Notice2026-04800
Self-Regulatory Organizations; CME Securities Clearing Inc.; Notice of Filing of Proposed Rule Change To Modify the CME Securities Clearing Inc. Amended and Restated By-Laws, Board of Directors Charter, Risk Management Committee Charter, Nominating Committee Charter, and Audit Committee Charter
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 12, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 48 (Thursday, March 12, 2026)</title>
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[Federal Register Volume 91, Number 48 (Thursday, March 12, 2026)]
[Notices]
[Pages 12224-12229]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-04800]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104955; File No. SR-CMESC-2026-002]
Self-Regulatory Organizations; CME Securities Clearing Inc.;
Notice of Filing of Proposed Rule Change To Modify the CME Securities
Clearing Inc. Amended and Restated By-Laws, Board of Directors Charter,
Risk Management Committee Charter, Nominating Committee Charter, and
Audit Committee Charter
March 9, 2026.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 26, 2026, CME Securities Clearing Inc. (``CMESC'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission'') the proposed rule change described in Items I, II, and
III below, which Items have been substantially prepared by CMESC. CMESC
filed the proposed rule change pursuant to Section 19(b)(2) of the
Act.\3\ The Commission is publishing this notice to solicit comments on
the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(2).
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I. CMESC's Statement of the Terms and Substance of the Proposed Rule
Change
The proposed rule change of CME Securities Clearing Inc.
(``CMESC'') is annexed hereto as Exhibit 5 and consists of
modifications to the Amended and Restated By-Laws of CME Securities
Clearing Inc. (``Amended and Restated By-Laws''), the Board of
Directors Charter (``Board Charter''), the Risk Management Committee
Charter, the Nominating Committee Charter, the Audit Committee Charter,
and the Regulatory Oversight Committee Charter (the Risk Management
Committee Charter, the Nominating Committee Charter, the Audit
Committee Charter,
[[Page 12225]]
and the Regulatory Oversight Committee Charter, collectively, the
``Committee Charters''). These modifications are necessary to
facilitate composing and standing up CMESC's new Board of Directors
(which may be hereinafter referred to as the ``Board'') and the
adoption of CMESC's Amended and Restated By-Laws, the Board Charter,
and the Committee Charters in anticipation of the launch of CMESC's
clearing services. Each modification is described in more detail below.
II. CMESC's Statement of the Purpose of, and Statutory Basis for the
Proposed Rule Change
In its filing with the Commission, CMESC included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. CMESC has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
A. CMESC's Statement of the Purpose of, and Statutory Basis for the
Proposed Rule Change
1. Purpose
Background
On December 13, 2024, CMESC filed with the Commission its
application on Form CA-1 (``Application'') for registration as a
clearing agency to provide central counterparty services for
transactions involving U.S. Treasury securities. The Commission
published notice of the Application in the Federal Register on January
22, 2025.\4\ The Application contained certain proposed governance
documents, including CMESC's Amended and Restated By-Laws,\5\ Board of
Directors Charter,\6\ Risk Management Committee Charter,\7\ Nominating
Committee Charter,\8\ Audit Committee Charter,\9\ and Regulatory
Oversight Committee Charter.\10\ Together, these governance documents
constitute CMESC's governance framework as a registered, operating
clearing agency (``Governance Framework''). On December 1, 2025, the
Commission issued an order (``Order'') granting CMESC's Application for
registration as a clearing agency, which finds the Application
satisfies the requirements of the Act and rules and regulations
thereunder.\11\ Specifically, the Commission discusses in the Order
CMESC's governance arrangements as reflected in the foregoing
governance documents \12\ and determines that ``CMESC is so organized
and has the capacity to be able to facilitate the prompt and accurate
clearance and settlement of securities transactions and to comply with
the provisions of the Exchange Act and the rule[s and] regulations
thereunder.'' \13\
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\4\ Securities Exchange Act Release No. 34-102200 (Jan. 15,
2025), 90 FR 7713 (Jan. 22, 2025). Non-confidential aspects of the
Application, including any exhibits thereto cited in this order, are
available on the Commission's website at: <a href="https://www.sec.gov/rules-regulations/other-commission-orders-notices-information/cme-form-ca-1">https://www.sec.gov/rules-regulations/other-commission-orders-notices-information/cme-form-ca-1</a>.
