[Federal Register Volume 77, Number 91 (Thursday, May 10, 2012)]
[Notices]
[Pages 27530-27532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-11242]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66914; File No. SR-CME-2012-16]
Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change To Amend Rules Regarding CDS Clearing Member Obligations
and Qualifications
May 3, 2012.
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 April 23, 2012, Chicago Mercantile Exchange Inc. (``CME'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change described in Items I and II, below, which items
have been prepared substantially by CME. The Commission is publishing
this Notice and Order to solicit comments on the proposed rule change
from interested persons and to approve the proposed rule change on an
accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CME proposes to amend certain of its rules to comply with pending
revisions to the CFTC Regulations. The text of the proposed rule change
is available at the CME's Web site at http://www.cmegroup.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
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 III below. The self-regulatory organization 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 operates a
[[Page 27531]]
substantial business clearing futures and swaps contracts subject to
the jurisdiction of the CFTC. CME proposes to amend certain of its
rules to comply with certain mandatory revisions that are related to
recent changes in CFTC Regulations that will become effective on May 7,
2012. More specifically, CME proposes to adopt revisions to CME Rule
8H04 (CDS Clearing Member Obligations and Qualifications).
As described above, the CFTC adopted a number of new regulations
designed to implement the core principles for derivatives clearing
organizations (DCOs) in the Commodity Exchange Act, as amended by the
Dodd-Frank Act. CFTC Regulation 39.12, which becomes effective on May
7, 2012, provides for participant and product eligibility requirements.
CFTC Regulation 39.12(a)(iii) provides that a DCO ``shall not set
minimum capital requirements of more than $50 million for any person
that seeks to become a clearing member in order to clear swaps.'' CFTC
Regulation 39.12(a)(2)(ii) provides that ``[c]apital requirements shall
be scalable to the risks posed by clearing members.'' CFTC Regulation
39.12(a) provides that a DCO ``shall establish appropriate admission
and continuing participation requirements for clearing members of the
derivatives clearing organization that are objective, publicly
disclosed, and risk-based.''
In order to comply with these Regulations, CME plans to amend CME
Rule 8H04. Revised CME Rule 8H04.2 sets minimum capital for a CDS
Clearing Member at $50 million and defines ``capital'' consistent with
Regulation 39.12(a)(2)(i). In order to scale the capital requirements
of CDS Clearing Members to the risks posed by such CDS Clearing
Members, new CME Rule 8H04.3 requires CDS Clearing Members to maintain
capital of at least 20% of the aggregate performance bond requirement
for its proprietary and customer CDS Contracts. Revised CME Rule 8H04.9
requires CDS Clearing Members to provide nominations for certain
members of the CDS Risk Committee and CDS Default Management Committee.
The text of the proposed rule change is available at the CME's Web
site at http://www.cmegroup.com. CME also made a filing, CME Submission
12-124, with its primary regulator, the CFTC, with respect to the
proposed rule changes.
CME believes the proposed changes are consistent with the
requirements of the Exchange Act. First, CME, a derivatives clearing
organization, is required to implement the proposed changes to comply
with recent changes to CFTC regulations. CME notes that the policies of
the Commodity Exchange Act (``CEA'') with respect to clearing are
comparable to a number of the policies underlying the Exchange Act,
such as promoting market transparency for derivatives markets,
promoting the prompt and accurate clearance of transactions and
protecting investors and the public interest. Second, CME believes the
proposed changes are specifically designed to promote the prompt and
accurate clearance and settlement of derivative agreements, contracts,
and transactions, and assure the safeguarding of securities and funds
which are in the custody or control of CME, and, in general, protect
investors and the public interest, because the rules changes establish
objective and risk-based admission and continuing participation
requirements for clearing members in compliance with applicable law.
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.
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. 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 may be submitted by using 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-2012-16 on the subject line.
Paper comments should be sent in triplicate to Elizabeth
M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CME-2012-16. 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
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of CME. 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-2012-16 and should be
submitted on or before May 31, 2012.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
Section 19(b) of the Act \3\ directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\4\ In particular, Section 17A(b)(3)(F) of the Act
requires that the rules of the clearing agency be designed to promote
the prompt and accurate clearance and settlement of securities
transactions, and to the extent applicable, derivative agreements,
contracts, and transactions.\5\
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\3\ 15 U.S.C. 78s(b).
\4\ 15 U.S.C. 78s(b)(2)(B).
\5\ 15 U.S.C. 78q-1(b)(3)(F).
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The proposed change would allow CME to expand the base of potential
clearing members by lowering the net capital threshold for membership,
thereby promoting the prompt and accurate clearance and settlement of
securities transactions, and derivative agreements, contracts, and
transactions. It should also allow CME to comply with new CFTC
regulatory requirements, thereby promoting the prompt and accurate
clearance and settlement of derivative agreements, contracts, and
transactions.
[[Page 27532]]
In its filing, CME requested that the Commission approve this
proposed rule change on an accelerated basis for good cause shown. CME
cites as the reason for this request CME's operation as a DCO, which is
subject to regulation by the CFTC under the CEA and, in particular, new
CFTC regulations that become effective on May 7, 2012. Thus, the
Commission finds good cause, pursuant to Section 19(b)(2) of the
Act,\6\ for approving the proposed rule change prior to the 30th day
after the date of publication of notice in the Federal Register because
as a registered DCO, CME is required to comply with the new CFTC
regulations by the time they become effective on May 7, 2012.
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\6\ 15 U.S.C. 78s(b)(2).
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-CME-2012-16) is approved on an
accelerated basis.\7\
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\7\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition and
capital formation. 15 U.S.C. 78c(f).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-11242 Filed 5-9-12; 8:45 am]
BILLING CODE 8011-01-P