[Federal Register: July 29, 2009 (Volume 74, Number 144)]
[Notices]
[Page 37740-37748]
[DOCID:fr29jy09-132]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60373; File No. S7-17-09]

Order Granting Temporary Exemptions Under the Securities Exchange
Act of 1934 in Connection With Request on Behalf of Eurex Clearing AG
Related to Central Clearing of Credit Default Swaps, and Request for
Comments

July 23, 2009.

I. Introduction

    In response to the recent turmoil in the financial markets, the
Securities and Exchange Commission (``Commission'') has taken multiple
actions to protect investors and ensure the integrity of the nation's
securities markets, including actions \1\ designed to address concerns
related to the market in credit default swaps (``CDS'').\2\ The over-
the-counter

(``OTC'') market for CDS has been a source of concern to us and other
financial regulators, and we have recognized that facilitating the
establishment of central counterparties (``CCPs'') for CDS can play an
important role in reducing the counterparty risks inherent in the CDS
market, and thereby can help mitigate potential systemic impacts.\3\
Thus, taking action to help foster the prompt development of CCPs,
including granting conditional exemptions from certain provisions of
the federal securities laws, is in the public interest.
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    \1\ See generally Securities Exchange Act Release No. 59578
(Mar. 13, 2009), 74 FR 11781 (Mar. 19, 2009) (temporary exemption in
connection with CDS clearing by Chicago Mercantile Exchange Inc.),
Securities Exchange Act Release No. 59527 (Mar. 6, 2009), 74 FR
10791 (Mar. 12, 2009) (temporary exemption in connection with CDS
clearing by ICE US Trust LLC), Securities Exchange Act Release No.
59164 (Dec. 24, 2008), 74 FR 139 (Jan. 2, 2009) (temporary exemption
in connection with CDS clearing by LIFFE A&M and LCH.Clearnet Ltd.)
and other Commission actions discussed therein.
    \2\ A CDS is a bilateral contract between two parties, known as
counterparties. The value of this financial contract is based on
underlying obligations of a single entity or on a particular
security or other debt obligation, or an index of several such
entities, securities, or obligations. The obligation of a seller
under a CDS to make payments under a CDS contract is triggered by a
default or other credit event as to such entity or entities or such
security or securities. Investors may use CDS for a variety of
reasons, including to offset or insure against risk in their fixed-
income portfolios, to take positions in bonds or in segments of the
debt market as represented by an index, or to capitalize on the
volatility in credit spreads during times of economic uncertainty.
In recent years, CDS market volumes have rapidly increased. See
Semiannual OTC derivatives statistics at end-December 2008, Bank for
International Settlement (``BIS''), available at http://www.bis.org/
statistics/otcder/dt1920a.pdf.
    This growth has coincided with a significant rise in the types
and number of entities participating in the CDS market. CDS were
initially created to meet the demand of banking institutions looking
to hedge and diversify the credit risk attendant with their lending
activities. However, financial institutions such as insurance
companies, pension funds, securities firms, and hedge funds have
entered the CDS market.
    \3\ See generally actions referenced in note 1, supra.
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    The Commission's authority over this OTC market for CDS is limited.
Specifically, Section 3A of the Securities Exchange Act of 1934
(``Exchange Act'') limits the Commission's authority over swap
agreements, as defined in Section 206A of the Gramm-Leach-Bliley
Act.\4\ For those CDS that are swap agreements, the exclusion from the
definition of security in Section 3A of the Exchange Act, and related
provisions, will continue to apply. The Commission's action today does
not affect these CDS, and this Order does not apply to them. For those
CDS that are not swap agreements (``non-excluded CDS''), the
Commission's action today provides conditional exemptions from certain
requirements of the Exchange Act.
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    \4\ 15 U.S.C. 78c-1. Section 3A excludes both a non-security-
based and a security-based swap agreement from the definition of
``security'' under Section 3(a)(10) of the Exchange Act, 15 U.S.C.
78c(a)(10). Section 206A of the Gramm-Leach-Bliley Act defines a
``swap agreement'' as ``any agreement, contract, or transaction
between eligible contract participants (as defined in section 1a(12)
of the Commodity Exchange Act * * *) * * * the material terms of
which (other than price and quantity) are subject to individual
negotiation.'' 15 U.S.C. 78c note.
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    The Commission believes that using well-regulated CCPs to clear
transactions in CDS would provide a number of benefits, by helping to
promote efficiency and reduce risk in the CDS market and among its
participants, requiring maintenance of records of CDS transactions that
would aid the Commission's efforts to prevent and detect fraud and
other abusive market practices, addressing concerns about counterparty
risk--through the novation process--by substituting the
creditworthiness and liquidity of the CCP for the creditworthiness and
liquidity of the counterparties to a CDS,\5\ contributing generally to
the goal of market stability, and reducing CDS risks through
multilateral netting of trades.\6\
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    \5\ ``Novation'' is a ``process through which the original
obligation between a buyer and seller is discharged through the
substitution of the CCP as seller to buyer and buyer to seller,
creating two new contracts.'' Committee on Payment and Settlement
Systems, Technical Committee of the International Organization of
Securities Commissioners, Recommendations for Central Counterparties
(November 2004) at 66. Through novation, the CCP assumes
counterparty risk.
    \6\ See generally actions referenced in note 1, supra.
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    In this context, Eurex Clearing AG (``Eurex'') has requested that
the Commission grant exemptions from certain requirements under the
Exchange Act with respect to its proposed activities in clearing and
settling certain CDS, as well as the proposed activities of certain
other persons, as described below.\7\
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    \7\ See Letter from Paul Architzel, Alston & Bird LLP, to
Elizabeth M. Murphy, Secretary, Commission, July 23, 2009.
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    Based on the facts presented and the representations made in the
request on behalf of Eurex,\8\ and for the reasons discussed in this
Order, the Commission temporarily is exempting, subject to certain
conditions, Eurex from the requirement to register as a clearing agency
under Section 17A of the Exchange Act solely to perform the functions
of a clearing agency for certain non-excluded CDS transactions. The
Commission also temporarily is exempting eligible contract participants
and others from certain Exchange Act requirements with respect to non-
excluded CDS cleared by Eurex.\9\ The Commission's exemptions are
temporary and will expire on April 23, 2010.\10\
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    \8\ See id. The exemptions we are granting today are based on
representations made in the request on behalf of Eurex. We
recognize, however, that there could be legal uncertainty in the
event that one or more of the underlying representations were to
become inaccurate. Accordingly, if any of these exemptions were to
become unavailable by reason of an underlying representation no
longer being materially accurate, the legal status of existing open
positions in non-excluded CDS associated with persons subject to
those unavailable exemptions would remain unchanged, but no new
positions could be established pursuant to the exemptions until all
of the underlying representations were again accurate.
    \9\ This Order, however, does not provide exemptive relief in
connection with Eurex's clearing of certain customer CDS
transactions; specifically, customer CDS transactions cleared
through U.S. clearing members (other than registered broker-
dealers), and CDS transactions by U.S. customers cleared through
non-U.S. clearing members. The Commission is considering the issues
raised by that type of customer clearing activity--particularly with
respect to the segregation of customer funds and securities that
customers post with members as collateral, and the protection and
transfer of those customer assets in the event of a member's
insolvency. The Commission is working toward the goal of being able
to provide exemptive relief to facilitate the central clearing, by
Eurex, of these customer CDS transactions.
    \10\ To facilitate the operation of one or more CCPs for the CDS
market, the Commission has also approved interim final temporary
rules providing exemptions under the Securities Act of 1933 and the
Exchange Act for non-excluded CDS. See Securities Act Release No.
8999 (Jan. 14, 2009), 74 FR 3967 (Jan. 22, 2009).
     Further, the Commission has provided temporary exemptions in
connection with Sections 5 and 6 of the Exchange Act for
transactions in non-excluded CDS. See Securities Exchange Act
Release No. 59165 (Dec. 24, 2008), 74 FR 133 (Jan. 2, 2009).
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II. Discussion

