September 14, 2015
Comments on “Margin Requirements for Uncleared Swaps for Swap Dealers and Major
Swap Participants － Cross-Border Application of the Margin Requirements; Proposed
Rule” issued by the Commodity Futures Trading Commission
Japanese Bankers Association
1. Preamble(1) We, the Japanese Bankers Association (“JBA”), would like to express our gratitude
for this opportunity to comment on a proposed rule “Margin Requirements for
Uncleared Swaps for Swap Dealers and Major Swap Participants－Cross-Border
Application of the Margin Requirements; Proposed Rule” (the “proposed rule” or the“proposed cross-border application”) (RIN 3038–AC97) issued on July 14, 2015 by
the Commodity Futures Trading Commission (the “CFTC”).
(2) To our understanding, the primary impact of the proposed rule on Japanese financial
institutions arises when they transact with a covered swap entity (CSE). In
September 2013, the Basel Committee on Banking Supervision (“BCBS”) and theBoard of the International Organization of Securities Commissions (“IOSCO”)
released their final report on “Margin requirements for non-centrally cleared
derivatives” (“BCBS/IOSCO Final Report”), and national supervisors are toestablish detailed margin requirements based on that international minimum
standards. The proposed rule published accordingly by the CFTC, which supervises
the U.S. market (i.e. the world’s largest derivative market), is considered importantbecause it is deemed as a model or guidance for other jurisdictions to follow.
(3) We would like to comment particularly from the perspectives not only of Japan, butalso of Asian regions and jurisdictions where collateral agreements (“CSA”) are lesscommonly used. We expect that our comments below will be of assistance and offer
an additional point of reference as the CFTC, as well as other supervisors, work
towards finalizing the rule so that it will become a most reasonable and fair rule fromglobal perspectives and will promote the implementation of the international
standards.
(4) When reading our comments provided herein, please refer to our comments ofDecember 2, 2014 submitted to the CFTC (entitled “Comments on ‘Margin
Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants’issued by the Commodity Futures Trading Commission”)1, and also our comments1

http://www.zenginkyo.or.jp/fileadmin/res/abstract/opinion/opinion261232.pdf

of July 10, 2015 submitted to the European Supervisory Authorities (entitled“Comments on Second Consultation Paper: Draft Regulatory Technical Standards
on risk-mitigation techniques for OTC-derivative contracts not cleared by a CCP
under Article 11(15) of Regulation (EU) No 648/2012 issued by the European
Supervisory Authorities”)2. We presume that the consultation paper issued by theEuropean Supervisory Authorities reflects harmonization efforts made among mainsupervisors, such as the U.S., Europe and Japan, and would like to ask the CFTC torecognize our comments to such a consultation paper as our most recent view andgain full understanding of it.
2. General comments(1) Necessity of integrating swap margin rules
As national proposed rules increase, there will be numerous combinations of rules
according to counterparty’s home countries, subjecting entities to respective
standards for documentation and management. Given this, it is obvious that theswap margin regulatory framework will fail to function in effect. For example,
unless various versions of ISDA agreements are established, it would be extremely
difficult to retroactively apply the requirement of initial margin exchange to existingtransactions. Further, while the proposed cross-border application prescribes the useof Hybrid, Firm-Wide Approach, the approach is considered as complicated andthus it will require significant cost (e.g. labor and system costs) and time to prepare
for regulatory compliance. If cross-border application rules vary across jurisdictions,such burdens for regulatory compliance will further increase, making it moredifficult for entities to comply with applicable rules. In this view, for essential
solution of this issue, it would be necessary to promote the integration of swap
margin rules in order to avoid substituted compliance.
(2) Permission of substituted compliance without comparability assessment
If it is determined that swap margin rules will not be integrated and thus entities willneed to avail themselves of substituted compliance, the comparability assessment
between national rules will need to be performed, which is expected to take a year(s)even if the public- and private sectors take prompt actions with joint efforts. Further,system development and other specific regulatory compliance tasks by individual
entities cannot be initiated unless the comparability assessment is completed.
Therefore, if the comparability assessment is performed, it is our concern that
regulatory compliance tasks will not be completed before the effective date of the
proposed rule, giving rise to a number of parties that will have to suspend newtransactions. From this point of view, the CFTC is requested to ensure comparability
with other national regulations before, instead of after, the finalization of the2

