Securities Law & Instruments


Headnote

Chicago Mercantile Exchange Inc. – OSC Rule 91-507 – derivatives trade reporting obligations – applicant seeking relief from requirements to publicly disseminate transaction level data 48 hours from the execution time stamp – relief granted, subject to conditions.

DIRECTOR’S EXEMPTION

IN THE MATTER OF
CHICAGO MERCANTILE EXCHANGE INC.

DECISION
(Section 42 of Ontario Securities Commission Rule 91-507 Trade Repositories and Derivatives Data Reporting)

                WHEREAS Chicago Mercantile Exchange Inc. (the “Applicant”) is a designated trade repository pursuant to an order under section 21.2.2 of the Securities Act (Ontario) (the “Act”) dated September 19, 2014 (the “Designation Order”) and therefore the Applicant, as a designated trade repository, is subject to obligations under Ontario Securities Commission (“OSC” or the “Commission”) Rule 91-507 Trade Repositories and Derivatives Data Reporting (“OSC Rule 91-507”);

                AND UPON the application of the Applicant to the Director (as such term is defined in section 1 of the Act) for an order pursuant to Section 42 of OSC Rule 91-507 exempting the Applicant from the requirements under subsection 39(3) and item 7 of Appendix C of OSC Rule 91-507 for a designated trade repository to publicly disseminate prescribed transaction-level data for certain derivatives, 48 hours after the time and date represented by the execution timestamp field of the transaction (the “48-Hour Dissemination Requirement”);

                AND UPON the Applicant having represented to the Director that:

1.             the Applicant is a corporation organized under the laws of the State of Delaware in the United States and is a wholly owned subsidiary of CME Group Inc. (“CMEG”);

2.             CMEG is a publicly traded for-profit corporation organized under the laws of Delaware and listed for trading on the NASDAQ Global Select Market and is the ultimate parent company of the Applicant;

3.             the Applicant provides trade repository services in Ontario pursuant to the Designation Order and is subject to requirements and obligations applicable to designated trade repositories under OSC Rule 91-507 and to the terms and conditions that are set out in Schedule "A" of the Designation Order;

4.             the Applicant accepts derivatives transaction data required to be reported under the OSC Rule 91-507 for credit, interest rate, commodity and foreign exchange asset classes;

5.             as prescribed in Appendix C to OSC Rule 91-507, the Applicant is required to publicly disseminate transaction-level data for certain derivatives (the “Disseminated Transactions”) in compliance with the 48-Hour Dissemination Requirement;

6.             in order to publicly disseminate the Disseminated Transactions and comply with the 48-Hour Dissemination Requirement, the Applicant relies on technology infrastructure and resources that are shared across the whole of its organization (the “Applicant’s Systems”); 

7.             the Applicant’s Systems, including the technology infrastructure and resources used to publicly disseminate the Disseminated Transactions, require certain periods of non-operation or downtime (“System Downtime”) to comply with system and operational risk control requirements including the requirements set out in section 21 of OSC Rule 91-507 as well as to allow for regular maintenance, major system upgrades, database patches and emergency fixes, all which are critical for the safe, secure and efficient operation of the Applicant’s trade repository services;

8.             there are twenty-nine consecutive hours of System Downtime scheduled each week, starting at 1:00 am ET on Saturday until 6:00 am ET on Sunday, affecting the Applicant’s Systems;

9.             System Downtime can also occur on an ad hoc basis; and

10.          as a consequence of both scheduled and ad hoc System Downtime, the Applicant is from time to time unable to comply with the 48-Hour Dissemination Requirement for certain Disseminated Transactions;

                AND UPON the Director being satisfied that exempting the Applicant from the 48-Hour Dissemination Requirement would not be prejudicial to the public interest;

                IT IS THE DECISION of the Director that pursuant to section 42 of OSC Rule 91-507, the Applicant is exempted from the 48-Hour Dissemination Requirement when the Applicant is prevented from publicly disseminating a Disseminated Transaction in accordance with the 48-Hour Dissemination Requirement as a direct consequence of System Downtime (the “Exemption”);

                PROVIDED THAT:

1.             the Applicant publicly disseminates each Disseminated Transaction that was not publicly disseminated in accordance with the 48-Hour Dissemination Requirement as a direct consequence of System Downtime as soon as practicable following the conclusion of the period of System Downtime that prevented public dissemination of the Disseminated Transaction in accordance with the 48-Hour Dissemination Requirement;

2.             beginning in 2018, on the last business day in March of each year, the Applicant provides the Director with an annual written report:

(a)           detailing, on a monthly basis for the preceding 12 months and segregated by asset class, (i) the number of Disseminated Trades that have been delayed from being publicly disseminated in accordance with the 48-Hour Dissemination Requirement and (ii) the average length of the delays that resulted from System Downtime; and

(b)           describing how the Applicant is working to optimize the Applicant’s Systems and reduce System Downtime including a description of the impact of any changes made to the Applicant’s Systems on  the number of Disseminated Transactions delayed from being publicly disseminated in accordance with the 48-Hour Dissemination Requirement as a result of System Downtime; and

3.             the Exemption expires five years after the date of this decision.

                DATED February 9, 2017

“Kevin Fine”
Director, Derivatives Branch
Ontario Securities Commission