300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 299 2299 christopher.bowen@cmegroup.com cmegroup.com

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Christopher Bowen 

Managing Director and Chief Regulatory Counsel

Legal Department

July 6, 2017

VIA Electronic Mail

Mr. Christopher J. Kirkpatrick 

Office of the Secretariat 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, N.W. 

Washington, DC 20581

RE: CFTC Regulation 39.5(b) Submission: Acceptance of KRW and INR IRS for 

Clearing. 

CME Submission No. 17-277

Dear Mr. Kirkpatrick:

Chicago Mercantile Exchange Inc. (“CME”), a registered derivatives clearing organization (“DCO”) under 

the Commodity Exchange Act, as amended (the “Act”), hereby submits to the Commodity Futures Trading 

Commission (“CFTC” or “Commission”), pursuant to Commission Rule 39.5(b), its plan to accept interest 

rate swaps (“IRS”) denominated in Korean Won (“KRW”) and India Rupee (“INR”) for clearing, beginning 

July 10, 2017. 

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

Pursuant to Regulation 39.5(b)(3)(i), CME states that it is eligible to accept KRW and INR IRS 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 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

The most recent Triennial Central Bank Survey of the Bank of International Settlements (“BIS”) 

(http://www.bis.org/publ/rpfx16.htm) reported turnover in KRW IRS averaged $11.9 billion US dollar 

equivalent (“USDE”) per day in April 2016, and average turnover in INR of $5.6 billion (“USDE”) per day in 

April 2016. 

SDRView, the Swaps Data Repository viewer of Clarus Financial Technology, reported the average daily 

notional transacted and reported to United States SDRs in KRW IRS to be $1.29 billion (USDE) in the 

fourth quarter of 2016 and $1.21 billion (USDE) in the first quarter of 2017. SDRView also reported the 

average daily notional transacted and reported to US SDRs in INR to be $0.77 billion (USDE) in the fourth 

quarter of 2016 and $0.80 billion (USDE) in the first quarter of 2017. Since January 1st, 2013 the total 

notional reported to US SDRs in KRW was $1 trillion (USDE) and $668 billion (USDE) for INR as of June 

1, 2017. 
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 299 2299 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 KRW and INR IRS is the same as all other IRS cleared by CME and can be found 

in the CME Rulebook. This Rulebook is available at www.cmegroup.com/marketregulation/rulebook.index.html, which includes links to pertinent product chapters in the CME Rulebook 

and incorporates the Manual of Operations for CME Cleared Interest Rate Swaps (the “IRS Manual”). 

CME Clearing’s “Risk Management and Financial Safeguards” brochure (the “Risk Management 

Brochure”) available at http://www.cmegroup.com/clearing/files/financialsafeguards.pdf contains 

information regarding CME’s risk management capacity, expertise, resources, and financial safeguards 

system. 

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

While markets in certain OTC derivatives asset classes continued to function well during the financial 

crisis, the crisis demonstrated the potential for systemic risk arising from the interconnectedness of OTC 

derivatives market participants and the limited transparency of bilateral counterparty relationships. To 

help mitigate systemic risk in the OTC derivatives markets, the G-20 Leaders agreed that all standardized 

OTC derivatives contracts should be cleared through central counterparties by the end of 2012. One of 

the key goals of the Dodd-Frank Act is the reduction of systemic risk through the use of central clearing 

for OTC derivatives.

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 market-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 positions simply by buying back or selling the relevant 

contracts. The associated benefits are considerable:

 Centralized clearing. Clearing KRW and INR IRS through CME allows market participants to free 

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

customer risk management. 

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

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

As further described in the Risk Management Brochure, CME has the necessary resources available to 

clear KRW and INR IRS. 

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

CME does not believe that the clearance of KRW or INR IRS will have any negative impact, or impose 

any burden, on competition. CME’s schedule of fees for IRS can be found at 

http://www.cmegroup.com/trading/interest-rates/files/cleared-otc-irs-customer-fees.pdf. 