\5\ See Exhibit E-2A(2) to Form CA-1, available at <a href="https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2a-2-amended-restated-bylaws-12-13-24.pdf">https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2a-2-amended-restated-bylaws-12-13-24.pdf</a>.
\6\ See Exhibit E-2B to Form CA-1, available at <a href="https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2b-board-directors-charter-12-13-24.pdf">https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2b-board-directors-charter-12-13-24.pdf</a>.
\7\ See Exhibit E-2C to Form CA-1, available at <a href="https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2c-risk-management-committee-charter-12-13-24.pdf">https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2c-risk-management-committee-charter-12-13-24.pdf</a>.
\8\ See Exhibit E-2D to Form CA-1, available at <a href="https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2d-nominating-committee-charter-12-13-24.pdf">https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2d-nominating-committee-charter-12-13-24.pdf</a>.
\9\ See Exhibit E-2E to Form CA-1, available at <a href="https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2e-audit-committee-charter-12-13-24.pdf">https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2e-audit-committee-charter-12-13-24.pdf</a>.
\10\ See Exhibit E-2F to Form CA-1, available at <a href="https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2f-regulatory-oversight-committee-charter-12-13-24.pdf">https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2f-regulatory-oversight-committee-charter-12-13-24.pdf</a>.
\11\ Securities Exchange Act Release No. 104281 (Dec. 1, 2025),
90 FR 55926 (Dec. 4, 2025), available at <a href="https://www.federalregister.gov/documents/2025/12/04/2025-21908/cme-securities-clearing-inc-order-granting-an-application-for-registration-as-a-clearing-agency">https://www.federalregister.gov/documents/2025/12/04/2025-21908/cme-securities-clearing-inc-order-granting-an-application-for-registration-as-a-clearing-agency</a>.
\12\ Id. at 55930-55931.
\13\ Id. at 55932.
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The Governance Framework has not been formally adopted by CMESC. In
the Application, CMESC stated that the then-current By-Laws would be
amended and restated after the Commission grants CMESC's
registration.\14\ Because CMESC is a newly registered clearing agency,
it does not have any operating history and is in the early stage of
engaging with prospective Members and Users that are to be represented
on its Board. Thus, the adoption of the Governance Framework requires
CMESC to take certain steps in sequence. As the initial step to adopt
the Governance Framework, the current CMESC Board or CMESC's
stockholder will adopt the Amended and Restated Bylaws in accordance
with CMESC's current By-Laws.\15\ Upon adoption of the Amended and
Restated By-Laws, as provided in Article II, Section 3 therein, the
Secretary will call a special stockholders meeting for the purpose of
electing Directors consistent with the composition requirements
specified in Article III, Section 1, which align with the composition
requirements of Rule 17ad-25 under the Act. After the new Board is
constituted, it will undertake formal Board actions to adopt the Board
Charter and Committee Charters and appoint members to the Nominating
Committee and other Committees in accordance with the Committee
Charters. Once constituted the Nominating Committee and other
Committees will assume their responsibilities under their respective
Committee Charters. Consistent with its responsibilities, the
Nominating Committee will review the classification of each Director
elected to the initial Board to verify the Director's classification as
an Independent Director or non-Independent Director.
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\14\ See Exhibit E to Form CA-1, available at <a href="https://www.sec.gov/files/cmesc-ca-1-exhibit-e-narrative-12-13-24.pdf">https://www.sec.gov/files/cmesc-ca-1-exhibit-e-narrative-12-13-24.pdf</a>.
