[Federal Register Volume 80, Number 62 (Wednesday, April 1, 2015)]
[Notices]
[Pages 17516-17518]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-07361]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74587; File No. SR-CME-2015-005]


Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish a Default Management Committee and Address OTC Products That 
Are Subject to CME's Base Financial Safeguards

March 26, 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 March 23, 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 primarily prepared by CME. CME filed the proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act,\3\ and Rule 19b-
4(f)(4)(ii) \4\ thereunder, so that the proposed rule change 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 would make amendments to existing rules to 
establish a default management committee (``Active Base OTC Default 
Management Committee'' or ``Committee'') and address over-the-counter 
(``OTC'') products that are subject to CME's base financial safeguards, 
including OTC FX.

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

[[Page 17517]]

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 rule change 
would make amendments to existing rules to establish a default 
management committee and address OTC products that are subject to CME's 
base financial safeguards, including OTC FX.
    CME currently has an IRS Default Management Committee to assist 
with the management of a defaulting IRS Clearing Member's positions and 
a CDS Default Management Committee to assist with the management of a 
defaulting CDS Clearing Member's positions. The proposed rule change 
establishes the Committee as a similar construct to assist with the 
management of portfolio of its OTC Clearing Member's positions. The 
Committee will be comprised of traders in OTC products that are 
employees or directors of Base OTC Clearing Members (or their 
affiliates) and will serve on the Committee on a rotating basis. The 
Committee will assist CME in structuring hedges and portfolios for 
auction. Members of the Committee will also participate in default 
management drills for Base OTC products.
    The proposed rule amendments are summarized further as follows:
     New CME Rule 8F025. (Active Base OTC Default Management 
Committee) will establish the Committee and specify its composition of 
traders in the relevant OTC products who will serve on a rotational 
basis;
     CME Rule 8F004 (OTC Clearing Member Obligations and 
Qualifications) amendments will add requirements for OTC Clearing 
Members to (i) avail traders with proper experience to the Committee 
and (ii) participate in OTC Derivative default drill exercises;
     CME Rule 8F014 (Mitigation of Losses) amendments will 
harmonize with the related OTC IRS and OTC CDS rules, including the 
deletion of allocations of OTC positions;
     CME Rule 8F002 (Definitions) amendments will add the terms 
``Base OTC Clearing Member'' and ``OTC Derivative Product Category.''
    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 to its primary 
regulator, the CFTC, in CME Submission 14-080.
    CME believes the proposed rule change is consistent with the 
requirements of the Act including Section 17A of the Act.\5\ The 
establishment of the Committee and OTC Clearing Member requirements to 
provide traders and participate in auction as set forth in the proposed 
rule change forms part of CME's default procedures for OTC products to 
permit CME to take timely action to contain losses resulting from OTC 
positions in the event of a default of a CME OTC Clearing Member. The 
proposed rule change should therefore 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 rule 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 rule change is limited to CME's activities as a 
derivatives clearing organization 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 rule change is limited in its effect to CME's 
futures and swaps clearing businesses, the proposed rule 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.

As such, the proposed rule change is therefore consistent with the 
requirements of Section 17A of the Act \7\ and is 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 rule change 
would make amendments to existing rules to establish a default 
management committee to further strengthen CME's ability to take timely 
action to contain losses resulting from OTC positions in the event of a 
default of a CME OTC Clearing Member. Further, the proposed rule change 
is limited to CME's futures and swaps clearing businesses and, as such, 
does not affect the security-based swap clearing activities of CME in 
any way and therefore does 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 17518]]

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) \10\ of the Act and paragraph (f)(4)(ii) of Rule 19b-4 \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-2015-005 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-2015-005. 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.
    All submissions should refer to File Number SR-CME-2015-005 and 
should be submitted on or before April 22, 2015.

    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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Brent J. Fields,
Secretary.
[FR Doc. 2015-07361 Filed 3-31-15; 8:45 am]
BILLING CODE 8011-01-P