Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Notices 78923 

8 Yen-denominated interest rate swaps are subject 

to the mandatory clearing requirement in both the 

U.S. and Japan. 

9Exemptive Order Regarding Compliance With 

Certain Swap Regulations, 78 FR 43785 (Jul. 22, 

2013). 

10http://www.cftc.gov/PressRoom/

SpeechesTestimony/opaomalia-29. 

11http://www.cftc.gov/PressRoom/

SpeechesTestimony/omaliastatement071213b. 

1 78 FR 45292 (July 26, 2013). The Commission 

originally published proposed and further proposed 

guidance on July 12, 2012 and January 7, 2013, 

respectively. See Cross-Border Application of 

Certain Swaps Provisions of the Commodity 

Exchange Act, 77 FR 41214 (July 12, 2012) and 

Further Proposed Guidance Regarding Compliance 

with Certain Swap Regulations, 78 FR 909 (Jan. 7, 

2013). 

is not, comparable. For example, the 

Commission has declined to address or 

provide any clarity regarding the European 

Union’s regulatory data reporting 

determination, even though the European 

Union’s reporting regime is set to begin on 

February 12, 2014. Although the Commission 

has provided some limited relief with respect 

to regulatory data reporting, the lack of 

clarity creates unnecessary uncertainty, 

especially when the European Union’s 

reporting regime is set to begin in less than 

two months. 

Similarly, Japan receives no consideration 

for its mandatory clearing requirement, even 

though the Commission considers Japan’s 

legal framework to be comparable to the U.S. 

framework. While the Commission has 

declined to provide even a partial 

comparability determination, at least in this 

instance the Commission has provided a 

reason: the differences in the scope of entities 

and products subject to the clearing 

requirement.8 Such treatment creates 

uncertainty and is contrary to increased 

global harmonization efforts. 

Third, in the Commission’s rush to meet 

the artificial deadline of December 21, 2013, 

as established in the Exemptive Order 

Regarding Compliance with Certain Swap 

Regulations (‘‘Exemptive Order’’),9 the 

Commission failed to complete an important 

piece of the cross-border regime, namely, 

supervisory memoranda of understanding 

(‘‘MOUs’’) between the Commission and 

fellow regulators. 

I have previously stated that these MOUs, 

if done right, can be a key part of the global 

harmonization effort because they provide 

mutually agreed-upon solutions for 

differences in regulatory regimes.10

Accordingly, I stated that the Commission 

should be able to review MOUs alongside the 

respective comparability determinations and 

vote on them at the same time. Without these 

MOUs, our fellow regulators are left 

wondering whether and how any differences, 

such as direct access to books and records, 

will be resolved. 

Finally, as I have consistently maintained, 

the substituted compliance process should 

allow other regulatory bodies to engage with 

the full Commission.11 While I am pleased 

that the Notices are being voted on by the 

Commission, the full Commission only 

gained access to the comment letters from 

foreign regulators on the Commission’s 

comparability determination draft proposals 

a few days ago. This is hardly a transparent 

process. 

Unclear Path Forward 

Looking forward to next steps, the 

Commission must provide answers to several 

outstanding questions regarding these 

comparability determinations. In doing so, 

the Commission must collaborate with 

foreign regulators to increase global 

harmonization. 

First, there is uncertainty surrounding the 

timing and outcome of the MOUs. Critical 

questions regarding information sharing, 

cooperation, supervision, and enforcement 

will remain unanswered until the 

Commission and our fellow regulators 

execute these MOUs. 

Second, the Commission has issued timelimited no-action relief for the swap data 

repository reporting requirements. These 

comparability determinations will be done as 

separate notices. However, the timing and 

process for these determinations remain 

uncertain. 

Third, the Commission has failed to 

provide clarity on the process for addressing 

the comparability determinations that it 

declined to undertake at this time. The 

Notices only state that the Commission may 

address these requests in a separate notice at 

a later date given further developments in the 

law and regulations of other jurisdictions. To 

promote certainty in the financial markets, 

the Commission must provide a clear path 

forward for market participants and foreign 

regulators. 

The following steps would be a better 

approach: (1) The Commission should extend 

the Exemptive Order to allow foreign 

regulators to further implement their 

regulatory regimes and coordinate with them 

to implement a harmonized substituted 

compliance process; (2) the Commission 

should implement a flexible, outcomes-based 

approach to the substituted compliance 

process and apply it similarly to all 

jurisdictions; and (3) the Commission should 

work closely with our fellow regulators to 

expeditiously implement MOUs that resolve 

regulatory differences and address regulatory 

oversight issues. 

Conclusion 

While I support the narrow comparability 

determinations that the Commission has 

made, it was my hope that the Commission 

would work with foreign regulators to 

implement a substituted compliance process 

that would increase the global harmonization 

effort. I am disappointed that the 

Commission has failed to implement such a 

process. 

I do believe that in the longer term, the 

swaps regulations of the major jurisdictions 

will converge. At this time, however, the 

Commission’s comparability determinations 

have done little to alleviate the burden of 

regulatory uncertainty and duplicative 

compliance with both U.S. and foreign 

regulations. 

The G–20 process delineated and put in 

place the swaps market reforms in G–20 

member nations. It is then no surprise that 

the Commission must learn to coordinate 

with foreign regulators to minimize 

confusion and disruption in bringing much 

needed clarity to the swaps market. For all 

these shortcomings, I respectfully dissent 

from the Commission’s approval of the 

Notices. 

[FR Doc. 2013–30976 Filed 12–26–13; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Comparability Determination for the 

European Union: Certain Entity-Level 

Requirements 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of Comparability 

Determination for Certain Requirements 

under the European Market 

Infrastructure Regulation. 

SUMMARY: The following is the analysis 

and determination of the Commodity 

Futures Trading Commission 

(‘‘Commission’’) regarding certain parts 

of a joint request by the European 

Commission (‘‘EC’’) and the European 

Securities and Markets Authority 

(‘‘ESMA’’) that the Commission 

determine that laws and regulations 

applicable in the European Union 

(‘‘EU’’) provide a sufficient basis for an 

affirmative finding of comparability 

with respect to the following regulatory 

obligations applicable to swap dealers 

(‘‘SDs’’) and major swap participants 

(‘‘MSPs’’) registered with the 

Commission: (i) Chief compliance 

officer; (ii) risk management; and (iii) 

swap data recordkeeping; (collectively, 

the ‘‘Internal Business Conduct 

Requirements’’). 