\15\ See Exhibit E-2A(1) to Form CA-1, available at <a href="https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2a-1-initial-bylaws-12-13-24.pdf">https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2a-1-initial-bylaws-12-13-24.pdf</a>. Article IX sets forth the provisions for adoption of
amendments to the By-Laws.
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To implement the transition to the Governance Framework described
above, it is necessary for CMESC to make certain modifications to the
Amended and Restated By-Laws, Board Charter, and Committee Charters to
provide the flexibility needed to facilitate composing and standing up
the new Board and smooth the implementation of the Governance
Framework.
Specifically, CMESC is proposing to modify the Board Charter to
provide flexibility in the initial number of Directors on the Board,
change the staggered Board structure to a unitary board structure with
an annual term, provide certain standards for the Board's fulfillment
of its responsibilities and its conducting of Board meetings, and make
certain clarification changes to improve transparency. Related to the
changes to the Board Charter, CMESC is proposing to modify the Amended
and Restated By-Laws to remove the provision regarding the initial
number of Directors on the Board and to make certain clarification
changes to maintain consistency between the Amended and Restated By-
Laws and Committee Charters. CMESC is also proposing certain
modifications to the Nominating Committee Charter to reflect the
removal of the staggered board structure and re-composition of the
Board on an annual basis and to correct cross-reference errors.
Separately, CMESC is proposing modification to the Risk Management
Committee Charter to add a new responsibility of the Risk Management
Committee regarding oversight of CMESC's Enterprise Risk Management
Framework. In addition, CMESC is proposing a technical change to the
Audit Committee Charter to correct a cross-reference. Finally, CMESC is
proposing a non-substantive clarification change to each Committee
[[Page 12226]]
Charter to the provision prescribing the composition requirements for
the Committee to state more directly that a majority of the Directors
serving on the Committee must be Independent Directors.
The proposed changes are described in detail as follows.
Description of the Proposed Rule Change
1. Proposed Changes to the Amended and Restated By-Laws
CMESC is proposing to make the following conforming and
clarification changes to the Amended and Restated By-Laws.
First, CMESC is proposing to revise Article III (``Directors''),
Section 1 (``Number, Composition, and Election of Directors'') to
remove the requirement that the number of Directors on the initial
Board to be appointed following adoption of the Amended and Restated
Bylaws is fixed at nine (9) and replace it with a more flexible
standard, added to the Board Chater, that the number of Directors
appointed to such initial Board may be up to nine (9). This flexibility
to appoint a smaller number of Directors to the first Board appointed
following adopting of the Amended and Restated Bylaws is consistent
with the Board's authority under the existing version of Article III
Section 1 of the Amended and Restated By-Laws to fix the number of
Directors to a size of between one (1) and fifteen (15). CMESC believes
that it is more appropriate to address the size of the initial Board in
the Board Charter.
Second, in the same Section 1 of Article III, CMESC is proposing to
clarify that the Nominating Committee process for reviewing and
recommending candidates to serve on the Board will apply to the first
Board to be elected after the election of the initial Board following
adoption of the Amended and Restated By-Laws.\16\
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\16\ Following its appointment, the Nominating Committee will
also have other responsibilities under the Nominating Committee
Charter, which would include nominating candidates to fill any
vacancy that may occur on the Board including a vacancy on the
initial Board, and its role in verifying the classification of a
Director as an Independent Director or a non-Independent Director.
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Third, CMESC is proposing to change the manner of filling an
officer vacancy in Article IV (``Officers''), Section 2 (``Election'').