A. Description of Eurex's Proposal

    The exemptive request on behalf of Eurex describes how its proposed
arrangement for central clearing of CDS would operate, and makes
representations about the safeguards associated with those
arrangements, as described below:
1. Eurex Organization
    Eurex is a stock corporation formed and incorporated under the laws
of Germany. It is a wholly-owned subsidiary of Eurex Frankfurt AG
(``Eurex Frankfurt''), a German stock corporation that is itself
wholly-owned by Eurex Z[uuml]rich AG (``Eurex Z[uuml]rich''), a Swiss
stock corporation. Eurex Z[uuml]rich has two 50 percent parents:
Deutsche Borse AG (``DBAG''), a German stock corporation listed on the
Frankfurt Stock Exchange, and the SIX Swiss Exchange (``SIX'').
    Eurex is regulated as a CCP under the German Banking Act (``Banking
Act''), which explicitly treats the provision of central counterparty
services as a banking activity. Operation of a banking institution
requires prior written authorization from the German Federal Financial
Supervisory Authority (``BaFin''). On an annual basis, BaFin requires
Eurex to undergo an audit that covers financial requirements and risk
management.

    Eurex received permission to act as a CCP from BaFin on December
12, 2006. Eurex is supervised by BaFin cooperatively with the Deutsche
Bundesbank, the German Federal Bank. BaFin is Eurex's principal
regulator and is responsible for all sovereign measures, including
licensing, monitoring, and closing individual institutions. BaFin also
can issue general instructions, including principles and regulations
that establish rules for carrying out banking business, providing
financial services, and limiting risk. The Deutsche Bundesbank is
responsible for current, ongoing oversight and supervision with respect
to the safety and soundness of the institution's operations. In the
U.K., Eurex is a Recognised Overseas Clearing House (``ROCH''), subject
to regulation by the U.K. Financial Services Authority.
2. Eurex Central Counterparty Services for CDS
    Eurex's CDS clearance and settlement services will accept for
clearing bilateral CDS transactions within the product scope of its
rules and that are recorded in the Depository Trust & Clearing
Corporation's (``DTCC'') Deriv/SERV Trade Information Warehouse
(``TIW'').\11\ Eurex will act as a central counterparty for entities
that are CDS clearing members of Eurex in connection with clearing of
CDS transactions by assuming, through novation, the obligations of all
eligible CDS transactions accepted by it for clearing and collecting
margin and other credit support from CDS clearing members to
collateralize their obligations to Eurex. Eurex's trade submission
process is designed to ensure that it maintains a matched book of
offsetting CDS contracts.
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    \11\ Eurex will offer CDS clearance and settlement services on
the iTraxx Europe (Main), iTraxx HiVol, and iTraxx Europe Crossover
CDS Indices. It will also offer CDS clearance and settlement
services on single-name reference entities that are the constituents
of those indices. Once it has offered clearance and settlement
services for CDS transactions on the iTraxx indices and their
constituents, Eurex will accept bilateral transactions on the CDX
Index. Eventually, depending on market demand, Eurex may offer
clearance and settlement services on single-name reference entities
on the CDX constituents.
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    Operationally, for a transaction to clear through Eurex, it must
first be recorded in Deriv/SERV's Trade Information Warehouse
(``TIW''). Eurex will leverage the Deriv/SERV infrastructure in
operating its CDS clearing services by establishing an interface to
DTCC's Deriv/SERV TIW to capture matched and confirmed trades.\12\
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    \12\ Major market participants frequently use the Deriv/SERV
comparison and confirmation service of DTCC when documenting their
CDS transactions. This service creates electronic records of
transaction terms and counterparties. As part of this service,
market participants separately submit the terms of a CDS transaction
to Deriv/SERV in electronic form. Paired submissions are compared to
verify that their terms match in all required respects. If a match
is confirmed, the parties receive an electronic confirmation of the
submitted transaction. All submitted transactions are recorded in
the Deriv/SERV TIW, which serves as the primary registry for
submitted transactions.
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    Under Eurex rules, each bilateral CDS contract between CDS clearing
members that is submitted to and accepted by Eurex for clearing will be
novated. At the time of novation, each bilateral CDS contract submitted
to Eurex will be terminated and replaced by two CDS contracts between
Eurex and each of the original counterparties. As central counterparty
to each novated CDS contract, Eurex will be able to net offsetting
positions on a multilateral basis, which will significantly reduce the
outstanding notional amount of each CDS clearing member's CDS
portfolio.
3. Eurex Risk Management
    Eurex represents that it will maintain strict, objectively
determined, risk-based margin and clearing fund requirements, which
will be subject to ongoing regulation and oversight by the BaFin. These
requirements will also be consistent with clearing industry practice
and international standards established for central counterparties as
articulated in the Committee on Payment and Settlement Systems/
International Organization of Securities Commissions (``CPSS-IOSCO'')
Recommendations for Central Counterparties (``RCCP'').\13\ Eurex has a
multilevel system to mitigate counterparty risk. The amount of margin
and guaranty fund required of each Eurex clearing member will be
continuously monitored and periodically adjusted as required to reflect
the size and profile of, and risk associated with, the Eurex clearing
member's cleared CDS transactions (and related market factors). An
initial level of protection is provided by a system of collateral
margining. The margining system is supplemented by (i) mandatory
contributions to the Eurex CDS clearing fund (``CDS Clearing Fund'')
and (ii) reserves maintained by Eurex.
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    \13\ The RCCP was drafted by a joint task force (``Task Force'')
composed of representative members of IOSCO and CPSS and published
in November 2004. The Task Force consisted of securities regulators
and central bankers from 19 countries and the European Union. The
U.S. representatives on the Task Force included staff from the
Commission, the Federal Reserve Board of Governors, and the
Commodity Futures Trading Commission.
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    Eurex will calculate the amount of up-front margin required for
cleared CDS transactions based upon the overall risk exposure of the
CDS clearing member. The CDS clearing member's risk exposure will be
based on five components: (i) Mark-to-market margin, based on the
difference between the net present values based on the CDS spread in
the agreement and the most recently observed market spread; (ii) next
day margin, which accounts for the decay in value in liquidating
outstanding positions of a defaulting member; (iii) liquidity margin,
which takes into account the time necessary to unwind a position that
is in default; (iv) accrued premium margin,\14\ which represents the
daily value of the spread the protection buyer pays to the protection
seller; and (v) credit event margin.\15\ Acceptable margin includes
cash in currencies deemed acceptable by Eurex, currently the U.S.
dollar, the Euro, the Swiss franc, and British pound, and securities in
accordance with existing eligibility criteria.\16\ The total margin
requirement for CDS covers the market risk of the positions held by a
CDS clearing member so that, should a CDS clearing member default,
Eurex would have sufficient margin to cover losses to at least the 99
percent confidence interval without recourse to other financial
resources.
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    \14\ Accrued premium margin is applicable to CDS protection
buyers only.
    \15\ Credit event margin is applicable to CDS protection sellers
only.
    \16\ See http://www.eurexclearing.com/risk/parameters_en.html
for admission criteria and current acceptable collateral.
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    Eurex will also maintain a clearing fund to cover losses arising
from a Eurex CDS clearing member's default on cleared CDS transactions
that exceed the amount of margin held by Eurex from the defaulting
Eurex CDS clearing member. Each Eurex CDS clearing member will be
required to contribute five percent of their margin requirement to the
clearing fund, subject to a minimum of [euro]50 million. Since the size
of the clearing fund will grow in relation to the volume of each CDS
clearing member's open positions, it is designed to maintain adequate,
liquid resources to enable Eurex to handle a default in which the
defaulting CDS clearing member's margin requirement is insufficient to
cover the loss.
    Eurex will also establish rules that mutualize the risk of a Eurex
CDS clearing member default across all Eurex CDS clearing members. In
the event of a Eurex CDS clearing member's default,

