62998 Federal Register / Vol. 79, No. 203 / Tuesday, October 21, 2014 / Notices 

14 17 CFR 200.30–3(a)(12). 

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). 

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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. 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–CBOE– 

2014–073 and should be submitted on 

or before November 12, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24957 Filed 10–20–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73365; File No. SR–CME– 

2014–40] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange Inc.; 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Regarding Its Collateral 

Acceptance Practices for Its Base 

Guaranty Fund 

October 15, 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 October 

3, 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

CME proposes to make certain 

changes to its collateral acceptance 

practices. The proposed changes would 

not impact CME’s collateral acceptance 

practices relating to its CDS Guaranty 

Fund; the changes would only affect 

CME’s Base Fund. More specifically, 

CME is introducing a new and limited 

exemption from CME limits on the 

value of letters of credit clearing 

members are eligible to deposit on 

behalf of qualifying customers in 

satisfaction of the clearing members’ 

core performance bond requirements 

with respect to CME’s Base Fund (the 

‘‘Exemption’’). The text of the proposed 

rule change is immediately below. 

Italicized text indicates additions; 

bracketed text indicates deletions. 

* * * * * 

Collateral Types Accepted for Futures, 

Options, Forwards, OTC FX & 

Commodity Swaps (available at http://

www.cmegroup.com/clearing/financialand-collateral-management/) 

* * * * * 

New Category 3 & 4 Capped at $7bn Per Firm 

Category 1 Category 2 Category 3* Category 4** 

Cash U.S. Treasuries IEF5 (Interest Bearing Cash) Letters 

of Credit.* 

U.S. Government Agencies Strips 

TIPS (capped at $1bn per firm). 

Select MBS. 

IEF2† (Money Market Mutual Funds). 

Gold (capped at $500mm per firm). 

Stocks (capped at $1bn per firm). 

IEF4 (corporate bonds). 

Foreign Sovereign Debt (capped at 

$1bn per firm). 

* LOCs are capped at the lesser of 

25% of core requirement per currency requirement or $500M per 

firm. Clearing members that wish to 

post additional LOCs on behalf of 

qualifying commercial end users 

may be eligible for a limited exemption from this cap.# LOCs are not 

permitted to meet house performance bond requirements for financial affiliated clearing members.

* Capped at 40% of core requirement 

per currency requirement per firm.

** Capped at 40% of core requirement 

per currency requirement per firm or 

$5 billion per firm, the lesser of the 

two. 

†Not included in the 40% requirement. 

* * * * * 

# Please contact the clearing house at 

CreditRisk@cmegroup.com if you would 

like to learn more about this exemption. 

* * * * * 

CME Group Acceptable Performance 

Bond Collateral for Futures, Options, 

Forwards, OTC FX, and Commodity 

Swaps (available at http://

www.cmegroup.com/clearing/files/

acceptable-collateral-futures-optionsselect-forwards.pdf) 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 203 / Tuesday, October 21, 2014 / Notices 62999 

5 15 U.S.C. 78q–1. 

Asset class 

Requirement 

type eligibility 

(core, concentration or 

Guaranty Fund) 

Description Haircut 

schedule 

Eligible for 

cleared swaps 

customer 

requirements 

Eligible for 

customer 

segregated 

requirements 

Eligible for 

house 

(proprietary) 

requirements 

Notes 

Letters of Credit Core 25% Concentration 

100% Guaranty Fund 

0%.

• Letters of 

Credit for 

Performance 

Bond.

0% ................... No .................... Yes .................. Yes .................. • Letters of 

Credit are not 

accepted for 

Forwards and 

Commodity 

Swaps. 

• Capped at 

the lesser of 

25% of core 

requirement 

or $500 million per clearing member.# 

• Category 2 

Asset**. 

# Clearing members that wish to post additional LOCs on behalf of qualifying commercial end users may be eligible for a limited exemption 

from this cap. Please contact the clearing house at CreditRisk@cmegroup.com if you would like to learn more about this exemption. 

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 certain changes to its 

collateral acceptance practices. The 

proposed changes would not impact 

CME’s collateral acceptance practices 

relating to its CDS Guaranty Fund; the 

changes would only affect CME’s Base 

Fund. 

More specifically, CME is introducing 

a new and limited exemption from CME 

limits on the value of letters of credit 

clearing members are eligible to deposit 

on behalf of qualifying customers in 

satisfaction of the clearing members’ 

core performance bond requirements 

with respect to CME’s Base Fund (the 

‘‘Exemption’’). The Exemption would be 

narrowly tailored and would only apply 

to certain non-financial customers and 

their clearing members. The Exemption 

would increase the value of letters of 

credit a clearing member would be able 

to post in satisfaction of the clearing 

member’s core requirement to two times 

the lesser of: (a) 25% of a total clearing 

member’s collateral on deposit for its 

core requirement; or (b) US$500 million 

(‘‘Exemption Limit’’); provided that, any 

letter of credit deposits above the Nonexempt Limit would only be able to be 

used to margin qualifying customers. 

