Notice2026-18002
Self-Regulatory Organizations; CME Securities Clearing Inc.; Notice of Filing of Proposed Rule Change To Amend Rule 410, Rule 101, the Capped Liquidity Facility Procedure, and the Liquidity Risk Management Policy
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
September 3, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 91 Issue 170 (Thursday, September 3, 2026)</title>
</head>
<body><pre>
[Federal Register Volume 91, Number 170 (Thursday, September 3, 2026)]
[Notices]
[Pages 56678-56685]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-18002]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-106243; File No. SR-CMESC-2026-008]
Self-Regulatory Organizations; CME Securities Clearing Inc.;
Notice of Filing of Proposed Rule Change To Amend Rule 410, Rule 101,
the Capped Liquidity Facility Procedure, and the Liquidity Risk
Management Policy
August 31, 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 August 21, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
I. CMESC's Statement of the Terms and Substance of the Proposed Rule
Change
The proposed rule change of CME Securities Clearing Inc.
(``CMESC'') and consists of modifications of (i) CMESC's Rules 410 and
101 regarding Capped Liquidity Facility (``CLF'') \4\ and CLF Master
Repurchase Agreement (``CLF MRA''), (ii) the Capped Liquidity Facility
Procedure (``CLF Procedure'') and (iii) Liquidity Risk Management
Policy (``LRMP''). Each of the proposed changes is described in more
detail below.
---------------------------------------------------------------------------
\4\ Capitalized terms used herein and not defined have the
meanings assigned to such terms in the Rules of CME Securities
Clearing Inc. (``Rules''), as applicable, available at <a href="https://www.cmegroup.com/rulebook/CMESC/CMESC%20Rulebook.pdf">https://www.cmegroup.com/rulebook/CMESC/CMESC%20Rulebook.pdf</a>.
---------------------------------------------------------------------------
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
On December 1, 2025, the Commission issued an order approving
CMESC's Form CA-1 application for registration as a clearing agency
(``Application'') to provide central counterparty services for
transactions involving U.S. Treasury securities. As a registered
clearing agency providing central counterparty services, CMESC is a
covered clearing agency subject to clearing agency standards provided
in Section 17A of the Securities Exchange Act of 1934, as amended
(``Act''),\5\ and rules and regulations thereunder. SEC Rule 17ad-22(e)
\6\ under the Act requires each covered clearing agency to maintain and
hold qualifying liquid resources at the minimum to effect same-day,
intraday and multiday settlement of payment obligations with a high
degree of confidence under a wide range of foreseeable stress
scenarios, including, but not limited to, the default of the
Participant Family that would generate the largest aggregate payment
obligation for the covered clearing agency in extreme but plausible
market conditions.\7\ To ensure compliance with these requirements,
CMESC has established several liquidity tools in its Rules and policies
and procedures, including but not limited to the CLF in Rule 410, the
associated CLF Procedure, and the LRMP.\8\ The CLF is designed to
provide access to required liquidity in the event CMESC's other sources
of liquidity are unavailable or insufficient.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78q-1(b)(3)(F).
\6\ 17 CFR 240.17ad-22(e).
\7\ See Rule 17ad-22(e)(7)(i) and (ii), 17 CFR 240.17ad-
22(e)(7)(i) and (ii).
\8\ The LRMP and CLF Procedure were submitted to the Commission
as part of the Application.
---------------------------------------------------------------------------
To facilitate the implementation of the CLF in connection with
launching its Clearing Services, CMESC is proposing to amend Rule 410
by: (i) making the CLF MRA that each Member is required to enter into
with CMESC a rules-based agreement; (ii) providing more detail
regarding how CMESC calculates the size of the CLF and the allocated
amount (``Allocated CLF Amount'') up to which each Member is required
to purchase securities from CMESC on terms and conditions set forth in
the CLF MRA and adding a requirement to require each Member that is
approved by CMESC to commence clearing Eligible Securities Transactions
to provide information deemed relevant by CMESC in order to determine
such Member's Allocated
[[Page 56679]]
CLF Amount; and (iii) making clarifying changes and removing
redundancies to promote readability. As a result of the proposed
changes to Rule 410, CMESC is also proposing to make conforming and
clarifying changes to Rule 101 (the definition of CLF MRA), the CLF
Procedure and the LRMP to maintain consistency among the Rules, the CLF
Procedure and LRMP, remove ambiguities and improve clarity.
Each of the proposed changes to Rule 410, Rule 101 (Definition of
CLF MRA), the CLF Procedure and LRMP is described in more detail below.
Description of the Proposed Rule Change
1. Proposed Amendments to Rule 410
A. Rules-Based CLF MRA: Proposed Amendments to Rule 410(a)
Under existing Rule 410(a), each Member is required to enter into a
CLF MRA with CMESC, pursuant to which the Member may be notified by
CMESC to enter into repurchase transactions in Eligible Securities with
CMESC to purchase Eligible Securities up to the Member's Allocated CLF
Amount if and when CMESC declares a CLF Event pursuant to Rule 410(b).
Existing Rule 410(a) sets forth the terms of the CLF MRA. To mitigate
administrative burdens on both CMESC and the Members in preparing and
executing separate agreements and to promote efficiency and
consistency, CMESC is proposing to establish a rules-based MRA through
the following proposed changes to Rule 410(a).
