Federal Register / Vol. 80, No. 1 / Friday, January 2, 2015 / Notices 77 

15 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). 

5Pursuant to a teleconference with CME’s 

counsel on December 19, 2014, staff in the Division 

of Trading and Markets has modified this sentence 

to insert references to the Agreement’s execution 

and implementation date. 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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 Number SR– 

ICC–2014–21 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–ICC–2014–21. 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 ICE Clear Credit and on ICE 

Clear Credit’s Web site at https://

www.theice.com/clear-credit/regulation. 

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–ICC–2014–21 and should 

be submitted on or before January 23, 

2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–30700 Filed 12–31–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73937; File No. SR–CME– 

2014–18] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange Inc.; 

Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change Regarding Certain Contractual 

Arrangements That Apply to its Overthe-Counter Credit Default Swap 

Clearing Offering 

December 24, 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 December 15, 2014, 

Chicago Mercantile Exchange Inc. 

(‘‘CME’’) filed with the Securities and 

Exchange Commission (the 

‘‘Commission’’) the proposed rule 

change described in Items I, II and III, 

below, which Items have been primarily 

prepared by CME. CME filed the 

proposal pursuant to Section 19(b)(3)(A) 

of the Act,3 and Rule 19b–4(f)(4)(ii) 

thereunder,4 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 make certain 

revenue sharing and governance 

changes related to certain contractual 

arrangements that apply to its over-thecounter credit default swap (‘‘OTC 

CDS’’) clearing offering. CME entered 

into this arrangement (the ‘‘Agreement’’) 

with a group of clearing members on 

June 30, 2012 and the proposed rule 

change has been implemented by CME 

since June 30, 2012.5

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 filing 

this proposed rule change with respect 

to the Agreement made with various 

third-party financial institutions 

(‘‘DFMs’’) relating to its OTC CDS 

clearing business. The Agreement 

incentivized the DFMs to support CME’s 

initial development of its OTC CDS 

clearing infrastructure and is designed 

to ensure that the DFMs continue their 

demonstrated commitment to CME’s 

ongoing CDS clearing efforts. The 

existing DFMs were selected based on 

their support in CME’s development of 

its clearing initiative, ability to provide 

liquidity, their client clearing and risk 

management expertise, as well as their 

willingness to test and generally support 

centralized clearing in CDS Contracts on 

an on-going basis. CME may invite other 

firms to join the Agreement in the future 

so long as such firms are among the top 

CDS clearing members by notional 

amount of CDS Contracts submitted to 

the Clearing House during any sixmonth period through June 2015 or are 

approved by a majority of the thenexisting DFMs. 

In summary, under the Agreement, 

the DFMs that satisfy their obligations 

under the Agreement will receive a 

portion of the clearing revenues and 

market data revenues generated in 

connection with CME’s clearing of 

certain specified CDS Contracts, will be 


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78 Federal Register / Vol. 80, No. 1 / Friday, January 2, 2015 / Notices 

6The DFM share of gross revenue is based on the 

number of DFMs and adjusted for applicable 

discounts, rebates, taxes and expenses. 

7 During a December 22, 2014 teleconference with 

CME counsel, staff in the Division of Trading and 

Markets confirmed that CME has filed the following 

fee-related filings relating to the Agreement: 

Securities Exchange Act Release No. 34–65634 (Oct. 

26, 2011), 76 FR 67517 (Nov. 1, 2011) (File No. SR– 

CME–2011–11); Securities Exchange Act Release 

No. 34–66030 (Dec. 22, 2011), 76 FR 82006 (Dec. 

29, 2011) (File No. SR–CME–2011–18); Securities 

Exchange Act Release No. 34–68490 (Dec. 20, 2012), 

77 FR 76314 (Dec. 27, 2012) (File No. SR–CME– 

2012–46); Securities Exchange Act Release No. 34– 

71403 (Jan. 27, 2014), 79 FR 5501 (Jan. 31, 2014) 

(File No. SR–CME–2014–03) and Securities 

Exchange Act Release No. 34–73752 (Dec. 5, 2014), 

79 FR 73655 (Dec. 11, 2014) (File No. SR–CME– 

2014–55). 

8The Agreement does not amend the charter of 

the CDS RC. 

9This includes all CDS Clearing Members, not 

just DFMs. 