Currently, Article IV, Section 2 of the Amended and Restated By-Laws
provides that officer vacancies shall be filled by the Board, which
contradicts certain provisions in the other governance documents.\17\
Therefore, CMESC proposes to change the relevant language in Article
IV, Section 2 to state that officer vacancies shall be filled as
specified in the Amended and Restated By-Laws or any Board committee
charter. Similarly, CMESC is proposing to remove the language in the
same paragraph regarding the salaries of all officers being fixed by
the Board to take into consideration that the compensation of certain
officers may not be fixed by the Board under certain existing Board
committee charters.\18\
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\17\ For example, the Regulatory Oversight Committee Charter
provides that if the Chief Compliance Officer position becomes
vacant, the Head of the Corporation shall appoint a successor,
subject to the approval of the Regulatory Oversight Committee. See
Exhibit E-2F to Form CA-1, available at <a href="https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2f-regulatory-oversight-committee-charter-12-13-24.pdf">https://www.sec.gov/files/cmesc-ca-1-exhibit-e-2f-regulatory-oversight-committee-charter-12-13-24.pdf</a>.
\18\ For example, the Regulatory Oversight Committee Charter
provides that the compensation of the Chief Compliance Officer is
recommended by senior management, subject to the review of the
Regulatory Oversight Committee. See id.
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Finally, CMESC is proposing to create a defined term ``Annual
Meeting'' in Article II, Section 2, which is currently used in the
Amended and Restated By-Laws but not defined. The defined term will
clarify that ``Annual Meeting'' refers to the annual meeting of
Stockholders.
2. Proposed Changes to the Board Charter
CMESC is proposing certain changes to the Board Charter to
facilitate composing and standing up a new Board following CMESC's
registration as a clearing agency.
First, CMESC is proposing to change the second bullet under Section
II (``Board Composition'') by changing the exact number of nine
Directors required to be on the initial Board following adoption of the
Amended and Restated By-Laws to no more than nine Directors to provide
the flexibility for composing the Board shortly before the launch of
CMESC's clearing services. This change is accompanied by a qualifier
that the number of Directors on the Board shall continually be composed
of a sufficient number of Directors to meet the composition
requirements described in the Board Charter included in the
Application, which requirements are consistent with Rule 17ad-25 of the
Act and shall be subject to the provisions in Section I of Article III
of the Amended and Restated By-Laws regarding the election of the
initial Board following adoption thereof as described above.\19\
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\19\ 17 CFR 240.17ad-25.
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Second, CMESC is proposing to change the staggered (classified)
Board structure to a non-classified Board structure with a unitary
annual term by eliminating Section IV (``Term of Office; Classes'')
entirely and revising the existing Section V (``Election of
Directors'') to provide that the Directors will be elected by the
Stockholder at the Annual Meeting of the Stockholder and each Director
so elected will serve until the end of the annual term or until the
Director's earlier death, resignation, or removal. On further
consideration, a staggered or classified Board structure, which is
often utilized by Delaware corporations as an anti-takeover defense
mechanism, is not an appropriate structure for CMESC. As a registered
clearing agency, CMESC does not need a staggered Board structure as a
defense mechanism, and a staggered Board structure would unnecessarily
complicate the process of composing the Board and administering the
terms of the Directors. As a result of removing Section IV, Section V
(``Election of Directors'') will be renumbered as Section IV and ``Term
of Office'' will be added to the heading of the new Section IV. In
addition, CMESC is proposing to capitalize the term ``annual meeting''
throughout the new Section IV to clarify that it is a defined term.
Third, CMESC is proposing to add language to Section I
(``Purpose'') to specifically state the standards and obligations of
the Board of Directors in fulfilling its responsibilities.
Specifically, CMESC is proposing to add new language as a third bullet
under Section I to require the Board, in fulfilling its
responsibilities, to consider the legitimate interests of Members and
Users, and prioritize the overall risk management, safety, and
efficiency of CMESC, including its obligations to facilitate and
promote the prompt and accurate clearance and settlement of securities
transactions and to assure safeguarding securities and funds, and
generally support the stability of the broader financial system in
accordance with best practices in the industry. The purpose of adding
this language is to provide greater visibility and transparency to
Directors of the Board and the public with respect to the Board's
responsibilities, consistent with its responsibilities as stated in the
Amended and Restated By-Laws.\20\
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\20\ See Amended and Restated By-Laws, Art. III, Sec. 3(c), Art.
