Assessment of Chicago Mercantile Exchange Inc. – March 2017 Executive Summary
| Purpose |
This report presents the Reserve Bank of Australia's Assessment of Chicago Mercantile Exchange Inc. (CME), which operates in Australia under an overseas clearing and settlement (CS) facility licence. CME is incorporated in the United States (US), and is primarily regulated by the Commodity Futures Trading Commission (CFTC) under US legislation. As a Systemically Important Derivatives Clearing Organization (SIDCO), CME is also subject to oversight by the Federal Reserve Board of Governors. Given the nature and scope of CME's current activities in Australia, the Bank does not consider it necessary at this stage to conduct a detailed assessment of CME against all of the Financial Stability Standards for Central Counterparties (the CCP Standards). This report covers CME's progress against the regulatory priorities the Bank has set for it. The report covers the 12 months ending 31 December 2016 (the assessment period). |
| Conclusion | In the assessment period CME has either met or made progress towards meeting the regulatory priorities identified by the Bank in its previous Assessment. |
| Progress towards 2016 Priorities |
In line with the Bank's regulatory priority, CME has developed or enhanced its recovery and wind-down plans for each of its clearing services. The associated rule changes were implemented during the assessment period. CME has also worked towards expanding the number of investment counterparties it has, including opening accounts at central banks. This is expected to allow CME to address the Bank's priority of reducing the size and concentration of unsecured investments of cash collateral with non-government obligors. Furthermore, CME has implemented enhancements to its governance arrangements, introducing board-level approval of key risk management frameworks. These changes go towards addressing a number of the Bank's priorities. With respect to the Bank's other regulatory priorities, CME has engaged with the Bank and provided the necessary data to allow the Bank to monitor these priorities. |
| Other Material Developments | During the assessment period, CME was granted recognition as a third-country central counterparty (CCP) by the European Securities and Markets Authority (ESMA). CME was also authorised in Japan, Singapore, Hong Kong and Mexico. |
| Supervisory Focus for 2017 |
In the coming year the Bank's supervisory focus will be to assess the outcome of the work planned or underway at CME, which is expected to fully address the Bank's earlier priorities. The Bank also expects CME to consider any implications of Guidance on Cyber Resilience for Financial Market Infrastructures (the Cyber Resilience Guidance) recently finalised by the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO). Similarly, the Bank expects CME to consider any implications of the CPMI-IOSCO Guidance on Resilience and Recovery of Central Counterparties (the CCP Resilience and Recovery Guidance) once it is finalised. |