Document ID: SEC-2014-1781-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Mercantile Exchange, Inc.
Posted Date: 2014-10-22T04:00Z

[Federal Register Volume 79, Number 204 (Wednesday, October 22, 2014)]
[Notices]
[Pages 63194-63196]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-25076]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73370; File No. SR-CME-2014-41]

Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
CME Rule 816

October 16, 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 7, 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CME is proposing to make certain changes to CME Rule 816 which 
governs guaranty fund deposits. More specifically, the proposed changes 
would amend CME Rule 816 (Guaranty Fund Deposit) to establish CME risk 
management staff as responsible for determining one of the two 
alternative minimum amounts for clearing members' Base Guaranty Fund 
deposits. The proposed changes would only impact the CME Base Guaranty 
Fund and would not impact the CME CDS Guaranty Fund.

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 CME Rule 816 which governs guaranty fund deposits. The proposed 
changes would only impact the CME Base Guaranty Fund and would not 
impact the CME CDS Guaranty Fund.
    More specifically, the proposed changes would amend CME Rule 816 
(Guaranty Fund Deposit) to establish CME risk management staff as 
responsible for determining one of the two alternative minimum amounts 
for clearing members' Base Guaranty Fund deposits. Under current Rule 
816, the minimum Base Guaranty Fund deposit of each clearing member is 
calculated as the greater of (a) a minimum amount specified by the 
Clearing House Risk Committee (``CHRC'') or (b) the clearing member's 
proportionate share of the ``Aggregate Guaranty Fund Deposit,'' an 
amount which is also determined by the CHRC.
    Revised Rule 816 would empower CME risk management staff rather 
than the CHRC to determine the Aggregate Guaranty Fund Deposit, thus 
enabling risk management staff to adjust the minimum Base Guaranty Fund 
deposit as necessary to remain in compliance with CME's financial 
resource requirements under applicable Commodity Futures Trading 
Commission (``CFTC'') regulations. The

[[Page 63195]]

`greater of' measure established in Rule 816 will remain unchanged, 
meaning risk management staff may not establish a clearing member's 
minimum Base Guaranty Fund deposit lower than the minimum amount 
specified by the CHRC.
    Additionally, a paragraph referencing Kansas City Board of Trade 
(``KCBT'') clearing permit holders is being removed from CME Rule 816 
as the permit holders' status has expired pursuant to the terms of the 
KCBT-Chicago Board of Trade merger agreement.
    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. The proposed rule change would become effective 
immediately but would be operationalized on October 17, 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 enhance CME's ability to manage 
risks posed by its clearing members by enabling clearing house staff to 
require a higher minimum Base Guaranty Fund deposit amount as needed. 
Allowing staff rather than the CHRC to determine the Aggregate Guaranty 
Fund Deposit amount provides CME with additional risk management 
flexibility. For these reasons, the proposed changes 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\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78q-1.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    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 
over-the-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 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.
    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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 
would enhance CME's ability to manage risks posed by its clearing 
members by enabling clearing house staff to require a higher minimum 
Base Guaranty Fund deposit amount as needed. Allowing staff rather than 
the CHRC to determine the Aggregate Guaranty Fund Deposit amount 
provides CME with additional risk management flexibility. Further, the 
proposed changes 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(4)(ii).
---------------------------------------------------------------------------

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-2014-41 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-2014-41. 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

[[Page 63196]]

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/market-regulation/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-2014-41 
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\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-25076 Filed 10-21-14; 8:45 am]
BILLING CODE 8011-01-P