[Federal Register Volume 80, Number 26 (Monday, February 9, 2015)]
[Notices]
[Pages 7054-7056]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02499]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74191; File No. SR-CME-2015-003]
Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Change to CME
Rule 814 To Clarify Certain Operational Details Regarding Current CME
Settlement Cycles
February 3, 2015.
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 January 21, 2015, Chicago Mercantile Exchange Inc. (``CME'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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 (``DCO''). More
specifically, the proposed change would amend the text of current CME
Rule 814 to clarify certain operational details regarding current CME
settlement cycles.
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 make rulebook changes that are limited to
its business clearing futures and swaps under the exclusive
jurisdiction of the CFTC. More specifically, the proposed changes would
amend the text of current CME Rule 814 to clarify certain operational
details regarding current CME settlement cycles.
The first proposed change to CME Rule 814 would add further detail
regarding the settlement cycle for commodity contracts that are
options. The current version of Rule 814 is silent on the settlement
cycle for commodity contracts that are options, and so additional
language is proposed to ensure that the market is aware that settlement
of option value operates differently than settlement for non-option
commodity contracts. The proposed rule change is consistent with the
current settlement process so no operational changes are needed to
implement the proposed rules. The second proposed change is to amend
Rule 814 so that it explicitly reflects the fact that the current CME
settlement process results in outstanding exposures being settled to
zero fair value during each settlement cycle. The third proposed change
is to add further clarity regarding settlement finality at the CME
clearing house. Lastly, certain terms in the Rule 814 text are being
modified in order to provide additional clarity to the marketplace and
regulators. As described above, none of these revisions would change
any aspect of current operations but, rather, would merely clarify
certain operational details of the clearing cycle currently in place in
the text of Rule 814.
The proposed rule change that is described in this filing is
limited to CME's business as a derivatives clearing organization
clearing products under the exclusive jurisdiction of the CFTC. CME has
not cleared security based swaps and does not plan to and therefore the
proposed rule change does not impact CME's security-based swap clearing
business in any way. The proposed rule change will become effective
immediately. CME notes that it has also submitted the proposed rule
change that is the subject of this filing
[[Page 7055]]
to its primary regulator, the CFTC, in CME Submission 14-585.
CME believes the proposed rule change is consistent with the
requirements of the Act including Section 17A of the Act.\5\ The
proposed rule change would amend the text of current CME Rule 814 to
clarify certain operational details regarding current CME settlement
cycles. The additional clarity in CME's rulebook regarding its
settlement cycles should be seen to be 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 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 Act.\6\
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78q-1.
\6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Furthermore, the proposed change is limited to CME's futures and
swaps clearing businesses, which means it is limited in its effect to
products that are under the exclusive jurisdiction of the CFTC. As
such, the proposed change is limited to CME's activities as a DCO
clearing futures that are not security futures and 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 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 CME's
futures and swaps clearing businesses, 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.
CME believes that the proposal does not significantly affect any
securities clearing operations of CME because CME recently filed a
proposed rule change that clarified that CME has decided not to clear
security-based swaps, except in a very limited set of circumstances.\7\
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. As such, the changes are
therefore consistent with the requirements of Section 17A of the Act
\8\ and are properly filed under Section 19(b)(3)(A) \9\ and Rule 19b-
4(f)(4)(ii) \10\ thereunder.
---------------------------------------------------------------------------
\7\ 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 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 Contracts.
\8\ 15 U.S.C. 78q-1.
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(4)(ii).
---------------------------------------------------------------------------
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. CME is making the
aforementioned changes simply to clarify current settlement processes;
there are no operational changes. Further, the changes are limited to
CME's futures and swaps clearing businesses and, as such, do not affect
the security-based swap clearing activities of CME in any way and
therefore do 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 pursuant to Section
19(b)(3)(A) \11\ of the Act and paragraph (f)(4)(ii) of Rule 19b-4 \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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(4)(ii).
---------------------------------------------------------------------------
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-2015-003 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC, 21049-1090.
All submissions should refer to File Number SR-CME-2015-003. 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 or
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.
[[Page 7056]]
All submissions should refer to File Number SR-CME-2015-003 and
should be submitted on or before March 2, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill Peterson,
Assistant Secretary.
[FR Doc. 2015-02499 Filed 2-6-15; 8:45 am]
BILLING CODE 8011-01-P