CME Securities Clearing, Inc.; Order Granting an Application for Registration as a Clearing Agency Under Section 17A of the Securities Exchange Act of 1934

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104281; File No. 600-44]</DEPDOC> <SUBJECT>CME Securities Clearing, Inc.; Order Granting an Application for Registration as a Clearing Agency Under Section 17A of the Securities Exchange Act of 1934</SUBJECT> <DATE>December 1, 2025.</DATE> <HD SOURCE="HD1">I. Introduction</HD> On December 13, 2024, CME Securities Clearing, Inc. (“CMESC”) filed with the Securities and Exchange Commission (“Commission”) an application on Form CA-1 (“Application”) under Section 17A of the Securities Exchange Act of 1934 (“Exchange Act”) seeking to register as a clearing agency to provide central counterparty (“CCP”) services for transactions involving U.S. Treasury securities. <SU>1</SU> <FTREF/> Notice of the Application was published for comment in the <E T="04">Federal Register</E> on January 22, 2025. <FTREF/> <SU>2</SU> On April 18, 2025, the Commission instituted proceedings pursuant to Section 19(a)(1)(B) of the Exchange Act to determine whether to grant or deny the Application. <SU>3</SU> <FTREF/> On July 21, 2025, the Commission designated a longer period for Commission action on the OIP. <SU>4</SU> <FTREF/> On September 30, 2025, CMESC agreed to extend the time for the Commission's review of the Application. <FTNT> <SU>1</SU>  15 U.S.C. 78 <E T="03">q</E> -1. If CMESC determines in the future to provide other clearing agency services or to perform the functions of a clearing agency for transactions in other types of securities, CMESC would need to amend its application on Form CA-1 to so reflect and submit any related proposed rule changes as required under Section 19(b) of the Exchange Act. </FTNT> <FTNT> <SU>2</SU>  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: <E T="03">https://www.sec.gov/rules-regulations/other-commission-orders-notices-information/cme-form-ca-1.</E> </FTNT> <FTNT> <SU>3</SU>  Release No. 34-102889 (Apr. 18, 2025), 90 FR 17269 (Apr. 24, 2025) (“OIP”). </FTNT> <FTNT> <SU>4</SU>  Release No. 34-103514 (July 21, 2025), 90 FR 34938 (July 24, 2025). </FTNT> The Commission received comment letters on the notice of the Application and on the OIP, as well as response letters from CMESC. <SU>5</SU> <FTREF/> Each comment letter either expressed explicit support for approval of the Application or generally expressed support for the expansion of access to the clearing of transactions in U.S. Treasury securities through the approval of new clearing agencies. Some commenters also recommended that CMESC consider certain changes to the Application. The comment letters received, and CMESC's response letters thereto, are discussed in Part III. <FTNT> <SU>5</SU>  The public comment file for the Application is available on the Commission's website at: <E T="03">https://www.sec.gov/comments/600-44/600-44.htm.</E> On May 27, 2025, CME Group submitted two letters in one set, and both letters are included as part of the one entry reflected on the Commission's website. <E T="03">See</E> letters from Jonathan Marcus, Senior Managing Director and General Counsel, CME Group, Inc., dated May 27, 2025 (“CME Response Letter” and “CME Fees Letter”). The CME Response Letter addresses the comment letters received on the Application, and the CME Fees Letter describes CMESC's intent with respect to its fee schedule. </FTNT> This order grants CMESC's Application for registration as a clearing agency for the reasons set forth in Part III below. <HD SOURCE="HD1">II. Statutory Standard for Registration as a Clearing Agency</HD> Clearing agencies are broadly defined under the Exchange Act and undertake a variety of functions, <SU>6</SU> <FTREF/> including providing the services of a CCP. <SU>7</SU> <FTREF/> Pursuant to Section 17A of the Exchange Act and Rule 17Ab2-1 thereunder, an entity that meets the definition of a clearing agency must register with the Commission (or obtain from the Commission an exemption from registration prior to performing the functions of a clearing agency). <SU>8</SU> <FTREF/> In addition to the requirements set forth in Rule 17Ab2-1, Section 19(a)(1) of the Exchange Act establishes the standard for Commission review of an application for registration as a clearing agency. Pursuant thereto, the Commission shall grant registration of a clearing agency if it finds that the requirements of the Exchange Act and the rules and regulations thereunder with respect to the applicant are satisfied. <SU>9</SU> <FTREF/> The Commission shall deny such registration if it does not make such finding. <SU>10</SU> <FTREF/> <FTNT> <SU>6</SU>  15 U.S.C. 78c(a)(23)(A) (providing the definition of “clearing agency”); <E T="03">see also</E> Release No. 34-78961 (Sept. 28, 2016), 81 FR 70786, 70897 (Oct 13, 2016) (“CCA Standards Adopting