[Federal Register Volume 79, Number 225 (Friday, November 21, 2014)]
[Notices]
[Pages 69545-69547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27572]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73615; File No. SR-CME-2014-49]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Decision Not To Clear Security-Based Swaps

November 17, 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 November 17, 2014, Chicago Mercantile Exchange 
Inc. (``CME Inc.'') 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 Inc. CME Inc. 
filed the proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and 
Rule 19b-4(f)(6) \4\ thereunder, so that the proposal

[[Page 69546]]

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)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CME Inc. is filing the proposed rule change that is limited to its 
business as a derivatives clearing organization. More specifically, the 
proposed rule change clarifies that CME Inc. has decided not to clear 
security-based swaps (``SBSs'').\5\ As a result, CME Inc. is removing 
references in Chapter 8-H (Credit Default Swaps Clearing) to SBSs.
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    \5\ CME Inc.'s decision not to clear SBS is subject to the 
limited exception of clearing Restructuring European Single Name CDS 
Contracts, as more fully detailed below. All references herein to 
CME Inc.'s decision not to clear SBS should be read/understood in 
this context.
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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 Inc. 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 Inc. 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 Inc. 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. 
To date, CME Inc. has never performed the functions of a clearing 
agency with respect to SBSs. This proposed rule change is designed to 
make explicit that CME Inc. has decided not to clear SBSs.
    As a result of the above decision, CME Inc. is proposing to amend 
Rule 8H01 to explicitly state that CME Inc. will not clear SBSs, with 
the exception of Restructuring European Single Name CDS Contracts 
created following the occurrence of a Restructuring Credit Event in 
respect of an iTraxx Component Transaction.\6\ The clearing of 
Restructuring European Single Name CDS Contracts will be a necessary 
byproduct after such time that CME Inc. begins clearing iTraxx Europe 
index CDS. As currently contemplated, CME Inc. will not permit market 
participants to increase, close out (other than due to the occurrence 
of a credit event) or otherwise affect the size of a position in a 
Restructuring European Single Name CDS Contract.\7\
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    \6\ CME Inc. plans to launch clearing services for iTraxx Europe 
index CDS products and will file a separate proposed rule change 
with the Commission in connection with its iTraxx proposal.
    \7\ CME Inc. will provide further details surrounding the 
clearing of iTraxx Europe index CDS, and Restructuring European 
Single Name CDS Contracts specifically, in a separate iTraxx rule 
filing.
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    Additionally, to remove references to SBSs, CME Inc. will 
accordingly amend or delete Rules 8H04 (CDS Clearing Member Obligations 
and Qualifications), 8H820 (Performance Bond for Security-Based Swaps), 
8H930.C (Acceptable Performance Bond Deposits for CDS Products), 8H931 
(Rule Changes Relating to Security-Based Swaps), 8H932 (Records 
Relating to Disciplinary Proceedings and Security-Based Swaps), 8H933 
(Notice Regarding Certain Disciplinary Matters Related to Security-
Based Swaps), 8H934 (Reports to CDS Clearing Members), and 8H938 
(Summary Suspensions Relating to Security-Based Swap Clearing 
Activities).
    CME Inc. believes the proposed rule change is consistent with the 
requirements of the Exchange Act, including Section 17A of the Exchange 
Act,\8\ in general, and furthers the objectives of Section 
17A(b)(3)(F),\9\ in particular, in that it is designed to remove 
impediments to and perfect the mechanism of a national system for the 
prompt and accurate clearance and settlement of securities 
transactions, and in general, to protect investors and the public 
interest. The proposed rule change will provide adequate notice to the 
public that CME Inc. will not clear SBSs. Additionally, by deciding not 
to clear SBSs, CME Inc. believes that it will avoid subjecting non-
security products to potentially ``duplicative or inconsistent 
regulation'' and will ``eliminate any potential inefficiencies and 
undue delays that could result from the requirement that the Commission 
review changes to rules primarily affecting clearing operations with 
respect to products that are not securities . . .'' \10\ As a result, 
CME Inc. believes that the proposed rule change is consistent with the 
Exchange Act.
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    \8\ 15 U.S.C. 78q-1.
    \9\ 15 U.S.C. 78q-1(b)(3)(F).
    \10\ See Securities Exchange Act Release No. 34-69284 (April 9, 
2013), 78 FR 21046 (April 9, 2013).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CME Inc. does not believe that the proposed rule change will have 
any impact, or impose any burden, on competition. The proposed rule 
change merely makes explicit the fact that CME Inc. has decided not to 
clear SBSs. Because CME Inc. never performed, and will not perform, the 
functions of a clearing agency with respect to SBS, the proposed rule 
change will not affect any actual clearing activities of CME Inc. and 
should not have any burden on competition. In fact, CME Inc. believes 
that the proposed rule change will have a positive effect on 
competition since the proposal will result in the avoidance of 
``potential legal uncertainty and market disruption caused by delays 
that could result from the requirement that the Commission undertake a 
full review'' of CME Inc.'s non-security products.\11\
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    \11\ See Securities Exchange Act Release No. 34-64832 (July 7, 
2011), 76 FR 41056 (July 13, 2011).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants, or Others

    CME Inc. has not solicited, and does not intend to solicit, 
comments regarding this proposed rule change. CME Inc. has not received 
any unsolicited written comments from interested parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    CME Inc. has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) \13\ thereunder.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
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    Because the proposed rule change (i) does not significantly affect 
the protection of investors or the public interest, (ii) does not 
impose any significant burden on competition, and (iii) does not become 
operative prior to 30 days from the date on which it was filed, or such 
shorter time as the Commission may designate, if consistent with the 
protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A)(iii) of the 
Act \14\ and Rule 19b-4(f)(6) \15\ thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after

[[Page 69547]]

the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ 
CME Inc. has asked the Commission to waive the five-day pre-filing 
requirement and the 30-day operative delay so that the proposed rule 
change may become operative immediately upon filing.\18\ The Commission 
believes that waiver of the 30-day operative delay is appropriate, as 
CME Inc. has, to date, never performed the functions of a clearing 
agency with respect to SBSs, and the rule text removed or altered as a 
result the proposed rule change removes any ambiguity concerning CME 
Inc.'s ability or desire to perform the functions of a clearing agency 
with respect to SBSs. Therefore, the Commission believes that waiving 
the 30-day operative delay is consistent with the protection of 
investors and the public interest and designates the proposed rule 
change as operative upon filing.\19\
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    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
    \18\ Rule 19b-4(f)(6)(iii) requires a self-regulatory 
organization to submit to the Commission written notice of its 
intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. 17 CFR 
240.19b-4(f)(6)(iii). The Commission has waived the five-day pre-
filing period in this case.
    \19\ Solely for purposes of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed 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. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule change should be approved or disapproved.

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-2014-49 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-2014-49. 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 Inc. and on 
CME Inc.'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-2014-49 and 
should be submitted on or before December 12, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27572 Filed 11-20-14; 8:45 am]
BILLING CODE 8011-01-P