10For instance, if the actual number of CDS 

Clearing Membership Representatives is 5, then a 

majority of the CDS Clearing Membership 

Representatives will be selected from those CDS 

Clearing Members with the 7 largest average 

contributions to the CDS Guaranty Fund. 

11CME’s CDS advisory group includes a 

representative from each of the DFMs and a 

representative from CME. In addition, CME may 

invite up to 2 non-DFM CDS clearing members that 

are in the top 10 contributors to the CDS Guaranty 

Fund and up to 3 non-CDS Clearing Members to 

appoint representatives to the CDS advisory group. 

12 15 U.S.C. 78q–1(b)(3)(F). 

13 15 U.S.C. 78q–1(b)(3)(C). 

14 15 U.S.C. 78q–1(b)(3)(I). 

15 15 U.S.C. 78q–1(b)(3)(F). 

16 15 U.S.C. 78q–1. 

subject to a cap on the CDS clearing fees 

payable to CME, and will be entitled to 

participate in CME’s CDS advisory 

group. In addition, CME has agreed to 

minimum CDS clearing member 

representation on the CDS Risk 

Committee (the ‘‘CDS RC’’). These 

aspects and other relevant background 

and context regarding the Agreement are 

described in greater detail below. 

DFM Obligations Under the Agreement 

Under the Agreement, DFMs are 

required to (i) maintain a CDS clearing 

membership at CME in good standing, 

(ii) offer customers the ability to clear 

CDS Contracts at CME on a nondiscriminatory basis by comparison to 

the terms offered for clearing of 

substantially similar CDS Contracts 

through any U.S.-based derivatives 

clearing organization, (iii) provide to 

CME certain settlement price quotes and 

transaction data relating to CDS 

Contracts, and (iv) submit CDS 

Contracts to CME that generate specified 

minimum annual fees. 

Economic Incentives for the DFMs 

Under the Agreement 

Under the Agreement, CME and the 

DFMs have agreed to share certain of the 

adjusted gross revenues associated with 

CME’s CDS Contracts clearing 

activities,6 including the sale of market 

data generated by such activities (the 

‘‘Revenue Pools’’). 

DFMs that qualify during a relevant 

measurement period, will each receive a 

pro-rata share of the Revenue Pools 

based on volumes of CDS Contracts 

submitted to CME. In addition, CME has 

agreed to a fixed cap for the noncustomer fees charged to each DFM for 

the clearing of CDS Contracts submitted 

to CME by such DFM and its affiliates 

during each 12-month period during the 

term of the Agreement.7

Finally, CME has agreed to offer each 

DFM the option of electing, in lieu of 

the incentives under the Agreement, any 

other pricing structure for the clearing 

of CDS Contracts that any other CDS 

clearing member chooses to accept from 

CME. 

Governance Rights 

In addition, CME has agreed with the 

DFMs that, among other things: 

1. It will exercise its rights under 

CME’s CDS RC charter 8 so as to cause 

a majority of the CDS RC to be 

composed such that (i) employees or 

directors of CDS Clearing Members 9

maintain a majority of the CDS RC (the 

‘‘CDS Clearing Membership 

Representatives’’) and (ii) a majority of 

the CDS Clearing Membership 

Representatives be selected from those 

CDS Clearing Members that have the 

‘‘n’’ largest average contributions to the 

CDS Guaranty Fund, where ‘‘n’’ is equal 

to the actual number of CDS Clearing 

Membership Representatives plus two 

(2); 10

2. each DFM may appoint a 

representative (a ‘‘DFM Representative’’) 

to participate on CME’s CDS advisory 

group; 11 and 

3. it will not launch any CDS Product 

that was not originally contemplated by 

the Agreement in the CDS Guaranty 

Fund if (i) the DFM Representatives 

object to such launch based on material 

risk management concerns that such 

DFM Representatives have identified 

and that CME is unable to reasonably 

mitigate, (ii) the CDS RC does not 

approve the product launch, (iii) 

regulatory approval is not obtained, or 

(iv) there are not a sufficient number of 

CDS Clearing Members that have agreed 

to submit such CDS Product to CME for 

clearing and to provide settlement price 

information to CME for such CDS 

Product. 

