SUBMISSION COVER SHEET

IMPORTANT: Check box if Confidential Treatment is requested 

Registered Entity Identifier Code (optional): 21-350

Organization: Chicago Mercantile Exchange Inc. (“CME”)

Filing as a: DCM SEF DCO SDR 

Please note - only ONE choice allowed.

Filing Date (mm/dd/yy): 07/20/21 

Filing Description: Acceptance of SARON Denominated Interest Rate Swaps for Clearing 

SPECIFY FILING TYPE 

Please note only ONE choice allowed per Submission.

Organization Rules and Rule Amendments

Certification § 40.6(a)

Approval § 40.5(a)

Notification § 40.6(d)

Advance Notice of SIDCO Rule Change § 40.10(a)

SIDCO Emergency Rule Change § 40.10(h)

Rule Numbers: 

New Product Please note only ONE product per Submission.

Certification § 40.2(a) 

Certification Security Futures § 41.23(a)

Certification Swap Class § 40.2(d)

Approval § 40.3(a)

Approval Security Futures § 41.23(b)

Novel Derivative Product Notification § 40.12(a)

Swap Submission § 39.5

Product Terms and Conditions (product related Rules and Rule Amendments)

Certification § 40.6(a) 

Certification Made Available to Trade Determination § 40.6(a)

Certification Security Futures § 41.24(a)

Delisting (No Open Interest) § 40.6(a) 

Approval § 40.5(a)

Approval Made Available to Trade Determination § 40.5(a)

Approval Security Futures § 41.24(c)

Approval Amendments to enumerated agricultural products § 40.4(a), § 40.5(a)

“Non-Material Agricultural Rule Change” § 40.4(b)(5)

Notification § 40.6(d)

Official Name(s) of Product(s) Affected: 

Rule Numbers: 
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 301 4645 christopher.bowen@cmegroup.com cmegroup.com

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Christopher Bowen 

Managing Director and Chief Regulatory Counsel

Legal Department

July 20, 2021

VIA ELECTRONIC PORTAL

Mr. Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: CFTC Regulation 39.5(b) Certification. Acceptance of Swiss Average Rate Overnight 

(“SARON”) Denominated Interest Rate Swaps for Clearing.

CME Submission No. 21-350

Dear Mr. Kirkpatrick:

Chicago Mercantile Exchange Inc. (“CME” or “CME Clearing”), a registered derivatives clearing 

organization (“DCO”) under the Commodity Exchange Act, as amended (“CEA” or “Act”) hereby submits to

the Commodity Futures Trading Commission (“CFTC”) pursuant to Commission Regulation 39.5(b), its 

acceptance of Swiss Average Rate Overnight (“SARON”) denominated overnight index swaps (“SARON

Swaps”) and related amendments to CME Rule 90102.E.1. (“Interest Rate Swaps Rate Options”) of Chapter 

901 (“Interest Rate Swaps Contract Terms”), effective on trade date Monday, July 26, 2021.

SARON is administered and calculated by SIX Swiss Exchange Financial Information AG (“SIX”) in 

Switzerland. SARON is an overnight benchmark rate based on overnight transactions and quotes posted 

in the Swiss Franc repo market. Publication of SARON began on August 25, 2009, with historical data 

available since June 30, 1999. SIX is committed to the IOSCO Principles for Financial Benchmark and 

SARON is endorsed for use in the European Union and listed in the European Securities and Markets 

Authority (“ESMA”) Register pursuant to the EU Benchmarks Regulation.1

As part of regulatory and industry initiatives to transition away from certain key interbank offered rates 

(“IBORs”) and interest rate benchmarks, in October 2017 the Swiss National Working Group (“NWG”) on 

Swiss Franc Reference Rates recommended SARON as an alternative “risk-free rate” (“RFR”) to Swiss 

