2014-20210. Self-Regulatory Organizations; Chicago Mercantile Exchange Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 802.H

August 20, 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 August 7, 2014, 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 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 filing a proposed rule change that is limited to its business as a derivatives clearing organization. More specifically, the proposed rule change contains certain clarifying amendments to CME Rule 802.H.

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 and currently offers clearing services for many different futures and swaps products. With this filing, CME proposes to make rule changes that apply to CME's Base Guaranty Fund. More specifically, the proposed changes would make clarifying amendments to current CME Rule 802.H (Base Cooling Off Period and Multiple Defaults).

CME previously amended CME Rule 802 on June 19, 2012 to establish a fixed $100 million amount for CME's contribution to the financial safeguards package associated with its Base Guaranty Fund (“Base CME Contribution”). That amendment inadvertently excluded the express language limiting CME's corporate contribution to the Base financial safeguards package during the Base Cooling-Off Period, similar to CME's structure for the CDS and IRS guaranty funds, which limit CME's obligation during the respective cooling off periods applicable to CDS and IRS. CME is now proposing to add the clarifying language into Rule 802.H to harmonize the relevant rule text across the Base, IRS and CDS product classes and to provide clarity to the marketplace regarding CME's obligation to replenish its Base CME Contribution during a Base Cooling-Off Period.

The proposed rule change that is described in this filing is limited to CME's Base Guaranty Fund and therefore is limited to its business as a derivatives clearing organization clearing products under the exclusive jurisdiction of the Commodity Futures Trading Commission (“CFTC”) and does not materially impact CME's security-based swap clearing business in any way. The proposed changes would become effective immediately but would be operationalized on August 20, 2014. CME notes that it has also submitted the proposed rule change that is the subject of this filing to its primary regulator, the CFTC, in CME Submission 14-277.

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 amend rule text that applies to CME's Base Guaranty Fund to harmonize the relevant rule text across CME's Base, IRS and CDS product classes. The proposed changes would provide clarity to the marketplace regarding CME's obligation to replenish its Base CME Contribution during a Base Cooling-Off Period. Because the proposed amendments would clarify the operation of CME's rules and default management procedures in connection with its Base Guaranty Fund, the changes should therefore 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]

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 swaps 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 CME's Base Guaranty Fund, 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.

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 simply provide clarity to the marketplace regarding CME's obligation to replenish its Base CME Contribution during a Base Cooling-Off Period. Further, the changes are limited to CME's Base Guaranty Fund and, as such, 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.

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 [e-mail]. Please include File No. SR-CME-2014-32 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-2014-32. 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 a.m. and 3 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/​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-2014-32 and should be submitted on or before September 16, 2014.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.^[12]

Kevin M. O'Neill,

Deputy Secretary.

Footnotes

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).

5.  15 U.S.C. 78q-1.

6.  15 U.S.C. 78q-1(b)(3)(F).

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).

10.  15 U.S.C. 78s(b)(3)(A).

11.  17 CFR 240.19b-4(f)(4)(ii).

12.  17 CFR 200.30-3(a)(12).