Section 17A of the Exchange Act does 

not permit the rules of a clearing agency 

to unfairly discriminate in the 

admission of participants or among 

participants in the use of the clearing 

agency.12 The rules of a clearing agency 

must also assure its participants are 

fairly represented with respect to the 

administration of its affairs.13 Further, 

the rules of the clearing agency must not 

impose any burden on competition that 

is not necessary or appropriate in 

furtherance of the purposes of the 

Exchange Act.14 Although the terms of 

the Agreement deliver certain rights to 

a set of participants that are not offered 

to others, CME believes the proposed 

rules are nevertheless consistent with 

the requirements of the Exchange Act 

for the following reasons. 

First, the Agreement provides an 

enumerated group of DFMs, who are 

also CDS Clearing Members at CME, 

with economic incentives and other 

contractual rights that will not be 

afforded to other CDS Clearing Members 

who are not DFMs. The rationale for 

providing this group of DFMs with these 

rights is to incentivize them (i) to 

provide substantial support to CME in 

its development and structuring of its 

OTC CDS clearing offering and (ii) to 

serve as the initial set of CDS clearing 

members. These swap market 

participants invested significant time 

and resources to support CME staff’s 

efforts to design, develop, and 

implement CME’s OTC swaps clearing 

infrastructure and agreed to provide 

clearing member services for OTC CDS 

on an ongoing basis. Providing these 

rights to these participants does not 

constitute unfair discrimination among 

participants of CME because of the 

equity ownership-like commitments 

undertaken by these DFMs during 

CME’s initial offering phase. Because 

the DFMs provided these equity 

ownership-like commitments during 

CME’s initial offering phase, there is not 

unfair discrimination among 

participants and the Agreement should 

be seen to be consistent with Section 

17A(b)(3)(F) of the Exchange Act.15

With respect to the governance rights 

provided to the DFMs, CME also 

believes that these should be found to 

be consistent with the requirements of 

Section 17A of the Exchange Act.16 CME 

recognizes that there would be reason to 

be concerned in circumstances where 

one particular member of a selfregulatory organization (‘‘SRO’’) was 

able to acquire a controlling influence in 

the administration of the affairs of the 

SRO. Such circumstances would have 

the potential to jeopardize an SRO’s 

ability to operate impartially, as a single 

controlling member might be tempted to 

exercise its controlling influence by 

directing the SRO to refrain from 

diligently surveilling the member’s 


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Federal Register / Vol. 80, No. 1 / Friday, January 2, 2015 / Notices 79 

17 15 U.S.C. 78q–1(b)(3)(C). 

18See Securities Exchange Act Release No. 34– 

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

(File No. 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. 19 15 U.S.C. 78q–1(b)(3)(F). 

20 15 U.S.C. 78s(b)(3)(A). 

21 17 CFR 240.19b–4(f)(4)(ii). 

22See supra note 18. 

conduct or from punishing any conduct 

that violates the rules of the SRO, 

Commodity Exchange Act or other 

applicable laws. However, those types 

of concerns are not present with the 

governance incentives offered to the 

DFMs in the Agreement. 

Further, the Agreement provides for 

significant market participant 

participation in the governance of CDS 

Products by specifying certain 

membership composition criteria for the 

CDS RC. These composition criteria, in 

general, provide assurance that the 

participants with the most exposure to 

CME’s CDS clearing initiative will be 

represented on the CDS RC. This 

granting of a voice to the market 

participants with the greatest risk to the 

Clearing House for CDS products is 

inherently fair and consistent with 

Section 17A(b)(3)(C) of the Exchange 

Act.17 Further, these provisions also 

ensure that no single participant would 

be able to obtain a concentrated and 

outsized influence that would implicate 

the concerns outlined above nor is 

representation on the CDS RC based on 

DFM status. 

Finally, the proposal will not affect 

any securities clearing operations of 

CME because CME recently filed a 

proposed rule change that clarified that 

CME has decided not to clear securitybased swaps, except in a very limited 

set of circumstances.18 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 have no effect on any securities 

clearing operations of CME. 

For these reasons, CME submits that 

the specific economic incentives and 

contractual governance rights granted to 

the DFMs should be found to be 

reasonable and consistent with the Act. 

The terms of the Agreement do not 

constitute unfair discrimination in the 

admission of participants or among 

participants in the use of the clearing 

agency but rather provide reasonable 

incentives to support the clearing 

offering. The arrangements should be 

seen as consistent with Section 

17A(b)(3)(F) of the Exchange Act,19 and 

should otherwise be seen to be 

consistent with the Act’s investor 

protection and public interest mandates. 