First, CMESC proposes to modify the first sentence of existing Rule
410(a)(i), which currently requires each Member to enter into a
separate CLF MRA with CMESC, to state that each Member is a party to a
CLF MRA pursuant to and by operation of Rule 410(a). This new language
is designed to make clear that the CLF MRA is established pursuant to
and by operation of Rule 410(a) without additional steps taken on
either part of CMESC or Members to execute an agreement.
Second, CMESC proposes to modify the first sentence of Rule
410(a)(i) to make clear that the CLF MRA will be on terms set out at
the end of Rule 410 and proposes to move existing Rule 410(a)(ii)(A)-
(F) that contains the terms of CLF MRA to the end of Rule 410 with
certain adjustments, as explained below:
<bullet> The proposed CLF MRA set out at the end of Rule 410 will
include new language to provide that the CLF MRA is entered into
between CMESC and each Member by operation of Rule 410 and that
capitalized terms used but not defined in the CLF MRA have the meanings
set forth in the Rules; these provisions are intended to implement the
proposed changes to Rule 410(a)(i) that are designed to create a rules-
based MRA;
<bullet> As a rules-based agreement, the proposed CLF MRA will
incorporate by reference the SIFMA Master Repurchase Agreement
September 1996 version (``SIFMA MRA'') (without the referenced annexes
therein), rather than being established as a separate agreement in a
form based on the SIFMA Master Repurchase Agreement as provided in
existing Rule 410(a)(ii), and will provide that each CLF Transaction is
subject to the terms of the SIFMA MRA and Rule 410(a);
<bullet> In addition to incorporating the SIFMA MRA, the proposed
CLF MRA will provide that, notwithstanding anything else in the SIFMA
MRA, certain terms will apply to CLF Event Transactions between CMESC
and the Member. These terms are listed as paragraphs (a)-(g) in the
proposed CLF MRA and are described below:
[ssquf] Existing Rule 410(a)(ii)(A) will become new paragraph (a)
in the proposed CLF MRA except that the reference to ``this Rule 410''
will be changed to ``Rule 410'';
[ssquf] Existing Rule 410(a)(ii)(B) will become new paragraph (b)
of the proposed CLF MRA and CMESC proposes to create a new defined term
``Liquidating Trade'' to refer to a trade liquidating the financed
securities in clause (x) of this new paragraph (b);
[ssquf] Existing Rule 410(a)(ii)(C) will become new paragraph (c)
of the proposed CLF MRA and CMESC proposes to add a sentence from
existing Rule 410(g) to new paragraph (c), which will provide that
``[e]ach CLF Event Transaction will be entered into on an overnight
basis, unless otherwise specified by the Corporation''; in addition,
CMESC proposes to replace the text of ``trade liquidating the financed
securities'' in clause (x) of this new paragraph (c) with ``Liquidating
Trade'' as a result of the creation of the new defined term described
above; CMESC also proposes to add new text ``upon expiration of the
term of a CLF Event Transaction'' to the end of clause (z) of this new
paragraph (c) to clarify that each CLF Event Transaction will remain
open until the occurrence of the CLF Event Transaction Termination Date
upon expiration of the term of a CLF Event Transaction;
[ssquf] Existing Rule 410(a)(ii)(D) will become new paragraph (d)
of the proposed CLF MRA with minor adjustments and will state that
``[i]t shall be an ``Event of Default'' (for purposes of this CLF MRA)
with respect to the buyer under a CLF MRA if the Corporation ceases to
act for the Member pursuant Rule 901 or 902'';
[ssquf] Existing Rule 410(a)(ii)(E) will become new paragraph (e)
of the proposed CLF MRA with minor adjustments and will state that
``[t]here shall be no ``Event of Default'' (for purposes of this CLF
MRA) with respect to the Corporation as the seller other than a
Corporation Default within the meaning of Rule 714'';
[ssquf] Existing Rule 410(a)(ii)(F) will become new paragraph (f)
of the proposed CLF MRA without any changes;
[ssquf] Finally, CMESC proposes to add a new paragraph (g) in the
proposed CLF MRA to deal with any potential conflicts between the CLF
MRA and SIFMA MRA, which states that in the event of any inconsistency
between the terms of the SIFMA MRA and the CLF MRA, the terms of the
CLF MRA will govern.
[ssquf] After moving existing Rule 410(a)(ii) to the proposed CLF
MRA at the end of Rule 410, CMESC proposes to renumber existing Rule
410(a)(i) as Rule 410(a).
Finally, CMESC proposes to make additional clean-up changes to Rule
410(a). First, CMESC proposes to remove a sentence in existing Rule
410(a)(i) regarding the categories of securities CMESC may include as
Eligible Securities in the context of a CLF Event Transaction. This
sentence repeats the same provision in existing Rule 410(e) (to be
renumbered as Rule 410(c) as described below) and its deletion will
remove redundancy. Second, CMESC proposes to add a phrase ``pursuant to
Rule 410(b) below'' to the last sentence of Rule 410(a)(i) to clarify
that CMESC's declaration of a CLF Event and the ensuing actions taken
by CMESC will be pursuant to Rule 410(b).
