73122 Federal Register / Vol. 79, No. 236 / Tuesday, December 9, 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 240.19b4(f)(4)(ii). 

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 No. SR– 

CME–2014–52 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–2014–52. 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 

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/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–2014–52 and should 

be submitted on or before December 30, 

2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28769 Filed 12–8–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73729; File No. SR–CME– 

2014–13] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange Inc.; 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to the Application of 

Excess Defaulting Clearing Member 

Assets in Crossover Default Scenarios 

and the Harmonization of Defaulted 

Base Clearing Member Collateral 

Definitions 

December 3, 2014. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

CME is filing proposed rules changes 

that are limited to its business as a 

derivatives clearing organization. More 

specifically, the proposed rule changes 

would make amendments to CME Rules 

relating to the application of excess 

defaulting clearing member assets in 

crossover default scenarios and the 

harmonization of Defaulted Base 

Clearing Member Collateral definitions. 

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 operates a 

substantial business clearing futures and 

swaps contracts subject to the 

jurisdiction of the CFTC. CME is 

proposing new rules to specify the 

allocation of excess collateral of a 

defaulted clearing member to losses 

relating to products in other financial 

safeguards at CME pro rata based on the 

remaining loss in each of such product 

classes. Additionally, CME is proposing 

to amend CME Rule 802.A to harmonize 

the member collateral definition across 

the default rules. CME notes that it has 

also made a corresponding filing with 

the CFTC, in Submission No. 14–097R, 

regarding the proposed changes. 

The proposed changes to CME Rules 

802.D, 8G802.D and 8H802.D would 

specify the allocation of excess 

collateral of a defaulted clearing 

member for a particular financial 

safeguard package to losses relating to 

product classes subject to other 

financial safeguards at CME. CME 

employs three financial safeguard 

packages (i.e. waterfalls) for each of the 

following product classes: interest rate 

swap products (‘‘IRS’’); credit default 

swap products (‘‘CDS’’); and Base 

products (which are all products other 

than IRS and CDS). The default rules for 

each respective waterfall contain the 

ability, once the loss of the clearing 

member for that waterfall is entirely 

satisfied, to use excess house assets of 

the clearing member towards satisfying 

uncovered losses of such clearing 

member for products in other waterfalls. 

For example, if a member was clearing 

IRS and Base products and excess Base 

collateral remained after completely 

satisfying all losses for Base Products, 

the rules provide that such excess may 

be used towards any uncovered losses of 

that clearing member for IRS products. 

CME rules are currently silent on the 

allocation mechanism of such excess 

funds to unresolved losses in other 

product classes where losses remain in 

both of the other product classes. The 

proposed new CME Rules 802.D.1, 

8G802.D.1, and 8H802.D.1 would 

specify that any such excess is allocated 

to the other safeguard packages pro rata 

based on the remaining loss in each of 

such product classes. 

Additionally, CME is proposing to 

amend CME Rule 802.A.2 to harmonize 


rljohnson on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 236 / Tuesday, December 9, 2014 / Notices 73123 

5 15 U.S.C. 78q–1. 

6 15 U.S.C. 78q–1(b)(3)(F). 

7 15 U.S.C. 78s(b)(3)(A). 

8 17 CFR 240.19b–4(f)(4)(ii). 

9See 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 Europe index CDS. 

10 15 U.S.C. 78s(b)(2)(B). 

the clearing member house collateral 

definition across the default rules. 

CME believes the proposed rule 

changes are consistent with the 

requirements of the Exchange Act 

including Section 17A.5 The proposed 

changes for the allocation of excess 

funds comport with CFTC Regulation 

39.16(c)(2)(iv) by adding clarifying 

language to specify the sequence in 

which excess house funds of the 

defaulting clearing member for a 

product class will be used to satisfy 

uncovered losses for other product 

classes. In addition, changes are 

proposed that would harmonize the 

defaulted clearing member definition 

and clarify the defaulted member’s 

assets held by the clearing house that 

may be used to satisfy losses due to the 

clearing member’s default. Because 

these changes clarify CME’s existing 

default rules and procedures, they 

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 

CME or for which it is responsible, and, 

in general, to protect investors and the 

public interest in a way that is 

consistent with Section 17A(b)(3)(F) of 

the Exchange Act.6

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 

simply specify the allocation of excess 

collateral of a defaulted clearing 

member to losses relating to products in 

other financial safeguards at CME pro 

rata based on the remaining loss in each 

of such product classes and, 

additionally, harmonize the member 

collateral definition across the default 

rules. 

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 

CME Inc. has filed the proposed rule 

change pursuant to Section 19(b)(3)(A) 7

of the Act and paragraph (f)(4)(ii) of 

Rule 19b–4 8 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 proposed rule 

change that clarified that CME has 

decided not to clear security-based 

swaps, except in a very limited set of 

circumstances. 9 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 securitybased swaps. Therefore, this proposal 

will not have an effect on any securities 

clearing operations of CME. 

