73120 Federal Register / Vol. 79, No. 236 / Tuesday, December 9, 2014 / Notices 

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). 

III. Date of Effectiveness of the Advance 

Notice and Timing for Commission 

Action 

The designated clearing agency may 

implement this change if it has not 

received an objection to the proposed 

change within 60 days of the later of (i) 

the date that the Commission receives 

the notice of proposed change, or (ii) the 

date the Commission receives any 

further information it requests for 

consideration of the notice. The 

designated clearing agency shall not 

implement this change if the 

Commission has an objection. 

The Commission may, during the 60- 

day review period, extend the review 

period for an additional 60 days for 

proposed changes that raise novel or 

complex issues, subject to the 

Commission providing the designated 

clearing agency with prompt written 

notice of the extension. The designated 

clearing agency may implement a 

change in less than 60 days from the 

date of receipt of the notice of proposed 

change by the Commission, or the date 

the Commission receives any further 

information it requested, if the 

Commission notifies the designated 

clearing agency in writing that it does 

not object to the proposed change and 

authorizes the designated clearing 

agency to implement the change on an 

earlier date, subject to any conditions 

imposed by the Commission. 

The designated clearing agency shall 

post notice on its Web site of proposed 

changes that are implemented. 

The proposal shall not take effect 

until all regulatory actions required 

with respect to the proposal are 

completed. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing. 

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– 

OCC–2014–809 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–OCC–2014–809. 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 advance notice that 

are filed with the Commission, and all 

written communications relating to the 

advance notice 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 the 

filing also will be available for 

inspection and copying at the principal 

office of OCC and on OCC’s Web site at 

http://www.theocc.com/components/

docs/legal/rules_and_bylaws/sr_occ_14_

809.pdf. 

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–OCC–2014–809 and should 

be submitted on or before December 30, 

2014. 

By the Commission. 

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28767 Filed 12–8–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73728; File No. SR–CME– 

2014–52] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange Inc.; 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to CME Rules 818, 

8G01 and 8H01 

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 24, 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 a proposed rule change 

that is limited to its business as a 

derivatives clearing organization 

(‘‘DCO’’). More specifically, the 

proposed rule change contains 

amendments to clarify that netting will 

occur separately for each of the 

proprietary accounts, futures customer 

accounts, and clearing swap customer 

accounts of each Clearing Member at the 

time of close-out. 

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 DCO with the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) and offers 

clearing services for many different 

futures and swaps products. The 

proposed rule changes that are the 

subject of this filing are limited to 

CME’s business as a DCO offering 

clearing services for CFTC-regulated 

swaps products. More specifically, the 

proposed rule change would adopt 

amendments to CME Rule 818.C 

(Netting and Offset) and CME Rules 

8G01 and 8H01 to clarify that netting 

will occur separately for each of the 

proprietary accounts, futures customer 

accounts, and clearing swap customer 


rljohnson on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 236 / Tuesday, December 9, 2014 / Notices 73121 

5See Securities Exchange Act Release No. 34– 

73615 (Nov. 17, 2014), 79 FR 69545 (Nov. 21, 2014) 

(SR–CME–2014–49). Pursuant to a teleconference 

with CME’s in-house counsel on December 1, 2014, 

staff in the Division of Trading and Markets has 

edited this sentence to clarify CME’s intentions not 

to clear security-based swaps except for a very 

limited set of circumstances described in the abovereferenced proposed rule change. 

6 15 U.S.C. 78q–1. 

7 15 U.S.C. 78q–1(b)(3)(F). 

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). 

11See supra note 5. 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(4)(ii). 

accounts of each Clearing Member at the 

time of close-out. 

CME Rule 818.C provides for the 

master netting agreement that applies in 

the event of a CME Bankruptcy Event 

(as defined in Rule 818) or default (as 

described in Rule 818). The proposed 

amendments clarify that netting will 

occur separately for each of the 

proprietary accounts, futures customer 

accounts, and clearing swap customer 

accounts of each Clearing Member at the 

time of close-out. The proposed 

amendments add sub-clauses to clarify 

that the relevant account classes will be 

closed out separately consistent with 

applicable CFTC Regulations and § 4d of 

the Commodity Exchange Act (‘‘CEA’’). 

Clearing Member’s proprietary, futures 

customer, and cleared swaps customer 

account classes will be closed out 

separately from one another, and 

cleared swaps customers will be closed 

out on an individual customer basis. 

Further, the proposed amendments add 

a provision clarifying that in the event 

of a Bankruptcy Event that is preceded 

by (or occurs simultaneously with) a 

limited recourse event in Interest Rate 

Swaps (‘‘IRS’’) and Credit Default Swaps 

(‘‘CDS’’), the amount of any variation 

margin haircut that is applied as a result 

of the limited recourse Rules (CME Rule 

8G802.B for IRS and CME Rule 8H802.B 

for CDS) will not be available for netting 

with losses from products subject to 

other financial safeguards under Rule 

818.C. 

CME is also amending Rules 8G01 

and 8H01 to further clarify that Rule 818 

(Close-Out Netting) will apply for all 

products in the event of a CME 

Bankruptcy Event or default and will 

not be superseded by the conflict of 

rules provisions of Rules 8G01 and 

8H01, respectively. 

The changes that are described in this 

filing are limited to CME’s business as 

a DCO clearing products under the 

exclusive jurisdiction of the CFTC and 

CME has made a decision not to clear 

security-based swaps.5 The changes will 

be effective on filing. CME notes that it 

has also certified the proposed rule 

changes that are the subject of this filing 

to its primary regulator, the CFTC, in a 

separate filing, CME Submission No. 

14–477. The text of the CME proposed 

rule amendments is attached, with 

additions underlined and deletions in 

strikethrough. 

CME believes the proposed rule 

changes are consistent with the 

requirements of the Exchange Act 

including Section 17A of the Exchange 

Act.6 CME is proposing the amendments 

to clarify that netting will occur 

separately for each of the proprietary 

accounts, futures customer accounts, 

and clearing swap customer accounts of 

each Clearing Member at the time of 

close-out. These proposed amendments 

will solidify CME’s legal netting 

procedures framework (which applies in 

the event of a CME insolvency) which 

should be seen to be in accordance with 

the objective of promoting 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.7

Furthermore, the proposed changes 

are limited in their effect to products 

offered under CME’s authority to act as 

a DCO. The products that are the subject 

of this filing are under the exclusive 

jurisdiction of the CFTC. As such, the 

proposed CME changes are limited to 

CME’s activities as a DCO clearing 

swaps that are not security-based swaps, 

futures that are not security futures and 

forwards that are not security forwards. 

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 

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 8 and 

are properly filed under Section 

19(b)(3)(A) 9 and Rule 19b–4(f)(4)(ii) 10

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 amendments 

simply clarify and solidify CME’s legal 

netting procedures framework. Further, 

the changes are limited to CME’s 

derivatives clearing business and CME 

has made a decision not to clear 

security-based swaps and therefore 

would not impose any burden on 

competition that is inappropriate in 

furtherance of the purposes of the Act.11

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) 12 of the Act and Rule 19b– 

4(f)(4)(ii) 13 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: 


rljohnson on DSK3VPTVN1PROD with NOTICES
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