39.5(b)(ii)(E): Statement on Legal Certainty and Insolvency 
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 299 2299 christopher.bowen@cmegroup.com cmegroup.com

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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 Part 190 (Bankruptcy) of the commission’s regulation. Also 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. CME Rule 818 (Close-Out 

Netting) is included in CME Rulebook Chapter 8.1

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 Part 

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

aspects of its insolvency proceeding may also be governed by the Securities Investor Protection Act. 

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

Attached under separate cover as Exhibit 2 are the product-specifications for KRW and INR IRS, which 

will be added to CME’s IRS product scope on its website at www.cmegroup.com/irs. KRW and INR IRS 

will settle in USD. 

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

CME Rule 8G04 (IRS Clearing Member Obligations) and the IRS Manual specify the requirements for IRS 

Clearing Members.

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

We have concurrently submitted in CME Submission 17-277S, a document, marked for confidential 

treatment, describing the curve building for INR and KRW IRS. Additionally, Chapter 8 (End of Day 

Valuations) of the IRS Manual describes IRS pricing. 

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

The Risk Management Brochure2 summarizes CME’s risk management procedures applicable to the 

clearing of KRW and INR IRS. 

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

The product rules for KRW and INR IRS are being added to Chapters 901 of the CME Rulebook and are 

enclosed in Exhibit 1 which is attached hereto. The product rules (i) define Non-Deliverable Swap

Settlement Currency; (ii) add KRW-CD-KSDA-Bloomberg and INR-FBIL-MIBOR-OIS-COMPOUND as a 

new rate option in Rule 90102.E (Rate Options); (ii) add a new Rule 90102.F. which incorporate the 

Settlement Rate Option where the settlement is Non-Deliverable; and (iii) add a new Rule 90102.G. which 

incorporate the Fallback Reference Price where the settlement is Non-Deliverable. Additions to existing 

rules are underscored. 

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. 

 

1 http://www.cmegroup.com/rulebook/CME/I/8/8.pdf

2 http://www.cmegroup.com/clearing/files/financialsafeguards.pdf
300 Vesey Street New York, NY 10282 T 212 299 2200 F 212 299 2299 christopher.bowen@cmegroup.com cmegroup.com

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If you require any additional information regarding this submission, please contact me at 212-299-2200 or 

via e-mail at CMEGSubmissionInquiry@comegroup.com. 

Sincerely,

Christopher Bowen

Managing Director and Chief Regulatory Counsel

Attachments: Exhibit 1 – CME Rulebook Amendments, KRW and INR IRS Product Rules 

Exhibit 2 – KRW and INR IRS Product Specifications (attached under separate cover) 
5

EXHIBIT 1

CME RULEBOOK

KRW and INR Product Rules

(Additions underlined; deletions overstruck)

Chapter 901 Interest Rate Swaps Contract Terms 

90102.E. 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-WMBA-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. BRL-CDI (in which case the rate for a Reset Date will be The Overnight Brazilian Interbank 

Deposit Rate Annualized known as the average (“Media”) of the DI-OVER-EXTRA Grupo as 

published by The Câmara de Custódia e Liquidação as of no later than 12:00 pm on the next 

Brazil business Day provided that any adjustments made by The Câmara de Custódia e 

Liquidação to such rate, if made any time later than the end of the Business Day on such Reset 

Date, shall not be taken into account by the parties. If BRL-CDI is not published, the Rate Option 

shall instead by (in the following order of priority): (i) the overnight deposit rate published for the 

relevant date by the Bolsa de Mercadorias & Futuros; or (ii) determined by the Calculation Agent.)