http://www.zenginkyo.or.jp/fileadmin/res/abstract/opinion/opinion270740.pdf

2

proposed rule, and then to make substituted compliance available for all national
regulations without requiring comparability assessment, thereby giving an option ofsubstituted compliance to parties to each transaction.
(3) Provision of realistic preparation period
If our requests mentioned in (1) and (2) above will not be met and thus thecomparability assessment will need to be performed, it may be necessary tocomplete the assessment immediately. Given the effective date of the proposed rule,the comparability determinations need to be approved within the year 2015 at thelatest. However, more realistic time for preparation would be necessary taking into
consideration that joint efforts by the public- and private sectors to assesscomparability will be made, and necessary actions such as documentation andsystem development will be taken, after all national regulations are finalized. In thisview, it is requested to set a transitional period of at least one and a half years prior tostarting the regulation implementation phase after the U.S., Europe and Japaneserules are finalized.
It goes without saying that we consider that the timing of implementation should not
be delayed unnecessarily. Therefore, also from the perspective of avoiding extensionof the timing of implementation, the approach requested in paragraph (1), or at least
the approach requested in paragraph (2), should be taken. If both approaches cannot
be taken, it is indispensable that realistic timing of implementation will be set or atransitional period will be provided.
3.

Specific comments(1) Necessity of integrating swap margin rules
Currently, there are 16 (= 4 (i.e. the CFTC, the U.S. prudential regulators, EU andJapan rules) x 4) combinations of standards depending on the counterparty’s homecountries or their supervisors. In the future, as national rules increase, there will be
numerous combinations of rules of counterparty’s home countries, subjecting
entities to respective standards for documentation and management. Given this, it isobvious that the swap margin regulatory framework will fail to function in effect.
Further, while the proposed cross-border application proposes the use of Hybrid,
Firm-Wide Approach, the approach is considered as complicated and thus it will
require significant cost (e.g. labor and system costs) and time to prepare forregulatory compliance. If cross-border application rules vary across jurisdictions,such burdens for regulatory compliance will further increase, making it moredifficult for entities to comply with applicable rules. In this view, for essential
solution of this issue, it would be necessary to promote the integration of swap
margin rules in order to avoid substituted compliance.

3(2) Permission of substituted compliance without comparability assessment
If it is determined that swap margin rules will not be integrated and thus entities willneed to avail themselves of substituted compliance, the comparability assessment
between national rules will need to be performed, which is expected to take a year(s)even if the public- and private sectors take prompt actions with joint efforts. Further,
specific approaches to documentation and system development, etc. to be taken byindividual entities cannot be initiated unless the comparability assessment iscompleted. Therefore, if the comparability assessment is performed, it is our concernthat such regulatory compliance tasks will not be completed before the effective dateof the proposed rule, giving rise to a number of parties that will have to suspend newtransactions. Moreover, comparability between jurisdictions should be ensured
because each national rule is established based on the BCBS/IOSCO Final Report.
Given above, the CFTC is requested to ensure comparability with other national
regulations before, instead of after, the finalization of the proposed rule and then to
make substituted compliance available for all national regulations without requiring
performance of comparability assessment, thereby giving an option of substitutedcompliance to parties to each transaction; or to allow substituted compliance as longas the BCBS/IOSCO Final Report is observed.
(3) Provision of realistic preparation period
If our requests for the integration of swap margin rules and the permission ofsubstituted compliance without comparability assessment will both not be met andthus the comparability assessment will need to be performed, it is necessary tocomplete the assessment immediately. Given the effective date of the proposed rule,the comparability determinations need to be approved within the year 2015 at thelatest. However, more realistic time for preparation would be necessary taking into
consideration that joint efforts by the pubic- and private sectors to assesscomparability will be made, and necessary actions such as documentation andsystem development will be taken, after all national regulations are finalized. In thisview, it is requested to set a transitional period of at least one and a half years prior tostarting the regulation implementation phase after the U.S., Europe and Japaneserules are finalized.
(4) Timeframe up to the effective date (September 1, 2016)
Suppose that the approaches (1) to (3) requested above are not accepted and the
proposed rule will be implemented on the currently-planned effective date. Given
that contractual negotiations with counterparties (documentation) need to becompleted before that effective date, major supervisors, such as the U.S., Europe andJapan, will have to finalize their national rules by end of October 2015 and thecomparability assessment will have to be completed by end of this year. Otherwise,
preparation for regulatory compliance will not be able to be completed before the4effective date, which is expected to give rise to confusion among market
participants; for example, a number of parties will suspend new transactions. The
CFTC is requested to understand that even if such confusion has not materialized yet,a considerable amount of stress will inevitably arise if finalization of the rules by
national supervisors is not progressing well.
At least 6 months arenecessary