DATES: Effective Date: This 

determination will become effective 

immediately upon publication in the 

Federal Register. 

FOR FURTHER INFORMATION CONTACT: Gary 

Barnett, Director, 202–418–5977, 

gbarnett@cftc.gov, Frank Fisanich, Chief 

Counsel, 202–418–5949, ffisanich@

cftc.gov, and Ellie Jester, Special 

Counsel, 202–418–5874, ajester@

cftc.gov, Division of Swap Dealer and 

Intermediary Oversight, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

On July 26, 2013, the Commission 

published in the Federal Register its 

‘‘Interpretive Guidance and Policy 

Statement Regarding Compliance with 

Certain Swap Regulations’’ (the 

‘‘Guidance’’).1 In the Guidance, the 


tkelley on DSK3SPTVN1PROD with NOTICES
78924 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Notices 

2 78 FR 43785 (July 22, 2013). 

3The Entity-Level Requirements under the 

Exemptive Order consist of 17 CFR 1.31, 3.3, 

23.201, 23.203, 23.600, 23.601, 23.602, 23.603, 

23.605, 23.606, 23.608, 23.609, and parts 45 and 46 

of the Commission’s regulations. 

4For purposes of this notice, the Internal 

Business Conduct Requirements consist of 17 CFR 

3.3, 23.201, 23.203, 23.600, 23.601, 23.602, 23.603, 

23.605, and 23.606. 

5This notice does not address swap data 

repository reporting (‘‘SDR Reporting’’). The 

Commission may provide a comparability 

determination with respect to the SDR Reporting 

requirement in a separate notice. 6Public Law 111–203, 124 Stat. 1376 (2010). 

7 7 U.S.C. 2(i). 

8The compliance dates are summarized on the 

Compliance Dates page of the Commission’s Web 

site. (http://www.cftc.gov/LawRegulation/

DoddFrankAct/ComplianceDates/index.htm.) 

9 78 FR 45342–45. 

10See the Guidance, 78 FR 45342–44. 

11Under §§ 23.203 and 23.606, all records 

required by the CEA and the Commission’s 

regulations to be maintained by a registered SD or 

Commission set forth its interpretation 

of the manner in which it believes that 

section 2(i) of the Commodity Exchange 

Act (‘‘CEA’’) applies Title VII’s swap 

provisions to activities outside the U.S. 

and informed the public of some of the 

policies that it expects to follow, 

generally speaking, in applying Title VII 

and certain Commission regulations in 

contexts covered by section 2(i). Among 

other matters, the Guidance generally 

described the policy and procedural 

framework under which the 

Commission would consider a 

substituted compliance program with 

respect to Commission regulations 

applicable to entities located outside the 

U.S. Specifically, the Commission 

addressed a recognition program where 

compliance with a comparable 

regulatory requirement of a foreign 

jurisdiction would serve as a reasonable 

substitute for compliance with the 

attendant requirements of the CEA and 

the Commission’s regulations 

promulgated thereunder. 

In addition to the Guidance, on July 

22, 2013, the Commission issued the 

Exemptive Order Regarding Compliance 

with Certain Swap Regulations (the 

‘‘Exemptive Order’’).2 Among other 

things, the Exemptive Order provided 

time for the Commission to consider 

substituted compliance with respect to 

six jurisdictions where non-U.S. SDs are 

currently organized. In this regard, the 

Exemptive Order generally provided 

non-U.S. SDs and MSPs in the six 

jurisdictions with conditional relief 

from certain requirements of 

Commission regulations (those referred 

to as ‘‘Entity-Level Requirements’’ in the 

Guidance) until the earlier of December 

21, 2013, or 30 days following the 

issuance of a substituted compliance 

determination.3

On May 7, 2013, the EC and ESMA 

(collectively, the ‘‘applicant’’) submitted 

a request that the Commission 

determine that laws and regulations 

applicable in the EU provide a sufficient 

basis for an affirmative finding of 

comparability with respect to certain 

Entity-Level Requirements, including 

the Internal Business Conduct 

Requirements.4 The applicant provided 

Commission staff with an updated 

submission on August 6, 2013. On 

November 11, 2013, the application was 

further supplemented with corrections 

and additional materials. The following 

is the Commission’s analysis and 

determination regarding the Internal 

Business Conduct Requirements, as 

detailed below.5

II. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act6

(‘‘Dodd-Frank Act’’ or ‘‘Dodd-Frank’’), 

which, in Title VII, established a new 

regulatory framework for swaps. 

Section 722(d) of the Dodd-Frank Act 

amended the CEA by adding section 

2(i), which provides that the swap 

provisions of the CEA (including any 

CEA rules or regulations) apply to crossborder activities when certain 

conditions are met, namely, when such 

activities have a ‘‘direct and significant 

connection with activities in, or effect 

on, commerce of the United States’’ or 

when they contravene Commission 

rules or regulations as are necessary or 

appropriate to prevent evasion of the 

swap provisions of the CEA enacted 

under Title VII of the Dodd-Frank Act.7

In the three years since its enactment, 

the Commission has finalized 68 rules 

and orders to implement Title VII of the 

Dodd-Frank Act. The finalized rules 

include those promulgated under 

section 4s of the CEA, which address 

registration of SDs and MSPs and other 

substantive requirements applicable to 

SDs and MSPs. With few exceptions, the 

delayed compliance dates for the 

Commission’s regulations implementing 

such section 4s requirements applicable 

to SDs and MSPs have passed and new 

SDs and MSPs are now required to be 

in full compliance with such regulations 

upon registration with the 

Commission.8 Notably, the requirements 

under Title VII of the Dodd-Frank Act 

related to SDs and MSPs by their terms 

apply to all registered SDs and MSPs, 

irrespective of where they are located, 

albeit subject to the limitations of CEA 

section 2(i). 