90102.F. Non-Deliverable Swap Settlement Currency

With respect to Non-Deliverable Interest Rate Swap Transaction (“NDIRSs”), where a Reference 

Currency is specified, all calculations and determinations shall be made by reference to the Reference 

Currency but settlement shall be due in the Settlement Currency
6

90102.G. Non-Deliverable Swap Rate Options

With respect to NDIRSs, 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. KRW-CD-KSDA-Bloomberg

2. INR-FBIL-MIBOR-OIS-COMPOUND

90102.G.1. Settlement Rate Option

With respect to NDIRSs listed in 90102.G., the Settlement Rate Option as applicable shall be:

(a) KRW.KFTC18/KRW02

(b) INR.RBIB/INR01

90102.G.2. Fallback Reference Price

With respect to NDIRSs listed in 90102.G., the Fallback Reference Price as applicable shall be 

determined by:

(a) SFEMC KRW Indicative Survey Rate (KRW04)

(b) SFEMC INR Indicative Survey Rate (INR02)
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EXHIBIT 2

KRW and INR IRS Product Specifications

(attached under separate cover)
EXHIBIT 2

Attribute KRW

Maximum Maturity 21 YEARS

Variable Notional a

Forward Starting a

Spreads above and below index a

Negative Floating and Fixed Rates a

Different First Fixing a

Upfront Payment Dates T+1 through maturity

Settlement Convention T+1

Settlement Currency USD

FIXED

FLOAT

FLOAT

LEG_CCY KRW

LEG_START_DATE_ADJ_BUS_DAY_CONV

NONE

LEG_MAT_DATE_ADJ_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING

LEG_MAT_DATE_ADJ_CAL

KRSE, USNY Required, 

other calendars optional

LEG_PAY_FREQ 3M

LEG_PAY_REL_TO BEG_PER

END_PER

LEG_PAY_ADJ_BUS_DAY_CONV FOLLOWING

MODFOLLOWING

PRECEDING

LEG_PAY_ADJ_CAL

KRSE, USNY Required, 

other calendars optional

LEG_DAYCOUNT 30/360

ACT/360

ACT/365.FIXED

ACT/ACT.ISDA

30E/360

30E/360.ISDA

ACT/ACT.ICMA

LEG_TYPE
LEG_CALC_PER_ADJ_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING

LEG_CALC_PER_ADJ_CAL

KRSE, USNY Required, 

other calendars optional

LEG_CALC_FREQ 3M

LEG_COMP_METHOD None

Flat

Straight

SpreadExclusive

LEG_INDEX

KRW-CD-KSDA-Bloomberg

LEG_INDEX_TENOR 3M

LEG_RESET_FREQ 3M

LEG_RESET_REL_TO BEG_PER

LEG_RESET_DATE_ADJ_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING

LEG_RESET_DATE_ADJ_CAL

KRSE, USNY Required, 

other calendars optional

LEG_FIXING_DATE_OFFSET

*Market standard fixing offset shown as 

example but CME accepts any 

signed/unsigned number

-1D

LEG_FIXING_DAY_TYPE Business

Calendar

LEG_FIXING_DATE_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING

LEG_FIXING_DATE_CAL

KRSE Required

Other Calendars Optional

INITIAL_FIXING_DATE_OFFSET

*Market standard fixing offset shown as 

example but CME accepts any 

signed/unsigned number

-1D

INITIAL_FIXING_DAY_TYPE Business

Calendar
INITIAL_FIXING_DATE_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING

INITIAL_FIXING_DATE_CAL

KRSE Required

Other Calendars Optional

LEG_FX_FIXING_RATE_SOURCE KRW.KFTC18/KRW02

LEG_FX_FIXING_DATE_OFFSET -2D

LEG_FX_FIXING_DAY_TYPE Business

LEG_FX_FIXING_DATE_BUS_DAY_CONV NONE

PRECEDING

LEG_FX_FIXING_DATE_CAL

KRSE Required

Other Calendars Optional

LEG_START_DATE YYYYMMDD

LEG_MAT_DATE YYYYMMDD

LEG_SPREAD

LEG_NOTIONAL

LEG_FIXED_RATE

LEG_INITIAL_RATE

LEG_FIRST_REG_PER_START_DATE

LEG_LAST_REG_PER_END_DATE

LEG_INITIAL_STUB_RATE

LEG_ROLL_CONV

*Please note "IMM" refers the third 

Wednesday of Jan, Mar, June, Dec 

LEG_STUB_TYPE

LEG_INITIAL_STUBRATE_INDEX1

LEG_INITIAL_STUBRATE_INDEX2

1-30

EOM

IMM

ShortInitial

ShortFinal

LongInitial

LongFinal

3M

3M

3M

LEG_FINAL_STUBRATE_INDEX1
LEG_INITIAL_VALUE

LEG_STEP_DATE YYYYMMDD

LEG_STEP_VALUE

LEG_FINAL_STUBRATE_INDEX2

3M
EXHIBIT 2

Attribute INR

Maximum Maturity 10 YEARS

Variable Notional ×

Forward Starting a

Spreads above and below index a

Negative Floating and Fixed Rates a

Different First Fixing a

Upfront Payment Dates

T+1 through maturity

Settlement Convention T+1

FIXED

FLOAT

FLOAT

LEG_CCY INR

LEG_START_DATE_ADJ_BUS_DAY_CONV

NONE

LEG_MAT_DATE_ADJ_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING

LEG_MAT_DATE_ADJ_CAL INMU, USNY Required, 

other calendars 

optional

LEG_PAY_FREQ 1M

3M

6M

1Y

1T

LEG_PAY_REL_TO END_PER

LEG_PAY_ADJ_BUS_DAY_CONV FOLLOWING

MODFOLLOWING

PRECEDING

LEG_PAY_ADJ_CAL INMU, USNY Required, 

other calendars 

optional

LEG_PAY_DATE_OFFSET 0D

LEG_PAY_DAY_TYPE Business

LEG_TYPE
LEG_DAYCOUNT 30/360

ACT/360

ACT/365.FIXED

ACT/ACT.ISDA

30E/360

30E/360.ISDA

ACT/ACT.ICMA

LEG_CALC_PER_ADJ_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING

LEG_CALC_PER_ADJ_CAL INMU, USNY Required, 

other calendars 

optional

LEG_CALC_FREQ 1M

3M

6M

1Y

1T

LEG_COMP_METHOD N/A

LEG_INDEX INR-FBIL-MIBOR-OISCOMPOUND

LEG_INDEX_TENOR N/A

LEG_RESET_FREQ 1M

3M

6M

1Y

1T

LEG_RESET_REL_TO END_PER

LEG_RESET_DATE_ADJ_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING

LEG_RESET_DATE_ADJ_CAL INMU, USNY Required, 

other calendars 

optional

LEG_FIXING_DATE_OFFSET

0D

LEG_FIXING_DAY_TYPE Business

Calendar

LEG_FIXING_DATE_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING
LEG_FIXING_DATE_CAL INMU Required

Other Calendars 

Optional

INITIAL_FIXING_DATE_OFFSET 0D

INITIAL_FIXING_DAY_TYPE Business

Calendar

INITIAL_FIXING_DATE_BUS_DAY_CONV NONE

FOLLOWING

MODFOLLOWING

PRECEDING

INITIAL_FIXING_DATE_CAL INMU Required

Other Calendars 

Optional

LEG_FX_FIXING_RATE_SOURCE INR.RBIB/INR01

LEG_FX_FIXING_DATE_OFFSET -2D

LEG_FX_FIXING_DAY_TYPE Business

LEG_FX_FIXING_DATE_BUS_DAY_CONV NONE

PRECEDING

LEG_FX_FIXING_DATE_CAL INMU Required

Other Calendars 

Optional

LEG_START_DATE YYYYMMDD

LEG_MAT_DATE YYYYMMDD

LEG_SPREAD

LEG_SETTLEMENT_CCY USD

LEG_NOTIONAL

LEG_FIXED_RATE

LEG_INITIAL_RATE

LEG_FIRST_REG_PER_START_DATE

LEG_LAST_REG_PER_END_DATE

*Initial Stub Rate and Interpolation are not supported for OIS swaps, as tenor = 1D

LEG_ROLL_CONV

LEG_STUB_TYPE

NONE

1-30

EOM

ShortInitial

ShortFinal

LongInitial

LongFinal