Pages 65275-65277]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26006]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73445; File No. SR-CME-2014-46]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Make Changes to Settlement Procedures Regarding Seven CME Cleared OTC 
FX Spot, Forward and Swap Contracts

October 28, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given 
that, on October 20, 2014, Chicago Mercantile Exchange Inc. (``CME'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as 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.
---------------------------------------------------------------------------

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

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CME is proposing rule changes that are limited to its business as a 
derivatives clearing organization (``DCO''). More specifically, the 
proposed rule change contains amendments to certain aspects of CME's 
settlement procedures for seven of CME's Cleared Over-the-Counter 
(``OTC'') Foreign Exchange (``FX'') 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 the purpose of 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 these 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 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 
offers clearing services for cleared-only OTC FX contracts on a number 
of 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 proposes to make amendments to five of 
these contracts.
---------------------------------------------------------------------------

    \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, 77 FR 48207, 48255 
(August 13, 2012).
---------------------------------------------------------------------------

    The amendments would impact the following CME contracts and 
associated rules:
     Rule 270H.02.A. Day of Cash Settlement of Cleared OTC U.S. 
Dollar/Chinese Renminbi (USD/RMB) Spot, Forwards and Swaps (Rulebook 
Chapter 270H: Commodity Code: USDCNY); Rule 270H.02.B.--Procedures if 
No Cash Settlement Price is Available for the USD/RMB Cleared OTC Spot, 
Forwards and Swaps Contracts;
     Rule 271H.02.A. Day of Cash Settlement of Cleared OTC U.S. 
Dollar/

[[Page 65276]]

Korean Won (USD/KRW) Spot, Forwards and Swaps (Rulebook Chapter 271H: 
Commodity Code: USDKRW); Rule 271H.02.B.--Procedures if No Cash 
Settlement Price is Available for the USD/KRW Cleared OTC Spot, 
Forwards and Swaps Contracts;
     Rule 279H.02.A. Day of Cash Settlement of Cleared OTC U.S. 
Dollar/Indian Rupee (USD/INR) Spot, Forwards and Swaps (Rulebook 
Chapter 279H: Commodity Code: USDINR);
     Rule 280H.02.A. Day of Cash Settlement of Cleared OTC U.S. 
Dollar/Malaysian Ringgit (USD/MYR) Spot, Forwards and Swaps (Rulebook 
Chapter 280H: Commodity Code: USDMYR);
     Rule 281H.02.A. Day of Cash Settlement of Cleared OTC U.S. 
Dollar/Indonesian Rupiah (USD/IDR) Spot, Forwards and Swaps (Rulebook 
Chapter 281H: Commodity Code: USDIDR);
     Rule 282H.02.A. Day of Cash Settlement of Cleared OTC U.S. 
Dollar/Taiwan Dollar (USD/TWD) Spot, Forwards and Swaps (Rulebook 
Chapter 282H: Commodity Code: USDTWD); and
     Rule 283H.02.A. Day of Cash Settlement of Cleared OTC U.S. 
Dollar/Philippines Peso (USD/PHP) Spot, Forwards and Swaps (Rulebook 
Chapter 283H: Commodity Code: USDPHP).
    More specifically, CME is proposing to amend Rule 270H.02.B. and 
271H.02.B. to remove an outdated interpretation reference regarding 
fallback procedures. CME will work with EMTA, a trade group focused on 
the global emerging markets trading and investment community, and other 
OTC organizations, to make sure CME is aligned in the event a rate is 
not determined or published. Further, CME is proposing rule changes to 
Rules 270H.02.A., 271H.02.A., 279H.02.A., Rule 280H.02.A., Rule 
281H.02.A., Rule 282H.02.A. and Rule 283H.02.A. that would specify that 
in the event that a ``Final Settlement Price'' is not able to be 
determined for the applicable contracts, then the Final Settlement 
Price would be determined pursuant to existing CME Rule 812.\6\ CME 
Rule 812 allows CME to establish a final settlement price in the event 
the final settlement price cannot be determined and alternative 
settlement procedures are not otherwise specified in the relevant 
product chapter.
---------------------------------------------------------------------------

    \6\ Pursuant to a teleconference with CME's counsel on October 
23, 2014, staff in the Division of Trading and Markets has revised 
this sentence by adding Rule 280H.02.A. to the description of the 
Rules that are being amended as part of the proposed rule change.
---------------------------------------------------------------------------

    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 CFTC, in a 
separate filing, CME Submission No. 14-409.
    CME believes the proposed rule change is consistent with the 
requirements of the Act including Section 17A of the Act.\7\ CME is 
proposing the amendments to clarify that CME would be allowed to 
establish a final settlement price for certain OTC FX contracts in the 
event a final settlement price cannot be determined and alternative 
settlement procedures are not otherwise specified in the relevant 
product chapter. These amendments to CME's fallback procedures 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 Act.\8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1.
    \8\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    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, futures that are not security futures 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 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 Act \9\ and are properly filed under Section 
19(b)(3)(A) \10\ and Rule 19b-4(f)(4)(ii) \11\ thereunder.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78q-1.
    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(4)(ii).
---------------------------------------------------------------------------

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 amendments 
are designed to establish appropriate fallback settlement price 
procedures for several OTC FX contracts. Further, the changes are 
limited to CME's derivatives clearing business and, as such, do not 
affect the security-based swap clearing activities of CME in any way 
and therefore would 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) \12\ of the Act and Rule 19b-4(f)(4)(ii) \13\ 
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\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(4)(ii).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing,

[[Page 65277]]

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 Number SR-CME-2014-46 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-2014-46. 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 filings will also 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-2014-46 
and should be submitted on or before November 24, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26006 Filed 10-31-14; 8:45 am]
BILLING CODE 8011-01-P