To provide guidance as to the 

Commission’s views regarding the scope 

of the cross-border application of Title 

VII of the Dodd-Frank Act, the 

Commission set forth in the Guidance 

its interpretation of the manner in 

which it believes that Title VII’s swap 

provisions apply to activities outside 

the U.S. pursuant to section 2(i) of the 

CEA. Among other matters, the 

Guidance generally described the policy 

and procedural framework under which 

the Commission would consider a 

substituted compliance program with 

respect to Commission regulations 

applicable to entities located outside the 

U.S. Specifically, the Commission 

addressed a recognition program where 

compliance with a comparable 

regulatory requirement of a foreign 

jurisdiction would serve as a reasonable 

substitute for compliance with the 

attendant requirements of the CEA and 

the Commission’s regulations. With 

respect to the standards forming the 

basis for any determination of 

comparability (‘‘comparability 

determination’’ or ‘‘comparability 

finding’’), the Commission stated: 

In evaluating whether a particular category 

of foreign regulatory requirement(s) is 

comparable and comprehensive to the 

applicable requirement(s) under the CEA and 

Commission regulations, the Commission 

will take into consideration all relevant 

factors, including but not limited to, the 

comprehensiveness of those requirement(s), 

the scope and objectives of the relevant 

regulatory requirement(s), the 

comprehensiveness of the foreign regulator’s 

supervisory compliance program, as well as 

the home jurisdiction’s authority to support 

and enforce its oversight of the registrant. In 

this context, comparable does not necessarily 

mean identical. Rather, the Commission 

would evaluate whether the home 

jurisdiction’s regulatory requirement is 

comparable to and as comprehensive as the 

corresponding U.S. regulatory 

requirement(s).9

Upon a comparability finding, 

consistent with CEA section 2(i) and 

comity principles, the Commission’s 

policy generally is that eligible entities 

may comply with a substituted 

compliance regime, subject to any 

conditions the Commission places on its 

finding, and subject to the 

Commission’s retention of its 

examination authority and its 

enforcement authority.10

In this regard, the Commission notes 

that a comparability determination 

cannot be premised on whether an SD 

or MSP must disclose comprehensive 

information to its regulator in its home 

jurisdiction, but rather on whether 

information relevant to the 

Commission’s oversight of an SD or 

MSP would be directly available to the 

Commission and any U.S. prudential 

regulator of the SD or MSP.11 The 


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Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Notices 78925 

MSP shall be maintained in accordance with 

Commission regulation 1.31 and shall be open for 

inspection by representatives of the Commission, 

the United States Department of Justice, or any 

applicable prudential regulator. 

In its Final Exemptive Order Regarding 

Compliance with Certain Swap Regulations, 78 FR 

858 (Jan. 7, 2013), the Commission noted that an 

applicant for registration as an SD or MSP must file 

a Form 7–R with the National Futures Association 

and that Form 7–R was being modified at that time 

to address existing blocking, privacy, or secrecy 

laws of foreign jurisdictions that applied to the 

books and records of SDs and MSPs acting in those 

jurisdictions. See id. at 871–72 n. 107. The 

modifications to Form 7–R were a temporary 

measure intended to allow SDs and MSPs to apply 

for registration in a timely manner in recognition 

of the existence of the blocking, privacy, and 

secrecy laws. In the Guidance, the Commission 

clarified that the change to Form 7–R impacts the 

registration application only and does not modify 

the Commission’s authority under the CEA and its 

regulations to access records held by registered SDs 

and MSPs. Commission access to a registrant’s 

books and records is a fundamental regulatory tool 

necessary to properly monitor and examine each 

registrant’s compliance with the CEA and the 

regulations adopted pursuant thereto. The 

Commission has maintained an ongoing dialogue 

on a bilateral and multilateral basis with foreign 

regulators and with registrants to address books and 

records access issues and may consider appropriate 

measures where requested to do so. 

12See e.g., sections 4s(f)(1)(C), 4s(j)(3) and (4) of 

the CEA. 

13See e.g., §§ 23.203(b) and 23.606. 

14See supra note 10. 

15EMIR: Regulation (EU) No 648/2012 of the 

European Parliament and of the Council of 4 July 

2012 on OTC derivatives, central counterparties and 

trade repositories. http://eur-lex.europa.eu/

LexUriServ/LexUriServ.do?uri=OJ:L:2012:201:

0001:0059:EN:PDF 

16 Directive 2004/39/EC and the relevant 

implementing measures (Directive 2006/73/EC and 

Regulation 1287/2006). http://eur-lex.europa.eu/

LexUriServ/LexUriServ.do?uri=CELEX:

32004L0039:EN:NOT 

17 Directive 2006/48/EC of the European 

Parliament and of the Council of 14 June 2006 

relating to the taking up and pursuit of the business 

of credit institutions.http://eur-lex.europa.eu/

LexUriServ/LexUriServ.do?uri=CONSLEG:

2006L0048:20100330:EN:PDF.The current version 

of CRD will soon be replaced by CRD IV. CRD IV 

entered into force on June 28, 2013, and shall apply 

in most of its parts from January 1, 2014. 

18Because the applicant’s request and the 

Commission’s determinations herein are based on 

the comparability of EU requirements applicable to 

entities subject to EMIR, MiFID, and CRD, an SD or 

MSP that is not subject to the requirements of 

EMIR, MiFID, or CRD upon which the Commission 

bases its determinations, may not be able to rely on 

the Commission’s comparability determinations 

herein. The applicant has noted for the Commission 

that the concept of an MSP is not explicitly 

mirrored in EU legislation and so it cannot be 

confirmed that MSPs would always be covered by 

EMIR, MiFID, or CRD. However, the applicant states 

that the definition of an ‘‘investment firm’’ under 

MiFID is considerably wider than that of an SD, and 

thus MSP’s should, in most cases, be caught within 

the definition of ‘‘investment firm.’’ 

19See the Web site of the European Commission 

for confirmation of the transposition of MiFID into 

the national law of each Member State, available 

here: http://ec.europa.eu/internal_market/ 

securities/docs/transposition/table_en.pdf. Note 

that the issue of partial implementation in the 

Netherlands was resolved in 2008, http:// 

ec.europa.eu/eu_law/eulaw/decisions/dec_

08_05_06.htm. The Commission notes that the EC 

has certified to the Commission that each Member 

State in which a registered SD or MSP is organized 

has completed the transposition process (e.g., 

Ireland, UK, France, Spain, and Germany). 

20The applicant provided information regarding 

MiFID II and the Markets in Financial Instruments 

Regulation (‘‘MiFIR’’), http://ec.europa.eu/internal

_market/securities/isd/mifid/index_en.htm, stating 

that these two proposals are part of the legislative 

package for the review of MiFID, and that the 

legislative process may be concluded with the 

adoption of the final political agreement by the end 

of 2013. The applicant further stated that an 

additional 18 to 24 months will be needed to adopt 

implementing measures, with the overall package to 

be applied by the end of 2015. 