Eurex will look to the following resources, in order: (i) The
defaulting CDS clearing member's margin; (ii) the defaulting CDS
clearing member's contribution to the clearing fund; (iii) Eurex's
reserve fund; (iv) non-defaulting CDS clearing members' contribution to
the clearing fund; and (v) a one-time assessment to non-defaulting CDS
clearing members.
    Eurex will conduct routine stress testing periodically throughout
the trading day to ensure that it can meet its obligations as a CCP in
normal and extreme market conditions to a 99.9 percent confidence
level. Each CDS clearing member's risk exposure will be stress-tested
against a comprehensive set of scenarios for all product groups that it
clears. Stress-testing scenarios include the worst historical
observations experienced in each of the product groups as well as
Eurex's expectation on worst potential future price movements.
Potential losses based on stress scenarios are compared to each CDS
clearing member's additional margin. Losses beyond additional margin
are then compared to the clearing fund. As soon as the consumption of
the clearing fund by any CDS clearing member--irrespective of the CDS
clearing member's credit quality--breaches a defined threshold, Eurex
will take risk-mitigating actions. These risk-mitigating actions may be
CDS clearing member-specific, such as imposing extra margin
requirements, or general, such as calling for additional clearing fund
contributions by all CDS clearing members.
4. Member Default
    Following a default by a CDS clearing member, Eurex would follow a
procedure to help ensure an orderly liquidation and unwinding of the
open positions of the defaulting member. First, the defaulting CDS
clearing member is required to close its existing cleared CDS contracts
and notify its customers so that they can transfer their transactions
to another Eurex CDS clearing member. If the Eurex CDS clearing member
does not close or transfer cleared CDS contracts within a reasonable
period of time, Eurex can close the positions on behalf of the
defaulting CDS clearing member. If Eurex is unable to close the cleared
CDS contracts within a reasonable period, it may use a voluntary
auction process to liquidate the defaulting CDS clearing member's
position as a whole or in meaningful amounts. Finally, Eurex may assign
any remaining positions to non-defaulting CDS clearing members on a pro
rata basis.

B. Temporary Conditional Exemption From Clearing Agency Registration
Requirement

    Section 17A of the Exchange Act sets forth the framework for the
regulation and operation of the U.S. clearance and settlement system,
including CCPs. Specifically, Section 17A directs the Commission to use
its authority to promote enumerated Congressional objectives and to
facilitate the development of a national clearance and settlement
system for securities transactions. Absent an exemption, a CCP that
novates trades of non-excluded CDS that are securities and generates
money and settlement obligations for participants is required to
register with the Commission as a clearing agency.
    Section 36 of the Exchange Act authorizes the Commission to
conditionally or unconditionally exempt any person, security, or
transaction, or any class or classes of persons, securities, or
transactions, from any provision or provisions of the Exchange Act or
any rule or regulation thereunder, by rule, regulation, or order, to
the extent that such exemption is necessary or appropriate in the
public interest, and is consistent with the protection of
investors.\17\
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    \17\ 15 U.S.C. 78mm.
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    Accordingly, pursuant to Section 36 of the Exchange Act, the
Commission finds that it is necessary or appropriate in the public
interest and is consistent with the protection of investors to exercise
its authority to grant an exemption until April 23, 2010 to Eurex from
Section 17A of the Exchange Act, solely to perform the functions of a
clearing agency for Cleared CDS,\18\ subject to the conditions
discussed below.
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    \18\ For purposes of this exemption, and the other exemptions
addressed in this Order, ``Cleared CDS'' means a credit default swap
that is submitted (or offered, purchased, or sold on terms providing
for submission) to Eurex, that is offered only to, purchased only
by, and sold only to eligible contract participants (as defined in
Section 1a(12) of the Commodity Exchange Act as in effect on the
date of this Order (other than a person that is an eligible contract
participant under paragraph (C) of that section)), and in which: (1)
The reference entity, the issuer of the reference security, or the
reference security is one of the following: (i) an entity reporting
under the Exchange Act, providing Securities Act Rule 144A(d)(4)
information, or about which financial information is otherwise
publicly available; (ii) a foreign private issuer whose securities
are listed outside the United States and that has its principal
trading market outside the United States; (iii) a foreign sovereign
debt security; (iv) an asset-backed security, as defined in
Regulation AB, issued in a registered transaction with publicly
available distribution reports; or (v) an asset-backed security
issued or guaranteed by the Federal National Mortgage Association
(``Fannie Mae''), the Federal Home Loan Mortgage Corporation
(``Freddie Mac''), or the Government National Mortgage Association
(``Ginnie Mae''); or (2) the reference index is an index in which
80% or more of the index's weighting is comprised of the entities or
securities described in subparagraph (1). As discussed above, the
Commission's action today does not affect CDS that are swap
agreements under Section 206A of the Gramm-Leach-Bliley Act. See
note 4, supra. The Commission's action today also does not affect
activities in CDS that are outside the jurisdiction of the United
States.
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    Our action today balances the aim of facilitating the prompt
establishment of Eurex as a CCP for non-excluded CDS transactions--
which should help reduce systemic risks--with ensuring that important
elements of Commission oversight are applied to the non-excluded CDS
market. In doing so, we are mindful that applying the full scope of the
Exchange Act to transactions involving non-excluded CDS could deter the
prompt establishment of Eurex as a CCP to settle those transactions.
    While we are acting so that the prompt establishment of Eurex as a
CCP for non-excluded CDS will not be delayed by the need to apply the
full scope of Exchange Act Section 17A's requirements that govern
clearing agencies, the relief we are providing is temporary and
conditional. The limited duration of the exemptions will permit the
Commission to continue to gain more direct experience with the non-
excluded CDS market after Eurex becomes operational, giving the
Commission the ability to oversee the development of the centrally
cleared non-excluded CDS market as it evolves. During the exemptive
period, the Commission will closely monitor the impact of the CCPs on
the CDS market. In particular, the Commission will seek to assure
itself that the CCPs do not act in an anticompetitive manner or
indirectly facilitate anticompetitive behavior with respect to fees
charged to members, the dissemination of market data and the access to
clearing services by independent CDS exchanges or CDS trading
platforms. The Commission will take that experience into account in
future actions.
    Moreover, this temporary exemption in part is based on Eurex's
representation that it meets the standards set forth in the CPSS-IOSCO
RCCP report. The RCCP establishes a framework that requires a CCP to
have: (i) the ability to facilitate the prompt and accurate clearance
and settlement of CDS transactions and to safeguard its users' assets;
and (ii) sound risk management, including the ability to appropriately
determine and collect clearing fund and monitor its users' trading.
This framework is generally consistent with the requirements of Section
17A of the Exchange Act.