Franc (“CHF”) London Inter-bank Offered Rate (“LIBOR”) (“CHF LIBOR”) for new contracts and as the 

alternative reference rate to replace CHF LIBOR as a “fallback” for references to CHF LIBOR in legacy 

derivative contracts.2 Following a period of consultation, in January 2021 ISDA amended certain “floating 

rate options” in the 2006 ISDA Definitions to include fallbacks that would apply on the discontinuation of 

key IBORs, providing that ISDA referencing OTC CHF LIBOR interest rate swaps (“IRS”) should “fall-back” 

to a term and spread adjusted SARON rate on the permanent discontinuation or non-representativeness 

of CHF LIBOR. At the same time, CME Clearing introduced similar fallback provisions into the CME 

Rulebook providing for the fall-back to a term and spread adjusted SARON for both “new” and “legacy”

1 See https://www.six-group.com/en/products-services/the-swiss-stock-exchange/market-data/indices/swiss-referencerates.html#scrollTo=governance-regulation

2 The Swiss NWG is the key forum to foster the transition to SARON and to discuss international developments relating to SARON 

transition. See https://www.snb.ch/en/ifor/finmkt/fnmkt_benchm/id/finmkt_reformrates
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 301 4645 christopher.bowen@cmegroup.com cmegroup.com

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cleared OTC IRS referencing CHF LIBOR in the event of permanent discontinuation or nonrepresentativeness of that rate.3

Following industry consultation, on March 5, 2021, the UK Financial Conduct Authority (“FCA”) announced 

that all settings of CHF LIBOR will cease to be provided by ICE Benchmark Administration, the UK 

administrator of LIBOR (“IBA”), immediately after publication on December 31, 2021.4

Following the FCA announcement, market participants are preparing for the forthcoming transition of 

bilateral and cleared OTC IRS from CHF LIBOR to SARON. CME currently supports CHF LIBOR interest 

rate swaps and proposes to launch SARON overnight index swaps (“OIS”) to facilitate market participants 

in this transition process in good time ahead of the scheduled discontinuation of CHF LIBOR after 

December 31, 2021.

As shown in Exhibit 2, CME’s cleared OTC IRS product scope will be increased to include SARON OIS. 

39.5(b)(3)(i): Eligibility to Clear 

Pursuant to CFTC Regulation 39.5(b)(3)(i), CME states that it is eligible to accept SARON Swaps for 

clearing. Should the Commission determine that such swaps are required to be cleared, CME will be able 

to maintain compliance with the DCO core principles set forth in Section 5b(c)(2) of the Act and the 

Regulations promulgated thereunder. 

In accordance with CFTC Regulation 39.5(b)(3)(ii)-(viii), we are providing the following information in 

support of this submission: 

39.5(b)(3)(ii)(A): Statement on Outstanding Derivatives Notional Exposure, Trading Liquidity and 

Pricing Data 

Publication of SARON by SIX began on August 25, 2009, with historical data available since June 30, 1999. 

SARON represents the overnight interest rate of the secured money market for Swiss francs, based on 

transactions and quotes posted in the Swiss repo market. The Swiss repo market is under the surveillance 

of SIX Exchange Regulation and is regulated under the Swiss Financial Market Infrastructure Act (“FMIA”) 

as a multilateral trading facility. Some 160 banks and insurance companies participate in the Swiss repo 

market. Between 2017 and 2019 the average daily trade volume was around CHF 3.3 billion. 5

A. SARON Swaps 

Based on information published by ISDA taken from US Swap Data Repositories, in the week ending June 

11, 2021, SARON traded notional was USD 1.3 billion. For the year to date, ending June 11, 2021, SARON

traded notional was USD 12.9 billion.6

We expect further development of the SARON Swaps market in the near future, particularly in the lead up 

to and following the discontinuation of CHF LIBOR scheduled for 31 December 2021.

3

https://www.cmegroup.com/content/dam/cmegroup/notices/clearing/2021/01/Chadv21-039.pdf

4 See FCA Announcement, March 5, 2021, available at https://www.fca.org.uk/publication/documents/future-cessation-lossrepresentativeness-libor-benchmarks.pdf. The FCA further confirmed that it has no intention of using its powers to require IBA to 

continue the publication of any CHF LIBOR settings on a non-representative basis after end December 2021.