21 78 FR 45343. 

Commission’s direct access to the books 

and records required to be maintained 

by an SD or MSP registered with the 

Commission is a core requirement of the 

CEA12 and the Commission’s 

regulations,13 and is a condition to 

registration.14

III. Regulation of SDs and MSPs in the 

EU 

On May 7, 2013, the EC and ESMA 

submitted a request that the 

Commission assess the comparability of 

laws and regulations applicable in the 

EU with the CEA and the Commission’s 

regulations promulgated thereunder. 

The applicant provided Commission 

staff with an updated submission on 

August 6, 2013. On November 11, 2013, 

the application was further 

supplemented with corrections and 

additional materials. 

As represented to the Commission by 

the applicant, swap activities in the EU 

member states is governed primarily by 

the European Market Infrastructure 

Regulation (‘‘EMIR’’).15

EMIR and the Regulatory Technical 

Standards (‘‘RTS’’) are regulations with 

immediate, binding, and direct effect in 

all EU member states (i.e., no 

transposition into domestic law 

required). EMIR entered into force on 

August 16, 2012. 

In addition, as represented to the 

Commission by the applicant, swap 

activities in the EU are also governed by 

a number of regulatory requirements 

other than EMIR. 

Markets in Financial Instruments 

Directive (‘‘MiFID)’’:16 MiFID is a 

directive and in accordance with the 

Treaty on the Functioning of the 

European Union, all Member States of 

the EU are legally bound to implement 

the provisions of MiFID by November 1, 

2007, by transposing them into their 

national laws. MiFID applies in 

particular to investment firms, which 

comprise any legal person whose 

regular occupation or business is the 

provision of one or more investment 

services to third parties and/or the 

performance of one or more investment 

activities on a professional basis. 

Investment services and activities 

means any of the services and activities 

listed in Section A of Annex I of MiFID 

relating to any of the instruments listed 

in Section C of Annex I of MiFID. 

Section C of Annex 1 refers explicitly to 

swaps as well as ‘‘other derivative 

financial instruments’’. 

Capital Requirements Directive 

(‘‘CRD’’):17 CRD is also a directive and 

in accordance with the Treaty on the 

Functioning of the European Union, all 

Member States of the EU are legally 

bound to implement the provisions of 

CRD by December 31, 2006, by 

transposing them into their national 

laws.18

Due to the requirement that each EU 

Member State transpose MiFID and CRD 

into its national law, the comparability 

determinations in this notice are based 

on the representations of the applicant 

to the Commission that (i) each Member 

State of the EU where an SD or MSP 

would seek to rely on substituted 

compliance on the basis of the 

comparability of the MiFID or CRD 

standards has completed the process of 

transposing MiFID and CRD into its 

national law;19 (ii) such national laws 

have transposed MiFID and CRD 

without change in any aspect that is 

material for a comparability 

determination contained herein; and 

(iii) such transposed law is in full force 

and effect as of the time that any SD or 

MSP seeks to rely on a relevant 

comparability determination contained 

herein. The Commission notes that to 

the extent that any of the foregoing 

representations are incorrect, an affected 

comparability determination will not be 

valid. 

In addition to MiFID and CRD, the 

applicant noted that there are a number 

of proposed laws and regulations that, 

when implemented, would affect the 

regulation of SDs and MSPs in the EU.20

IV. Comparable and 

Comprehensiveness Standard 

The Commission’s comparability 

analysis will be based on a comparison 

of specific foreign requirements against 

the specific related CEA provisions and 

Commission regulations as categorized 

and described in the Guidance. As 

explained in the Guidance, within the 

framework of CEA section 2(i) and 

principles of international comity, the 

Commission may make a comparability 

determination on a requirement-byrequirement basis, rather than on the 

basis of the foreign regime as a whole.21

In making its comparability 

determinations, the Commission may 

include conditions that take into 


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22 78 FR 45343. 

23 78 FR 45343. 

24 78 FR 45343. The Commission’s substituted 

compliance program would generally be available 

for SDR Reporting, as outlined in the Guidance, 

only if the Commission has direct access to all of 

the data elements that are reported to a foreign trade 

repository pursuant to the substituted compliance 

program. Thus, direct access to swap data is a 

threshold matter to be addressed in a comparability 

evaluation for SDR Reporting. Moreover, the 

Commission explains in the Guidance that, due to 

its technical nature, a comparability evaluation for 

SDR Reporting ‘‘will generally entail a detailed 

comparison and technical analysis.’’ A more 

particularized analysis will generally be necessary 

to determine whether data stored in a foreign trade 

repository provides for effective Commission use, in 

furtherance of the regulatory purposes of the DoddFrank Act. See 78 FR 45345. 

25A finding of comparability may not be possible 

for a number of reasons, including the fact that the 

foreign jurisdiction has not yet implemented or 

finalized particular requirements. 

26 78 FR 45343. 

27As explained in the Guidance, such 

‘‘approaches used will vary depending on the 

circumstances relevant to each jurisdiction. One 

example would include coordinating with the 

foreign regulators in developing appropriate 

regulatory changes or new regulations, particularly 

where changes or new regulations already are being 

considered or proposed by the foreign regulators or 

legislative bodies. As another example, the 

Commission may, after consultation with the 

appropriate regulators and market participants, 

include in its substituted compliance determination 

a description of the means by which certain swaps 

market participants can achieve substituted 

compliance within the construct of the foreign 

regulatory regime. The identification of the means 

by which substituted compliance is achieved would 

be designed to address the regulatory objectives and 

outcomes of the relevant Dodd-Frank Act 

requirements in a manner that does not conflict 

with a foreign regulatory regime and reduces the 

likelihood of inconsistent regulatory obligations. 

For example, the Commission may specify that 

[SDs] and MSPs in the jurisdiction undertake 

certain recordkeeping and documentation for swap 

activities that otherwise is only addressed by the 

foreign regulatory regime with respect to financial 

activities generally. In addition, the substituted 

compliance determination may include provisions 

for summary compliance and risk reporting to the 

Commission to allow the Commission to monitor 

whether the regulatory outcomes are being 

achieved. By using these approaches, in the interest 

of comity, the Commission would seek to achieve 

its regulatory objectives with respect to the 

Commission’s registrants that are operating in 

foreign jurisdictions in a manner that works in 

harmony with the regulatory interests of those 

jurisdictions.’’ 78 FR 45343–44. 