Documentation↓<Condition>
ISDA to finalize templates and each firm to develop a
documentation policy↓<Condition>
Finalization of national rules by major supervisors,
such as the U.S., Europe and Japan, and completionof the comparability assessment↓<Condition>
Harmonization efforts among the U.S., Europe andJapan

3 to 4 months are necessary
Need to be completed by
December 2015 at the latest
3 to 4 months

See Appendix for supplementary explanation of the above timeframe.
(5) Areas requiring harmonization
We highlighted three areas in our comments of July 10, 2015 submitted to theEuropean Supervisory Authorities (entitled “Comments on Second Consultation
Paper: Draft Regulatory Technical Standards on risk-mitigation techniques for
OTC-derivative contracts not cleared by a CCP under Article 11(15) of Regulation(EU) No 648/2012 issued by the European Supervisory Authorities”): (i) setting apractical settlement period (“the issue of T+1”); (ii) exemption for jurisdictions
where the regulation is not implemented and those where the legal enforceability is
not assessed; and (iii) easing the conditions for applying the additional haircut of 8%.
In addition to these areas, it is considered that the netting sets, interaffiliate
transactions and initial margin (IM) calculation models are also areas requiringharmonization.
For the purpose of reiterating our views particularly on those areas characteristic to
the U.S. national rules (i.e. (a) netting sets, (b) interaffiliate transactions and (c)eligible collateral), excerpts from our comments of December 2, 2014 submitted to
the CFTC (entitled “Comments on ‘Margin Requirements for Uncleared Swaps for
Swap Dealers and Major Swap Participants’ issued by the Commodity Futures
Trading Commission”) are provided below. With regard to interaffiliate transactions,
it is considered that harmonizing to “not apply the rules without exception, ” which
JFSA proposed as a draft regulation for Japan, is the best approach to take rather
than to impose respective national rules. If such an approach is difficult to take, an
5exemption similar to the CFTC’s exemption with respect to central clearing
obligation (which is almost consistent with the content of the consultation paper
published by the European Supervisory Authorities) should at least be provided tomaintain consistency with other relevant regulations.
(a) Netting sets
Calculation requirements: Netting sets (59929; §23.154(b)(2))i) Under the proposed rule, if swaps entered into before and after the applicable
compliance date (“legacy trade” and “new trade,” respectively) are covered by
the same ISDA master agreement, both legacy trade and new trade are required
to be included in the aggregate in the IM calculation.
ii) Compared to the case where IM is calculated solely for new trade, if IM is
calculated for legacy trade and new trade in the aggregate, the required amount ofIM may become excessive. This contradicts with the objective of the
BCBS/IOSCO Final Report to avoid a rapid dry up of liquidity and market
turmoil by phasing in the regulation.
iii) If, on the other hand, financial institutions seek to exclude legacy trade fromthe IM calculation, they need to cover legacy trade and new trade under separate
ISDA master agreements. In such cases, the effect of close-out netting upondefault decreases and thus credit risks of the overall financial system increases;