    In addition, this Order is designed to assure that--as represented
in the request on behalf of Eurex--information will be available to
market participants about the terms of the CDS cleared by Eurex, the
creditworthiness of Eurex or any guarantor, and the clearing and
settlement process for the CDS. Moreover, to be within the definition
of Cleared CDS for purposes of this exemption (as well as the other
exemptions granted through this Order), a CDS may only involve a
reference entity, a reference security, an issuer of a reference
security, or a reference index that satisfies certain conditions
relating to the availability of information about such persons or
securities. For non-excluded CDS that are index-based, the definition
provides that at least 80 percent of the weighting of the index must be
comprised of reference entities, issuers of a reference security, or
reference securities that satisfy the information conditions. The
definition does not prescribe the type of financial information that
must be available or the location of the particular information,
recognizing that eligible contract participants have access to
information about reference entities and reference securities through
multiple sources. The Commission believes, however, that it is
important in the CDS market, as in the market for securities generally,
that parties to transactions should have access to financial
information that would allow them to appropriately evaluate the risks
relating to a particular investment and make more informed investment
decisions.\19\ Such information availability also will assist Eurex and
the buyers and sellers in valuing their Cleared CDS and their
counterparty exposures. As a result of the Commission's actions today,
the Commission believes that information should be available for market
participants to be able to make informed investment decisions, and
value and evaluate their Cleared CDS and their counterparty exposures.
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    \19\ The Commission notes the recommendations of the President's
Working Group on Financial Markets regarding the informational needs
and due diligence responsibilities of investors. See Policy
Statement on Financial Market Developments, The President's Working
Group on Financial Markets, Mar. 13, 2008, available at: http://
www.ustreas.gov/press/releases/reports/pwgpolicystatemktturmoil_
03122008.pdf.
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    This temporary exemption is subject to a number of conditions that
are designed to enable Commission staff to monitor Eurex's clearance
and settlement of CDS transactions, cooperate with BaFin, and help
reduce risk in the CDS market. These conditions require that Eurex: (i)
Make available on its Web site annual audited financial statements;
(ii) preserve records of all activities related to the business of
Eurex as a CCP for Cleared CDS for at least five years (in an easily
accessible place for the first two years); (iii) supply information
relating to its Cleared CDS clearance and settlement services as may be
reasonably requested by the Commission and provide access to the
Commission to conduct on-site inspections of facilities, records and
personnel related to its Cleared CDS clearance and settlement services;
\20\ (iv) notify the Commission about material disciplinary actions
taken against any of its members with respect to Cleared CDS clearance
and settlement services, and about the involuntary termination of the
membership of an entity using those services; (v) notify the Commission
not less than one day prior to implementation or effectiveness of
changes to its rules, procedures, and any other material events
affecting its Cleared CDS clearance and settlement services, or, in
exigent circumstances, as promptly as reasonably practicable under the
circumstances; (vi) provide the Commission with reports prepared by
independent audit personnel that are generated in accordance with risk
assessment of the areas set forth in the Commission's Automation Review
Policy Statements \21\ and its annual audited financial statements
prepared by independent audit personnel; and (vii) report all
significant systems outages to the Commission.
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    \20\ The Commission's inspections shall be subject to
cooperation with BaFin and upon terms and conditions agreed to
between the Commission and BaFin in the bilateral MOU related to
cooperation and information-sharing. ``Memorandum of Understanding
Concerning Consultation, Cooperation, and the Exchange of
Information Related to Market Oversight and the Supervision of
Financial Services Firms,'' Apr. 26, 2007.
    \21\ See Automated Systems of Self-Regulatory Organizations,
Securities Exchange Act Release No. 27445 (Nov. 16, 1989), 54 FR
48703 (Nov. 24, 1989), and Automated Systems of Self-Regulatory
Organizations, Securities Exchange Act Release No. 29185 (May 9,
1991), 56 FR 22490 (May 15, 1991).
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    In addition, this relief is conditioned on Eurex, directly or
indirectly, making available to the public on terms that are fair and
reasonable and not unreasonably discriminatory: (i) all end-of-day
settlement prices and any other prices with respect to Cleared CDS that
Eurex may establish to calculate mark-to-market margin requirements for
Eurex clearing members; and (ii) any other pricing or valuation
information with respect to Cleared CDS as is published or distributed
by Eurex. The Commission believes this is an appropriate condition for
Eurex's exemption from registration as a clearing agency. In Section
11A of the Exchange Act, Congress found that ``[i]t is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure . . . the
availability to brokers, dealers, and investors of information with
respect to quotations for and transactions in securities.'' \22\ The
President's Working Group on Financial Markets has stated that
increased transparency is a policy objective for the over-the-counter
derivatives market,\23\ which includes the market for CDS. The
condition is designed to further this policy objective of both Congress
and the President's Working Group by requiring Eurex to make useful
pricing data available to the public on terms that are fair and
reasonable and not unreasonably discriminatory. Congress adopted these
standards for the distribution of data in Section 11A. The Commission
long has applied the standards in the specific context of securities
market data,\24\ and it anticipates that Eurex will distribute its data
on terms that generally are consistent with the application of these
standards to securities market data. For example, data distributors
generally are required to treat subscribers equally and not grant
special access, fees, or other privileges to favored customers of the
distributor. Similarly, distributors must make their data feeds
reasonably available to data vendors for those subscribers who wish to
receive their data indirectly through a vendor rather than directly
from the distributor. In addition, a distributor's attempt to tie data
products that must be made available to the public with other products
or services of the distributor would be inconsistent with the statutory
requirements.\25\ The Commission

carefully evaluates any type of discrimination with respect to
subscribers and vendors to assess whether there is a reasonable basis
for the discrimination given, among other things, the Exchange Act
objective of promoting price transparency.\26\ Moreover, preventing
unreasonable discrimination is a practical means to promote fair and
reasonable terms for data distribution because distributors are more
likely to act appropriately when the terms applicable to the broader
public also must apply to any favored classes of customers.\27\
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    \22\ 15 U.S.C. 78k-1(a)(1)(C)(iii). See also 15 U.S.C. 78k-
1(a)(1)(D).
    \23\ See President's Working Group on Financial Markets, Policy
Objectives for the OTC Derivatives Market (Nov. 14, 2008), available
at http://www.ustreas.gov/press/releases/reports/
policyobjectives.pdf (``Public reporting of prices, trading volumes
and aggregate open interest should be required to increase market
transparency for participants and the public.''). See also
Department of the Treasury, Financial Regulatory Reform: A New
Foundation, available at http://www.financialstability.gov/docs/
regs/FinalReport_web.pdf, at p.48 (``[m]arket efficiency and price
transparency should be improved in derivatives markets . . . by
requiring development of a system for timely reporting of trades and
prompt dissemination of prices and other trade information.'').
    \24\ See Securities Exchange Act Release No. 42209 (Dec. 9,
1999), 64 FR 70613, 70621-70623 (Dec. 17, 1999) (``Market
Information Concept Release'') (discussion of legal standards
applicable to market data distribution since Section 11A was adopted
in 1975).
    \25\ See Securities Exchange Act Release No. 59039 (Dec. 2,
2008), 73 FR 74770, 74793 (Dec. 9, 2008) (``NYSE ArcaBook Order'')
(``[S]ection 6 and Exchange Act Rule 603(a) require NYSE Arca to
distribute the ArcaBook data on terms that are not tied to other
products in a way that is unfairly discriminatory or
anticompetitive.'').
    \26\ See Market Information Concept Release, 64 FR at 70630
(``The most important objectives for the Commission to consider in
evaluating fees are to assure (1) the wide availability of market
information, (2) the neutrality of fees among markets, vendors,
broker-dealers, and users, (3) the quality of market information--
its integrity, reliability, and accuracy, and (4) fair competition
and equal regulation among markets and broker-dealers.'').
    \27\ See NYSE ArcaBook Order, 73 FR at 74794 (``[T]he proposed
fees for ArcaBook data will apply equally to all professional
subscribers and all non-professional subscribers . . . The fees
therefore do not unreasonably discriminate among types of
subscribers, such as by favoring participants in the NYSE Arca
market or penalizing participants in other markets.'').
---------------------------------------------------------------------------

    As a CCP, Eurex will collect and process information about CDS
transactions, prices, and positions from all of its clearing members.
With this information, a CCP will, among other things, calculate and
disseminate current values for open positions for the purpose of
setting appropriate margin levels. The availability of such information
can improve fairness, efficiency, and competitiveness of the market--
all of which enhance investor protection and facilitate capital
formation. Moreover, with pricing and valuation information relating to
Cleared CDS, market participants would be able to derive information
about underlying securities and indexes. This may improve the
efficiency and effectiveness of the securities markets by allowing
investors to better understand credit conditions generally.