5 See https://www.six-group.com/en/products-services/the-swiss-stock-exchange/market-data/indices/swiss-referencerates.html#scrollTo=governance-regulation

6 Data published weekly by ISDA at http://analysis.swapsinfo.org/
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 301 4645 christopher.bowen@cmegroup.com cmegroup.com

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39.5(b)(3)(ii)(B): Rule Framework, Capacity, Operational Expertise and Resources, and Credit 

Support Infrastructure 

The rule framework for SARON Swaps is the same as all other IRS cleared by CME and is set forth in the 

CME Rulebook.7 Furthermore, CME Clearing’s “Risk Management and Financial Safeguards” brochure 

(the “Risk Management Brochure”), contains information regarding CME’s risk management capacity, 

expertise, resources, and financial safeguard system.8 Both documents are available to the public on the 

CME Group website.

39.5(b)(3)(ii)(C): Statement on the Mitigation of Systemic Risk 

As a central counterparty, CME interposes itself between counterparties to the swaps (and other derivatives 

products) that it clears, becoming the buyer to every seller and the seller to every buyer. For each swap 

that it clears, CME provides all clearing house services, including a mark-to-market function, on a daily 

basis. Depending upon the particular asset class, CME may standardize contract-critical dates (e.g., start 

dates, last trade dates, expiry dates) and other contract terms. This may enable customers who hold 

positions to liquidate or to adjust positional exposures simply by buying back or selling the relevant 

contracts. The associated benefits are considerable:

• Centralized clearing. Clearing SARON Swaps through CME allows market participants to free up 

counterparty credit lines. The daily mark-to-market process employed by CME enhances customer 

risk management opportunities. 

• Operational efficiencies. Centralized clearing of swaps reduces operational burdens in several 

ways. Standardization and centralized clearing enables consolidation of collateral management 

and cash flows and eliminates the need for novation or tear-ups. 

• Ease of position adjustment. In non-cleared markets, the only means to completely eliminate the 

risk of a swap is to (i) enter into a tear-up agreement with the swap counterparty, or (ii) enter into a 

novation (i.e., find another entity willing to assume its side of the swap). In either case, the tear-up 

or the novation must be approved by the bilateral swap counterparty. For most asset classes, 

central clearing may be used to offset exposures by a contra trade. 

As further described in the Risk Management Brochure and summarized in the section below titled “Risk 

Management Procedures,” CME has the necessary resources available to clear SARON Swaps. 

39.5(b)(3)(ii)(D): Statement on Competition and Appropriate Fees and Charges 

CME does not believe that the clearing of SARON Swaps will have any negative impact, or impose any 

burden, on competition. In clearing SARON Swaps CME will provide market participants with another 

clearing service provider to support activity in SARON derivative contracts. 

CME’s schedule of fees for IRS can be found at https://www.cmegroup.com/trading/interest-rates/clearedotc-irs-customer-fees.html.

39.5(b)(ii)(E): Statement on Legal Certainty and Insolvency 

The bankruptcy of a DCO is governed by subchapter IV of Chapter 7 of the U.S. Bankruptcy Code (11 

U.S.C. §§ 761-767), and by Subpart C of Part 190 (“Bankruptcy”) of the Commission’s Regulations. Also 

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The CME Rulebook is available at https://www.cmegroup.com/rulebook/CME/

8 The Risk Management Brochure is available at http://www.cmegroup.com/clearing/files/financialsafeguards.pdf
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 301 4645 christopher.bowen@cmegroup.com cmegroup.com

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relevant in the event that CME were to enter into bankruptcy proceedings is CME Rule 818. (“Close-Out 

Netting”) included in Chapter 8 (“Clearing House and Performance Bonds”) of the CME Rulebook. 

