SEC Division of Investment Management staff letter: Chicago Mercantile Exchange

~~CMEGroup A CME/Chicago Board of Trade/NYMEX Company July 28, 2011 Douglas Scheidt, Esq. Associate Director Division of Investment Management Securities and Exchange Commission 100 F Street, N .E. Washington, D.C. 20549 Re: Applicability of Rule 17f-6 to Cleared IRS Transactions Dear Mr. Scheidt:
Pursuant to our recent telephone conversations with the Division of Investment Management (the "Division") staff, we are submitting this letter to request further temporary no-action assurance that the Division staff will not recommend enforcement action to the Securities and Exchange Commission (the "Commission") under Section 17(f) of the Investment Company Act of 1940 (the "1940 Act") against any registered Investment Company (a "Fund") if the Fund or its custodian places and maintains cash, securities and/or other property ("assets") in the custody of the Chicago Mercantile Exchange ("CME") or a futures commission merchant ("FCM") registered with the Commodity Futures Trading Commission ("CFTC") that is a CME clearing member (a "CME Clearing Member") for purposes of meeting CME's or a CME Clearing Member's margin requirements for certain interest rate swap contracts ("IRS") that are cleared by CME. We note that the Division staff has previously taken this position in a letter dated March 24,2011 (the "Current IRS No-Action Letter,,).l The CFTC recently issued temporary relief to exempt swap market participants from various requirements under the Commodity Exchange Act, as amended (the "CEA") that would otherwise apply to certain swap transactions as a result of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act")2 generally becoming effective on July 16, 2011 (the "Effective Date Order,,).3 The Dodd Frank Act and the Effective Date Order reflect an underlying policy to facilitate the central clearing of IRS transactions to reduce systemic risk in the global financial markets, while also minimizing unnecessary disruption and costs to the markets. Consistent with the CFTC's issuance of the Effective Date Order, we are requesting that the Division staff issue further no-action assurances for IRS transactions See CME Group, SEC No-Action Letter, Fed. Sec. L. Rep. (CCH) ~ 76,712 (March 24, 20 II). The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). See 76 Fed. Reg. 35372 (June 17,2011). World Financial Center One North End Avenue New YOlk, New York 10282 GENERAL 212 299 2000 MARKETING 2122992301 cmegroup.com