April 21, 2021

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April 20, 2021

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April 19, 2021

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CFTC Unanimously Approves Final Rule for Granting Exemptions From DCO Registration

On November 18, the Commodity Futures Trading Commission unanimously approved a final rule (Final Rule) establishing a framework for the CFTC to grant a clearing organization organized outside of the US an exemption from registration as a derivatives clearing organization (DCO) to permit the clearing organization to clear swaps transactions on behalf of certain US persons. Subject to the terms and conditions set out in the Final Rule, the CFTC may grant an exemption from registration if: (1) the CFTC determines that the clearing organization is subject to comparable, comprehensive supervision and regulation by its home country authorities; and (2) the clearing organization agrees that its clearing services on behalf of US persons will be limited to:

  1. a US person that is a clearing member of the exempt DCO that clears swaps only for itself and those persons that fall within the definition of “proprietary account” set forth in CFTC Regulation 1.3;

  2. a non-US person that is a clearing member of the exempt DCO that clears swaps for any affiliated US person that falls within the definition of “proprietary account”; and

  3. a futures commission merchant that is a clearing member of the exempt DCO, or otherwise maintains an account with an affiliated broker that is a clearing member, for the purpose of clearing only proprietary swaps positions for itself and those persons that fall within the definition of “proprietary account.”

The Final Rule codifies existing CFTC policies and procedures for granting such exemptions and establishes procedures the CFTC can use to modify or terminate an exemption. To date, the CFTC has exempted four non-US clearing organizations from registration.

The Final Rule will be effective 30 days after publication in the Federal Register.

The Final Rule is available here.

©2021 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 325



About this Author

Kevin M. Foley, Finance Lawyer, Katten Llaw Firm

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.


Stanley V. Polit, Katten Muchin, Financial Services lawyer, Corporate Regulatory Matters Attorney

Stanley Polit concentrates his practice in transactional, corporate and regulatory aspects of financial services matters. Stan is able to provide legal services to a wide variety of clients including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, commodity trading advisers, financial institutions and general corporate clients.

Prior to joining Katten, Stan served as a council member for a national crisis management firm, where he specialized in crisis communication and merged media strategies. He has...