Document ID: SEC-2012-0046-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Mercantile Exchange, Inc.
Posted Date: 2012-01-11T05:00Z

[Federal Register Volume 77, Number 7 (Wednesday, January 11, 2012)]
[Notices]
[Pages 1775-1777]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-305]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66102; File No. SR-CME-2011-22]

Self-Regulatory Organizations; Chicago Mercantile Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish Certain Fee Programs in Connection With Its OTC Interest Rate 
Swap Clearing Offering

January 5, 2012.
    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 22, 2011, 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 proposed rule 
change pursuant to Section 19(b)(3)(A) \3\ of the Act and Rule 19b-
4(f)(2) \4\ thereunder.
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    \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)(2).
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I. Self-Regulatory Organization's Statement of Terms of Substance of 
the Proposed Rule Change

    CME is proposing to make certain fee-related changes that would 
apply to its OTC Interest Rate Swap clearing offering. The text of the 
proposed changes is as follows: \5\
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    \5\ The text of the proposed changes does not appear in CME's 
rulebook but is available on CME's Web site at http://www.cmegroup.com/market-regulation/rule-filings.html. Telephone 
conference between Tim Elliot, Director and Associate General 
Counsel, CME, and Doyle Horn, Special Counsel, Securities and 
Exchange Commission Division of Trading and Markets on January 4, 
2012.
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CME Incentive Program for Over-the-Counter Interest Rate Swaps

Program Purpose

    The purpose of the Program is to incentivize participants to 
increase the volume in CME over-the-counter (``OTC'') interest rate 
swaps which will improve market liquidity. The resulting addition of 
liquidity for these Products (as defined below) benefits all 
participants in the market.

Product Scope

    CME OTC Interest Rate Swaps cleared by the Clearing House 
(``Products'').

Eligible Participants

    CME may designate up to five (5) participants in the Program based 
on their level of expertise and experience with the Products. 
Participants may be CME members and/or non-members.
    CME will also take potential participants' experience in the 
Products and historical volume in the Products with the Clearing House 
when making its selections.

Program Term

Non-Asset Managers
    Qualification Period: January 6, 2012 through December 31, 2012.
    Earned Incentive Period: January 1, 2013 through December 31, 2016.
Asset Managers
    Qualification Period: January 6, 2012 through December 31, 2012.
    Earned Incentive Period: January 1, 2013 through December 31, 2021.

Hours

    N/A.

Obligations

    Participants must provide designated accounts to CME in order for 
the account to receive consideration for the incentives described 
below.

Incentives

    1. Fee Discounts. Once accepted into the Program, participants will 
be eligible to receive predetermined discounts for transaction fees and 
maintenance fees in the Products during the Term.
    2. Volume Discount Incentives. Additionally, once accepted into the 
Program, participants may qualify for predetermined fee discounts based 
on the overall fees charged for transactions in the Products submitted 
to the Clearing House during the Qualification Period.

Monitoring and Termination of Status

    The Clearing House shall monitor participants' activity and 
performance and shall retain the right to revoke Program participant 
status if they conclude from review that a Program participant no 
longer meets the eligibility requirements of the Program.
* * * * *

Founding Member Over-the-Counter Interest Rate Swap Incentive Program

Program Purpose

    The purpose of the Program is to provide more liquid markets in OTC

[[Page 1776]]

Interest Rate Swap products. By incentivizing large market participants 
CME expects to bring in increased volume. The resulting addition of 
liquidity of these products benefits all participants in the market.

Product Scope

    CME OTC Interest Rate Swaps that are cleared by the Clearing House 
(``Products'').

Eligible Participants

    CME selected the participants based on their ability to provide 
liquidity, client clearing and risk management expertise as well as 
their willingness to design and test the offering on an on-going basis.

Program Term

    Start date is January 6, 2012. End date is December 31, 2012.

Hours

    N/A.

Incentives

    Discounted Fees. Participants will be eligible to receive 
predetermined discounts for transaction fees regarding the Products.
* * * * *
    The text of the proposed changes is also available at the 
Exchange's Web site at http://www.cmegroup.com, at the principal office 
of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of 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 Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    CME currently offers clearing for certain OTC Interest Rate Swap 
products. The filing proposes to establish two new fee programs (the 
``Programs'') that will apply to CME's OTC Interest Rate Swap (``IRS'') 
clearing offering.\6\ The proposed changes that are the subject of this 
filing are related to the fees CME charges for clearing and therefore 
will become effective upon filing. However, the Programs will become 
operative on January 6, 2012.
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    \6\ The staff notes that CME's general fee schedule for OTC 
Interest Rate Swap clearing offering was previously filed with the 
Commission and became effective on December 20, 2011. See Exchange 
Act Release No. 34-66029 (Dec. 22, 2011), 76 FR 82005 (Dec. 29, 
2011) (SR-CME-2011-20).
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    The Programs include two separate fee programs. The first is a 
volume incentive program that is designed to incentivize participants 
to increase their volume in CME OTC IRS through predetermined fee 
discounts for transaction fees and maintenance fees. The volume 
incentive program may include up to five participants (including CME 
members and/or non-members) designated by CME based on factors 
including potential participants' experience in IRS activities and 
historical volumes in IRS with CME. The second program will feature 
certain predetermined discounts for transaction fees. Eligible 
participants will include participants selected by CME based on their 
ability to provide liquidity, client clearing and risk management 
expertise, as well as their willingness to assist CME in designing and 
testing its IRS clearing offering.
    Pursuant to Commodity Futures Trading Commission (``CFTC'') 
regulations, the Programs have been interpreted by CME as an incentive 
program subject to CFTC Regulation 40.6(d), requiring a self 
certification filing to the CFTC, although no change to text of the CME 
rulebook is required. CME notes that it has already certified the 
proposed changes that are the subject of this filing to its primary 
regulator, the CFTC. The text of the CME proposed changes is attached.
(b) Statutory Basis
    The proposed changes establish or change a member due, fee or other 
charge imposed by CME under Section 19(b)(3)(A)(ii) of the Exchange Act 
and Rule 19b-4(f)(2) thereunder. CME believes that the proposed changes 
are consistent with the requirements of the Securities Exchange Act of 
1934 and the rules and regulations thereunder and, in particular, to 
Section 17A(b)(3)(iv), in that it provides for the equitable allocation 
of reasonable dues, fees and other charges among participants. CME 
notes that it operates in a highly competitive market in which market 
participants can readily direct business to competing venues.

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.

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 was filed pursuant to Section 19(b)(3)(A) 
of the Act and paragraph (f)(2) of Rule 19b-4 and became effective on 
filing. At any time within sixty days of the filing of such 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 may be submitted by using 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-2011-22 on the subject line.
     Paper comments should be sent in triplicate to Elizabeth 
M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-CME-2011-22. 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

[[Page 1777]]

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 such 
filing also will be available for inspection and copying at the 
principal office of CME. 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-2011-22 and 
should be submitted on or before February 1, 2012.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-305 Filed 1-10-12; 8:45 am]
BILLING CODE 8011-01-P