X, Sec. 1.
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Separate but related to the foregoing proposed change, CMESC is
also proposing to add language to existing Section VIII
(``Meetings'')--to be re-numbered as Section VII after the proposed
removal of existing Section IV--to specifically state considerations
the Board should take into account when evaluating a proposal.
[[Page 12227]]
Specifically, CMESC is proposing to require the Board of Directors to
take into account, when evaluating a proposal in front of the Board,
all factors that the Board of Directors deems relevant, including,
without limitation, to the extent deemed relevant: (i) the potential
impact of the proposal on the integrity, continuity, and stability of
the Corporation, on the ability to prevent fraudulent and manipulative
acts and practices, and on investors and the public, and (ii) whether
such proposal would promote the prompt and accurate clearance and
settlement of securities transactions and, to the extent applicable,
derivative agreements, contracts, and transactions, assure the
safeguarding of securities and funds which are in the custody or
control of the clearing agency or for which it is responsible, foster
cooperation and coordination with persons engaged in the clearance and
settlement of securities transactions, and remove impediments to and
perfect the mechanism of a national system for the prompt and accurate
clearance and settlement of securities transactions, in light of the
nature of CMESC and its operations as a registered clearing agency and
its status as a self-regulatory organization. This language is
consistent with the statutory requirements and the clearing agency
standards promulgated by the Commission under the statute and provides
greater visibility and clarification to Directors of the Board and the
public with respect to the Board's responsibilities, which conform with
its responsibilities as stated in the Amended and Restated By-Laws.\21\
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\21\ See id.
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Finally, CMESC is proposing to make certain clarification and
technical changes to the Board Charter to improve clarity, maintain
consistency among various governance documents, and correct certain
errors. These clarification and technical changes include:
<bullet> Clarifying that it is the Nominating Committee's
responsibility, with support from the Secretary, to broadly consider
all relevant facts and circumstances to evaluate, determine, and
document, as necessary, whether reported new relationships or changes
to existing relationships may likely impair the categorization of a
Director as an Independent Director and preclude a Director from being
an Independent Director in the fifth bullet under Section II.
<bullet> Making non-substantive revisions to the existing fourth,
fifth, and sixth sub-bullets under the fifth bullet of Section II \22\
to combine them into a new sub-bullet to create a new defined term
``Interested Party'' to refer to the types of third-party organization,
entity, or outside auditor described in the existing fourth, fifth and
sixth sub-bullets under the existing fifth bullet of Section II, which
are closely aligned with Rule 17ad-25(f)(4), (5), and (6).\23\ The new
sub-bullet combining the existing fourth, fifth and sixth sub-bullets
under the fifth bullet of Section II continues to be closely aligned
with Rule 17ad-25(f)(4), (5) and (6) of the Act.\24\ The revisions are
designed to improve drafting efficiency by incorporating the new
defined term ``Interested Party'' and allow the subsequent sub-bullets
(i.e., existing seventh and eighth sub-bullets) to conveniently use the
term ``Interested Party'' to refer to the type of third-party
organization, entity or outside auditor described in Rule 17ad-
25(f)(4)-(6) with respect to disclosure and monitoring of a Director's
relationships and relationships of the Director's family members with
CMESC, its affiliates, or Interested Parties that could affect the
Director's categorization as an Independent Director.
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\22\ The first, third, and fourth bullets under Section II have
no proposed changes, and thus are replaced by ellipses in the
redline shown in Exhibit 5.
\23\ 17 CFR 240.17ad-25(f)(4)-(6).
\24\ 17 CFR 240.17ad-25(f)(4)-(6).
