[Federal Register Volume 80, Number 26 (Monday, February 9, 2015)]
[Notices]
[Pages 7054-7056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02499]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74191; File No. SR-CME-2015-003]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Change to CME 
Rule 814 To Clarify Certain Operational Details Regarding Current CME 
Settlement Cycles

February 3, 2015.
    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 January 21, 2015, 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-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 (``DCO''). More 
specifically, the proposed change would amend the text of current CME 
Rule 814 to clarify certain operational details regarding current CME 
settlement cycles.

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 make rulebook changes that are limited to 
its business clearing futures and swaps under the exclusive 
jurisdiction of the CFTC. More specifically, the proposed changes would 
amend the text of current CME Rule 814 to clarify certain operational 
details regarding current CME settlement cycles.
    The first proposed change to CME Rule 814 would add further detail 
regarding the settlement cycle for commodity contracts that are 
options. The current version of Rule 814 is silent on the settlement 
cycle for commodity contracts that are options, and so additional 
language is proposed to ensure that the market is aware that settlement 
of option value operates differently than settlement for non-option 
commodity contracts. The proposed rule change is consistent with the 
current settlement process so no operational changes are needed to 
implement the proposed rules. The second proposed change is to amend 
Rule 814 so that it explicitly reflects the fact that the current CME 
settlement process results in outstanding exposures being settled to 
zero fair value during each settlement cycle. The third proposed change 
is to add further clarity regarding settlement finality at the CME 
clearing house. Lastly, certain terms in the Rule 814 text are being 
modified in order to provide additional clarity to the marketplace and 
regulators. As described above, none of these revisions would change 
any aspect of current operations but, rather, would merely clarify 
certain operational details of the clearing cycle currently in place in 
the text of Rule 814.
    The proposed rule change that is described in this filing is 
limited to CME's business as a derivatives clearing organization 
clearing products under the exclusive jurisdiction of the CFTC. CME has 
not cleared security based swaps and does not plan to and therefore the 
proposed rule change does not impact CME's security-based swap clearing 
business in any way. The proposed rule change will become effective 
immediately. CME notes that it has also submitted the proposed rule 
change that is the subject of this filing

[[Page 7055]]

to its primary regulator, the CFTC, in CME Submission 14-585.
    CME believes the proposed rule change is consistent with the 
requirements of the Act including Section 17A of the Act.\5\ The 
proposed rule change would amend the text of current CME Rule 814 to 
clarify certain operational details regarding current CME settlement 
cycles. The additional clarity in CME's rulebook regarding its 
settlement cycles should be seen to be 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.\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 change is limited to CME's futures and 
swaps clearing businesses, which means it is limited in its effect to 
products that are under the exclusive jurisdiction of the CFTC. As 
such, the proposed change is limited to CME's activities as a DCO 
clearing futures that are not security futures and 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 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 change is limited in its effect to CME's 
futures and swaps clearing businesses, the proposed change is 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.

CME believes that the proposal does not significantly affect any 
securities clearing operations of CME because CME recently filed a 
proposed rule change that clarified that CME has decided not to clear 
security-based swaps, except in a very limited set of circumstances.\7\ 
The rule filing reflecting CME's decision not to clear security-based 
swaps removed any ambiguity concerning CME's ability or intent to 
perform the functions of a clearing agency with respect to security-
based swaps. Therefore, this proposal will not have an effect on any 
securities clearing operations of CME. As such, the changes are 
therefore consistent with the requirements of Section 17A of the Act 
\8\ and are properly filed under Section 19(b)(3)(A) \9\ and Rule 19b-
4(f)(4)(ii) \10\ thereunder.
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    \7\ See Securities Exchange Act Release No. 34-73615 (Nov. 17, 
2014), 79 FR 69545 (Nov. 21, 2014) (SR-CME-2014-49). The only 
exception is with regards to Restructuring European Single Name CDS 
Contracts created following the occurrence of a Restructuring Credit 
Event in respect of an iTraxx Component Transaction. The clearing of 
Restructuring European Single Name CDS Contracts will be a necessary 
byproduct after such time that CME begins clearing iTraxx Contracts.
    \8\ 15 U.S.C. 78q-1.
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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. CME is making the 
aforementioned changes simply to clarify current settlement processes; 
there are no operational changes. Further, the changes are limited to 
CME's futures and swaps clearing businesses 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.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \11\ of the Act and paragraph (f)(4)(ii) of Rule 19b-4 \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.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2015-003 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC, 21049-1090.

All submissions should refer to File Number SR-CME-2015-003. 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 or 
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.

[[Page 7056]]

    All submissions should refer to File Number SR-CME-2015-003 and 
should be submitted on or before March 2, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Jill Peterson,
Assistant Secretary.
[FR Doc. 2015-02499 Filed 2-6-15; 8:45 am]
BILLING CODE 8011-01-P