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Commodity Futures Trading Commission (CFTC) Makes Comparability Determinations for Substituted Compliance Purposes

The Commodity Futures Trading Commission has approved comparability determinations for substituted compliance with six different non-US regulatory regimes. Pursuant to the substituted compliance determinations, the CFTC will permit non-US swap dealers (SDs) and non-US major swap participants (MSPs) to comply with regulations in their home jurisdiction in lieu of complying with comparable CFTC regulations.The CFTC has provided a chart (availablehere) summarizing entity-level comparability determinations for Australia, Canada, the European Union, Hong Kong, Japan and Switzerland. Except as otherwise indicated in the chart, the substituted compliance determinations provide relief for certain non-US SDs and non-US MSPs from various CFTC entity-level requirements, including CFTC Regulations 3.3 (Chief Compliance Officer), 23.201 (Swap Data Recordkeeping), 23.203 (Swap Data Recordkeeping), 23.600 (Risk Management Program), 23.601 (Monitoring of Position Limits), 23.602 (Diligent Supervision), 23.603 (Business Continuity), 23.605 (Conflicts of Interest), 23.606 (Availability of Information for Disclosure) and 23.609 (Clearing Member Risk Management). 

The CFTC additionally provided transaction-level comparability determinations for the European Union and Japan. For the European Union, the CFTC approved substituted compliance for CFTC Regulations 23.501 (Trade Confirmation), 23.502 (Portfolio Reconciliation and Compression) and 23.503 (Portfolio Compression), as well as parts of CFTC Regulations 23.202 (Daily Trading Records) and 23.504 (Swap Trading Relationship Documentation). For Japan, the CFTC approved substituted compliance for CFTC Regulation 23.202 and parts of CFTC Regulation 23.504. 

All of the CFTC’s comparability determinations are available here

In making the comparability determinations, the CFTC declined to make determinations for CFTC Regulations 23.600(c)(2) (Periodic Risk Exposure Reports) and 23.608 (Restrictions on Counterparty Clearing Relationships) in all jurisdictions, and CFTC Regulation 23.609 (Clearing Member Risk Management) in Hong Kong and Switzerland. Accordingly, the CFTC’s Division of Swap Dealer and Intermediary Oversight has issued temporary no-action relief from such requirements for non-US SDs and non-US MSPs established in the relevant jurisdictions until March 3, 2014. CFTC Letter No. 13-78 is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume IV, Number 5


About this Author

Guy Dempsey Jr., Bank Regulations Legal Specialist, Katten Muchin

Guy C. Dempsey Jr. concentrates his practice on derivatives and structured products and on bank regulation. He advises clients on derivatives transactions of all types across all asset classes, as well as on the corporate governance, regulatory, collateral, compliance, insolvency and litigation issues associated with such products.

Much of Guy’s work involves helping bank and non-bank clients analyze the details and impact of the Dodd-Frank Act. He maintains deep knowledge of the banking laws and regulations relating to capital markets activities....

James M. Brady, Katten Muchin Law Firm, Finance Attorney

James Brady concentrates his practice in financial services matters.

While in law school, James was an editor of the Michigan Journal of International Law. He also served as a judicial intern to the Honorable Stephen J. Markman of the Michigan Supreme Court. http://www.kattenlaw.com/James-Brady