thereby undermining the objective of introducing the proposed rule.
The proposed rule therefore should delete this requirement; or if it is difficult todo so, should be amended to require legacy trade to be included in the IM
calculation only when legacy trade and new trade are covered under the same
CSA.
(b) Interaffiliate transactions
Interaffiliate transactions (59904; 2nd Column)
The proposed rule imposes margin requirements also on interaffiliate transactions(including the case where the counterparty is non-financial entity). Although weunderstand that the proposed rule intends to mitigate the systemic risk by
applying the margin requirements without exception, the necessity for imposing
the proposed rule on interaffiliate transactions is not considered to be high, and at
least, it is not necessary to apply the proposed rule from the date of its
enforcement. This is because; (a) risks arising from interaffiliate transactions are
generally much lower than external transactions, (b) although organized as alocally-incorporated company in accordance with local authorities’ intention, etc.,
many affiliates are substantially managed integrally with the bank similarly to thestructure of the head office and branches and thus transactions with the affiliates
do not differ in substance from transactions with the head office and branches, (c)imposing the margin rules on interaffiliate transactions may undermine theestablishment of an efficient booking system and (d) it is practically difficult to6enter into the CSA with all covered counterparties, including affiliates, within aconsiderably limited timeframe by no later than the compliance date. Given
above, it is recommended that the CFTC addresses this issue carefully by also
taking into account international regulatory developments.
(c) Eligible collateral
Eligible collateral and haircuts (§23.156)
The proposed rule limits eligible collateral for variation margin (VM) to cash
only. (According to our interpretation) cash collateral should be denominatedeither in U.S. dollars or in the settlement currency (of the swap transaction). The
issue here is that under the swap where payment obligations are settled in thecurrency other than U.S. dollars (e.g. euro interest rate swap), cash collateraldenominated in the currency other than that settlement currency (e.g. JPY cash
collateral) will not be permitted to be used as VM. This would not only
undermine the discretion of financial institutions but also would create aconsiderably unfair playing field for non-U.S. financial institutions relative to
U.S. financial institutions because the former will need to obtain foreign currency
to pledge collateral, which will increase collateral cost and the liquidity risk offoreign funds.
(6) Cross-border application approach
The CFTC’s proposed rule on margin requirements (Federal Register of October 3,2014) sought comments for the following three alternative approaches:i)Transaction-level approach (the approach provided in the CFTC’s CrossBorder Guidance (Federal Register of July 26, 2013))
ii) Prudential Regulators’ approach (the approach provided in the Prudential
Regulator’s proposed margin requirements (Federal Register of September
24, 2014))iii) Entity-level approach