Release”) (stating that clearing agencies are broadly defined in the Exchange Act and undertake a variety of functions). </FTNT> <FTNT> <SU>7</SU>   <E T="03">See</E> 17 CFR 240.17ad-22(a)(2) (defining “central counterparty” as a clearing agency that interposes itself between counterparties to securities transactions, acting functionally as the buyer to every seller and the seller to every buyer). </FTNT> <FTNT> <SU>8</SU>  15 U.S.C. 78 <E T="03">q</E> -1(b); 17 CFR 240.17ab2-1 (“Rule 17Ab2-1”). </FTNT> <FTNT> <SU>9</SU>  15 U.S.C. 78 <E T="03">q</E> -1; 15 U.S.C. 78s(a)(1). </FTNT> <FTNT> <SU>10</SU>  15 U.S.C. 78s(a)(1). </FTNT> The requirements of the Exchange Act applicable to clearing agencies are set forth in Section 17A of the Exchange Act and the rules and regulations thereunder. <SU>11</SU> <FTREF/> Accordingly, to grant CMESC's application for registration as a clearing agency, the Commission must find that the Application satisfies the requirements of Section 17A(b) of the Exchange Act and rules and regulations thereunder, including the determinations set forth in paragraphs (A) through (I) of Section 17A(b)(3) of the Exchange Act. <SU>12</SU> <FTREF/> <FTNT> <SU>11</SU>  Rules for registered clearing agencies include recordkeeping requirements, 17 CFR 240.17a-1; the filing process for proposed rule changes, 17 CFR 240.19b-4; rules addressing operations and risk management, governance and conflicts of interest, and plans for recovery and wind-down at, respectively, 17 CFR 240.17ad-22 (“Rule 17Ad-22”), 240.17ad-25 (“Rule 17Ad-25”), and 240.17ad-26 (“Rule 17Ad-26”); and the requirements set forth in Regulation Systems Compliance and Integrity, 17 CFR 242.1000 <E T="03">et seq.</E> (“Regulation SCI”). The Commission conducts ongoing monitoring of registered clearing agencies through its supervisory program for registered clearing agencies. The Commission also assesses compliance with Commission rules by conducting examinations and investigations. <E T="03">See</E> 15 U.S.C. 78q(b); 15 U.S.C. 78u(a). </FTNT> <FTNT> <SU>12</SU>  15 U.S.C. 78s(a); 15 U.S.C. 78 <E T="03">q</E> -1(b)(3)(A)-(I). The determinations are described further below. </FTNT> After a clearing agency's application for registration is granted, the clearing agency must continue to satisfy the requirements of the Exchange Act and the rules and regulations thereunder. The Commission has explained that “[a]n approval of clearing agency registration does not mean that no further modifications of the applicant's rules, systems, procedures, or practices are needed.”  <SU>13</SU> <FTREF/> Rather, the Commission stated that a registered clearing agency's obligation to continue to satisfy the requirements of the Exchange Act and the rules and regulations thereunder means that “[t]he self-regulatory obligations of [a] fully registered clearing agenc[y] cannot end” after registration. <SU>14</SU> <FTREF/> To ensure such compliance, the Commission stated that it “will continue to use its oversight, inspection, and enforcement authority as necessary and appropriate to further the purposes of the [Exchange] Act.”  <SU>15</SU> <FTREF/> <FTNT> <SU>13</SU>   <E T="03">See</E> Release No. 34-69838 (June 24, 2013), 78 FR 39027, 39029 (June 28, 2013) (“FICC Registration”) (approving an application by the Fixed Income Clearing Corporation (“FICC”) for permanent registration as a clearing agency). </FTNT> <FTNT> <SU>14</SU>   <E T="03">See</E> Release No. 34-20221 (Sept. 23, 1983), 48 FR 45167, 45171 (Oct. 3, 1983) (approving nine applications for permanent registration as a clearing agency). </FTNT> <FTNT> <SU>15</SU>   <E T="03">Id.</E> </FTNT> <HD SOURCE="HD1">III. Review of Application Under Statutory Standard for Registration</HD> Consistent with the requirements in Sections 17A and 19(a)(1) of the Exchange Act described above, the Commission below discusses how the Application satisfies each of the statutory requirements to be registered as a clearing agency. <SU>16</SU> <FTREF/> <FTNT> <SU>16</SU>   <E T="03">See</E> 15 U.S.C. 78 <E T="03">q</E> -1(b)(3)(A)-(I) (describing the statutory determinations that the Commission must make regarding the rules and structure of a clearing agency to grant registration). In 1980, the Commission published a statement of the views and positions of Commission staff regarding the requirements of Section 17A. <E T="03">See</E> Release No. 34-16900 (June 17, 1980), 45 FR 41920 (June 23, 1980). </FTNT> <HD SOURCE="HD2">A. Organization and Capacity</HD> <HD SOURCE="HD3">1. Statutory Standard: Section 17A(b)(3)(A)</HD> Section 17A(b)(3)(A) of the Exchange Act states that a clearing agency shall not be registered unless the Commission determines that such clearing agency is so organized and has the capacity to be able to facili ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 165k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━