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<bullet> Clarifying that the Chairman of the Board shall be
selected by the Board ``on an annual basis'' in Section III (``Chairman
of the Board''), which is consistent with the new annual term of the
Board under the proposed declassified (non-staggered) Board structure.
<bullet> Removing reference to ``the President'' from existing
Section VII (``Removal and Resignation'')--which will become Section VI
after the proposed removal of Section IV--to clarify that ``President''
is not an officer position in CMESC.
3. Proposed Changes to the Risk Management Committee Charter
CMESC is proposing to clarify the text prescribing the composition
requirements for the Risk Management Committee (``CSRMC'') in the Risk
Management Committee Charter. In this respect, CMESC proposes to revise
the first bullet in Section II (``Membership & Organization'') to state
more clearly the intention that a majority of the Directors serving on
the CSRMC must be Independent Directors, the same as required for the
Board, rather than the existing language ``in at least the same
majority percentage as required for the Board,'' which does not
accurately reflect the original intent.
CMESC is also proposing to clarify the responsibilities of the
CSRMC. Specifically, CMESC proposes to add two bullets to Section IV
(``CSRMC Meetings, Tasks and Authority'') under ``Responsibilities.''
The first proposed bullet would require CSRMC to provide oversight of
CMESC's Enterprise Risk Management Framework (``ERMF''), including
annual review of the ERMF and review and approval of substantive
changes to the ERMF and to annually submit a recommendation to the
Board to approve the ERMF. The second proposed bullet would require
CSRMC to review the quarterly Enterprise Risk Profile report on CMESC's
enterprise risks. Enterprise risk management is an integral part of
CMESC's risk management, which is overseen by CSRMC. The proposed
additions provide clarifications with respect to the CSRMC's
responsibility, which is critical to CMESC's overall risk management.
4. Proposed Changes to the Nominating Committee Charter
Same as the clarification change proposed to make to the Risk
Management Committee Charter, CMESC is proposing to clarify the text in
the Nominating Committee Charter that prescribes the composition of the
Nominating Committee. In this respect, CMESC proposes to revise the
first bullet in Section II (``Membership & Organization'') to state
more clearly the intention that a majority of the Directors serving on
the Nominating Committee (as with the Board) shall be Independent
Directors, rather than the existing language ``in at least the same
majority percentage as required for the Board,'' which does not
accurately reflect the original intent.
CMESC is also proposing to make certain conforming changes to the
Nominating Committee Charter, as follows:
<bullet> Changing the existing language regarding Board nominations
to reflect the proposed change from a staggered Board structure to a
declassified (non-staggered) Board structure with a unitary annual
term. Currently, the existing Nominating Committee is required to
provide to the Board a nominee to fill each Director position that is
open for each Director term that begins as of the annual Stockholder
meeting, which reflects a staggered Board structure. Under the proposed
declassified (non-staggered) Board structure, all the Directors will
have the same annual term. Therefore, CMESC is proposing to replace the
existing
[[Page 12228]]
provision regarding Board nominations with proposed new language that
requires the Nominating Committee to recommend nominees to the Board
for election at the Annual Meeting of the Stockholder as set forth in
the Board Charter, consistent with the proposed unitary annual term of
the Directors.
<bullet> Changing a cross-reference located in Section IV
(``Nominating Committee Meetings, Tasks and Authority'') under
``Responsibilities'' to Section V, reflecting the proposed removal of
Section IV from the Board of Directors Charter.
5. Proposed Changes to the Audit Committee Charter
CMESC is proposing certain changes to the Audit Committee Charter.
Same as the other Committee Charters, CMESC is proposing to clarify the
text prescribing the composition of the Audit Committee. In this
respect, CMESC proposes to revise the first bullet in Section II
(``Membership & Organization'') to state more clearly the intention
that that a majority of the Directors serving on the Audit Committee
(as with the Board) shall be Independent Directors, rather than the
existing language ``in at least the same majority percentage as
required for the Board,'' which does not accurately reflect the
original intent.