The proposed cross-border application prescribes a new approach (Hybrid, FirmWide Approach) which is a combination of the approach i) and approach iii) and isclosely aligned with the approach ii). Basically, under the new approach, regulatory
requirements to be applied ((a) to be subject to the U.S. margin rules, (b) to beeligible for substituted compliance or (c) to be excluded from the U.S. margin rules)
are determined in accordance with the attribute of the counterparty of a covered
swap entity (“CSE”). Also, regulatory requirements to be applied are adjusted inaccordance with margin types ((a) IM received by a CSE, (b) IM posted by a CSE or(c) VM).
This is a complicated approach that will require a considerable amount of costs to
prepare for regulatory compliance. It will especially require significant workload torequest attestation from counterparties in respect of their attribute and organize and7maintain such information. Even if it is determined to use this approach, the CFTC
is requested to make necessary coordination in advance with other U.S. authorities(the U.S. Prudential Regulators and the SEC) so that they will also adopt the same
approach.
If the U.S. authorities adopt their respective cross-border approaches, covered
entities will incur increasing costs to comply with U.S. regulations. To realize abetter regulatory environment, and from a perspective of pursuing the better
regulation which intends to enhance the quality of financial regulations, we consider
that a common approach should be adopted at least under the Dodd-Frank Act.
Otherwise, the current ongoing market fragmentation caused by establishingcomprehensive regulations by the Volcker Rule as well as rules on swap dealers(“SD”) and major swap participants (“MSP”) is expected to accelerate. Specifically,
it is anticipated that disincentives (a negative incentive to avoid transactions with
U.S. entities) will increase; for example, a non-SD/MSP will avoid transactions witha SD/MSP.
Further, what concerns Japanese banks is ambiguity about which cross-borderapplication approaches should be taken for certain interaffiliate transactions; forexample, it is unclear whether the CFTC’s proposed approach or the Prudential
Regulators’ approach would be taken for derivative transactions between a U.S.
derivatives subsidiary, which is registered as an SD/MSP and thus is subject to the
CFTC regulations, and the New York branch of a non-U.S. bank, which is notregistered as an SD/MSP. Therefore, a cross-border application approach to be taken
for such interaffiliate transactions should be clarified. Namely, the CFTC isrequested to clarify that the CFTC’s proposed approach will take precedence byfocusing on an SD/MSP-registered entity. It is also requested to make necessary
coordination with other U.S. authorities so that the same approach will be adopted inthis respect.
With regard to the treatment of a Foreign Consolidated Subsidiary (“FCS”) which is
not guaranteed by a U.S. person, it is prescribed that the CFTC’s cross-borderapplication approach is adopted basically (41387; 1st to 3rd Column). However, since
FCSs are operating under the supervision of the authorities of the country in which
they were established and are obliged to primarily comply with the rules imposed bysuch authorities, the national rules of the country of their establishment should takeprecedence over the CFTC rules. Although the CFTC’s cross-border application
approach is designed to allow substituted compliance to a greater extent, substitutedcompliance is not available for transactions with a non-U.S. CSE guaranteed by a
U.S. person. Further, substituted compliance is also not available for thosejurisdictions where the regulation is not implemented in which case the CFTC rules
8are applied. This could cause a considerable burden on those counterparties locatedin the country of establishment.
(7) Substituted compliance
Our comment in this paragraph is based on the assumption that swap margin rules
will not be integrated and thus entities will need to avail themselves of substitutedcompliance. We support that the procedures for the CFTC to determine that othernational rules and regulations have comparability and comprehensiveness in light of
the regulatory requirements of the CFTC (“comparability determination”) have beenclarified.
The proposed rule provides some descriptions that reconfirm the content of the
CFTC’s Cross-Border Guidance.
i)

It is described that under the outcome-based approach, the CFTC does notlook to whether the identicalness between the CFTC rules and regulations is
ensured (41389; 2nd Column).

ii) Non-U.S. private financial institutions may apply for a comparability
determination individually. Also, a foreign regulatory authority may submit
such a request based on intention of financial institutions under its
supervision (41390; 1st & 2nd Column).
iii) Once a comparability determination is made for a jurisdiction, it will apply
for all entities or transactions in that jurisdiction (41390; 2nd Column).
iv) In the comparability determination process, the CFTC closely consults,
cooperates, and coordinates with the U.S. prudential regulators and relevant
foreign regulators. The foreign regulator(s) enters into a memorandum of
understanding (“MOU”) with the CFTC, as necessary (41390; 2nd Column).
The concept of “stricter rules apply” should not be easily applied in evaluatingcomparability to other foreign jurisdictions’ margin requirements. Instead, it isimportant to conduct a comprehensive evaluation by taking into consideration risk
mitigation effects. For example, under the proposed rule by the U.S. authorities, U.S.
dollar cash is always eligible as collateral for VM but cash denominated in othercurrencies can be used as eligible collateral only when transactions are executed inthat currency. On the other hand, under the proposed rules by European or Japanese
authorities, all major currencies are always eligible as cash collateral for VM. At aglance, the U.S. regulation seems a stricter rule because its scope of eligible
collateral is narrower. However, from the perspective of achieving the original
objective of mitigating risks, it cannot be said that the U.S. regulation is always more
effective than other national regulations. In this view, the CFTC is requested to makea comparability determination by capturing substance.
9