CME submits that the proposed rule 

change promotes the prompt and 

accurate clearance and settlement of 

transactions, assures the safeguarding of 

securities and funds which are in the 

custody or control of the clearing agency 

or for which it is responsible, fosters 

cooperation and coordination with 

persons engaged in the clearance and 

settlement of securities transactions, 

removes impediments to and perfects 

the mechanism of a national system for 

the prompt and accurate clearance and 

settlement of securities transactions, 

and, in general, protects investors and 

the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CME does not believe that the 

proposed rule change will impose any 

burden that is not reasonable, 

appropriate, or in furtherance of the Act. 

As discussed above, the proposed rules 

will provide an enumerated group of 

DFM firms, who are also CDS Clearing 

Members at CME, with economic 

incentives and other contractual rights 

that will not be afforded to other CDS 

Clearing Members who are not DFMs or 

do not become DFMs. Providing these 

benefits to one set of firms and not all 

could potentially have an impact on 

competition. However, CME believes 

any such impacts should not be seen to 

be unreasonable in light of the fact that 

these benefits were afforded in 

consideration of the substantial support 

provided to CME in the development 

and structuring of its OTC CDS clearing 

offering and the firms’ agreement to 

serve as the initial set of clearing 

members. 

Further, the changes are limited to 

CME’s derivatives clearing business 

and, as such, do not affect securitybased swap clearing activities of CME in 

any way and therefore would 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) 20 of the Act and Rule 19b– 

4(f)(4)(ii) 21 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.22 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 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 No. SR– 

CME–2014–18 on the subject line. 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
80 Federal Register / Vol. 80, No. 1 / Friday, January 2, 2015 / Notices 

23 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). 

5Pursuant to a teleconference with CME’s 

counsel on December 19, 2014, staff in the Division 

of Trading and Markets has modified this sentence 

to insert references to the Agreement’s execution 

and implementation date. 

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–2014–18. 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–2014–18 and should 

be submitted on or before January 23, 

2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

Brent J. Fields, 

Secretary. 

[FR Doc. 2014–30696 Filed 12–31–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73938; File No. SR–CME– 

2014–19] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange Inc.; 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Regarding Certain Contractual 

Arrangements That Apply to Its Overthe-Counter Interest Rate Swap 

Clearing Offering 

December 24, 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 December 

15, 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 proposing to make certain 

revenue sharing and governance 

changes related to certain contractual 

arrangements that apply to its over-thecounter interest rate swap (‘‘OTC IRS’’) 

clearing offering. CME entered into this 

arrangement (the ‘‘Agreement’’) with a 

group of clearing members on June 30, 

2012 and the proposed rule change has 

been implemented by CME since June 

30, 2012.5

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 filing 

this proposed rule change with respect 

to the Agreement made with various 

third-party financial institutions (dealer 

founding members, ‘‘DFMs’’) relating to 

its OTC IRS clearing business. The 

Agreement incentivized the DFMs to 

support CME’s initial development of its 

OTC IRS clearing infrastructure and is 

designed to ensure that the DFMs 

continue their demonstrated 

commitment to CME’s ongoing IRS 

clearing efforts. The existing DFMs were 

selected based on their support in 

CME’s development of its clearing 

initiative, ability to provide liquidity, 

their client clearing and risk 

management expertise, as well as their 

willingness to test and generally support 

centralized clearing in IRS Contracts on 

an on-going basis. CME may invite other 

firms to join the Agreement in the future 

so long as such firms are approved by 

a majority of the then-existing DFMs. 

In summary, under the Agreement, 

the DFMs that satisfy their obligations 

under the Agreement will receive a 

portion of the clearing revenues and 

market data revenues generated in 

connection with CME’s clearing of 

certain specified IRS Contracts, will be 

subject to a cap on the IRS clearing fees 

payable to CME, and will be entitled to 

participate on CME’s IRS advisory 

group. In addition, CME has agreed to 

minimum IRS clearing member 

representation on the IRS Risk 

Committee (the ‘‘IRS RC’’). These 

aspects and other relevant background 

and context regarding the Agreement are 

described in greater detail below. 

DFM Obligations Under the Agreement 

Under the Agreement, DFMs are 

required to (i) maintain an IRS clearing 

membership at CME in good standing, 

(ii) offer customers the ability to clear 

IRS Contracts at CME on a nondiscriminatory basis by comparison to 

the terms offered for clearing of 

substantially similar IRS Contracts 

through any U.S.-based derivatives 

clearing organization, (iii) provide to 


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