[Federal Register Volume 79, Number 126 (Tuesday, July 1, 2014)]
[Notices]
[Pages 37371-37372]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15324]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72465; File No. SR-CME-2014-26]
Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Regarding Modifications to Its OTC IRS Fee Schedule
June 25, 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 June 18, 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)(2) \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)(2).
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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 modify the fee schedule applicable to its
over-the-counter (``OTC'') interest rate swap (``IRS'') clearing
offering.
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 modify the fee schedule (the ``Fee
Schedule'') that applies to over-the-counter (``OTC'') Interest Rate
Swaps (``IRS'') cleared at CME.
The proposed fee change relates to the charges for customer back-
loaded trades. The proposed change applies to the OTC IRS Customer Fee
Schedule. The proposed modification would specify that certain
qualifying back-loaded trades would be eligible for rebated clearing
fees provided that certain conditions and criteria are met. In order to
be eligible for the clearing fee rebate, the following criteria would
have to be satisfied: The entire back-loaded portfolio must have an
aggregate gross notional equal to or greater than $500 billion (or U.S.
Dollar equivalent); the customer notifies CME at least five (5) days in
advance by contacting [email protected]; the participating back-
loaded trades are back-loaded within a period of twenty (20) business
days or less; and, finally,
[[Page 37372]]
the back-loaded trades result in a net increase in customer open
interest during the specified back-loading period.
In addition, the proposed modification to the OTC IRS Fee Schedule
also includes certain corrections to the current Fee Schedule for IRS
Clearing Members dealing with end of day offsets for currencies. These
corrections are intended to adjust the standard day offsets that are
used to coincide more closely with market standard settlement
conventions.
The change that is described in this filing impacts fees that are
limited to CME's business as a derivatives clearing organization
clearing products under the exclusive jurisdiction of the CFTC and does
not materially impact CME's security-based swap clearing business in
any way. The fee change would become effective immediately but would be
operationalized on July 1, 2014. CME notes that it has already
submitted the proposed rule changes that is the subject of this filing
to its primary regulator, the CFTC, in CME Submission 14-239.
CME believes the proposed rule change is consistent with the
requirements of the Exchange Act including Section 17A of the Exchange
Act.\5\ More specifically, the proposed rule changes establish or
change a member due, fee or other charge imposed by CME under Section
19(b)(3)(A)(ii) \6\ of the Exchange Act and Rule 19b-4(f)(2) \7\
thereunder. CME believes that the proposed fee change is consistent
with the requirements of the Exchange Act and the rules and regulations
thereunder and, in particular, to Section 17A(b)(3)(D) of the Exchange
Act,\8\ because the proposed fee changes apply equally to all OTC IRS
customers clearing IRS at CME and therefore the proposed changes
provide for the equitable allocation of reasonable dues, fees and other
charges among participants. CME also notes that it operates in a highly
competitive market in which market participants can readily direct
business to competing venues. As such, the proposed change is
appropriately filed pursuant to Section 19(b)(3)(A)\9\ of the Act and
Rule 19b-4(f)(2) \10\ thereunder.
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\5\ 15 U.S.C. 78q-1.
\6\ 15 U.S.C. 78s(b)(3)(A)(ii).
\7\ 17 CFR 240.19b-4(f)(2).
\8\ 15 U.S.C. 78q-1(b)(3)(D).
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(2).
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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 fee change provides a
waiver of fees for certain large qualifying back-loaded IRS legacy
portfolios. Back-loaded transactions are defined as where the trade
date for the transaction is prior to the cleared date and, thus, by
definition, are transactions which have already occurred well before
clearing. Back-loaded transactions promote the general goal of
increasing central clearing of OTC derivatives products. Further, OTC
IRS are swaps under the exclusive jurisdiction of the CFTC, and, as
such, these proposed fee change 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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A) \11\ of the Act and Rule 19b-4(f)(2) \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)(2).
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IV. Solicitation of Comment
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-2014-26 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-2014-26. 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-2014-26 and
should be submitted on or before July 22, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
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\13\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2014-15324 Filed 6-30-14; 8:45 am]
BILLING CODE 8011-01-P