It is also mentioned with respect to substituted compliance that the proposed rule
does not contain an emerging market exception (41390; Question 4 in 3rd Column).
To our understanding, the emerging market exception is a rule that allows exemptionof those transactions constituting less than 5% of the firm’s notional swaps from themargin requirements; and is an essential rule particularly when executing
transactions with those jurisdictions where the legal enforceability of netting is notassessed (e.g. China). In the absence of such rule, bankruptcy of a counterparty
located in those jurisdictions where the legal enforceability of netting is not assessed
will cause risk of cherry picking by the receiver in bankruptcy. Please also refer tothe ISDA letter of July 10, 2015 submitted to the European Supervisory Authorities3.
With regard to the treatment of those jurisdictions where the legal enforceability of
netting is not assessed, the proposed rule questions whether the CFTC should permit
the collecting/posting of VM on a net basis (41390; Question 5 in 3rd Column).
In the first place, VM should be collected/posted on a net basis. Transactions withcounterparties located in those jurisdictions where the legal enforceability of netting
is not assessed should be exempted from both VM and IM requirements. Exposuresrelated to transactions with counterparties located in those jurisdictions where thelegal enforceability of netting is not assessed are calculated in a different way
depending on which side of the contractual party performs the calculation (i.e. theparty located in those jurisdictions where the legal enforceability of netting isverified should calculate exposures under the assumption that positive exposures
cannot be offset against negative exposures, whereas its counterparty should
calculate exposures under the assumption that such netting is permitted). Therefore,
the amount of VM to be collected/posted cannot be fixed. If VM is calculated on a
net basis, the party located in those jurisdictions where the legal enforceability of
netting is verified will be required to post collateral even if it has positive exposure,which may rather raise the possibility of increase in risk. Further, given that IM is
originally designed to cover the portion that cannot be covered by VM under theassumption that netting is permitted, requiring collecting and posting of IM undertransactions with counterparties for which netting is not permitted would beinconsistent with the original nature of IM.
3

http://www2.isda.org/functional-areas/wgmr-implementation/
II. ISSUES NOT RAISED IN QUESTIONS IN CONSULTATION PAPER
ISSUE 1. Cross-Border.
A. Permit transactions with non-netting jurisdictions for up to 5% of an entity's OTC derivatives.
Suggestion:
We ask the ESAs to provide an exemption from the margin requirements for an entity's OTC derivatives
with parties in "non-netting jurisdictions" for up to 5% of the entity's OTC derivatives (measured bynotional amounts). "Non-Netting Jurisdictions" are those in which it is not possible to get a clean netting
opinion.
Explanation: (omitted)