28 ‘‘Swaps activities’’ is defined in Commission 

regulation 23.600(a)(7) to mean, ‘‘with respect to a 

registrant, such registrant’s activities related to 

swaps and any product used to hedge such swaps, 

including, but not limited to, futures, options, other 

swaps or security-based swaps, debt or equity 

securities, foreign currency, physical commodities, 

and other derivatives.’’ The Commission’s 

regulations under 17 CFR Part 23 are limited in 

scope to the swaps activities of SDs and MSPs. 

29No SD or MSP that is not legally required to 

comply with a law or regulation determined to be 

comparable may voluntarily comply with such law 

or regulation in lieu of compliance with the CEA 

and the relevant Commission regulation. Each SD 

or MSP that seeks to rely on a comparability 

determination is responsible for determining 

whether it is subject to the laws and regulations 

found comparable. Currently, there are no MSPs 

organized outside the U.S. and the Commission 

therefore cautions any non-financial entity 

organized outside the U.S. and applying for 

registration as an MSP to carefully consider 

whether the laws and regulations determined to be 

comparable herein are applicable to such entity. 

30The Commission has provided the relevant 

foreign regulator(s) with opportunities to review 

and correct the applicant’s description of such laws 

and regulations on which the Commission will base 

its comparability determination. The Commission 

relies on the accuracy and completeness of such 

review and any corrections received in making its 

comparability determinations. A comparability 

determination based on an inaccurate description of 

foreign laws and regulations may not be valid. 

31 78 FR 45345. 

account timing and other issues related 

to coordinating the implementation of 

reform efforts across jurisdictions.22

In evaluating whether a particular 

category of foreign regulatory 

requirement(s) is comparable and 

comprehensive to the corollary 

requirement(s) under the CEA and 

Commission regulations, the 

Commission will take into consideration 

all relevant factors, including, but not 

limited to: 

• The comprehensiveness of those 

requirement(s), 

• The scope and objectives of the 

relevant regulatory requirement(s), 

• The comprehensiveness of the 

foreign regulator’s supervisory 

compliance program, and 

• The home jurisdiction’s authority to 

support and enforce its oversight of the 

registrant.23

In making a comparability 

determination, the Commission takes an 

‘‘outcome-based’’ approach. An 

‘‘outcome-based’’ approach means that 

when evaluating whether a foreign 

jurisdiction’s regulatory requirements 

are comparable to, and as 

comprehensive as, the corollary areas of 

the CEA and Commission regulations, 

the Commission ultimately focuses on 

regulatory outcomes (i.e., the home 

jurisdiction’s requirements do not have 

to be identical).24 This approach 

recognizes that foreign regulatory 

systems differ and their approaches vary 

and may differ from how the 

Commission chose to address an issue, 

but that the foreign jurisdiction’s 

regulatory requirements nonetheless 

achieve the regulatory outcome sought 

to be achieved by a certain provision of 

the CEA or Commission regulation. 

In doing its comparability analysis the 

Commission may determine that no 

comparability determination can be 

made 25 and that the non-U.S. SD or 

non-U.S. MSP, U.S. bank that is an SD 

or MSP with respect to its foreign 

branches, or non-registrant, to the extent 

applicable under the Guidance, may be 

required to comply with the CEA and 

Commission regulations. 

The starting point in the 

Commission’s analysis is a 

consideration of the regulatory 

objectives of the foreign jurisdiction’s 

regulation of swaps and swap market 

participants. As stated in the Guidance, 

jurisdictions may not have swap 

specific regulations in some areas, and 

instead have regulatory or supervisory 

regimes that achieve comparable and 

comprehensive regulation to the DoddFrank Act requirements, but on a more 

general, entity-wide, or prudential, 

basis.26 In addition, portions of a foreign 

regulatory regime may have similar 

regulatory objectives, but the means by 

which these objectives are achieved 

with respect to swaps market activities 

may not be clearly defined, or may not 

expressly include specific regulatory 

elements that the Commission 

concludes are critical to achieving the 

regulatory objectives or outcomes 

required under the CEA and the 

Commission’s regulations. In these 

circumstances, the Commission will 

work with the regulators and registrants 

in these jurisdictions to consider 

alternative approaches that may result 

in a determination that substituted 

compliance applies.27

Finally, the Commission will 

generally rely on an applicant’s 

description of the laws and regulations 

of the foreign jurisdiction in making its 

comparability determination. The 

Commission considers an application to 

be a representation by the applicant that 

the laws and regulations submitted are 

in full force and effect, that the 

description of such laws and regulations 

is accurate and complete, and that, 

unless otherwise noted, the scope of 

such laws and regulations encompasses 

the swaps activities 28 of SDs and 

MSPs 29 in the relevant jurisdictions.30

Further, as stated in the Guidance, the 

Commission expects that an applicant 

would notify the Commission of any 

material changes to information 

submitted in support of a comparability 

determination (including, but not 

limited to, changes in the relevant 

supervisory or regulatory regime) as, 

depending on the nature of the change, 

the Commission’s comparability 

determination may no longer be valid.31

The Guidance provided a detailed 

discussion of the Commission’s policy 

regarding the availability of substituted 


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32See 78 FR 45348–50. The Commission notes 

that registrants and other market participants are 

responsible for determining whether substituted 

compliance is available pursuant to the Guidance 

based on the comparability determination 

contained herein (including any conditions or 

exceptions), and its particular status and 

circumstances. 

33This notice does not address § 23.608 

(Restrictions on counterparty clearing 

relationships). The Commission declines to take up 

the request for a comparability determination with 

respect to this regulation due to the Commission’s 

view that there are not laws or regulations 

applicable in the EU to compare with the 

prohibitions and requirements of § 23.608. The 

Commission may provide a comparability 

determination with respect to this regulation at a 

later date in consequence of further developments 

in the law and regulations applicable in the EU. 

This notice also does not address capital 

adequacy because the Commission has not yet 

finalized rules for SDs and MSPs in this area, nor 

SDR Reporting. The Commission may provide a 

comparability determination with respect to these 

requirements at a later date or in a separate notice. 

34An MOU is one type of arrangement between 

or among regulators. Supervisory arrangements 

could include, as appropriate, cooperative 

arrangements that are memorialized and executed 

as addenda to existing MOUs or, for example, as 

independent bilateral arrangements, statements of 

intent, declarations, or letters. 

35 78 FR 45344. 