C. Temporary General Exemption for Eurex and Certain Eligible Contract
Participants

    Applying the full panoply of Exchange Act requirements to
participants in transactions in non-excluded CDS likely would deter
some participants from using CCPs to clear CDS transactions. At the
same time, it is important that the antifraud provisions of the
Exchange Act apply to transactions in non-excluded CDS; indeed, OTC
transactions subject to individual negotiation that qualify as
security-based swap agreements already are subject to these antifraud
provisions.\28\
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    \28\ While Section 3A of the Exchange Act excludes ``swap
agreements'' from the definition of ``security,'' certain antifraud
and insider trading provisions under the Exchange Act explicitly
apply to security-based swap agreements. See (a) paragraphs (2)
through (5) of Section 9(a), 15 U.S.C. 78i(a), prohibiting the
manipulation of security prices; (b) Section 10(b), 15 U.S.C.
78j(b), and underlying rules prohibiting fraud, manipulation or
insider trading (but not prophylactic reporting or recordkeeping
requirements); (c) Section 15(c)(1), 15 U.S.C. 78o(c)(1), which
prohibits brokers and dealers from using manipulative or deceptive
devices; (d) Sections 16(a) and (b), 15 U.S.C. 78p(a) and (b), which
address disclosure by directors, officers and principal
stockholders, and short-swing trading by those persons, and rules
with respect to reporting requirements under Section 16(a); (e)
Section 20(d), 15 U.S.C. 78t(d), providing for antifraud liability
in connection with certain derivative transactions; and (f) Section
21A(a)(1), 15 U.S.C. 78u-1(a)(1), related to the Commission's
authority to impose civil penalties for insider trading violations.
    ``Security-based swap agreement'' is defined in Section 206B of
the Gramm-Leach-Bliley Act as a swap agreement in which a material
term is based on the price, yield, value, or volatility of any
security or any group or index of securities, or any interest
therein.
---------------------------------------------------------------------------

    We thus believe that it is appropriate in the public interest and
consistent with the protection of investors temporarily to apply
substantially the same framework to transactions by market participants
in non-excluded CDS that applies to transactions in security-based swap
agreements. Applying substantially the same set of requirements to
participants in transactions in non-excluded CDS as apply to
participants in OTC CDS transactions will avoid deterring market
participants from promptly using CCPs, which would detract from the
potential benefits of central clearing.
    Accordingly, pursuant to Section 36 of the Exchange Act, the
Commission finds that it is necessary or appropriate in the public
interest and is consistent with the protection of investors to exercise
its authority to grant an exemption until April 23, 2010 from certain
requirements under the Exchange Act. This temporary exemption in part
applies to Eurex, and to any Eurex U.S. Clearing Member \29\ or Eurex
non-U.S. Clearing Member \30\ that is not a broker or dealer registered
under Section 15(b) of the Exchange Act (other than paragraph (11)
thereof). This temporary exemption also applies to certain eligible
contract participants \31\ other than: eligible contract participants
that receive or hold funds or securities for the purpose of purchasing,
selling, clearing, settling or holding Cleared CDS positions for other
persons; \32\ eligible contract participants that are self-regulatory
organizations; or eligible contract participants that are registered
brokers or dealers.\33\
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    \29\ For Purposes of this Order, a ``Eurex U.S. Clearing
Member'' means any U.S. clearing member of Eurex that submits
Cleared CDS to Eurex for clearance and settlement exclusively (i)
for its own account or (ii) for the account of an affiliate that
controls, is controlled by, or is under common control with the U.S.
clearing member of Eurex.
    \30\ For Purposes of this Order, a ``Eurex non-U.S. Clearing
Member'' means any Eurex clearing member, other than a clearing
member that is a U.S. person, that submits Cleared CDS to Eurex for
clearance and settlement exclusively (i) for its own account, (ii)
for the account of an affiliate (including a U.S. affiliate) that
controls, is controlled by, or is under common control with the non-
U.S. clearing member of Eurex, or (iii) for the account of any other
person except a U.S. person.
    Consistent with these definitions of ``Eurex U.S. Clearing
Member'' and ``Eurex non-U.S. Clearing Member,'' this exemption is
available to Eurex members that clear CDS transactions for
themselves and their affiliates, or, in the case of non-U.S. members
of Eurex, that clear CDS transactions on behalf of non-U.S.
customers. The exemption otherwise does not extend to persons who
engage in customer clearing activities on Eurex (e.g., customer
clearing by a U.S. member of Eurex for any persons, or customer
clearing by a non-U.S. member of Eurex for U.S. persons). See note
9, supra.
    The exemptive relief for Eurex non-U.S. Clearing Members is
intended to provide legal certainty for these non-U.S. persons in
those circumstances when their activities in Cleared CDS are within
the jurisdiction of the United States. The exemptive relief is not
necessary for these non-U.S. persons when their activities in
Cleared CDS are not otherwise subject to the federal securities
laws.
    \31\ This exemption in general applies to eligible contract
participants, as defined in Section 1a(12) of the Commodity Exchange
Act as in effect on the date of this Order, other than persons that
are eligible contract participants under paragraph (C) of that
section.
    \32\ Solely for purposes of this requirement, an eligible
contract participant would not be viewed as receiving or holding
funds or securities for purpose of purchasing, selling, clearing,
settling, or holding Cleared CDS positions for other persons, if the
other persons involved in the transaction would not be considered
``customers'' of the eligible contract participant under the
analysis used for determining whether certain persons would be
considered ``customers'' of a broker-dealer under Exchange Act Rule
15c3-3(a)(1). For these purposes, and for the purpose of the
definition of ``Cleared CDS,'' the terms ``purchasing'' and
``selling'' mean the execution, termination (prior to its scheduled
maturity date), assignment, exchange, or similar transfer or
conveyance of, or extinguishing the rights or obligations under, a
Cleared CDS, as the context may require. This is consistent with the
meaning of the terms ``purchase'' or ``sale'' under the Exchange Act
in the context of security-based swap agreements. See Exchange Act
Section 3A(b)(4).
    \33\ A separate temporary exemption addresses the Cleared CDS
activities of registered broker-dealers. See Part II.D, infra.
Solely for purposes of this Order, a registered broker-dealer, or a
broker or dealer registered under Section 15(b) of the Exchange Act,
does not refer to someone that would otherwise be required to
register as a broker or dealer solely as a result of activities in
Cleared CDS in compliance with this Order.
---------------------------------------------------------------------------

    Under this temporary exemption, and solely with respect to Cleared
CDS,

these persons generally are exempt from the provisions of the Exchange
Act and the rules and regulations thereunder that do not apply to
security-based swap agreements. Those persons thus would still be
subject to those Exchange Act requirements that explicitly are
applicable in connection with security-based swap agreements.\34\ In
addition, all provisions of the Exchange Act related to the
Commission's enforcement authority in connection with violations or
potential violations of such provisions would remain applicable.\35\ In
this way, the temporary exemption would apply the same Exchange Act
requirements in connection with non-excluded CDS as apply in connection
with OTC credit default swaps.
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    \34\ See note 28, supra.
    \35\ Thus, for example, the Commission retains the ability to
investigate potential violations and bring enforcement actions in
the federal courts and administrative proceedings, and to seek the
full panoply of remedies available in such cases.
---------------------------------------------------------------------------

