[Federal Register Volume 79, Number 4 (Tuesday, January 7, 2014)]
[Notices]
[Pages 865-867]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31602]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71211; File No. SR-CME-2013-37]
Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Changes To Amend CME Rule 971.C
December 31, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on December 23, 2013, Chicago Mercantile Exchange
Inc. (``CME'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule changes described in Items I, II and
III below, which items have been prepared primarily by CME. The
Commission is publishing this notice to solicit comments on the
proposed rule changes from interested persons and to approve the
proposed rule changes 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 Changes
CME proposes to make amendments to CME Rule 971 as part of an
industry wide initiative that is designed to further safeguard customer
funds held at the futures commission merchant (``FCM'') level.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Changes
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose and basis for the proposed
rule changes and discussed any comments it received on the proposed
rule changes. 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 Changes
CME is registered as a derivatives clearing organization with the
Commodity Futures Trading Commission (``CFTC'') and operates a
substantial business clearing futures and swaps contracts subject to
the jurisdiction of the CFTC. CME proposes to make rule changes to CME
Rule 971 in coordination with the National Futures Association
(``NFA''). The proposed rule changes are part of a continuing futures
industry effort to enhance the protection of customer funds held at the
FCM level.
In the fall of 2012, CME made a separate filing to introduce new
provisions in CME Rule 971.C. Under these rule changes, FCM clearing
members were required to provide the CME Audit Department, now named
the Financial and Regulatory Surveillance Department (``FRS''), with
view-only full access of segregated, secured, and Cleared Swaps
Customer accounts at a bank or trust company.
When the 2012 rule changes were implemented, CME and NFA had
engaged a third party vendor, Alphametrix360, LLC, to facilitate CME's
and NFA's view only internet based access to relevant account
information. CME is proposing to make certain amendments to the text of
Rule 971.C for the purpose of allowing clearing members to be able to
submit account information through multiple mediums. These proposed
changes simply delete the phrases ``view only full'' and ``via the
internet'' in the current rule text to effect these changes.
In addition, CME also proposes to make certain additional
amendments to CME Rule 971.C to expand these reporting requirements to
include all applicable customer depositories under CFTC Regulations.
FRS will first expand its reporting requirement to include FCM customer
carrying broker balances. Additionally, the expansion is anticipated to
continue and subsequently will include Clearing House customer
balances. The amended language provides FRS the flexibility to phase in
these additional depositories, and is also intended to harmonize
industry requirements as similar rules have been proposed and adopted
by NFA effective as of September 6, 2013.\3\ NFA and CME have allocated
implementation responsibilities for these changes and both have been
working closely with the FCM community regarding the implementation of
these changes.
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\3\ See http://www.nfa.futures.org/news/PDF/CFTC/FR_4_081513.pdf.
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CME would like to operationalize the proposed changes on December
31, 2013, pending applicable regulatory reviews and approvals. CME
believes it is appropriate to grant this filing on an accelerated basis
because the proposed changes are part of an industry wide
[[Page 866]]
initiative that is specifically targeted at protecting investors and
furthering the public interest through adoption of requirements that
help safeguard customer funds held at the FCM level. Currently, CME
receives relevant customer account information through one medium. The
proposed changes would facilitate regulatory access to relevant
customer account information through additional mediums. Obtaining
access to additional data through these new mediums will enable CME to
more effectively discharge its regulatory obligations. Having access to
an expanded pool of customer account information will allow for a more
effective daily confirmation of relevant funds; a failure to have such
access yields a less effective process. CME's effective administration
of its regulatory function in this regard will help to further
safeguard customer assets and will ultimately benefit investors.
Further, NFA and CME have allocated implementation responsibilities for
the implementation of these changes in the futures industry and have
been working closely with the FCM community to ensure these
enhancements to the daily segregation monitoring system are adopted to
further safeguard customer assets. NFA submitted corresponding rule
changes to CFTC for a September 6, 2013 effective date. CME's proposed
rule changes are intended to apply these changes to the firms for which
CME is the DSRO to ensure that both NFA and CME can collect relevant
balance information in the manner described above. CME believes this
wider futures industry context in combination with the investor
protection purpose of these proposed changes justifies treatment of
this filing on an accelerated basis.
