FINANCIAL AND REGULATORY BULLETIN
TO: Chief Financial Officers; Chief Compliance Officers; Legal Counsel
DATE: June 16, 2016
SUBJECT: Changes to CME Group Subordinated Loan Procedures
In our continuing efforts to enhance the efficiencies in the regulatory review and approval processes for our clearing member firms, CME Group is implementing the following streamlined procedures regarding the approval of subordinated loan agreements and transactions.
1. All subordinated loan transactions must be submitted via a DSRO Supplemental Notice using the WinJammer™ Online Filing System. Such transactions include, but are not limited to, new subordinated loans, loan amendments, revolving loan drawdowns, prepayment requests and lender assignments.
2. Clearing members should submit via WinJammer™ a signed copy of any subordination agreement (including non-conforming subordination agreements) to their DSRO. A draft agreement should be filed prior to the proposed effective date to allow the Financial and Regulatory Surveillance Department (“FRS”) time to review the agreement in detail and request any changes. FRS considers 10 days prior to the effective date to be a reasonable amount of time to complete the review; however, FRS has discretion to approve agreements before the 10 days lapse. Please include contact information for the appropriate individual(s) for questions and/or required changes.
3. Clearing members shall also file with any loan agreement an Information Statement setting forth the name, address and business relationship of the lender to the clearing member at the time the proposed agreement is submitted.
4. For Broker/Dealers, any and all documentation sent to FINRA for subordinated loan transactions must be sent to the DSRO at the same time that it is submitted to FINRA for review. FINRA’s standard subordinated loans are acceptable provided they include a rider to the loan containing certain CFTC required language in order to be in compliance with CFTC regulations. FINRA is aware of this requirement and has approved these riders. Broker/Dealers should promptly submit any approval letters issued by FINRA for the requested transaction(s).
While clearing member firms are encouraged to immediately adopt the above procedures for subordinated loan transactions, the above procedures will be effective July 1, 2016 for all such transactions going forward.
Subordinated loan forms and the Information Statement are available at the following link on CME Group’s website: http://www.cmegroup.com/clearing/financial-and-regulatory-surveillance/forms.html.
If you have any questions, please contact Lisa Creamer in the FRS Department at 312-930-3224 or Lisa.Creamer@cmegroup.com, or contact the FRS Department at 312-930-3230.
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