36Section 4s(j)(3) and (4) of the CEA and 

Commission regulation 23.606 require a registered 

SD or MSP to make all records required to be 

maintained in accordance with Commission 

regulation 1.31 available promptly upon request to, 

among others, representatives of the Commission. 

See also 7 U.S.C. 6s(f); 17 CFR 23.203. In the 

Guidance, the Commission states that it ‘‘reserves 

this right to access records held by registered [SDs] 

and MSPs, including those that are non-U.S. 

persons who may comply with the Dodd-Frank 

recordkeeping requirement through substituted 

compliance.’’ 78 FR 45345 n. 472; see also id. at 

45342 n. 461 (affirming the Commission’s authority 

under the CEA and its regulations to access books 

and records held by registered SDs and MSPs as ‘‘a 

fundamental regulatory tool necessary to properly 

monitor and examine each registrant’s compliance 

with the CEA and the regulations adopted pursuant 

thereto’’). 

37The Commission retains its examination 

authority, both during the application process as 

well as upon and after registration of an SD or MSP. 

See 78 FR 45342 (stating Commission policy that 

‘‘eligible entities may comply with a substituted 

compliance regime under certain circumstances, 

subject, however, to the Commission’s retention of 

its examination authority’’) and 45344 n. 471 

(stating that the ‘‘Commission may, as it deems 

appropriate and necessary, conduct an on-site 

examination of the applicant’’). 

compliance 32 for the Internal Business 

Conduct Requirements.33

V. Supervisory Arrangement 

In the Guidance, the Commission 

stated that, in connection with a 

determination that substituted 

compliance is appropriate, it would 

expect to enter into an appropriate 

memorandum of understanding 

(‘‘MOU’’) or similar arrangement 34 with 

the relevant foreign regulator(s). 

Although existing arrangements would 

indicate a foreign regulator’s ability to 

cooperate and share information, ‘‘going 

forward, the Commission and relevant 

foreign supervisor(s) would need to 

establish supervisory MOUs or other 

arrangements that provide for 

information sharing and cooperation in 

the context of supervising [SDs] and 

MSPs.’’ 35

The Commission is in the process of 

developing its registration and 

supervision regime for provisionallyregistered SDs and MSPs. This new 

initiative includes setting forth 

supervisory arrangements with 

authorities that have joint jurisdiction 

over SDs and MSPs that are registered 

with the Commission and subject to 

U.S. law. Given the developing nature of 

the Commission’s regime and the fact 

that the Commission has not negotiated 

prior supervisory arrangements with 

certain authorities, the negotiation of 

supervisory arrangements presents a 

unique opportunity to develop close 

working relationships between and 

among authorities, as well as highlight 

any potential issues related to 

cooperation and information sharing. 

Accordingly, the Commission is 

negotiating such a supervisory 

arrangement with each applicable 

foreign regulator of an SD or MSP. The 

Commission expects that the 

arrangement will establish expectations 

for ongoing cooperation, address direct 

access to information,36 provide for 

notification upon the occurrence of 

specified events, memorialize 

understandings related to on-site 

visits,37 and include protections related 

to the use and confidentiality of nonpublic information shared pursuant to 

the arrangement. 

These arrangements will establish a 

roadmap for how authorities will 

consult, cooperate, and share 

information. As with any such 

arrangement, however, nothing in these 

arrangements will supersede domestic 

laws or resolve potential conflicts of 

law, such as the application of domestic 

secrecy or blocking laws to regulated 

entities. 

VI. Comparability Determination and 

Analysis 

The following section describes the 

requirements imposed by specific 

sections of the CEA and the 

Commission’s regulations for the 

Internal Business Conduct 

Requirements that are the subject of this 

comparability determination, and the 

Commission’s regulatory objectives with 

respect to such requirements. 

Immediately following a description of 

the requirement(s) and regulatory 

objective(s) of the specific Internal 

Business Conduct Requirements that the 

requestor submitted for a comparability 

determination, the Commission 

provides a description of the foreign 

jurisdiction’s comparable laws, 

regulations, or rules and whether such 

laws, regulations, or rules meet the 

applicable regulatory objective. 

The Commission’s determinations in 

this regard and the discussion in this 

section are intended to inform the 

public of the Commission’s views 

regarding whether the foreign 

jurisdiction’s laws, regulations, or rules 

may be comparable and comprehensive 

as those requirements in the DoddFrank Act (and Commission regulations 

promulgated thereunder) and therefore, 

may form the basis of substituted 

compliance. In turn, the public (in the 

foreign jurisdiction, in the United 

States, and elsewhere) retains its ability 

to present facts and circumstances that 

would inform the determinations set 

forth in this notice. 

As was stated in the Guidance, the 

Commission recognizes the complex 

and dynamic nature of the global swap 

market and the need to take an 

adaptable approach to cross-border 

issues, particularly as it continues to 

work closely with foreign regulators to 

address potential conflicts with respect 

to each country’s respective regulatory 

regime. In this regard, the Commission 

may review, modify, or expand the 

determinations herein in light of 

comments received and future 

developments. 

A. Chief Compliance Officer (§ 3.3). 

Commission Requirement: 

Implementing section 4s(k) of the CEA, 

Commission regulation 3.3 generally 

sets forth the following requirements for 

SDs and MSPs: 

• An SD or MSP must designate an 

individual as Chief Compliance Officer 

(‘‘CCO’’); 

• The CCO must have the 

responsibility and authority to develop 

the regulatory compliance policies and 

procedures of the SD or MSP; 

• The CCO must report to the board 

of directors or the senior officer of the 

SD or MSP; 

• Only the board of directors or a 

senior officer may remove the CCO; 

• The CCO and the board of directors 

must meet at least once per year; 

• The CCO must have the background 

and skills appropriate for the 

responsibilities of the position; 

• The CCO must not be subject to 

disqualification from registration under 

sections 8a(2) or (3) of the CEA; 

• Each SD and MSP must include a 

designation of a CCO in its registration 

application; 


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38 7 U.S.C. 6s(j). 

