[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]
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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.
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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 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.
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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, 77 FR 48207, 48255
(August 13, 2012).
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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.
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\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.
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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\
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\7\ 15 U.S.C. 78q-1.
\8\ 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, 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.
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\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).
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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 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.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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,
[[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\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26006 Filed 10-31-14; 8:45 am]
BILLING CODE 8011-01-P