At any time within 60 days of the 

filing of the proposed 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 Securities Exchange 

Act of 1934. If the Commission takes 

such action, the Commission shall 

institute proceedings under Section 

19(b)(2)(B) 10 of the Act to determine 

whether the proposed rule change 

should be approved or disapproved. 

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 No. SR– 

CME–2014–13 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–2014–13. 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, 100F 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 

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/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–2014–13 and should 

be submitted on or before December 30, 

2014. 


rljohnson on DSK3VPTVN1PROD with NOTICES
73124 Federal Register / Vol. 79, No. 236 / Tuesday, December 9, 2014 / Notices 

11 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. 78q–1(b)(3)(A). 

4 17 CFR 240.19b–4(f)(4)(ii). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28770 Filed 12–8–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73727; File No. SR–CME– 

2014–15] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange Inc.; 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Aligning Performance Bond 

and Guaranty Fund Collateral 

Acceptance With CFTC Regulation 

39.33 Requirements 

December 3, 2014. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Exchange Act’’ or ‘‘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 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 is proposing to announce via 

advisory notice certain changes to its 

collateral acceptance practices. More 

specifically, CME is proposing to issue 

two advisories to clearing member firms 

announcing that it will narrow the range 

of acceptable collateral types for 

guaranty fund deposits to cash and U.S. 

Treasury Bills, Notes and Bonds with 

time to maturity of ten years or less. 

II. Self-Regulatory Organizations 

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 operates a 

substantial business clearing futures and 

swaps contracts subject to the 

jurisdiction of the CFTC. CME is 

proposing to announce via advisory 

notice certain changes to its collateral 

acceptance practices. More specifically, 

CME is narrowing the range of 

acceptable collateral types for guaranty 

fund deposits to cash and U.S. Treasury 

Bills, Notes and Bonds with time to 

maturity of ten years or less. The 

changes that are the subject of these 

filings are designed to better position 

the utilization of clearing members’ 

guaranty fund deposits as qualifying 

liquidity resources under CFTC 

Regulation 39.33. 

The removal of IEF2, U.S. Agencies, 

and U.S. Treasury STRIPs and securities 

with time to maturity exceeding ten 

years does not materially impact the 

nature or level of risks presented by 

CME as the post-haircut risk profile of 

guaranty fund collateral deposits will be 

unchanged. Further, the impact to CME 

and its clearing firms is minimal as 

fewer than 22% of guaranty fund assets 

currently on deposit will have to be 

substituted in order to conform to the 

amended eligibility criteria. 

CME is also re-categorizing its eligible 

performance bond collateral types so 

that the assets in each category meet the 

definition of qualifying liquidity 

resources under CFTC Regulation 39.33. 

Category 1 will consist only of assets 

that independently meet the criteria of 

qualifying liquidity resources. Category 

2 and Category 3 will consist of assets 

that are qualifying liquidity resources 

due to being supported by CME’s credit 

facility. Amended Category 2 and 

Category 3 limits are designed to ensure 

such assets remain covered by CME’s 

credit facility and thus continue to meet 

the definition of qualifying liquidity 

resources. The specifics are as follows: 

collateral accepted under the IEF2 

program will be moved from Category 1 

to Category 3 and will be qualifying 

liquidity resources backed by CME’s 

credit facility; letters of credit and 

collateral accepted under the IEF5 

program will be moved from Category 2 

to Category 1 since cash and committed 

lines of credit are qualifying liquidity 

resources without being supported by 

CME’s credit facility; TIPS will be 

moved from Category 3 to Category 2 

and STRIPs will be moved from 

Category 1 to Category 2 to align the 

assets and limits of Category 2 with the 

terms of CME’s credit facility; and the 

acceptance of stocks in Category 3 will 

be limited to $1 billion per clearing 

member in alignment with borrowing 

base limits in the CME credit facility. 

Additionally, CME is capping IEF2 

acceptance at $5 billion rather than a 

percentage cap in order to mitigate the 

impact of re-categorization on its 

clearing membership. The recategorization and limits do not 

materially impact the nature or level of 

risks presented by CME as the posthaircut risk profile of deposited 

performance bond collateral deposits 

will be unchanged and no performance 

bond currently on deposit would have 

to be substituted to align with limits 

upon the re-categorization. 

A summary of the changes described 

in the Advisory Notices is set forth 

below: 

GUARANTY FUND ACCEPTABLE COLLATERAL

Current New 

• Cash • Cash 

• U.S. Treasury Bills/Notes/Bonds/Strips • U.S. Treasury Bills/Notes/Bonds * 

• U.S. Agencies (capped at 50% of total) 


rljohnson on DSK3VPTVN1PROD with NOTICES