CMESC is also proposing to correct a cross-reference located in
Section VII (``Confidentiality'') of the Audit Committee Charter.
Specifically, CMESC proposes correcting a reference to Rule 1203 of the
Rulebook to reference Rule 1202 instead. Rule 1203 regards the Risk
Management Committee, whereas Rule 1202 regards Use or Disclosure of
Material, Non-Public Information, and applies to this Section VII.
6. Proposed Changes to the Regulatory Oversight Committee Charter
Finally, CMESC is proposing to make the same clarification change
to the text prescribing the composition of the Regulatory Oversight
Committee in the Regulatory Oversight Committee Charter as the other
Committee Charters. CMESC proposes to revise the first bullet in
Section II (``Membership & Organization'') to state more clearly the
intention that a majority of the Directors serving on the Regulatory
Oversight Committee (as with the Board) shall be Independent Directors,
rather than the existing language ``in at least the same majority
percentage as required for the Board,'' which does not accurately
reflect the original intent.
2. Statutory Basis
Section 17A(b)(3)(A) of the Act requires, in part, that a clearing
agency be organized and have the capacity to be able to facilitate the
prompt and accurate clearance and settlement of securities transactions
and to comply with the provisions of the rules under the Act.\25\ CMESC
believes that the proposed rule change is consistent with these
provisions of Section 17A(b)(3)(A) because it contains proposed changes
that would facilitate composing and standing up a new Board and
adoption of the Governance Framework, which is critical to CMESC's
organization and its capacity to facilitate the prompt and accurate
clearance and settlement of securities transactions and to comply with
the provisions of the Act, as determined by the Commission in the
Order.\26\ Specifically, the proposed changes to the Board Charter to
change the fixed number of Directors required to be on the initial
Board upon the adoption of the Amended and Restated Bylaws to a cap
will provide the flexibility for composing and standing up the Board.
Further, the proposed changes to the Board Charter to replace the
staggered Board structure with a non-classified Board structure with a
unitary annual term (and the corresponding changes to the Nominating
Committee Charter) would remove unnecessarily complicated processes for
composing the Board and administering the terms of the Directors.
Separate but related, the proposed changes to the Amended and Restated
By-Laws to eliminate the requirement of a fixed number of Directors
required to be on the initial Board upon the adoption of the Amended
and Restated Bylaws as described above and the proposed changes to
clarify that the Nominating Committee process for reviewing and
recommending candidates to serve on the Board will apply to the first
Board after election of the initial Board following adoption of the
Amended and Restated By-laws are necessary changes prior to the
adoption of the Amended and Restated By-Laws, which will then begin a
series steps to adopt and implement CMESC's Governance Framework as
described above in the Background section of Item 3(a). In addition,
the proposed rule change provides greater clarity, consistency, and
understanding among the Board and the relevant Board committees of
their duties and responsibilities under the Amended and Restated By-
Laws and Committee Charters. The proposed rule change will thus allow
CMESC to operate more efficiently to facilitate the prompt and accurate
clearance and settlement of securities transactions.
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\25\ 15 U.S.C. 78q-1(b)(3)(A).
\26\ See supra note 10.