    This temporary exemption, however, does not extend to Sections 5
and 6 of the Exchange Act. The Commission separately issued a
conditional exemption from these provisions to all broker-dealers and
exchanges.\36\ This temporary exemption also does not extend to Section
17A of the Exchange Act; instead, Eurex is exempt from registration as
a clearing agency under the conditions discussed above. In addition,
this temporary exemption does not apply to Exchange Act Sections 12,
13, 14, 15(d) and 16; \37\ eligible contract participants and other
persons instead should refer to the interim final temporary rules
issued by the Commission. Finally, this temporary exemption does not
extend to the Commission's administrative proceeding authority under
Sections 15(b)(4) and (b)(6),\38\ or to certain provisions related to
government securities.\39\
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    \36\ See note 10, supra. A national securities exchange that
effects transactions in Cleared CDS would continue to be required to
comply with all requirements under the Exchange Act applicable to
such transactions. A national securities exchange could form
subsidiaries or affiliates that operate exchanges exempt under that
order. Any subsidiary or affiliate of a registered exchange could
not integrate, or otherwise link, the exempt CDS exchange with the
registered exchange including the premises or property of such
exchange for effecting or reporting a transaction without being
considered a ``facility of the exchange.'' See Section 3(a)(2), 15
U.S.C. 78c(a)(2).
    \37\ 15 U.S.C. 78l, 78m, 78n, 78o(d), 78p.
    \38\ Exchange Act Sections 15(b)(4) and 15(b)(6), 15 U.S.C.
78o(b)(4) and (b)(6), grant the Commission authority to take action
against broker-dealers and associated persons in certain situations.
Accordingly, while this exemption generally extends to persons that
act as inter-dealer brokers in the market for Cleared CDS and do not
hold funds or securities for others, such inter-dealer brokers may
be subject to actions under Sections 15(b)(4) and (b)(6) of the
Exchange Act.
    In addition, such inter-dealer brokers may be subject to actions
under Exchange Act Section 15(c)(1), 15 U.S.C. 78o(c)(1), which
prohibits brokers and dealers from using manipulative or deceptive
devices. As noted above, Section 15(c)(1) explicitly applies to
security-based swap agreements. Sections 15(b)(4), 15(b)(6) and
15(c)(1), of course, would not apply to persons subject to this
exemption who do not act as broker-dealers or associated persons of
broker-dealers.
    \39\ This exemption specifically does not extend to the Exchange
Act provisions applicable to government securities, as set forth in
Section 15C, 15 U.S.C. 78o-5, and its underlying rules and
regulations; nor does the exemption extend to related definitions
found at paragraphs (42) through (45) of Section 3(a), 15 U.S.C.
78c(a). The Commission does not have authority under Section 36 to
issue exemptions in connection with those provisions. See Exchange
Act Section 36(b), 15 U.S.C. 78mm(b).
---------------------------------------------------------------------------

D. Temporary General Exemption for Certain Registered Broker-Dealers

    The temporary exemptions addressed above--with regard to Eurex and
certain eligible contract participants--are not available to persons
that are registered as broker-dealers with the Commission (other than
those that are notice registered pursuant to Section 15(b)(11)).\40\
The Exchange Act and its underlying rules and regulations require
broker-dealers to comply with a number of obligations that are
important to protecting investors and promoting market integrity. We
are mindful of the need to avoid creating disincentives to the prompt
use of CCPs, and we recognize that the factors discussed above suggest
that the full panoply of Exchange Act requirements should not
immediately be applied to registered broker-dealers that engage in
transactions involving Cleared CDS. At the same time, we also are
sensitive to the critical importance of certain broker-dealer
requirements to promoting market integrity and protecting customers
(including those broker-dealer customers that are not involved with CDS
transactions).
---------------------------------------------------------------------------

    \40\ Exchange Act Section 15(b)(11) provides for notice
registration of certain persons that effect transactions in security
futures products. 15 U.S.C. 78o(b)(11).
---------------------------------------------------------------------------

    This calls for balancing the facilitation of the development and
prompt implementation of CCPs with the preservation of certain key
investor protections. Pursuant to Section 36 of the Exchange Act, the
Commission finds that it is necessary or appropriate in the public
interest and is consistent with the protection of investors to exercise
its authority to grant an exemption until April 23, 2010 from certain
Exchange Act requirements. Consistent with the temporary exemptions
discussed above, and solely with respect to Cleared CDS, we are
exempting registered broker-dealers in general from the provisions of
the Exchange Act and its underlying rules and regulations that do not
apply to security-based swap agreements. As above, we are not excluding
registered broker-dealers from Exchange Act provisions that explicitly
apply in connection with security-based swap agreements or from related
enforcement authority provisions.\41\ As above, and for similar
reasons, we are not exempting registered broker-dealers from: Sections
5, 6, 12(a) and (g), 13, 14, 15(b)(4), 15(b)(6), 15(d), 16 and 17A of
the Exchange Act.\42\
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    \41\ See notes 28 and 35, supra. As noted above, broker-dealers
also would be subject to Section 15(c)(1) of the Exchange Act, which
prohibits brokers and dealers from using manipulative or deceptive
devices, because that provision explicitly applies in connection
with security-based swap agreements. In addition, to the extent the
Exchange Act and any rule or regulation thereunder imposes any other
requirement on a broker-dealer with respect to security-based swap
agreements (e.g., requirements under Rule 17h-1T to maintain and
preserve written policies, procedures, or systems concerning the
broker or dealer's trading positions and risks, such as policies
relating to restrictions or limitations on trading financial
instruments or products), these requirements would continue to apply
to broker-dealers' activities with respect to Cleared CDS.
    \42\ We also are not exempting those members from provisions
related to government securities, as discussed above.
---------------------------------------------------------------------------

    Further we are not exempting registered broker-dealers from the
following additional provisions under the Exchange Act: (i) Section
7(c),\43\ which addresses the unlawful extension of credit by broker-
dealers; (ii) Section 15(c)(3),\44\ which addresses the use of unlawful
or manipulative devices by broker-dealers; (iii) Section 17(a),\45\
regarding broker-dealer obligations to make, keep and furnish
information; (iv) Section 17(b),\46\ regarding broker-dealer records
subject to examination; (v) Regulation T,\47\ a Federal Reserve Board
regulation regarding extension of credit by broker-dealers; (vi)
Exchange Act Rule 15c3-1, regarding broker-dealer net capital; (vii)
Exchange Act Rule 15c3-3, regarding broker-dealer reserves and custody
of securities; (viii) Exchange Act Rules 17a-3 through 17a-5, regarding
records to be made and preserved by broker-dealers and reports to be
made by broker-dealers; and (ix) Exchange Act Rule 17a-13, regarding
quarterly security counts to be made by certain exchange members and
broker-dealers.\48\ Registered broker-dealers

should comply with these provisions in connection with their activities
involving non-excluded CDS because these provisions are especially
important to helping protect customer funds and securities, ensure
proper credit practices and safeguard against fraud and abuse.\49\
---------------------------------------------------------------------------

    \43\ 15 U.S.C. 78g(c).
    \44\ 15 U.S.C. 78o(c)(3).
    \45\ 15 U.S.C. 78q(a).
    \46\ 15 U.S.C. 78q(b).
    \47\ 12 CFR 220.1 et seq.
    \48\ Solely for purposes of this exemption, in addition to the
general requirements under the referenced Exchange Act sections,
registered broker-dealers shall only be subject to the enumerated
rules under the referenced Exchange Act sections.
    \49\ Indeed, Congress directed the Commission to promulgate
broker-dealer financial responsibility rules, including rules
regarding custody, the use of customer securities and the use of
customers' deposits or credit balances, and regarding establishment
of minimum financial requirements.
---------------------------------------------------------------------------

