[Federal Register Volume 59, Number 19 (Friday, January 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1889]
[Federal Register: January 28, 1994]
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COMMODITY FUTURES TRADING COMMISSION
Common Banking and Settlement System of the Chicago Mercantile
Exchange and the Board of Trade Clearing Corporation
The Chicago Mercantile Exchange (``CME'') and the Board of Trade
Clearing Corporation (``BOTCC'') have submitted to the Commodity
Futures Trading Commission (``Commission'') a proposal to establish a
common banking and settlement system, pursuant to Section 5a(a)(12)(A)
of the Commodity Exchange Act (``Act''), 7 U.S.C. 7a(a)(12)(A), and
Commission Regulation 1.41(b), 17 CFR 1.41(b) (CME and BOTCC together
being the ``participating clearing organizations''). The proposal
requires that participants be limited to entities that are themselves
members of both the CME and BOTCC (``joint clearing members''), and
provides for computing and transferring performance bond margin,
settlement variation, and option premiums in respect of commodity
futures and options contracts of such joint clearing members. The
proposal also includes procedures governing the distribution of excess
performance bond margin deposits between the CME and BOTCC in certain
cases of suspension or expulsion of joint clearing members.
Whereas, the common banking and settlement procedures provide for
performance bond margin deposited by joint clearing members to be held
in the joint names of the participating clearing organizations at one
or more depositories;
Whereas, the common banking and settlement procedures provide for
the netting of daily settlement variation and option premium payments
that joint clearing members pay to or receive from the participating
clearing organizations;
Whereas, the common banking and settlement procedures can be used
to reallocate cash performance bond margin deposits of joint clearing
members between the participating clearing organizations;
Whereas, it is not intended that the common banking and settlement
procedures result in a novation of the joint clearing members'
obligations to either of the participating clearing organizations;
Whereas, in the event of the suspension or expulsion of a joint
clearing member, the common banking and settlement procedures prohibit
any excess performance bond margin, or proceeds thereof, attributable
to customer origin positions from being transferred between the CME and
the BOTCC to satisfy any deficit or unsatisfied settlement obligations
attributable to proprietary origin positions;
Whereas, by letter dated September 29, 1993, the participating
clearing organizations acknowledge that, in the event of the suspension
or expulsion of a joint clearing member, the common banking and
settlement procedures would permit the transfer of any excess
performance bond margin, or proceeds thereof, between the CME and the
BOTCC only if there was no shortfall in the funds required to meet the
joint clearing member's customer segregated funds requirements for all
of its customers, and, by letter dated December 13, 1993, the
participating clearing organizations acknowledge that the proposed
agreement among the joint clearing members and the participating
clearing organizations is expressly subject to the terms of this Order;
Whereas, by letter dated December 9, 1993, the participating
clearing organizations have represented that, before implementation of
the proposal, the agreement between the participating clearing
organizations will be amended to make clear that, in the event of a
default by a joint clearing member, the clearing organization at which
the default occurred will transfer funds to the other clearing
organization in accordance with its respective gross payment
obligations if there is a deficit in payment flows to the other
clearing organization resulting from the netting of payment obligations
pursuant to the common banking and settlement procedures, and will
otherwise satisfy its gross payment obligations to non-defaulting joint
clearing members in accordance with the routine settlement schedule;
Whereas, the proposal requires that participants be limited to
entities that are themselves members of both the CME and BOTCC and does
not permit participation by affiliated entities;
Whereas, the Commission has reviewed the common banking and
settlement proposal, the proposed agreement between the participating
clearing organizations, the proposed agreement among the joint clearing
members and the participating clearing organizations, the
representations of the participating clearing organizations as to the
operation of the common banking and settlement system, and such other
documents as constitute the complete record in this matter
(``Record'');
Now Therefore, based on the Record in this matter, and provided
that the common banking and settlement proposal submitted by the CME
and the BOTCC is implemented consistently with the representations and
agreements cited herein;
It is Hereby Ordered, Pursuant to Sections 4d and 20 of the Act, 7
U.S.C. 6d and 24, and consistent with the Bankruptcy Code, that, in the
event of the suspension or expulsion of a joint clearing member by both
the CME and the BOTCC, the clearing organization to which performance
bond margin has been allocated may transfer any excess performance bond
margin, or proceeds thereof, to the other clearing organization only if
there is no shortfall in the funds required to meet the joint clearing
member's customer segregated funds requirements for all of its
customers for whom segregation must be maintained.
It is Further Ordered, Pursuant to Section 5a(a)(12)(A) of the Act
that the CME and the BOTCC's request for Commission approval of their
proposal to establish a common banking and settlement system, including
approval of proposed CME Rule 802, proposed amendments to CME Rule 832,
proposed BOTCC Bylaws 118, 119, and 517, and proposed amendments to
BOTCC Bylaws 503, 508, 604, and 804 is hereby granted.
Issued in Washington, DC, this 21st day of December, 1993.
By the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 94-1889 Filed 1-27-94; 8:45 am]
BILLING CODE 6351-01-P