The current default limits for letters of 

credit are the lesser of 25% of each 

clearing member’s core performance 

bond requirement per currency 

requirement or US$500 million per 

clearing member. CME notes that letters 

of credit are not permitted to meet 

performance bond requirements for 

credit default swaps. 

By way of example, a clearing 

member with a US$600 million core 

requirement would normally be able to 

deposit up to US$150 million in letters 

of credit as performance bond. Under 

the Exemption, the clearing member 

would be able to use up to US$300 

million in letters of credit to meet its 

core requirement so long as all amounts 

above US$150 million were deposited 

on behalf of qualifying customers or 

affiliates of qualifying customers that 

meet the Exemption requirements. A 

clearing member with greater than US$2 

billion in performance bond on deposit 

for its core requirement would be 

limited to two times the US$500 million 

limit, or US$1 billion under the 

Exemption. 

The allocation of the excess letter of 

credit capacity to qualifying customers 

under the Exemption would be at the 

sole discretion of the clearing member 

and the Exemption Limit would be 

capped at two times the clearing 

member’s CME Clearing-designated 

letter of credit limit, no matter how 

many qualifying customers utilize the 

Exemption. CME Clearing, at its sole 

discretion, would be able to terminate 

the Exemption upon reasonable notice 

to the clearing member and its 

qualifying customer(s). 

As highlighted above, the proposed 

changes in this filing are limited to 

CME’s Base Guaranty Fund and 

therefore do not impact CME’s CDS 

Guaranty Fund. CME accepts a narrower 

range of collateral for CDS clearing and 

does not currently accept letters of 

credit, stocks or corporate bonds as 

acceptable collateral for CDS. The 

proposed rule change in this filing 

would not impact these current 

practices. The proposed rule change 

would become effective immediately 

but would be operationalized on 

October 8, 2014. 

CME believes the proposed rule 

change is consistent with the 

requirements of the Exchange Act 

including Section 17A of the Exchange 

Act.5 The proposed changes would 

amend CME’s collateral acceptance 

practices by introducing a limited 

exemption from CME limits on the 

value of letters of credit clearing 

members are eligible to deposit on 

behalf of qualifying customers in 

satisfaction of the clearing members’ 

core performance bond requirements 

with respect to CME’s Base Fund. The 

proposed Exemption would not impact 

CME’s ability to manage risk in regard 

to its qualifying customers and their 

clearing members. CME determined the 

amount of letters of credit eligible to be 

posted under the Exemption reflect an 

appropriate limitation on the 

mstockstill on DSK4VPTVN1PROD with NOTICES

63000 Federal Register / Vol. 79, No. 203 / Tuesday, October 21, 2014 / Notices 

6 15 U.S.C. 78q–1(b)(3)(F). 

7 15 U.S.C. 78q–1. 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(4)(ii). 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(4)(ii). 12 17 CFR 200.30–3(a)(12). 

concentration of assets posted as initial 

margin. The proposed Exemption is 

narrowly tailored and will provide CME 

with flexibility for the operational 

management of limits for these 

collateral types and therefore should be 

seen 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 Exchange Act.6

Furthermore, the proposed changes 

are limited to CME’s Base Guaranty 

Fund, which means the proposed 

changes are limited in their effect to 

products that are under the exclusive 

jurisdiction of the CFTC. As such, the 

proposed CME changes are limited to 

CME’s activities as a DCO clearing 

products 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 Exchange Act, such as 

promoting market transparency for overthe-counter derivatives markets, 

promoting the prompt and accurate 

clearance of transactions and protecting 

investors and the public interest. 

Because the proposed changes are 

limited in their effect to products that 

are under the exclusive jurisdiction of 

the CFTC and are therefore offered 

under CME’s authority to act as a DCO, 

the proposed changes are 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 securitybased 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. 

As such, the changes are therefore 

consistent with the requirements of 

Section 17A of the Exchange Act 7 and 

are properly filed under Section 

19(b)(3)(A) 8 and Rule 19b–4(f)(4)(ii) 9

thereunder. 

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 

provide a narrowly tailored exemption 

to certain practices that will provide 

CME with more flexibility for the 

operational management of limits for 

these collateral types. Further, the 

changes described in the submission 

relate only to products that fall under 

the exclusive jurisdiction of the CFTC. 

As such, these proposed changes 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 upon filing pursuant to Section 

19(b)(3)(A) 10 of the Act and Rule 19b– 

4(f)(4)(ii) 11 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. 

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 rule-comments@

sec.gov. Please include File Number SR– 

CME–2014–40 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–2014–40. 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 

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/marketregulation/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–2014–40 and should 

be submitted on or before November 12, 

2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24951 Filed 10–20–14; 8:45 am] 

BILLING CODE 8011–01–P 

mstockstill on DSK4VPTVN1PROD with NOTICES