B. Determination of the CLF Size and Calculation of the Allocated CLF
Amount: Proposed Amendments to Rule 410(i)
In addition to proposed changes to create a rules-based CLF MRA,
CMESC also proposes to amend existing Rule 410(i) (to be renumbered as
Rule 410(e)) to enhance the description of the calculations of the CLF
size and the Allocated CLF Amount. These amendments do not change the
existing methodology and formulae used to size the CLF and calculate
each Member's allocation.
[[Page 56680]]
i. Proposed Changes to Rule 410(i)(i) To Enhance the Description of the
Determination of the CLF Size
Existing Rule 410(i)(i) provides the calculation for the sizing of
the CLF. CMESC is proposing the following amendments to Rule 410(i)(i)
(renumbered as Rule 410(e)(i)) to enhance the description of the sizing
of the CLF.
First, CMESC proposes to clarify the first sentence of Rule
410(i)(i) regarding the assessment it conducts at least quarterly by
specifying that CMESC shall conduct an assessment at least every
quarter, or more frequently as CMESC deems appropriate, ``to determine
the required size of the CLF and each Member's Allocated CLF Amount.''
This additional detail clarifies the purpose of the quarterly
assessment (or more frequently as determined appropriate by CMESC) that
will determine the size and allocation of the CLF.
Second, CMESC proposes to provide additional details regarding its
calculation of the size of the CLF. These proposed changes are designed
to provide clarity and transparency in how CMESC calculates the size of
the CLF. They do not change the existing methodology CMESC established
to size the CLF. Currently, Rule 410(i)(i) provides that CMESC will
determine the size of the CLF through the assessment to evaluate its
hypothetical liquidity need in the event of a default of a Participant
Family (defined as the ``Stress Potential Payment Obligation'' or
``SPPO'') to which CMESC would be obligated to make the largest cash
payment. CMESC proposes to modify the second sentence of Rule 410(i)(i)
to make clear that CMESC would calculate the SPPO of each Participant
Family by evaluating the hypothetical cash settlement obligation that
CMESC may experience in the event of a Default of such Participant
Family in extreme but plausible market conditions, using a lookback
period deemed appropriate by CMESC. In addition, CMESC proposes to add
a new sentence to Rule 410(i)(i) to explain that CMESC will use the
largest SPPO across all Participant Families (defined as ``Cover 1
SPPO'') over the designated lookback period as the starting point in
determining the required size of the CLF.
Finally, although CMESC does not propose to change the substance of
the last sentence of Rule 410(i)(i) (renumbered as Rule 410(e)(i)),
CMESC proposes certain non-substantive changes to clarify the meaning
of this sentence. Specifically, CMESC proposes to add certain text to
specify that it may ``also'' consider other factors it deems relevant
``in sizing the CLF'' to make clear that in addition to assessing the
SPPO of each Participant Family over the designated lookback period and
to determine the Cover 1 SPPO over the lookback period as the starting
point in determining the size of the CLF, CMESC may also consider other
factors it deems relevant in its calculation of the size of the CLF. As
a result of these proposed revisions, CMESC also proposes to eliminate
a redundant phrase ``in determining the required size of the CLF (e.g.,
aggregated Allocated Capped CLF Amounts of all Members)'' from the end
of this sentence and add ``as deemed relevant by the Corporation'' to
the end of this sentence as a clarifying change.
ii. Proposed Changes to Rule 410(i)(ii) To Enhance the Description of
the Calculation of the Allocated CLF Amount
CMESC proposes several amendments to Rule 410(i)(ii) (renumbered as
Rule 410(e)(ii)) to enhance the description of the calculation of the
Allocated CLF Amount for added clarity and transparency. These changes
do not change the calculation or methodology used to determine each
Member's Allocated CLF Amount, as described in the Application
materials.
First, existing Rule 410(i)(ii) provides that CMESC shall calculate
each Member's Allocated CLF Amount at the time CMESC performs its
assessment referred to in clause (i) of Rule 410(i). CMESC proposes to
make minor changes to this sentence to clarify that CMESC will
calculate each Member's Allocated CLF Amount at the time ``as'' it
performs its assessment and change the reference to ``clause (i)'' in
this sentence to Rule 410(e)(i) due to renumbering Rule 410(i) to Rule
410(e).
Second, CMESC proposes certain changes to the second sentence of
existing Rule 410(i)(ii) to improve clarity. Currently, the second
sentence of Rule 410(i)(ii) states that, each Member's Allocated CLF
Amount will be calculated on a pro rata basis, based on the size of
each Member's ``SPPO'' relative to the total aggregate SPPO across all
Members. Because ``SPPO'' is already defined in proposed Rule 410(e)(i)
as the hypothetical cash settlement obligation CMESC may experience in
the event of a Default of a Participant Family in extreme but plausible
market conditions, CMESC proposes to add a new defined term ``Maximum
SPPO'', as described in the paragraph below, and proposes to specify
that the Maximum SPPO is determined using ``a designated lookback
period'' in the second sentence of Rule 410(i)(ii). As such, CMESC
proposes to modify the second sentence of Rule 410(i)(ii) to provide
that ``[e]ach Member's Allocated CLF Amount will be calculated on a pro
rata basis, based on the size of each Member's Maximum SPPO during the
designated lookback period relative to the total aggregate Maximum
SPPOs across all Members during the same period.'' Further, CMESC
proposes to define the pro rata ratio described in this sentence as the
``Obligation Ratio''.
