May 8, 2015

Comments on “Initial Response to District Court Remand Order in Securities Industry and
Financial Markets Association, et al. v. United States Commodity Futures Trading
Commission” issued by the Commodity Futures Trading Commission
Japanese Bankers Association

We, the Japanese Bankers Association (“JBA”), would like to express our gratitude for thisopportunity to comment on the release: “Initial Response to District Court Remand Order in
Securities Industry and Financial Markets Association, et al. v. United States Commodity
Futures Trading Commission” (RIN 3038–AE27) issued on March 10, 2015 by the Commodity
Futures Trading Commission (the “CFTC”).
We respectfully expect that the following comments will contribute to your further
discussion.

<General Comments>

Banks are faced with increasing costs for legal fees and external consulting fees in theirefforts to accurately interpret and comply with the derivative rules under the Dodd-Frank Act.
There still remain some areas with ambiguity in interpretation and thus banks have to manage
their business in a conservative manner.
Further, amid global trend towards tightening financial regulation, banks have incurredcosts in order to comply with multiple regulations where the timing of regulatory
implementation or regulatory requirements, etc. differ across jurisdictions or where thecomparability across jurisdictions is not established.
More specifically, the following three cases illustrated in (1) through (3) below and cases
provided in Specific Comments section have caused additional costs and therefore, the CFTC
is requested to give consideration to these matters.
(1) Banks registered as Swap Dealers (SD)While it is relatively easy to perform the cost-benefit analysis for the Transaction-Level
Requirements, such analysis for the Entity-Level Requirements would differ significantly
depending on the situation of counterparty financial institutions.
For non-U.S. financial institutions, transactions covered by the Cross-Border Guidance(i.e. transactions with U.S. Persons) account for approximately 10% of their total
1transactions and the Entity-Level Requirements are applied to the remaining 90% (i.e.
transactions with Non-U.S. Persons), incurring regulatory costs.
However, the CFTC’s initial cost-benefit analysis does not seem to take into accountsuch situation of non-U.S. financial institutions.
The CFTC therefore is requested to re-calculate benefits and costs after investigating thesituation of transactions of non-U.S. financial institutions, or should exempt non-U.S.
financial institutions from the Entity-Level Requirements (incl. to allow substitutedcompliance).

(2) Banks not registered as an SD
Transactions with U.S. Persons outside the U.S. are currently included in the scope of theextraterritorial application, and thus require considerable regulatory burdens. Therefore,banks have substantively suspended transactions with U.S. financial institutions andcorporations outside the U.S., except for some exempted activities, undermining theconvenience of their customers.
Further, banks have no choice but to avoid transactions with U.S. financial institutions,even though they are denominated in U.S. dollars, resulting in increasing risks and costs formaintaining market liquidity. Banks are also experiencing increasing costs in relation totransactions with U.S. corporations due to transferring trading locations and reporting on
behalf of customers.

(3) U.S. subsidiaries registered as an SD
As subsidiaries locally incorporated in the U.S. are deemed as a U.S. Person/SD,
customers tend to avoid transacting with these subsidiaries. In order to maintain business
relationships, transactions with such customers need to be booked by Non-U.S. Persons,which is giving rise to costs.

<Specific Comments>
1. Transaction Data Reporting
In principle, OTC derivatives regulations of jurisdictions other than the U.S. are notapplied across borders. Therefore, for U.S. Persons, there should be no particular problem
to perform the cost-benefit analysis only in relation to their obligation to report transaction
data to their home authority, i.e. the CFTC.
The CFTC’s OTC derivatives regulations, on the other hand, are applied extraterritorially.
Therefore, if Non-U.S. Persons, such as Japanese banks, execute cross-border transactions,2they would need to report such transactions to their home authorities (i.e. FSA, in the caseof Japan) and also certain transactions to the CFTC. Given this, the cost-benefit analysis on
Non-U.S. Persons should reflect the fact that they will be subject to double regulations.

Further, transaction data reporting requirements differ across jurisdictions in terms ofreporting data (elements and content), the definition of data elements and the due date ofreporting.
Therefore, whenever a new rule becomes effective or there is any change to existing
rules in each jurisdiction, banks will incur costs related to business processes and systems
development to comply with such rules.
In this view, it would be necessary to establish a transaction data reporting process
through an industry-wide initiative, such as developing rules for determining the reporting
party.

Moreover, data collected in accordance with the transaction data reporting requirements
are retained in fragments at multiple trade repositories, which are established in each hostjurisdiction or for each product, based on inconsistent data architecture. As a result, it isdifficult to obtain integrated data across products for the entire market. This raises aquestion as to whether benefits outweighing regulatory burdens are being realized. It istherefore necessary to reassess costs and benefits in this respect.

2. The Swaps Push-out Rule
Due to constraints on foreign banks caused by the swaps push-out rule, banks wereforced to spin off its derivatives activities to its U.S. subsidiary, giving rise to considerable
workload and costs for the transfer.
Since such spin-offs required explanations to customers and renewal of ISDA
agreements, etc., it is considered that there has been a considerable burden on customers as
well.
Further, subsidiaries to which the derivatives activities are transferred have been
incurring increasing costs for regulatory compliance (e.g. investment and running cost) andare having difficulty in making profits because they cannot pass on such costs to customers.

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