39See Final Swap Dealer and MSP Recordkeeping 

Rule, 77 FR 20128 (April 3, 2012) (relating to risk 

management program, monitoring of position 

• The CCO must administer the 

regulatory compliance policies of the SD 

or MSP; 

• The CCO must take reasonable steps 

to ensure compliance with the CEA and 

Commission regulations, and resolve 

conflicts of interest; 

• The CCO must establish procedures 

for detecting and remediating noncompliance issues; 

• The CCO must annually prepare 

and sign an ‘‘annual compliance report’’ 

containing: (i) A description of policies 

and procedures reasonably designed to 

ensure compliance; (ii) an assessment of 

the effectiveness of such policies and 

procedures; (iii) a description of 

material non-compliance issues and the 

action taken; (iv) recommendations of 

improvements in compliance policies; 

and (v) a certification by the CCO or 

chief executive officer that, to the best 

of such officer’s knowledge and belief, 

the annual report is accurate and 

complete under penalty of law; and 

• The annual compliance report must 

be furnished to the CFTC within 90 days 

after the end of the fiscal year of the SD 

or MSP, simultaneously with its annual 

financial condition report. 

Regulatory Objective: The 

Commission believes that compliance 

by SDs and MSPs with the CEA and the 

Commission’s rules greatly contributes 

to the protection of customers, orderly 

and fair markets, and the stability and 

integrity of the market intermediaries 

registered with the Commission. The 

Commission expects SDs and MSPs to 

strictly comply with the CEA and the 

Commission’s rules and to devote 

sufficient resources to ensuring such 

compliance. Thus, through its CCO rule, 

the Commission seeks to ensure firms 

have designated a qualified individual 

as CCO that reports directly to the board 

of directors or the senior officer of the 

firm and that has the independence, 

responsibility, and authority to develop 

and administer compliance policies and 

procedures reasonably designed to 

ensure compliance with the CEA and 

Commission regulations, resolve 

conflicts of interest, remediate 

noncompliance issues, and report 

annually to the Commission and the 

board or senior officer on compliance of 

the firm. 

Comparable EU Law and Regulations: 

The applicant has represented to the 

Commission that the following 

provisions of law and regulations 

applicable in the EU are in full force 

and effect in the EU, and comparable to 

and as comprehensive as section 4s(k) of 

the CEA and Commission regulation 3.3. 

MiFID Articles 13(2), 13(3) and 18 set 

forth the general obligation for 

investment firms (which would include 

SDs) to establish adequate policies and 

procedures to ensure compliance with 

requirements and to identify and 

properly manage conflicts of interests. 

MiFID implementing measure 

(Commission Directive ‘‘MiFID L2D’’) 

Articles 5, 6, 9, 21 to 23 clarify, along 

with ESMA guidelines, the application 

of some aspects of the MiFID articles, to 

ensure common, uniform, and 

consistent application of MiFID and the 

MiFID L2D across the EU. The main 

principles are the following: 

• Investment firms must appoint a 

person as compliance officer (‘‘CO’’) 

responsible for the compliance function 

(‘‘CF’’); 

• The CO must have sufficiently 

broad knowledge/experience and high 

level of expertise to assume 

responsibility for the CF and ensure it 

is effective; 

• Written reports must be sent to 

senior management (which includes 

boards of directors) on a regular basis (at 

least annually as well as on an ad-hoc 

basis when significant compliance 

matters are discovered); 

• The CO must only be appointed and 

replaced by senior management or 

supervisory function; 

• The CO, but also compliance staff, 

must have specific knowledge, skills 

and expertise relevant to the tasks and 

to the business of the firm; 

• Supervisors must ensure 

compliance with above requirements in 

the authorization process of investment 

firms and during on-going supervision; 

• CF, under the responsibility of the 

CO, must monitor and assess the 

adequacy and effectiveness of measures 

and procedures to ensure compliance 

with regulatory obligations and to 

address any deficiencies, including the 

obligation to identify and manage 

conflicts of interests and maintain 

effective conflicts of interest policies; 

• Written report to address, at least 

annually: The description of 

implementation and effectiveness of the 

overall control environment; the 

summary of major findings of the review 

of policies and procedures; the 

summary of inspections and reviews 

carried out; the risk identified; and the 

advice on any necessary remedial 

action; 

• The CF must be involved in all 

material non-routine correspondence 

with supervisors; 

• The CF must be involved in all 

significant modifications of the 

organization of the investment firm; 

• The CF must be independent; 

• Senior management retains ultimate 

responsibility to ensure firms’ 

compliance with obligations; and 

• Investment firms must arrange for 

all records necessary to enable 

supervisors to monitor compliance with 

requirements. 

Commission Determination: The 

Commission finds that the MiFID 

standards specified above are generally 

identical in intent to § 3.3 by seeking to 

ensure firms have designated a qualified 

individual as the compliance officer that 

reports directly to a sufficiently senior 

function of the firm and that has the 

independence, responsibility, and 

authority to develop and administer 

compliance policies and procedures 

reasonably designed to ensure 

compliance with the CEA and 

Commission regulations, resolve 

conflicts of interest, remediate 

noncompliance issues, and report 

annually on compliance of the firm. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

CCO requirements of MiFID are 

comparable to and as comprehensive as 

§ 3.3, with the exception of § 3.3(f) 

concerning certifying and furnishing an 

annual compliance report to the 

Commission. 

Notwithstanding that the Commission 

has not determined that the 

requirements of MiFID are comparable 

to and as comprehensive as § 3.3(f), any 

SD or MSP to which both § 3.3 and the 

MiFID standards specified above are 

applicable would generally be deemed 

to be in compliance with § 3.3(f) if that 

SD or MSP complies with the MiFID 

standards specified above, subject to 

certifying and furnishing the 

Commission with the annual report 

required under the MiFID standards 

specified above in accordance with 

§ 3.3(f). The Commission notes that it 

generally expects registrants to submit 

required reports to the Commission in 

the English language. 

B. Risk Management Duties (§§ 23.600– 

23.609) 

Section 4s(j) of the CEA requires each 

SD and MSP to establish internal 

policies and procedures designed to, 

among other things, address risk 

management, monitor compliance with 

position limits, prevent conflicts of 

interest, and promote diligent 

supervision, as well as maintain 

business continuity and disaster 

recovery programs.38 The Commission 

adopted regulations 23.600, 23.601, 

23.602, 23.603, 23.605, and 23.606 to 

implement the statute.39 The 


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limits, business continuity and disaster recovery, 

conflicts of interest policies and procedures, and 

general information availability, respectively). 