CME has also made a filing with the CFTC, CME Submission 13-453,
with respect to the proposed changes.
CME believes the proposed changes are consistent with the
requirements of the Exchange Act. First, CME, a derivatives clearing
organization, is implementing the proposed changes in accordance
Commodity Exchange Act (``CEA'') as part of an effort to harmonize
futures industry requirements in conjunction with the National Futures
Association, which has already adopted corresponding rules that went
effective as of September 6, 2013. The CEA contains a number of
provisions that are comparable to the policies underlying the Exchange
Act, including, for example, promoting market transparency for
derivatives markets, promoting the prompt and accurate clearance of
transactions and protecting investors and the public interest.
More importantly, CME believes the proposed changes are
specifically designed to protect investors and the public interest. The
proposed changes involve enhancements to requirements that provide a
self-regulatory organization with access to the customer accounts held
at banks for the purpose of discharging regulatory obligations. As
such, the proposed enhancements are clearly designed to bolster
safeguarding of customer funds held at the FCM level and protect
investors. Further, the proposed changes are part of a larger,
coordinated futures industry effort to safeguard customer funds.
Because the proposed changes are designed to enhance regulatory
requirements related to self-regulatory organization access to customer
accounts and are also part of an industry-wide plan initiated for the
purpose of further safeguarding investor funds, CME believes the
changes are consistent with the requirements of the Exchange Act
because they 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 CME 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 Exchange Act.\4\
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\4\ 15 U.S.C. 78q-1(b)(3)(F).
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B. Self-Regulatory Organization's Statement on Burden on Competition
CME does not believe that the proposed rule changes will have any
impact, or impose any burden, on competition. The rule changes merely
amend existing language in CME's rulebook for the purpose of enhancing
access to customer accounts for regulatory purposes as part of a larger
industry effort to safeguard customer funds.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Changes Received From Members, Participants, or Others
CME has not solicited, and does not intend to solicit, comments
regarding these proposed rule changes. 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
changes are 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-2013-37 on the subject line.
Paper Comments
Send paper comments 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-2013-37. 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 changes that are
filed with the Commission, and all written communications relating to
the proposed rule changes 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 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-2013-37
and should be submitted on or before January 28, 2014.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Changes
Section 19(b) of the Act \5\ directs the Commission to approve
proposed rule changes of a self-regulatory organization
[[Page 867]]
if it finds that such proposed rule changes are consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to such organization. The Commission finds that the proposed
rule changes are consistent with the requirements of the Act, in
particular the requirements of Section 17A of the Act, and the rules
and regulations thereunder applicable to CME.\6\ Specifically, the
Commission finds that the proposed rule changes are consistent with
Section 17A(b)(3)(F) of the Act,\7\ which requires, among other things,
that the rules of a registered clearing agency be designed to promote
the prompt and accurate clearance and settlement of securities
transactions and, to the extent applicable, derivatives agreements,
contracts and transactions, and to protect investors and the public
interest because the proposed changes involve enhancements to FCM
clearing member reporting requirements that provide CME, in its
capacity as a self-regulatory organization, with access to customer
accounts held at depositories for the purpose of discharging its
regulatory obligations and are designed to further safeguard customer
assets in the custody or control of the FCM.
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\5\ 15 U.S.C. 78s(b).
\6\ 15 U.S.C. 78q-1. In approving these proposed rule changes,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\7\ 15 U.S.C. 78q-1(b)(3)(F).
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In its filing, CME requested that the Commission approve these
proposed rule changes on an accelerated basis for good cause shown
because the proposed changes are part of an industry wide initiative
that is specifically designed to protect investors and the public
interest through adoption of requirements that help safeguard customer
funds held at the FCM level.
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\8\ for approving the proposed rule changes prior to the 30th
day after the date of publication of notice in the Federal Register
because, as a registered derivatives clearing organization, CME must
make the rule changes discussed above as part of an industry wide
initiative that is specifically designed to protect investors and the
public interest through adoption of requirements that help safeguard
customer funds held at the FCM level.
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\8\ 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,\9\ that the proposed rule changes (SR-CME-2013-37) be, and hereby
are, approved on an accelerated basis.
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\9\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-31602 Filed 1-6-14; 8:45 am]
BILLING CODE 8011-01-P [FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES]