Document ID: SEC-2014-1936-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Mercantile Exchange, Inc.
Posted Date: 2014-11-20T05:00Z

[Federal Register Volume 79, Number 224 (Thursday, November 20, 2014)]
[Notices]
[Pages 69166-69168]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-27452]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73607; File No. SR-CME-2014-43]

Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change in 
Connection With the Acceptance of USD Malaysian Palm Olein Calendar 
(Cleared Only) Contracts for Clearing

November 14, 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 November 6, 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.
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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)(4)(ii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CME is proposing rule changes that are limited to its business as a 
derivatives clearing organization (``DCO''). More specifically, the 
proposed rule change would add rules related to the acceptance of the 
USD Malaysian Palm Olein Calendar (Cleared Only) Contract for clearing.

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 DCO with the Commodity Futures Trading 
Commission (``CFTC'') and offers clearing services for many different 
futures and swaps products. The proposed rule change that is the 
subject of this filing is limited to CME's business as a DCO offering 
clearing services for CFTC-regulated swaps products. More specifically, 
the proposed rule change is related to CME's initial listing of the USD 
Malaysian Palm Olein Calendar Swap (Cleared Only) for clearing.

[[Page 69167]]

    The USD Malaysian Palm Olein Calendar Swaps would fit within a 
subset of one or more groups, categories, types, or classes of CFTC-
regulated swaps that CME already accepts for clearing. For example, CME 
currently accepts for clearing physical-commodity calendar swaps that 
financially-settle to a commercially-acceptable, publicly-accessible 
and timely disseminated price series including the following: CME USD 
Malaysian Crude Palm Oil Calendar Swap (CPC); CBOT Wheat Calendar Swap 
(WCS); CBOT Corn Calendar Swap (CCS); CBOT Soybean Calendar Swap (SNS); 
and the CBOT KC HRW Wheat Calendar Swap (KWS).
    The proposed new rules include a new product Chapter 204B in the 
CME rulebook. New rule 204B00 would specify that the USD Malaysian Palm 
Olein Calendar Swaps listed by CME would be for clearing-only, would be 
available only to ``eligible contract participants'' as defined in 
Section 1a(18) of the Commodity Exchange Act, and would be subject to 
the applicable provisions of the CME rulebook. New Rule 204B01 would 
lay out the various contract specifications of the USD Malaysian Palm 
Olein Calendar Swaps including, the unit of clearing, hours for 
clearing entry, minimum price increments, months cleared, position 
limits, last day of clearing, and liquidation during the delivery 
month. The proposed contracts would be liquidated by cash settlement as 
set forth in proposed Rule 204B02. Clearing members holding open 
positions in USD Malaysian Palm Olein Calendar Swaps at the time of 
termination of clearing would be required to make payment to and 
receive payment through CME in accordance with normal variation 
settlement procedures based on a settlement price equal to the final 
settlement price (as described in Rule 204B03.). As specified in 
proposed Rule 204B03, the final settlement price for the contracts 
would be determined through use of a third party service provider, 
i.e., the cumulative average of each Thomson Reuters ``Malaysia RBD 
Palm Olein'' third forward month closing time assessment for each 
business day of the contract month. Rule 204B04 specifies that daily 
settlement prices shall be generated each business day the CME is open 
using the most recent available Thomson Reuters values. Under proposed 
rule 204B05, the final settlement day for the proposed contracts would 
be on the last CME business day of the swap contract month. Under 
proposed rule 204B06, all disputes between interested parties may be 
settled by CME arbitration. Finally, proposed new rule 204B07 sets out 
CME's disclaimer regarding limitations of liability.
    The changes that are described in this filing are limited to 
listing the new USD Malaysian Palm Olein Calendar Swaps. The proposed 
changes are therefore limited to CME's business as a DCO clearing 
products under the exclusive jurisdiction of the CFTC and do not impact 
CME's security-based swap clearing business in any way. The changes 
will be effective on filing. CME notes that it has also certified the 
proposed rule change that is the subject of this filing to its primary 
regulator, the Commodity Futures Trading Commission (``CFTC''), in a 
separate filing, CME Submission No. 14-254. The text of the CME 
proposed rule amendments is attached, with additions underlined and 
deletions in brackets.
    CME believes the proposed rule change is consistent with the 
requirements of the Act including Section 17A of the Act.\5\ CME is 
proposing the amendments to facilitate the listing of a new clearing-
only physical-commodity calendar swap that financially-settles to a 
commercially-acceptable, publicly-accessible and timely disseminated 
price series. The addition of this new derivative product is designed 
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 Act.\6\
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    \5\ 15 U.S.C. 78q-1.
    \6\ 15 U.S.C. 78q-1(b)(3)(F).
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    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 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 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 Act \7\ and are properly filed under Section 
19(b)(3)(A) \8\ and Rule 19b-4(f)(4)(ii) \9\ thereunder.
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    \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).
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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 
CME would simply facilitate the listing of a new clearing-only 
physical-commodity calendar swap. Further, the changes are limited to 
CME's derivatives clearing business and, as such, do not affect the 
security-based 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) \10\ of the Act and Rule 19b-4(f)(4)(ii) \11\ 
thereunder. At any time within 60 days of the filing of the

[[Page 69168]]

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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(4)(ii).
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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-2014-43 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-2014-43. 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 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-2014-43 
and should be submitted on or before December 11, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27452 Filed 11-19-14; 8:45 am]
BILLING CODE 8011-01-P