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.
  • Effectiveness
  • Final rule effective within 30 days of pending publication in federal register.

Regulators CFTC
Entity Types B/D; Corp; Exch; FCM
Reference SP, PR, 8312-20, 11/18/2020; RIN 3038-AE65; Citation: *17 CFR* 39, 140;
Functions Compliance; Financial; Operations; Registration; Reporting; Risk
Countries United States of America; Cross-Border
Products Clearing; Commodities; Derivatives; Futures
Regions Am
Rule Type Final
Rule Date 11/18/2020
Effective Date 12/30/2020
Rule Id 91128
Linked to Rule :46145
Reg. Last Update 11/18/2020
Report Section US Investment

Last substantive update on 11/19/2020