Third, for the same reason stated above, CMESC proposes to amend
the third sentence of existing Rule 410(i)(ii) by replacing the first
reference to each Member's ``SPPO'' with the ``Maximum SPPO for
purposes of calculating the Member's Obligation Ratio''. In addition,
CMESC proposes to clarify that a Member's Maximum SPPO is calculated by
taking the sum of the Member's largest SPPO plus the two largest SPPOs
among the Users it authorizes, if applicable, over ``the'' designated
lookback period. CMESC is inserting the word ``two'' before the term
``largest SPPO'', while pluralizing the latter reference in the
existing text. In the same sentence, CMESC is deleting ``of the two''
and replacing it with ``among the''. Parallel changes are proposed in
the subsequent sentence. This formulation of the Rule text is intended
to result in a clearer, more precise description of CMESC's process for
incorporating User SPPOs in the calculation of a Member's Maximum SPPO
and aligns with the way the process is described in the CLF Procedures.
The process itself is unchanged; only the language in the Rulebook and
the CLF Procedures used to describe the calculation process is being
updated for additional clarity.
Fourth, CMESC proposes to replace ``SPPO'' with ``Maximum SPPO'' in
the fourth sentence of existing Rule 410(i)(ii) to conform to the
defined term and to add ``Obligation Ratio and'' in front of Allocated
CLF Amount to make clear that CMESC, at its sole discretion, can add a
multiplier to a particular Member's Maximum SPPO as part of determining
that Member's Obligation Ratio and Allocated CLF Amount.
Fifth, CMESC proposes to add a sentence between the fourth sentence
and fifth sentence in existing Rule 410(i)(ii) to enhance the
description of the allocation of the CLF, which provides that each
Member's Allocated CLF Amount is calculated as the product of the
Member's Obligation Ratio and the required CLF size determined in
accordance with Rule 410(e)(i), which provides for at least quarterly
resizing (or more frequently as
[[Page 56681]]
the Corporation deems appropriate). Although this calculation is
implied in the second sentence of existing Rule 410(i)(ii) regarding
each Member's Allocated CLF Amount calculated on a pro rata basis,
CMESC believes that by explicitly establishing how a Member's Allocated
CLF Amount is calculated, the proposed change will provide clarity and
transparency with respect to each Member's CLF obligation.
With respect to informing each Member of its individual Allocated
CLF Amount, CMESC proposes to clarify that CMESC will provide each
Member with its individual Allocated CLF Amount following each re-
sizing of the CLF. Therefore, CMESC proposes to delete references to
the ``periodic report'' from the fifth sentence and add ``following
each resizing of the CLF'' to the same sentence.
Finally, CMESC proposes to combine and restate the last two
sentences of existing Rule 410(i)(ii). The changes consist of restating
CMESC's obligation to notify each Member of its Allocated CLF Amount
following each resizing, and to remove a redundancy regarding Members'
obligations to enter into CLE Event Transactions upon CMESC's
declaration of a CLF Event, which is already provided for in greater
detail in Rule 410(b)(i)(B).
iii. Member Information To Facilitate CLF Calculations
In addition to the proposed changes described above, which are
designed to enhance the description of the CLF allocation, CMESC also
proposes modifications to Rule 410(i)(ii) (renumbered as Rule
410(e)(ii)) to provide a new requirement for a Member, in order to
commence clearance and settlement of Eligible Securities Transactions,
to provide information to CMESC to support CMESC's determination of
such Member's Allocated CLF Amount. Specifically, CMESC proposes to
insert in Rule 410(i)(ii) a provision that requires a Member to provide
certain information, including, without limitation, the projected
volumes and sizes of Eligible Securities Transactions to be submitted
for clearance and settlement by the Member and its authorized Users, if
any, over a period deemed relevant by CMESC, which will be incorporated
as an input into the sizing and allocation calculations for the CLF.
This information is intended to facilitate CMESC's assessment of the
Cover 1 SPPO as well as a Member's Maximum SPPO for purposes of
calculating the Member's Allocated CLF Amount during an initial ramp-up
phase. CMESC's Cover 1 SPPO calculations and Maximum SPPO calculations
for new Members will leverage this projected data and blend it with
data from the Member's actual cleared activity on a going-forward
basis, until the appropriate lookback period has lapsed. For avoidance
of doubt, the information required under the proposed changes to Rule
410(i)(ii), renumbered as Rule 410(e)(ii), serves as an input to
existing methodologies for calculating the size and allocation of the
CLF, which are unchanged by the proposed modifications.
C. Other Proposed Changes To Improve Clarity and Remove Redundancy:
Proposed Amendments to Rule 410(b)-(h)
CMESC further proposes several non-substantive, clarifying changes
to Rule 410 to improve readability and remove redundancies. The table
below lists each Rule 410 subsection which CMESC is proposing changes,
describing the proposed changes, and indicating the types of changes,
i.e., whether the changes are in the nature of clarification,
technical, or incorporation of proposed changes to Rule 410.
