[Federal Register Volume 79, Number 225 (Friday, November 21, 2014)]
[Notices]
[Pages 69545-69547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-27572]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73615; File No. SR-CME-2014-49]
Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Regarding Decision Not To Clear Security-Based Swaps
November 17, 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 November 17, 2014, Chicago Mercantile Exchange
Inc. (``CME Inc.'') 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 Inc. CME Inc.
filed the proposal pursuant to Section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6) \4\ thereunder, so that the proposal
[[Page 69546]]
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)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
CME Inc. is filing the proposed rule change that is limited to its
business as a derivatives clearing organization. More specifically, the
proposed rule change clarifies that CME Inc. has decided not to clear
security-based swaps (``SBSs'').\5\ As a result, CME Inc. is removing
references in Chapter 8-H (Credit Default Swaps Clearing) to SBSs.
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\5\ CME Inc.'s decision not to clear SBS is subject to the
limited exception of clearing Restructuring European Single Name CDS
Contracts, as more fully detailed below. All references herein to
CME Inc.'s decision not to clear SBS should be read/understood in
this context.
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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 Inc. 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 Inc. 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 Inc. 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.
To date, CME Inc. has never performed the functions of a clearing
agency with respect to SBSs. This proposed rule change is designed to
make explicit that CME Inc. has decided not to clear SBSs.
As a result of the above decision, CME Inc. is proposing to amend
Rule 8H01 to explicitly state that CME Inc. will not clear SBSs, with
the exception of Restructuring European Single Name CDS Contracts
created following the occurrence of a Restructuring Credit Event in
respect of an iTraxx Component Transaction.\6\ The clearing of
Restructuring European Single Name CDS Contracts will be a necessary
byproduct after such time that CME Inc. begins clearing iTraxx Europe
index CDS. As currently contemplated, CME Inc. will not permit market
participants to increase, close out (other than due to the occurrence
of a credit event) or otherwise affect the size of a position in a
Restructuring European Single Name CDS Contract.\7\
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\6\ CME Inc. plans to launch clearing services for iTraxx Europe
index CDS products and will file a separate proposed rule change
with the Commission in connection with its iTraxx proposal.
\7\ CME Inc. will provide further details surrounding the
clearing of iTraxx Europe index CDS, and Restructuring European
Single Name CDS Contracts specifically, in a separate iTraxx rule
filing.
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Additionally, to remove references to SBSs, CME Inc. will
accordingly amend or delete Rules 8H04 (CDS Clearing Member Obligations
and Qualifications), 8H820 (Performance Bond for Security-Based Swaps),
8H930.C (Acceptable Performance Bond Deposits for CDS Products), 8H931
(Rule Changes Relating to Security-Based Swaps), 8H932 (Records
Relating to Disciplinary Proceedings and Security-Based Swaps), 8H933
(Notice Regarding Certain Disciplinary Matters Related to Security-
Based Swaps), 8H934 (Reports to CDS Clearing Members), and 8H938
(Summary Suspensions Relating to Security-Based Swap Clearing
Activities).
CME Inc. believes the proposed rule change is consistent with the
requirements of the Exchange Act, including Section 17A of the Exchange
Act,\8\ in general, and furthers the objectives of Section
17A(b)(3)(F),\9\ in particular, in that it is designed to remove
impediments to and perfect the mechanism of a national system for the
prompt and accurate clearance and settlement of securities
transactions, and in general, to protect investors and the public
interest. The proposed rule change will provide adequate notice to the
public that CME Inc. will not clear SBSs. Additionally, by deciding not
to clear SBSs, CME Inc. believes that it will avoid subjecting non-
security products to potentially ``duplicative or inconsistent
regulation'' and will ``eliminate any potential inefficiencies and
undue delays that could result from the requirement that the Commission
review changes to rules primarily affecting clearing operations with
respect to products that are not securities . . .'' \10\ As a result,
CME Inc. believes that the proposed rule change is consistent with the
Exchange Act.
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\8\ 15 U.S.C. 78q-1.
\9\ 15 U.S.C. 78q-1(b)(3)(F).
\10\ See Securities Exchange Act Release No. 34-69284 (April 9,
2013), 78 FR 21046 (April 9, 2013).
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B. Self-Regulatory Organization's Statement on Burden on Competition
CME Inc. does not believe that the proposed rule change will have
any impact, or impose any burden, on competition. The proposed rule
change merely makes explicit the fact that CME Inc. has decided not to
clear SBSs. Because CME Inc. never performed, and will not perform, the
functions of a clearing agency with respect to SBS, the proposed rule
change will not affect any actual clearing activities of CME Inc. and
should not have any burden on competition. In fact, CME Inc. believes
that the proposed rule change will have a positive effect on
competition since the proposal will result in the avoidance of
``potential legal uncertainty and market disruption caused by delays
that could result from the requirement that the Commission undertake a
full review'' of CME Inc.'s non-security products.\11\
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\11\ See Securities Exchange Act Release No. 34-64832 (July 7,
2011), 76 FR 41056 (July 13, 2011).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
CME Inc. has not solicited, and does not intend to solicit,
comments regarding this proposed rule change. CME Inc. has not received
any unsolicited written comments from interested parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
CME Inc. has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-4(f)(6) \13\ thereunder.
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\12\ 15 U.S.C. 78s(b)(3)(A)(iii).
\13\ 17 CFR 240.19b-4(f)(6).
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Because the proposed rule change (i) does not significantly affect
the protection of investors or the public interest, (ii) does not
impose any significant burden on competition, and (iii) does not become
operative prior to 30 days from the date on which it was filed, or such
shorter time as the Commission may designate, if consistent with the
protection of investors and the public interest, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A)(iii) of the
Act \14\ and Rule 19b-4(f)(6) \15\ thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally
does not become operative prior to 30 days after
[[Page 69547]]
the date of the filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\
CME Inc. has asked the Commission to waive the five-day pre-filing
requirement and the 30-day operative delay so that the proposed rule
change may become operative immediately upon filing.\18\ The Commission
believes that waiver of the 30-day operative delay is appropriate, as
CME Inc. has, to date, never performed the functions of a clearing
agency with respect to SBSs, and the rule text removed or altered as a
result the proposed rule change removes any ambiguity concerning CME
Inc.'s ability or desire to perform the functions of a clearing agency
with respect to SBSs. Therefore, the Commission believes that waiving
the 30-day operative delay is consistent with the protection of
investors and the public interest and designates the proposed rule
change as operative upon filing.\19\
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\16\ 17 CFR 240.19b-4(f)(6).
\17\ 17 CFR 240.19b-4(f)(6)(iii).
\18\ Rule 19b-4(f)(6)(iii) requires a self-regulatory
organization to submit to the Commission written notice of its
intent to file the proposed rule change, along with a brief
description and text of the proposed rule change, at least five
business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. 17 CFR
240.19b-4(f)(6)(iii). The Commission has waived the five-day pre-
filing period in this case.
\19\ Solely for purposes of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed 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. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule change should be approved or disapproved.
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-2014-49 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-2014-49. 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 Inc. and on
CME Inc.'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-2014-49 and
should be submitted on or before December 12, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27572 Filed 11-20-14; 8:45 am]
BILLING CODE 8011-01-P