The bankruptcy of a clearing member that is a U.S. futures commission merchant (“FCM”) would be 

governed by subchapter IV of Chapter 7 of the U.S. Bankruptcy Code (11 U.S.C. §§ 761-767) and Subpart 

B of Part 190 (Bankruptcy) of the Commission’s Regulations. If an FCM is registered as a broker-dealer, 

certain aspects of its insolvency proceeding will be governed by the Securities Investor Protection Act. 

39.5(b)(3)(iii): Product Specification 

Attached as Exhibit 2 are the product-specifications for SARON Swaps. These specifications will be added, 

without the conditional statement of being subject to further regulatory review upon the effectiveness of this 

submission, to CME’s IRS product scope slate at https://www.cmegroup.com/trading/interest-rates/clearedotc.html. SARON Swaps will settle in CHF.

39.5(b)(3)(iv): Participant Eligibility Standards 

CME Rule 8G04. (“IRS Clearing Member Obligations and Qualifications”) specifies the requirements for 

IRS Clearing Members. 

39.5(b)(3)(v): Pricing Sources 

We have concurrently submitted in CME Submission 21-350s, a document, marked for confidential 

treatment, describing the curve building for cleared SARON Swaps. 

CHF SARON swaps rely on a single-curve valuation methodology with the SARON curve used for 

forecasting and discounting the cash flows of cleared SARON swaps. CHF SARON curve quotes will be 

sourced at 4:00 p.m. Central European Time (“CET”). CME plans to update the valuation methodology for 

cleared CHF LIBOR swaps as part of clearing support for SARON swaps, aligning the discounting curve 

used for these swap products. As such, CHF LIBOR swaps will rely on a dual-curve valuation methodology 

post SARON swap clearing.

SARON Swap Rate 

The SARON Swaps reference the SARON. The SARON is computed, and is calculated in real-time and 

published for the same business day every ten minutes from 8:30 a.m. CET by SIX. A fixing is conducted 

three times a day at 12:00 p.m., 4:00 p.m. and 6:00 p.m. CET. CME will utilize the 6:00 p.m. CET fixing, 

published on all official trading days of the CHF repo market and based on data of the same day, as the 

reference rate for SARON Swaps.

Details of the calculation and publication of SARON are available on the SIX website and summarized 

below. SARON is based on concluded transactions and trade quotes posted on the SIX Repo trading 

platform, provided they lie within the parameters of the quote filter. The quote filter is parameterized in a 

way that limits the possibilities for manipulation.9 The SARON methodology is based on a continuous 

calculation throughout the day. Prices of trades are volume weighted used to update the reference price if 

they do not exceed a 50 basis points difference to the reference price. There is no limit to trade volume. 

Quotes are volume weighted used if they lie within the quote filter of three basis points around the midprice. The mid-price is the volume weighted price of the best build and ask quote. A maximum number of 

10 quotes of different participants on each orderbook side may be used to update the reference price. If no 

quotes are available within the quote spread around the mid-price, the mid-price is used as the new 

9 See https://www.six-group.com/en/products-services/the-swiss-stock-exchange/market-data/indices/swiss-referencerates.html#scrollTo=calculation_and_publication
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 301 4645 christopher.bowen@cmegroup.com cmegroup.com

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reference price. In general quotes are restricted to CHF 100 million. Further details on the methodology are 

publicly available on the SIX website.10

39.5(b)(3)(vi): Risk Management Procedures 

The Risk Management Brochure summarizes CME’s risk management procedures applicable to the 

clearing of SARON Swaps. 

CME has performed various tests to ensure the existing IRS margin model and related parameters do not 

require any enhancements to cover the clearing of SARON Swaps. These tests included backtesting and 

correlation analysis where it was validated that CME’s existing IRS margin model generates performance 

bond requirements that are sufficient to cover the clearing of SARON Swaps. Further, the existing IRS 

financial safeguards will be utilized to cover any additional exposures related to the clearing of SARON

Swaps. The IRS financial safeguards will continue to provide risk management protection beyond daily 

settlement variation and performance bonds.