----------------------------------------------------------------------------------------------------------------
Rule Proposed change Purpose
----------------------------------------------------------------------------------------------------------------
Rule 410(b)(i)(A)................. To facilitate readability, added the sentence Clarification; consolidated
``the Corporation has sole discretion as to existing Rule 410(c) into
the non-Defaulting Members with whom it will Rule 410(b)(i)(A).
enter into CLF Event Transactions upon
declaration of a CLF Event and the terms of
each such transaction;'' from existing Rule
410(c).
Rule 410(b)(i)(B)................. Added ``selected to participate in CLF Event Clarification; consolidated
Transactions'' to refer more precisely to the existing Rule 410(d) into
Member that is selected by CMESC to Rule 410(b)(i)(B).
participate in CLF Event Transactions.
Added ``and any additional pertinent
information; Upon notice from the Corporation,
such Member must enter into the CLF Event
Transaction(s) with the Corporation at an
aggregate purchase price up to the maximum
amount allocated to such Member (`Allocated
CLF Amount') as calculated by the
Corporation'' from existing Rule 410(d).
Created the defined term ``Allocated CLF
Amount'' to replace existing ``Allocated
Capped CLF Amount'' throughout Rule 410.
Rule 410(b)(i)(C)................. Replaced ``an aggregate purchase price up to Clarification; removed
the maximum amount allocated to such Member redundancy that overlaps
(`Allocated Capped CLF Amount')'' with ``the with 410(b)(i)(B).
aggregate purchase price determined by the
Corporation, in its sole discretion''.
Rule 410(b)(i)(D)................. Deleted existing Rule 410(b)(1)(D) in its Removed redundancy that
entirety (i.e., ``Pursuant to the terms of the overlaps with paragraph
CLF MRA, each CLF Event Transaction will (c) of CLF MRA.
remain open until the earlier of (x) such time
that the Corporation has executed a trade
liquidating the financed securities
(`Liquidating Trade'), (y) such time that the
Corporation has obtained liquidity through its
other available liquid resources and closes
the CLF Event Transactions or (z) the CLF
Event Transaction Termination Date'').
Added ``Each CLF Event Transaction will remain
open pursuant to and in accordance with the
terms of the CLF MRA set forth at the end of
this Rule 410'' to set out the sequence of
events and the timeline of a CLF Event
Transaction.
Rule 410(b)(i)(E)................. Added ``that is a'' to refer to each Member Technical and
``that is a'' party to a CLF Event Transaction. Clarification.
Added ``exchange for cash in'' to the part that
states ``each such Member to deliver the
related Eligible Securities to the Corporation
in exchange for cash in order to enable the
Corporation to complete settlement''.
Rule 410(c)....................... Deleted........................................ Technical; consolidated
into Rule 410(b)(i)(A).
[[Page 56682]]
Rule 410(d)....................... Deleted........................................ Technical; consolidated
into Rule 410(b)(i)(B).
Rule 410(e)....................... Renumbered as Rule 410(c)...................... Technical.
Rule 410(f)....................... Renumbered as Rule 410(d)...................... Technical.
Rule 410(g)....................... Deleted........................................ Technical; consolidated
into CLF MRA paragraph
(c).
Rule 410(h)....................... Deleted........................................ Technical; removed to
reduce redundancy due to
overlap with Rule
410(b)(i)(E).
Rule 410(j)....................... Renumbered as Rule 410(f)...................... Technical.
Replaced ``Allocated Capped CLF Amount'' with
``Allocated CLF Amount'' for consistency with
the new proposed defined term.
Rule 410(k)....................... Renumbered as Rule 410(g)...................... Technical.
Rule 410(l)....................... Renumbered as Rule 410(h)...................... Technical.
Rule 410.......................... Added ``to'' in the legacy text relocated to Technical.
CLF MRA paragraph (d) for grammatical accuracy.
----------------------------------------------------------------------------------------------------------------
2. Proposed Amendments to Rule 101
As a result of the proposed changes to Rule 410(a) described above
to create a rules-based CLF MRA, CMESC proposes to amend the definition
of ``CLF MRA'' in Rule 101 to conform to the proposed changes to Rule
410(a). CMESC proposes to add more detail to the definition of ``CLF
MRA'' in Rule 101 to prescribe that ``CLF MRA means a Capped Liquidity
Facility Master Repurchase Agreement formed between a Member and the
Corporation by operation of Rule 410(a), which governs any CLF Event
Transaction between the Member and the Corporation, as defined and
further prescribed in Rule 410.'' This new definition clarifies that
the CLF MRA is a rules-based agreement between a Member and CMESC by
operation of Rule 410(a) and that CLF MRA governs CLF Event
Transactions between the Member and CMESC as further prescribed in Rule
410.
3. Proposed Amendments to CLF Procedure
The CLF Procedure establishes a framework for the governance,
execution and testing of CMESC's CLF, covering areas such as
calculation of the size and apportioning of CLF among Members,
administration of CLF Event Transactions, notification to Members,
Member attestation, and operational testing. As a result of the
proposed amendments to Rule 410 described above, CMESC proposes similar
changes to the CLF Procedure that are consistent with the proposed
amendments to Rule 410, as described below, for the purpose of aligning
provisions of the CLF Procedure with Rule 410.
