[Federal Register Volume 79, Number 239 (Friday, December 12, 2014)]
[Notices]
[Pages 73919-73921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-29102]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73776; File No. SR-CME-2014-29]
Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Make Clarifying Changes to CME Rule 814 and CME Rule 901
December 8, 2014.
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 November 26, 2014, Chicago Mercantile Exchange Inc. (``CME'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II and III 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 a proposed rule change that is limited to its
business as a derivatives clearing organization. More specifically, the
proposed rule change would make amendments to CME Rule 814 and CME Rule
901 to specify the time at which a settlement bank becomes responsible
to the clearing house to perform variation margin settlement and the
point during the clearing cycle at which a clearing member's
obligations to the clearing house cease. The proposed revisions would
not modify clearing house operations but merely clarify to the
marketplace the clearing cycle currently in place.
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 of 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 these 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
substantial business clearing futures and swaps contracts subject to
the jurisdiction of the CFTC. CME is proposing to make amendments to
CME Rule 814 and CME Rule 901 to specify the time at which a settlement
bank becomes responsible to the clearing house to perform variation
margin settlement and the point during the clearing cycle at which a
clearing member's obligations to the clearing house cease. The proposed
revisions would not modify clearing house operations but merely clarify
to the marketplace the clearing cycle currently in place. CME notes
that it has also made a corresponding filing with the CFTC, in
Submission No. 14-280, regarding the proposed changes.
[[Page 73920]]
The proposed changes would reflect the best practices outlined in
the Principles for Financial Market Infrastructures (``PFMIs''),
adopted by the joint Committee on Payment and Settlement Systems and
the Technical Committee of the International Organization of Securities
Commissions.\5\ Principle 8 of the PFMIs (Settlement finality) states
that an ``FMI's rules and procedures should clearly define the point at
which settlement is final'' and that ``[a]n FMI should be designed to
provide clear and certain final settlement of payments, transfer
instructions, or other obligations.'' \6\
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\5\ See Committee on Payment and Settlement Systems and
Technical Committee of the International Organization of Securities
Commissions, Principles for Financial Market Infrastructures (Apr.
16, 2012), available at http://www.bis.org/publ/cpss101a.pdf.
\6\ Id. at 64.
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Revised CME Rule 814 (Settlement Variation) will specify that
``settlement variation is deemed final when an irrevocable commitment
to pay has been provided to the Clearing House by a settlement bank in
a form or manner as approved by the Clearing House.'' The amendment to
Rule 814 codifies CME's uniform practice in regard to its settlement
bank legal agreements, which provide that the settlement bank's
obligation arises upon CME's receipt of the settlement bank's
irrevocable commitment to pay.
CME Rule 901.S (General Requirements and Obligations) is being
added to state that ``the obligation(s) of a clearing member to pay
settlement variation and/or performance bond during each clearing cycle
is not extinguished until all required cash and/or collateral is
deposited into the correct CME bank account at the relevant custodial
or settlement bank.'' The proposed changes increase the transparency of
the CME legal framework in this area and align the existing rules with
global PFMI standards by specifying the times at which settlement bank
obligations to the clearing house arise and clearing member obligations
are extinguished.
CME believes the proposed rule change is consistent with the
requirements of the Act including Section 17A.\7\ Because the proposed
change clarifies in CME's rules the time at which a settlement bank
becomes responsible to the clearing house to perform variation margin
settlement and the point during the clearing cycle at which a clearing
member's obligations to the clearing house cease,\8\ it promotes the
prompt and accurate clearance and settlement of securities transactions
and, to the extent applicable, derivatives agreements, contracts, and
transactions, assures the safeguarding of securities and funds which
are in the custody or control of CME or for which it is responsible,
and, in general, protects investors and the public interest in a way
that is consistent with Section 17A(b)(3)(F) of the Act.\9\
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\7\ 15 U.S.C. 78q-1.
\8\ Pursuant to a teleconference with CME's counsel on December
4, 2014, staff in the Division of Trading and Markets has modified
this sentence to clarify CME's intended explanation of the statutory
basis for the proposed rule change.
\9\ 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 change will have any
impact, or impose any burden, on competition. The proposed changes
specify the time at which a settlement bank becomes responsible to the
clearing house to perform variation margin settlement and the point
during the clearing cycle at which a clearing member's obligations to
the clearing house cease. The proposed revisions will not modify
clearing house operations but merely clarify to the marketplace the
clearing cycle currently in place.
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) \10\ of the Act and Rule 19b-4(f)(4)(ii) \11\
thereunder. CME asserts that this proposal constitutes 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, and 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,
which renders the proposed change effective upon filing. CME believes
that the proposal does not significantly affect any securities clearing
operations of CME because CME recently filed a rule change that
clarified that CME has decided not to clear security-based swaps,
except in a very limited set of circumstances.\12\ The rule filing
reflecting CME's decision not to clear security-based swaps removed any
ambiguity concerning CME's ability or intent to perform the functions
of a clearing agency with respect to security-based swaps. Therefore,
this proposal will not have an effect on any securities clearing
operations of CME.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(4)(ii).
\12\ See Securities Exchange Act Release No. 34-73615 (Nov. 17,
2014), 79 FR 69545 (Nov. 21, 2014) (SR-CME-2014-49). The only
exception is with regards to Restructuring European Single Name
Credit Default Swap (``CDS'') Contracts created following the
occurrence of a Restructuring Credit Event in respect of an iTraxx
Component Transaction. The clearing of Restructuring European Single
Name CDS Contracts will be a necessary byproduct after such time
that CME begins clearing iTraxx Europe index CDS.
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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.
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 Number SR-CME-2014-29 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-2014-29. 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/
[[Page 73921]]
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 filings will also 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-2014-29
and should be submitted on or before January 2, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29102 Filed 12-11-14; 8:45 am]
BILLING CODE 8011-01-P