E. Solicitation of Comments

    The Commission is continuing to monitor closely the development of
the CDS market and intends to determine to what extent, if any,
additional regulatory action may be necessary. For example, as
circumstances warrant, certain conditions could be added, altered, or
eliminated. Moreover, because these exemptions are temporary, the
Commission will in the future consider whether they should be extended
or allowed to expire. The Commission believes it would be prudent to
solicit public comment on its action today, and on what action it
should take with respect to the CDS market in the future. The
Commission is soliciting public comment on all aspects of these
temporary exemptions, including:
    1. Whether the length of this temporary exemption (until April 23,
2010) is appropriate. If not, what should the appropriate duration be?
    2. Whether the conditions to these temporary exemptions are
appropriate. Why or why not? Should other conditions apply? Are any of
the present conditions to the temporary exemptions provided in this
Order unnecessary? If so, please specify and explain why such
conditions are not needed.
    3. Whether Eurex ultimately should be required to register as a
clearing agency under the Exchange Act. Why or why not?
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/other.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-17-09 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number S7-17-09. This file number
should be included on the subject line if e-mail is used. To help us
process and review your comments more efficiently, please use only one
method. We will post all comments on the Commission's Internet Web site
(http://www.sec.gov/rules/exorders.shtml). Comments are also available
for public inspection and copying in the Commission's Public Reference
Room, 100 F Street, NE., Washington, DC 20549, on official business
days between the hours of 10 am and 3 pm. All comments received will be
posted without change; we do not edit personal identifying information
from submissions. You should submit only information that you wish to
make available publicly.

III. Conclusion

    It is hereby ordered, pursuant to Section 36(a) of the Exchange
Act, that, until April 23, 2010:
    (a) Exemption from Section 17A of the Exchange Act.
    Eurex Clearing AG (``Eurex'') shall be exempt from Section 17A of
the Exchange Act solely to perform the functions of a clearing agency
for Cleared CDS (as defined in paragraph (d)(1) of this Order), subject
to the following conditions:
    (1) Eurex shall make available on its Web site its annual audited
financial statements.
    (2) Eurex shall keep and preserve at least one copy of all
documents, including all correspondence, memoranda, papers, books,
notices, accounts and other such records as shall be made or received
by it relating to its Cleared CDS clearance and settlement services.
These records shall be kept for at least five years and for the first
two years shall be held in an easily accessible place.
    (3) Eurex shall supply information and periodic reports relating to
its Cleared CDS clearance and settlement services as may be reasonably
requested by the Commission, and shall provide access to the Commission
to conduct on-site inspections of all facilities (including automated
systems and systems environment), records, and personnel related to
Eurex's Cleared CDS clearance and settlement services.
    (4) Eurex shall notify the Commission, on a monthly basis, of any
material disciplinary actions taken against any of its members using
its Cleared CDS clearance and settlement services, including the denial
of services, fines, or penalties. Eurex shall notify the Commission
promptly when it terminates on an involuntary basis the membership of
an entity that is using Eurex's Cleared CDS clearance and settlement
services. Both notifications shall describe the facts and circumstances
that led to Eurex's disciplinary action.
    (5) Eurex shall notify the Commission of all changes to its rules,
procedures, and any other material events affecting its Cleared CDS
clearance and settlement services, including its fee schedule and
changes to risk management practices, not less than one day prior to
effectiveness or implementation of such changes or, in exigent
circumstances, as promptly as reasonably practicable under the
circumstances. All such rule changes will be posted on Eurex's Web
site. Such notifications will not be deemed rule filings that require
Commission approval.
    (6) Eurex shall provide the Commission with reports prepared by
independent audit personnel concerning its Cleared CDS clearance and
settlement services that are generated in accordance with risk
assessment of the areas set forth in the Commission's Automation Review
Policy Statements. Eurex shall provide the Commission with annual
audited financial statements for Eurex prepared by independent audit
personnel.
    (7) Eurex shall report all significant systems outages to the
Commission. If it appears that the outage may extend for 30 minutes or
longer, Eurex shall report the systems outage immediately. If it
appears that the outage will be resolved in fewer than 30 minutes,
Eurex shall report the systems outage within a reasonable time after
the outage has been resolved.
    (8) Eurex, directly or indirectly, shall make available to the
public on terms that are fair and reasonable and not unreasonably
discriminatory: (i) all end-of-day settlement prices and any other
prices with respect to Cleared CDS that Eurex may establish to
calculate mark-to-market margin requirements for Eurex clearing
members; and (ii) any other pricing or valuation information with
respect to Cleared CDS as is published or distributed by Eurex.
    (b) Exemption for Eurex, certain Eurex clearing members, and
certain eligible contract participants.
    (1) Persons eligible. The exemption in paragraph (b)(2) is
available to:
    (i) Eurex;
    (ii) Any Eurex U.S. Clearing Member (as defined in paragraph (d)(2)
of this Order) that is not a broker or dealer registered under Section
15(b) of the Exchange Act (other than paragraph (11) thereof);

    (iii) Any Eurex non-U.S. Clearing Member (as defined in paragraph
(d)(3) of this Order) that is not a broker or dealer registered under
Section 15(b) of the Exchange Act (other than paragraph (11) thereof);
and
    (iv) Any eligible contract participant (as defined in Section
1a(12) of the Commodity Exchange Act as in effect on the date of this
Order (other than a person that is an eligible contract participant
under paragraph (C) of that section)), other than: (A) An eligible
contract participant that receives or holds funds or securities for the
purpose of purchasing, selling, clearing, settling, or holding Cleared
CDS positions for other persons; (B) an eligible contract participant
that is a self-regulatory organization, as that term is defined in
Section 3(a)(26) of the Exchange Act; or (C) a broker or dealer
registered under Section 15(b) of the Exchange Act (other than
paragraph (11) thereof).
    (2) Scope of exemption.
    (i) In general. Such persons generally shall, solely with respect
to Cleared CDS, be exempt from the provisions of the Exchange Act and
the rules and regulations thereunder that do not apply in connection
with security-based swap agreements. Accordingly, under this exemption,
those persons would remain subject to those Exchange Act requirements
that explicitly are applicable in connection with security-based swap
agreements (i.e., paragraphs (2) through (5) of Section 9(a), Section
10(b), Section 15(c)(1), paragraphs (a) and (b) of Section 16, Section
20(d) and Section 21A(a)(1) and the rules thereunder that explicitly
are applicable to security-based swap agreements). All provisions of
the Exchange Act related to the Commission's enforcement authority in
connection with violations or potential violations of such provisions
also remain applicable.
    (ii) Exclusions from exemption. The exemption in paragraph
(b)(2)(i), however, does not extend to the following provisions under
the Exchange Act:
    (A) Paragraphs (42), (43), (44), and (45) of Section 3(a);
    (B) Section 5;
    (C) Section 6;
    (D) Section 12 and the rules and regulations thereunder;
    (E) Section 13 and the rules and regulations thereunder;
    (F) Section 14 and the rules and regulations thereunder;
    (G) Paragraphs (4) and (6) of Section 15(b);
    (H) Section 15(d) and the rules and regulations thereunder;
    (I) Section 15C and the rules and regulations thereunder;
    (J) Section 16 and the rules and regulations thereunder; and
    (K) Section 17A (other than as provided in paragraph (a)).
    (c) Exemption for certain registered broker-dealers.
    A broker or dealer registered under Section 15(b) of the Exchange
Act (other than paragraph (11) thereof) shall be exempt from the
provisions of the Exchange Act and the rules and regulations thereunder
specified in paragraph (b)(2), solely with respect to Cleared CDS,
except:
    (1) Section 7(c);
    (2) Section 15(c)(3);
    (3) Section 17(a);
    (4) Section 17(b);
    (5) Regulation T, 12 CFR 200.1 et seq.;
    (6) Rule 15c3-1;
    (7) Rule 15c3-3;
    (8) Rule 17a-3;
    (9) Rule 17a-4;
    (10) Rule 17a-5; and
    (11) Rule 17a-13.
    (d) Definitions.
    For purposes of this Order:
    (1) ``Cleared CDS'' shall mean a credit default swap that is
submitted (or offered, purchased or sold on terms providing for
submission) to Eurex, that is offered only to, purchased only by, and
sold only to eligible contract participants (as defined in Section
1a(12) of the Commodity Exchange Act as in effect on the date of this
Order (other than a person that is an eligible contract participant
under paragraph (C) of that section)), and in which:
    (i) The reference entity, the issuer of the reference security, or
the reference security is one of the following:
    (A) An entity reporting under the Exchange Act, providing
Securities Act Rule 144A(d)(4) information, or about which financial
information is otherwise publicly available;
    (B) A foreign private issuer whose securities are listed outside
the United States and that has its principal trading market outside the
United States;
    (C) A foreign sovereign debt security;
    (D) An asset-backed security, as defined in Regulation AB, issued
in a registered transaction with publicly available distribution
reports; or
    (E) An asset-backed security issued or guaranteed by Fannie Mae,
Freddie Mac or Ginnie Mae; or
    (ii) The reference index is an index in which 80 percent or more of
the index's weighting is comprised of the entities or securities
described in subparagraph (i).
    (2) ``Eurex U.S. Clearing Member'' shall mean any U.S. clearing
member of Eurex that submits Cleared CDS to Eurex for clearance and
settlement exclusively (i) for its own account or (ii) for the account
of an affiliate that controls, is controlled by, or is under common
control with the U.S. clearing member of Eurex.
    (3) ``Eurex non-U.S. Clearing Member'' shall mean any clearing
member of Eurex, other than a clearing member that is a U.S. person,
that submits Cleared CDS to Eurex for clearance and settlement
exclusively (i) for its own account, (ii) for the account of an
affiliate (including a U.S. affiliate) that controls, is controlled by,
or is under common control with the non-U.S. clearing member of Eurex,
or (iii) for the account of any other person except a U.S. person.