10(8) Definition of “U.S. person”(a) 41384; Question 1 in 1st Column: Consistency with the definition of other U.S.
authorities
The proposed cross-border application sets out the definition of “U.S. person”
which differs from the following two definitions, giving rise to potential
confusion. If it is determined to introduce a new definition in the proposed crossborder application, the definition of “U.S. person” should be integrated acrossrelevant U.S. authorities by modifying the currently-adopted definitions in the
future.
• Definition of “U.S. person” under the CFTC’s Cross-Border Guidance• Definition of “U.S. person” under the SEC’s final rule on cross-borderapplication (issued in June 2014)
If the term “U.S. person” is separately defined on a regulation-by-regulationbasis, the parties to the transaction will be required to provide status
representations (whether U.S. person or Non-U.S. person) for respective
regulations, leading to increasing costs for compliance with U.S. regulations (e.g.
representation by ISDA Amend and Representation Letter). For the purpose ofrealizing better regulation, a common definition should be used at least under the
Dodd-Frank Act.
(b) 41384; Questions 2 & 3 in 1st Column: Comparison with the definition of “U.S.
person” under the CFTC’s Cross-Border Guidance
We welcome the exclusion, from the proposed rule, of the description of prong(vi) in the CFTC’s Cross-Border Guidance: “any commodity pool, pooled
account, investment fund, or other collective investment vehicle that is notdescribed in prong (iii) and that is majority-owned by one or more persons
described in prong (i), (ii), (iii), (iv), or (v), except any commodity pool, pooled
account, investment fund, or other collective investment vehicle that is publicly
offered only to non-U.S. persons and not offered to U.S. persons”.
With regard to the description of prong (vii) in the CFTC’s Cross-Border
Guidance: “any legal entity (other than a limited liability company, limited
liability partnership or similar entity where all of the owners of the entity have
limited liability) that is directly or indirectly majority-owned by one or more
persons described in prong (i), (ii), (iii), (iv), or (v) and in which such person(s)bears unlimited responsibility for the obligations and liabilities of the legal
entity”; the underlined part has been modified in prong (vi) of the proposed rule
to read as “is owned by one or more persons”, excluding the majority ownership
requirement. This exclusion may result in a broader scope of “U.S. persons”
11relative to other swap regulations, and therefore, the majority ownership
requirement should not be excluded.
(c) 41384; Question 4a in 1st Column: Treatment of international institutions(Comparison with the definition of “U.S. person” under the SECs final rule on
cross-border application)
The SEC’s final rule on cross-border application excludes international
institutions headquartered in the U.S. (e.g. IMF, IBRD, IADB, ADB, AFDB andUnited Nations) from the definition of “U.S. person”. The proposed rule should
provide for such an exemption as well.
We request this exemption from the perspective that consistency with otherswap regulations should be basically maintained while at the same time
redundant costs for regulatory compliance should be minimized. It is considered
unlikely that the above-mentioned international institutions will represent
themselves as a U.S. person when the CFTC’s swap regulations come into effect.
Although they are invested by the U.S. government, financial institutions
generally separate them from the U.S. country risk in evaluating their credit riskin practice. In this view, it would be appropriate to exclude the above
international institutions from the definition of “U.S. person”.
(9) Other(a) Definition of “Guarantee”
We support the CFTC’s decision to narrow the definition of “guarantee” in the
proposed rule relative to its Interpretive Guidance and Policy Statement
Regarding Compliance with Certain Swap Regulations. A broader definition
under the interpretive guidance that includes arrangements such as keepwells
and liquidity puts would increase regulatory compliance costs. Since thedefinition set out in the proposed rule enables clearer understanding, and thus isconsidered to be more appropriate; the definition of “guarantee” under theinterpretive guidance should be modified similarly to the proposed rule.

12

Simulation of time schedule for margin requirement

Appendix

Note: The simulation is performed by setting the due date on the end of August 2016.
IM Phase1
7
Finalization of
the rules【EU】
Consultation

8

9

10

11

12

1

2

3

4

5

6

7

8

Remarks【US】
Final rule【EU】
Final rule
【JPN】
Consultation

Finalization of
templates for
VM & IM【JPN】
Final rule

It is estimated that NY Law templates
will be finalized 2 months after the
US rule is finalized.
Although it is estimated that othertemplates will be finalized 3 months
after the NY Law templates are
finalized, this schedule is slightly
front‐loading.

NY
LAW
ENG
LAW
JPN
LAW

Finalization of
templates for
ACA(*)ACA: Account Control Agreement

It is estimated that NY Law templates
will be finalized 3 months after the
US rule is finalized.
It is estimated that other templates
will be finalized 4 months after the
EU rule is finalized.

NY
LAW
ENG
LAW
JPN
trust

Industry
movement
Development oftemplates* anddocumentation policies

Major banks tostart negotiation

Negotiation to gain
momentum in theindustry*ACA needs 2 steps: 1. custodian creates a template; and 2. each company customizes the template.

After finalizing templates, eachcompany needs to develop a
documentation policy before
starting negotiation.
⇒ Equivalence assessment needs tobe finished until year‐end, otherwise
it is impossible to reflect it.

⇒ Based on the above simulation, 1. templates and documentation policies need to be developed within a short period, and 2. the US final rule should be finalized at least end of August.
⇒ The schedule is really tight, so if assumptions in simulation change, on‐time implementation is difficult.