A. Rules-Based CLF MRA
CMESC proposes to amend the Governance section of the CLF Procedure
to add that CLF Event Transactions are governed by a CLF MRA, as set
out in the Rules. This proposed addition is to align with and
acknowledge the proposed amendment to Rule 410 to state that each
Member is a party to a CLF MRA pursuant to and by operation of Rule
410(a), without additional steps taken on either part of CMESC or
Members to execute an agreement. CMESC also proposes to update within
the Governance section the internal governance committee that is
responsible for reviewing and approving the CLF Procedure on at least
an annual basis.
B. Sizing the CLF
CMESC proposes to amend the Sizing of the Facility section of the
CLF Procedure to add that it may consider additional factors in
addition to the Cover 1 SPPO amount, including but not limited to
information requested from Members. These proposed additions are to
align with and acknowledge similar proposed amendments to Rule 410 as
described above.
More specifically, CMESC proposes to modify the Sizing of the
Facility section of the CLF Procedure to clarify that the objective of
its CLF sizing methodology is to use the Cover 1 SPPO as the starting
point for estimating CMESC's hypothetical liquidity needs under extreme
but plausible market conditions. CMESC proposes to add language to this
section to mirror and align with the language at Rule 410(i)(i) (to be
renumbered as Rule 410(e)(i)), which provides consideration of these
historical and relevant factors in sizing the CLF.
CMESC also proposes that the CLF Procedure expressly state that
with respect to a Member approved by CMESC to commence clearance and
settlement of Eligible Securities Transactions, a Member's SPPO may be
based on information provided by the Member, in accordance with
abovementioned amendments to the Rules. This addition would account for
circumstances where CMESC does not already have historical trade
submission data from the Member to determine that Member's SPPO (e.g.,
a new Member) and CMESC seeks to request from and rely on appropriate
information supplied by a Member in order for CMESC to determine a
Member's SPPO. This addition also would bring the CLF Procedure into
alignment with Rule 410, as proposed to be amended.
C. Apportioning the CLF
CMESC proposes to amend the Apportioning section of the CLF
Procedure to similarly add that CMESC may request information from
Members to facilitate CMESC's calculation of each Member's Allocated
CLF Amount and to remove the description of how CMESC would otherwise
calculate the CLF obligation of a Member that had no transactions
during the relevant lookback period. The proposed additions are to
align with and acknowledge the proposed amendments to Rule 410(i)(ii).
Consistent with proposed changes to Rule 410(i)(ii) (renumbered as
Rule 410(e)(ii)), CMESC proposes that the CLF Procedure provide that a
Member's Maximum SPPO may be based on information requested by CMESC,
including the Member's projected volumes and sizes of transactions to
be cleared, to be calculated using a minimum lookback period as defined
in the CLF Procedure. The proposed change is designed to establish a
method for CMESC to compute each Member's Allocated CLF Amount in
accordance with CMESC Rules.
D. Notification and Attestation
CMESC proposes to modify the Notification and Attestation sections
of the CLF Procedure to clarify that on at least a quarterly basis and
upon any
[[Page 56683]]
resizing of the CLF, each Member will be informed of its individual
Allocated CLF Amount, as well as the effective date of any amended
Allocated CLF Amount. An authorized representative must acknowledge and
affirm the Member's potential CLF obligations on at least an annual
basis, as well as make other acknowledgments as required to ensure
Members are aware of and prepared to meet their relevant obligations.
These proposed changes regarding notice would be consistent with
changes proposed for Rule 410. In addition, CMESC believes that these
proposed amendments would enhance clarity on the operation of the CLF
and that they are reasonably designed to ensure that CMESC and its
Members will engage in meaningful and helpful information exchange in
support of assuring that Members meet their obligations under the CMESC
Rules, thereby facilitating CMESC meeting its obligations under the
Exchange Act and the SEC rules.
E. Other Proposed Clarification and Clean-Up Changes
Finally, CMESC proposes other clarifying, clean-up changes
throughout the CLF Procedure. CMESC's proposed clarifying, clean-up
changes fall within the following categories: (1) use capitalized terms
for consistency with the CMESC Rules and, where indicated, the LRMP and
the CLF Procedure; \9\ (2) use precise terminology consistently across
the CMESC Rules, the LRMP, and the CLF Procedure; \10\ (3) correct
minor grammatical or typographical errors; and (4) make clarifying
changes intended to improve the readability of the CLF Procedure. While
CMESC believes these changes will improve the clarity and readability
of the CLF Procedure, these changes do not change the substance of the
proposed rule change.
---------------------------------------------------------------------------
\9\ As examples, CMESC proposes to use capitalized terms as
defined in CMESC's Rules, including ``CLF Event Transaction(s);''
``Corporation;'' ``Allocated CLF Amount,'' consistently throughout
Sections 3 through 10 of the CLF Procedure.
\10\ As examples, CMESC proposes revise Section 3.2 of the CLF
Procedure to replace phrases like ``financial obligations'' with
``liquidity needs'' and ``funding'' to ``liquidity'' to be
consistent with the terminology used in the CMESC Rules.
