[Federal Register Volume 79, Number 107 (Wednesday, June 4, 2014)]
[Notices]
[Pages 32340-32342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-12885]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72272; File No. SR-CME-2014-21]
Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to IRS Coupon Blending
May 29, 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 May 16, 2014, 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 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 the proposed rule change that is limited to its
business as a derivatives clearing organization. More specifically, the
proposed rule change would adopt new CME Rule 90008 to allow market
participants the
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ability to reduce the number of open positions and/or the gross
notional of their interest rate swap (``IRS'') positions through
compression by coupon blending.
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 DCO with the Commodity Futures Trading
Commission (``CFTC'') and offers clearing services for many different
futures and swaps products. The proposed rule change that is the
subject of this filing is limited to CME's business as a DCO offering
clearing services for CFTC-regulated swaps products.
CME is proposing to adopt new CME Rule 90008 to allow market
participants the ability to reduce the number of open positions and/or
the gross notional of their interest rate swap (``IRS'') positions
through compression by coupon blending. CME is offering coupon blending
for market participants interested in reducing the number of IRS
contracts cleared at CME.
Under the new rule, a market participant interested in coupon
blending would inform CME or its IRS Clearing Member that it wishes to
exercise coupon blending and then CME would conduct a process that
would take IRS contracts executed at the same or different fixed rates
and replace them with zero or more IRS Contracts that have Fixed
Rate(s) equal to the blended rate(s) determined through the coupon
blending process. The process would result in either a reduction in the
number of transactions, a reduction in the aggregate gross notional of
the combined IRS Contracts or both. Coupon blending would be available
to all participants on a voluntary basis and could be automated at a
market participant's request.
The change that is described in this filing is limited to CME's
business as a DCO clearing products under the exclusive jurisdiction of
the CFTC and does not materially impact CME's security-based swap
clearing business in any way. CME notes that it has also certified the
proposed rule change that is the subject of this filing to its primary
regulator, the CFTC, in a separate filing, CME Submission No. 14-157.
This change will be effective on filing.
CME believes the proposed rule change is consistent with the
requirements of the Exchange Act including Section 17A of the Exchange
Act.\5\ The proposed change would allow market participants the ability
to reduce the number of open positions and/or the gross notional of
their IRS positions through compression by coupon blending. This new
process will result in either a reduction in the number of
transactions, a reduction in the aggregate gross notional of the
combined IRS Contracts or both. This tool will be available to all
market participants for cleared OTC IRS trades and these processes will
enhance the risk management tools available in connection with CME's
OTC IRS offering. These risk management enhancements 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 Exchange 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 in its effect to
products offered under CME's authority to act as a DCO. The products
that are the subject of this filing are under the exclusive
jurisdiction of the CFTC. As such, the proposed change is limited to
CME's activities as a DCO clearing 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 Exchange 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 IRS
products offered under CME's authority to act as a DCO, 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.
As such, the change is therefore consistent with the requirements of
Section 17A of the Exchange Act \7\ and are 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 would
provide market participants with the ability to reduce the number of
open positions and/or the gross notional of their IRS positions through
compression by coupon blending. This new process will enhance risk
management in connection with CME's IRS clearing offering and could
result in either a reduction in the number of already effected
transactions, a reduction in the aggregate gross notional of the
combined IRS Contracts or both, but should not be seen to impact
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. 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 Rule 19b-4(f)(4)(ii) \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
[[Page 32342]]
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-2014-21 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-2014-21. 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 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-2014-21 and
should be submitted on or before June 25, 2014.
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-12885 Filed 6-3-14; 8:45 am]
BILLING CODE 8011-01-P