39.5(b)(3)(vii): Rules, Manuals, Policies, or Procedures 

The product rules for SARON Swaps are being added to Chapter 901 of the CME Rulebook and are 

enclosed in Exhibit 1 which is attached hereto. The product rules and attendant non-substantive conforming 

revisions to add CHF-SARON-OIS-COMPOUND is reflected in amendments to Rule 90102.E.1. (“Interest 

Rate Swaps Rate Options”). Exhibit 1 below provides amendments to Rule 90102.E.1. in blackline format. 

39.5(b)(3)(viii): Notice of Submission 

Notice of this submission has been concurrently posted on CME Group’s website at 

http://www.cmegroup.com/market-regulation/rule-filings.html. 

Should you have any questions concerning the above, please contact the undersigned at (212) 299-2200 

or via e-mail at CMEGSubmissionInquiry@cmegroup.com.

Sincerely,

/s/ Christopher Bowen

Managing Director & Chief Regulatory Counsel

Attachments: Exhibit 1 – Amendments to Rule 90102.E.1. (“Interest Rate Swaps Rate Options”)

Exhibit 2 – SARON Swaps Product Specifications

10 https://www.six-group.com/dam/download/market-data/indices/swiss-reference-rates/six-swiss-reference-rates-output-statementen.pdf
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EXHIBIT 1

CME RULEBOOK

Chapter 901

Interest Rate Swap Contract Terms

(additions underscored)

***

90102. CONTRACT TERMS 

***

90102.E. Rate Options 

90102.E.1. Interest Rate Swaps Rate Options 

With respect to an IRS Contract, the Rate Option elected by the IRS Clearing Participant in accordance 

with Rule 90002.F from the following Rate Options or combination of Rate Options: 

1. USD-LIBOR-BBA 

2. USD-Federal Funds-H.15-OIS-COMPOUND 

3. USD-Federal Funds-H. 15-LIBOR-BBA 

4. EUR-EURIBOR-Reuters 

5. EUR-EURIBOR-Telerate (as defined in the 2000 ISDA Definitions, as published by ISDA) 

6. EUR-EONIA-OIS-COMPOUND 

7. GBP-LIBOR-BBA 

8. GBP- SONIA-COMPOUND 

9. JPY-LIBOR-BBA 

10. JPY-TONA-OIS-COMPOUND 

11. CHF-LIBOR-BBA 

12. CAD-BA-CDOR 

13. CAD-CORRA-OIS-COMPOUND 

14. AUD-BBR-BBSW 

15. AUD-LIBOR-BBA 

16. AUD-AONIA-OIS-COMP 

17. SEK-STIBOR-SIDE 

18. DKK-CIBOR-DKNA13 

19. DKK-CIBOR2-DKNA13 

20. NOK-NIBOR-NIBR 

21. HKD-HIBOR-HKAB 

22. NZD-BBR-FRA 

23. SGD-SOR-VWAP 

24. HUF-BUBOR-Reuters 

25. PLN-WIBOR-WIBO 

26. CZK-PRIBOR-PRBO 

27. ZAR-JIBAR-SAFEX 

28. MXN-TIIE-Banxico 

29. USD-SOFR-COMPOUND

30. EUR-EuroSTR-COMPOUND (also effective July 26, 2021 – see CME Submission No. 21-351)

31. CHF-SARON-OIS-COMPOUND

[Remainder of Rule unchanged.]
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EXHIBIT 2

CHF Swaps Product Specifications

CHF SARON Overnight Index Swap (OIS)

Product Type OIS: Fixed versus SARON

Currency CHF

Floating Rate Index CHF-SARON-OIS-COMPOUND

Maximum Maturity 31 years

Settlement Convention CHF will be settled on a two day (T+2) basis

Floating Index Tenor 1D

Price Alignment Rate SARON

Fixing Calendar Zurich Holiday calendar (CHZU)

Fixing Offset 0D

Day Count ACT/360

Payment Calendar CHZU required, others optional

Payment Frequency 1M, 3M, 6M, 1Y, 1Y

Payment Offset 2D

Variable Notional, Spreads, Stubs Yes; to be supported