    By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-17991 Filed 7-28-09; 8:45 am]

BILLING CODE 8010-01-P


Comment Info: =================

General Comment:Dear Mr. Zeller:

I am writing as an individual consumer to request an extension of the comment period for the Food and Drug Administration's ("FDA") Proposed Rule Deeming Tobacco Products to be Subject to the Federal Food, Drug, and Cosmetic Act, as amended by the Family Smoking and Prevention and Tobacco Control Act (the "Proposed Rule") published at 79 Fed. Reg. 23,142 and Federal Register No. 2014-09491. On behalf of myself, I am requesting that the comment period for the Proposed Rule be extended by the FDA for an additional 105 days, from its current 75-day period, to 180 days.

The Proposed Rule raises a number of significant issues and questions that are important and relevant to me, as a consumer of products that are proposed for regulation under the Proposed Rule. The Proposed Rule asks a multitude of different questions I might want to respond to. I want to provide my thoughts and comments on many of these issues, but my time to devote to researching and providing thoughtful comments on these important questions is limited. I have already spent many hours researching and dissecting these issues, but they take time. I know that the FDA took many years to even come up with the Proposed Rule, so I do not think it is at all unreasonable to allow the public a mere six months to comment on it. This is our only opportunity, as consumers, to provide our feedback.

I feel very strongly about e-cigarettes as an alternative to combustible cigarettes. Quite simply, I firmly believe that they saved my life. I wish to provide you with my personal story, as well as science-based and evidence-based responses to your questions so that you can take my comment into account. I realize that the FDA has the authority under 21 CFR 10.40 to extend this time frame and that the FDA has exercised this authority on numerous occasions in the past. I would therefore ask that you do so here, so that all stakeholders have the opportunity to provide their comments on this proposed regulation.

I appreciate your consideration of my request and am happy to discuss this issue with you further.


[Federal Register Volume 81, Number 229 (Tuesday, November 29, 2016)]
[Notices]
[Pages 85995-85996]
[FR Doc No: 2016-28612]

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DEPARTMENT OF HOMELAND SECURITY

Federal Emergency Management Agency

[Docket ID: FEMA-2016-0025; OMB No. 1660-0026]

Agency Information Collection Activities: Proposed Collection;
Comment Request; State Administrative Plan for the Hazard Mitigation
Grant Program

AGENCY: Federal Emergency Management Agency, DHS.

ACTION: Notice.

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

SUMMARY: The Federal Emergency Management Agency, as part of its
continuing effort to reduce paperwork and respondent burden, invites
the general public and other Federal agencies to take this opportunity
to comment on an extension, without change, of a currently approved
information collection. In accordance with the Paperwork Reduction Act
of 1995, this notice seeks comments concerning the State Administrative
Plan for the procedural guide that details how the State will
administer the Hazard Mitigation Grant Program.

DATES: Comments must be submitted on or before January 30, 2017.

ADDRESSES: To avoid duplicate submissions to the docket, please use
only one of the following means to submit comments:
    (1) Online. Submit comments at www.regulations.gov under Docket ID
FEMA-2016-0025. Follow the instructions for submitting comments.
    (2) Mail. Submit written comments to Docket Manager, Office of
Chief Counsel, DHS/FEMA, 500 C Street SW., 8NE, Washington, DC 20472-
3100.
    All submissions received must include the agency name and Docket
ID. Regardless of the method used for submitting comments or material,
all submissions will be posted, without change, to the Federal
eRulemaking Portal at http://www.regulations.gov, and will include any
personal information you provide. Therefore, submitting this
information makes it public. You may wish to read the Privacy Act
notice that is available via the link in the footer of
www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Nicole LaRosa, Grants Policy Branch,
Mitigation Division, at<PHONE_NUMBER>. You may contact the Records
Management Division for copies of the proposed collection of
information at email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: FEMA regulations in 44 CFR 206.437 require
development and update of the State Administrative Plan by State
Grantees as a condition of receiving Hazard Mitigation Grant Program
(HMGP) funding under section 404 of the Robert T. Stafford Disaster
Relief and Emergency Assistance Act of 1988, 42 U.S.C. 5170c. Grantees
can be any State of the United States, the District of Columbia, Puerto
Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of
the Northern Mariana Islands, or an Indian tribal government that
chooses to act as a grantee. Section 404 mandates FEMA approval of the
State Administrative Plan before awarding any project grant assistance
to a community or State applicant.

Collection of Information

    Title: State Administrative Plan for the Hazard Mitigation Grant
Program
    Type of Information Collection: Extension, without change, of a
currently approved information collection.
    OMB Number: 1660-0026.
    FEMA Forms: None.
    Abstract: The State Administrative Plan is a procedural guide that
details how the State will administer the HMGP. The State must have a
current administrative plan approved by the appropriate FEMA Regional
Administrator before receiving HMGP funds. The administrative plan may
take any form including a chapter within a comprehensive State
mitigation program strategy.
    Affected Public: State, local or Tribal government.
    Number of Respondents: 32.
    Number of Responses: 64.
    Estimated Total Annual Burden Hours: 512.
    Estimated Cost: $21,847.04.

Comments

    Comments may be submitted as indicated in the ADDRESSES caption
above. Comments are solicited to (a) evaluate whether the proposed data
collection is necessary for the proper performance of the agency,
including whether the information shall have practical utility; (b)
evaluate the accuracy of the agency's estimate of the burden of the
proposed collection of information, including the validity of the
methodology and assumptions used; (c) enhance the quality, utility, and
clarity of the information to be collected; and (d) minimize the burden
of the collection of information on those who are to respond, including
through the use of appropriate automated, electronic, mechanical, or
other technological collection techniques or other forms of information
technology, e.g., permitting electronic submission of responses.

    Dated: November 22, 2016.
Richard W. Mattison
Records Management Program Chief, Mission Support, Federal Emergency
Management Agency, Department of Homeland Security.
[FR Doc. 2016-28612 Filed 11-28-16; 8:45 am]
 BILLING CODE 9110-13-P