---------------------------------------------------------------------------
4. Proposed Amendments to LRMP
CMESC proposes several corresponding modifications to the LRMP to
align with proposed changes to Rule 410 as discussed above. The LRMP
contains CMESC's policies and procedures to monitor, measure, and
manage potential liquidity events and resources available to satisfy
liquidity obligations in extreme but plausible market conditions.
Specifically, CMESC proposes to amend Section 5.5.3.2. provisions on
the declaration of a CLF Event to clarify that CMESC will notify
Members of their CLF Event Transactions and also the cash amount
required to be obtained (in total across Members and per Member), the
type and volume of securities to be utilized, and the initial tenor of
the CLF Event Transactions, and declare an end to the CLF Event once it
has determined that the CLF Event Transactions entered into pursuant to
the CLF are no longer necessary. Additionally, CMESC proposes
conforming changes to Sections 6.1.1.4.2. and 6.1.1.4.3. to clarify
that CLF sizing is based primarily on Cover 1 SPPO, and apportioning is
based primarily on the Member's maximum SPPO and the maximum SPPOs
across all Members within a defined lookback period, consistent with
proposed changes to Rule 410. CMESC proposes additional changes to
Section 6.1.1.4.2. to align the description of frequency for
determining the size of the CLF at least quarterly, or more frequently
if CMESC determines appropriate, with that in Rule 410(e)(i). Finally,
CMESC proposes making other non-substantive clarifying, organizational
and cleanup changes to the LRMP. These changes are designed to fully
align the LRMP with the proposed changes in Rule 410.
2. Statutory Basis
For the reasons set forth below, CMESC believes the proposed rule
change is consistent with Section 17A of the Securities Exchange Act of
1934 (``Act''),\11\ Rule 17ad-22(e)(1) \12\ and Rule 17ad-22(e)(7).\13\
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78q-1(b)(3)(F).
\12\ 17 CFR 240.17ad-22(e)(1).
\13\ 17 CFR 240.17ad-22(e)(7).
---------------------------------------------------------------------------
Consistency With Section 17A(b)(3)(F) of the Act
Section 17A(b)(3)(F) of the Act requires, in part, that the rules
of a clearing agency be designed to promote the prompt and accurate
clearance and settlement of securities transactions, to remove
impediments to and perfect the mechanism of a national system for the
prompt and accurate clearance and settlement of securities
transactions, and, in general, to protect investors and the public
interest.\14\ For reasons described below, CMESC believes that the
proposed rule change is consistent with Section 17A(b)(3)(F) because it
would enhance CMESC's Rules regarding the CLF, the CLF Procedure and
LRMP by providing greater clarity, efficiency, and consistency among
the rules, policy and procedure regarding implementation of CMESC's
liquidity risk management and in furtherance of the goals of Section
17A(b)(3)(F).\15\
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78q-1(b)(3)(F).
\15\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
First, the primary purpose of the proposed changes in Rule 410(a),
corresponding definitional changes proposed in Rule 101, and conforming
changes proposed in the CLF Procedure and the LRMP is to establish a
rules-based CLF MRA to avoid the need and steps for CMESC to prepare
numerous separate bilateral agreements and for Members to review and
sign the CLF MRA with CMESC, saving time, costs and resources.
Moreover, a rules-based CLF MRA fosters consistency and provides legal
certainty by ensuring that all Members are bound by a unified,
standardized agreement. As such, the proposed changes to Rule 410(a)
facilitate CMESC's implementation of the CLF and promote efficiency and
legal certainty, which, in turn, helps promote the prompt and accurate
clearance and settlement of securities transactions and the protection
of investors and the public interest. Therefore, CMESC believes that
the proposed changes to Rule 410(a) are consistent with Section
17A(b)(3)(F) of the Act.\16\
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Second, the proposed changes in Rule 410(i)(i) and (ii) (renumbered
as Rule 410(e)(i) and (ii)) and conforming changes to the CLF Procedure
and the LRMP are also consistent with Section 17A(b)(3)(F) of the
Act.\17\ Specifically, the proposed changes to Rule 410(i)(i) provide
more detail regarding how CMESC would calculate the size of the CLF by
assessing the SPPO of each Participant Family and then using the Cover
1 SPPO over the designated lookback period as the starting point in
determining the required size of the CLF, while taking into
consideration other factors as deemed relevant by CMESC. In addition,
the proposed changes to Rule 410(i)(ii) enhance the clarity of the
calculation of each Member's Allocated CLF Amount and provide more
transparency to Members by distinguishing a Member's Maximum SPPO from
the Member's SPPO and providing more detail regarding how each Member's
Allocated CLF Amount is calculated based on its Obligation Ratio.