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The proposed rule change is also consistent with Rule 17ad-25 \27\
under the Act, which prescribes standards and requirements regarding
composition of a registered clearing agency's board of directors,
establishing a nominating committee, composition of the risk management
committee and the committees with the authority to act on behalf of the
board of directors of a registered clearing agency, and the
circumstances that preclude directors of a registered clearing agency
from being independent directors.\28\ As stated above, the Commission
has previously determined that CMESC's Governance Framework is
consistent with and comply with the statutory requirements and the
rules and regulations promulgated thereunder, including Rule 17ad-
25.\29\ The proposed rule change does not alter the aspect of the
Governance Framework that has been determined by the Commission to be
consistent with Rule 17ad-25, including, without limitation, CMESC's
Board composition requirements in the Board Charter and the Risk
Management Committee composition requirements in the Risk Management
Committee Charter remaining unchanged and consistent with Rule 17ad-
25(b) and (d) \30\ and CMESC's Nominating Committee composition
requirements and its responsibilities in the Nominating Committee
Charter remaining unchanged and consistent with Rule 17ad-25(c).\31\
Instead, the primary purpose of the proposed rule change is to
facilitate composing and standing up a new Board, by providing a
unitary Board structure with an annual term, the objective and
obligations of the Board in fulfilling its responsibilities, as well as
the considerations to be taken into account in evaluating proposals in
front of the Board and facilitate the adoption and implementation of
CMESC's Governance Framework by improving the clarity, consistency, and
readability of the Governance Framework. Therefore, CMESC believes that
the proposed rule change is consistent with Rule 17ad-25.
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\27\ 17 CFR 240.17ad-25.
\28\ See Rule 17ad-25(b)-(f), 17 CFR 240.17ad-25(b)-(f).
\29\ 17 CFR 240.17ad-25.
\30\ 17 CFR 240.17ad-25(b) and (d).
\31\ 17 CFR 240.17ad-25(c).
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[[Page 12229]]
B. CMESC's Statement on Burden on Competition
CMESC does not believe that the proposed rule change will have any
impact on competition. The proposed rule change is designed to provide
greater flexibility and facilitate composing and standing up CMESC's
Board, improve clarity, transparency, and visibility of governance
arrangements, and ensure consistency with the Act. As such, CMESC does
not believe the proposed rule change would have an impact on
competition because it neither imposes nor relieve any burdens on any
specified persons.
C. CMESC's Statement on Comments on the Proposed Rule Change Received
From Members, Participants, or Others
CMESC currently does not have any Members or Users and has not
received nor solicited any written comments from others related to this
proposal. CMESC has not received any unsolicited written comments from
any interested parties. If any written comments are received, they will
be publicly filed as an Exhibit 2 to this filing, as required by Form
19b-4 and the General Instructions thereto.
Persons submitting comments are cautioned that, according to
Section IV (Solicitation of Comments) of the Exhibit 1A in the General
Instructions to Form 19b-4, the Commission does not edit personal
identifying information from comment submissions. Commenters should
submit only information that they wish to make available publicly,
including their name, email address, and any other identifying
information.
All prospective commenters should follow the Commission's
instructions on how to submit comments, available at <a href="https://www.sec.gov/regulatory-actions/how-to-submit-comments">https://www.sec.gov/regulatory-actions/how-to-submit-comments</a>. General
questions regarding the rule filing process or logistical questions
regarding this filing should be directed to the Main Office of the
Commission's Division of Trading and Markets at
<a href="/cdn-cgi/l/email-protection#77030516131e19101619131a16051c1203043704121459101801"><span class="__cf_email__" data-cfemail="99edebf8fdf0f7fef8f7fdf4f8ebf2fcedead9eafcfab7fef6ef">[email protected]</span></a> or 202-551-5777. CMESC reserves the right to
not respond to any comments received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
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
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3143445d541c525e5c5c545f4542714254521f565e47"><span class="__cf_email__" data-cfemail="097b7c656c246a6664646c677d7a497a6c6a276e667f">[email protected]</span></a>. Please include
file number SR-CMESC-2026-002 on the subject line.
Paper Comments
<bullet> 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-CMESC-2026-002. 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 website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the filing will be available for inspection and
copying at the principal office of CMESC and on CMESC's website
(<a href="https://www.cmegroup.com/market-regulation/rule-filings.html">https://www.cmegroup.com/market-regulation/rule-filings.html</a>). Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CMESC-2026-002 and should be
submitted on or before April 2, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-04800 Filed 3-11-26; 8:45 am]
BILLING CODE 8011-01-P
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This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.