Assessment of Chicago Mercantile Exchange Inc 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, and is primarily regulated by the Commodity Futures Trading Commission (CFTC) under US legislation. CME has been designated in the United States as a Systemically Important Derivatives Clearing Organization (SIDCO), and therefore 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 has not considered 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 developments relating to the Bank's Assessment of CME for the 12 months ending 31 December 2017 (the assessment period). |
| Conclusion | In the assessment period CME has either met or made some progress towards meeting the outstanding regulatory priorities outlined in the Bank's previous Assessment. |
| Progress towards regulatory priorities | During the assessment period, CME materially reduced the size and concentration of its unsecured investments of cash collateral with nongovernment obligors, with the majority of its investments now placed with the Federal Reserve. CME also progressed its work on implementing its recovery and wind-down plans. The associated rule changes for its over-the-counter (OTC) Interest Rate Swap (IRS) clearing service are expected to be implemented during the next assessment period. Furthermore, CME commissioned an independent review of its Liquidity Risk Management Framework (LRMF) in 2017. |
| 2018 priorities and supervisory focus | In the coming year the Bank expects to complete its review of CME's recovery and wind-down plans as updated by CME. The Bank will also review the results of the independent review of CME's LRMF once it is completed. In addition, the Bank will consider the alignment of CME's practices with guidance from the Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO), Resilience of central counterparties (CCPs): Further guidance on the PFMI and will continue to expect CME to consider any implications of the CPMI-IOSCO Guidance on cyber resilience for financial market infrastructures for its operations. |