Finally, the proposed addition of the information requirement for
Members to commence clearing Eligible Securities Transactions under
Rule 410(i)(ii), renumbered as 410(e)(ii), will
[[Page 56684]]
enable CMESC to receive the information it deems relevant to assess and
determine the Cover 1 SPPO for purposes of sizing the CLF and the
Member's Maximum SPPO for purposes of calculating the Member's
Allocated CLF Amount. Having clear and consistent rules governing
Members' CLF requirements will facilitate CMESC's ability to continue
to meet its liquidity needs, which, in turn, will help ensure CMESC
continues to meet its settlement obligations, even where a CLF Event
has been declared. Therefore, CMESC believes that the proposed rule
change to Rule 410(i) is designed to promote the prompt and accurate
clearance and settlement of securities transactions, and, in turn, to
protect investors and the public interest.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Finally, CMESC also proposes other changes to the current text of
Rule 410(b)-(h) and (j), the CLF Procedure, and the LRMP to reduce
redundancy and promote clarity, which is critical to CMESC's liquidity
risk management. As mentioned above, having clear and consistent rules
governing Members' CLF requirements will facilitate CMESC's ability to
continue to meet its liquidity needs, which, in turn, will help ensure
CMESC continues to meet its settlement obligations, even where a CLF
Event has been declared. Therefore, CMESC believes that the proposed
rule change would promote the prompt and accurate clearance and
settlement of securities transactions, consistent with Section
17A(b)(3)(F).\18\
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------
Consistency With Rule 17ad-22(e)(1)
CMESC also believes that the proposed rule change is consistent
with Rule 17ad-22(e)(1) under the Act, which requires that a covered
clearing agency's policies and procedures provide for a well-founded,
clear, transparent, and enforceable legal basis for each aspect of its
activities in all relevant jurisdictions.\19\ CMESC believes that
through the proposed changes to Rule 410 to establish the rules-based
CLF MRA and associated definitional changes in Rule 101, as well as the
conforming, clarifying and technical changes in the Rules, the CLF
Procedure and the LRMP, the proposed rule change, such as the changes
described in Section 3.a.3.E above, improves the readability, clarity,
and transparency of its Rules by ensuring that defined terms and
precise terminology are used consistently throughout, which in turn
supports legal certainty and enforceability, consistent with Rule 17ad-
22(e)(1).\20\
---------------------------------------------------------------------------
\19\ 17 CFR 240.17ad-22(e)(1).
\20\ 17 CFR 240.17ad-22(e)(1).
---------------------------------------------------------------------------
Consistency With Rule 17ad-22(e)(7)
Finally, CMESC believes that the proposed rule change is consistent
with Rule 17ad-22(e)(7) under the Act. Rule 17ad-22(e)(7) requires
generally that a covered clearing agency establish, implement,
maintain, and enforce written policies and procedures reasonably
designed to effectively measure, monitor, and manage the liquidity risk
that arises in or is borne by the covered clearing agency.\21\ As
described above, the proposed changes to Rule 410, Rule 101, the CLF
Procedure, and LRMP are intended to facilitate CMESC's implementation
of the CLF by creating a rules-based CLF MRA, enhancing the
descriptions of the calculation of the CLF and each Member's Allocated
CLF Amount, adding the information requirement imposed on Members to
allow CMESC to receive information deemed relevant by CMESC to assess
the size of the CLF and determine a new Member's Allocated CLF Amount,
and making conforming, clarifying and technical changes to reduce
redundancy and promote clarity. As such, the proposed rule change will
enhance CMESC's liquidity risk management by further supporting CMESC's
ability to effectively assess and determine the CLF sizing and
allocation and its Members' abilities to effectively manage their
liquidity responsibilities and planning. CMESC therefore believes the
proposed rule change is consistent with Rule 17ad-22(e)(7).\22\
---------------------------------------------------------------------------
\21\ 17 CFR 240.17ad-22(e)(7).
\22\ 17 CFR 240.17ad-22(e)(7).
---------------------------------------------------------------------------
B. CMESC's Statement on Burden on Competition
Section 17A(b)(3)(I) of the Act \23\ requires that the rules of a
clearing agency not impose any burden on competition that are not
necessary or appropriate in furtherance of the purposes of the Act.
CMESC does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act. The proposed rule change will not change the
existing methodology used to calculate the CLF size or allocations, nor
will it create additional rights and obligations of Members and Users
that are not already provided in the existing Rules and policies and
procedures. As such, CMESC does not believe the proposed rule change
would have any impact on burden on competition or is not necessary or
appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78q-1(b)(3)(I).
---------------------------------------------------------------------------
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#3c484e5d5855525b5d5258515d4e5759484f7c4f595f125b534a"><span class="__cf_email__" data-cfemail="384c4a595c51565f59565c55594a535d4c4b784b5d5b165f574e">[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.
[[Page 56685]]
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-regulations/self-regulatory-organization-rulemaking">https://www.sec.gov/rules-regulations/self-regulatory-organization-rulemaking</a>);
or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d7a5a2bbb2fab4b8babab2b9a3a497a4b2b4f9b0b8a1"><span class="__cf_email__" data-cfemail="4c3e392029612f2321212922383f0c3f292f622b233a">[email protected]</span></a>. Please include
File Number SR-CMESC-2026-008 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities and
Exchange Commission, Station Place, 100 F Street NE, Washington, DC
20549.
All submissions should refer to File Number SR-CMESC-2026-008. 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-regulations/self-regulatory-organization-rulemaking">https://www.sec.gov/rules-regulations/self-regulatory-organization-rulemaking</a>). Copies of the
filing also 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-2026-008 and should be submitted
on or before September 24, 2026.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------
\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-18002 Filed 9-2-26; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on September 3, 2026.
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.