On August 8, 2018, the U.S. Commodity Futures Trading Commission (CFTC) announced a notice of proposed rulemaking, which if adopted as proposed, would set out the policies and procedures for clearing organizations located outside of the United States to follow if they want to obtain an exemption from registration as a derivatives clearing organization (DCO). Comments on the proposal must be received on or before October 12, 2018.
Under the Commodity Exchange Act, a clearing organization that clears swaps must be registered with the CFTC as a DCO. The CFTC may exempt a non-U.S. clearing organization from registration for the clearing of swaps if it determines that the clearing organization “is subject to comparable, comprehensive supervision and regulation” by its home country regulator. The proposed rules would incorporate into the CFTC regulations its existing policies and procedures for granting such exemptions. To date, the CFTC has exempted four non-U.S. clearing organizations from registration as a derivative clearing organizations.
In its press release on the proposal, the CFTC noted that the proposed rule would “would allow non-U.S. clearing organizations to navigate the exemption process with greater ease and reduce staff time and resources required to issue an exemption from registration. A more open and transparent process for obtaining an exemption from registration also promotes the CFTC’s goal of operating with cross-border comity and encourages greater harmonization of the U.S. and global financial markets.”