CFTC Foreign Clearing Exemption
On Nov. 18, CFTC approved final foreign DCO registration exemption.
- CFTC approved 2018 proposal as final rule, for granting exemptions from derivatives clearing organization DCO registration, to certain foreign clearing organizations (FCO).
- Follows Aug. 2018 proposal to codify no-action practice and Jul. 2019 supplementary proposal to expand exemptions further see #46145, adopts 2018 proposal only.
- Made changes to 17 CFR 39 scope, definitions, exemptions, notifications and reporting.
- Also changes to 17 CFR 140 on CFTC authority for delegation of exemption approvals.
- Only Original Proposal Adopted
- Chair Tarbert supported approving rule as "modest first step" to amend Part 39 rule doesn't permit exempt DCOs to clear U.S. customers but Tarbert supports expanding.
- Commissioner Quintenz also supported deferring to foreign regulators per 2018 proposal only authorized to clear proprietary positions of its U.S. clearing members.
- Commissioner Behnam concurred, always supported original 2018 proposal for more transparency but glad prohibits clearing of U.S. customer positions, condition for yes.
- Berkovitz agreed to support original only same as Behnam without US element added.
- Expanded Proposal Rejected
- Tarbert Said would have adopted 2019 proposal to greater flexibility, choice to most sophisticated US customers (ECP) to access swaps cleared at non-US clearinghouses.
- Would have given access to foreign-currency denominated instruments traded overseas to hedge various risks on a global basis no substantial risk CCPs exempted.
- Supports continued discussion and allowing some exempt DCOs additionally to clear certain non-U.S.-dollar denominated swaps for limited sophisticated ECP counterparts.
- Quintenz also supported going further to expanded exempt DCO framework to US.
- Behnam argued only supported rule as it went ahead without adopting 2019 one, no need to expand, wary of it but open and looked forward to possibility of reassessing.
- Berkovitz said expansion would have subjected U.S. customer accounts to foreign bankruptcy, regulations, promoted use of foreign intermediaries at expense of U.S.
- Also said would have exceeded CFTC limited exemptive authority, added major risks.
- Final rule effective within 30 days of pending publication in federal register.
||B/D; Corp; Exch; FCM
||SP, PR, 8312-20, 11/18/2020; RIN 3038-AE65; Citation: *17 CFR* 39, 140;
||Compliance; Financial; Operations; Registration; Reporting; Risk
||United States of America; Cross-Border
||Clearing; Commodities; Derivatives; Futures
|Reg. Last Update
Last substantive update on 11/19/2020