40See Customer Documentation Rule, 77 FR 

21278. Also, SDs must comply with Commission 

regulation 23.608, which prohibits SD providing 

clearing services to customers from entering into 

agreements that would: (i) Disclose the identity of 

a customer’s original executing counterparty; (ii) 

limit the number of counterparties a customer may 

trade with; (iii) impose counterparty-based position 

limits; (iv) impair a customer’s access to execution 

of a trade on terms that have a reasonable 

relationship to the best terms available; or (v) 

prevent compliance with specified time frames for 

acceptance of trades into clearing. 

41 ‘‘Swaps activities’’ is defined in Commission 

regulation 23.600(a)(7) to mean, ‘‘with respect to a 

registrant, such registrant’s activities related to 

swaps and any product used to hedge such swaps, 

including, but not limited to, futures, options, other 

swaps or security-based swaps, debt or equity 

securities, foreign currency, physical commodities, 

and other derivatives.’’ The Commission’s 

regulations under 17 CFR Part 23 are limited in 

scope to the swaps activities of SDs and MSPs. 

42As stated above, this notice does not address 

§ 23.608 (Restrictions on counterparty clearing 

relationships). The Commission declines to take up 

the request for a comparability determination with 

respect to this regulation due to the Commission’s 

view that there are not laws or regulations 

applicable in the EU to compare with the 

prohibitions and requirements of § 23.608. The 

Commission may provide a comparability 

determination with respect to this regulation at a 

later date in consequence of further developments 

in the law and regulations applicable in the EU. 

Commission also adopted regulation 

23.609, which requires certain risk 

management procedures for SDs or 

MSPs that are clearing members of a 

derivatives clearing organization 

(‘‘DCO’’).40 Collectively, these 

requirements help to establish a robust 

and comprehensive internal risk 

management program for SDs and MSPs 

with respect to their swaps activities,41

which is critical to effective systemic 

risk management for the overall swaps 

market. In making its comparability 

determination with regard to these risk 

management duties, the Commission 

will consider each regulation 

individually.42

1. Risk Management Program for SDs 

and MSPs (§ 23.600) 

Commission Requirement: 

Implementing section 4s(j)(2) of the 

CEA, Commission regulation 23.600 

generally requires that: 

• Each SD or MSP must establish and 

enforce a risk management program 

consisting of a system of written risk 

management policies and procedures 

designed to monitor and manage the 

risks associated with the swap activities 

of the firm, including without 

limitation, market, credit, liquidity, 

foreign currency, legal, operational, and 

settlement risks, and furnish a copy of 

such policies and procedures to the 

CFTC upon application for registration 

and upon request; 

• The SD or MSP must establish a 

risk management unit independent from 

the business trading unit; 

• The risk management policies and 

procedures of the SD or MSP must be 

approved by the firm’s governing body; 

• Risk tolerance limits and exceptions 

therefrom must be reviewed and 

approved quarterly by senior 

management and annually by the 

governing body; 

• The risk management program must 

have a system for detecting breaches of 

risk tolerance limits and alerting 

supervisors and senior management, as 

appropriate; 

• The risk management program must 

account for risks posed by affiliates and 

be integrated at the consolidated entity 

level; 

• The risk management unit must 

provide senior management and the 

governing body with quarterly risk 

exposure reports and upon detection of 

any material change in the risk exposure 

of the SD or MSP; 

• Risk exposure reports must be 

furnished to the CFTC within five 

business days following provision to 

senior management; 

• The risk management program must 

have a new product policy for assessing 

the risks of new products prior to 

engaging in such transactions; 

• The risk management program must 

have policies and procedures providing 

for trading limits, monitoring of trading, 

processing of trades, and separation of 

personnel in the trading unit from 

personnel in the risk management unit; 

and 

• The risk management program must 

be reviewed and tested at least annually 

and upon any material change in the 

business of the SD or MSP. 

Regulatory Objective: Through the 

required system of risk management, the 

Commission seeks to ensure that firms 

are adequately managing the risks of 

their swaps activities to prevent failure 

of the SD or MSP, which could result in 

losses to counterparties doing business 

with the SD or MSP, and systemic risk 

more generally. To this end, the 

Commission believes the risk 

management program of an SD or MSP 

must contain at least the following 

critical elements: 

• Identification of risk categories; 

• Establishment of risk tolerance 

limits for each category of risk and 

approval of such limits by senior 

management and the governing body; 

• An independent risk management 

unit to administer a risk management 

program; and 

• Periodic oversight of risk exposures 

by senior management and the 

governing body. 

Comparable EU Law and Regulations: 

The applicant has represented to the 

Commission that the following 

provisions of law and regulations 

applicable in the EU are in full force 

and effect in the EU, and comparable to 

and as comprehensive as section 4s(j)(2) 

of the CEA and Commission regulation 

23.600. 

• Under MiFID Article 13(5) & MiFID 

L2D Article 5, investment firms must 

have effective procedures for risk 

assessment, effective control, and 

safeguard arrangements for information 

processing systems, sound 

administrative and accounting 

procedures, and internal control 

mechanisms. 

• Under MiFID L2D Article 6, 

investment firms (including SDs) must, 

subject to a proportionality principle 

dependent on the size and nature of a 

firm’s business, establish and maintain 

an independent risk management 

function that is responsible for the 

implementation of risk management 

policies and procedures and that 

provides reports and advice to senior 

management regarding risk 

management. 

• MiFID L2D Article 9: Senior 

management (which includes boards of 

directors) must take responsibility for 

firms’ compliance with regulatory 

obligations including risk management. 

• MiFID L2D Article 9: Senior 

management must receive on a frequent 

basis, and at least annually, written 

reports on risk management issues, 

including any appropriate action taken 

in the event of deficiencies; 

• MiFID L2D Article 7: Investment 

firms must identify the risks relating to 

the firms’ activities, processes and 

systems, and set the level of risk 

tolerated by the firm in appropriate 

instances; must adopt effective 

arrangements, processes, and 

mechanisms to manage the risks relating 

to the firm’s activities, processes and 

systems, in light of the established level 

of risk tolerance; must monitor the 

adequacy and effectiveness of its risk 

management policies and procedures, 

the level of compliance with 

arrangements, processes and 

mechanisms for risk management; and 

must monitor the adequacy and 

effectiveness of measures taken to 

address any deficiencies. The risk 

management strategy should address 

credit and counterparty risk; residual 

risk; market risk; interest rate risk; 

operational risk; liquidity risk; 

securitization risk; concentration risk; 

and risk of excessive leverage. 

• Directive 2002/87/EC Article 9: In 

the case of financial conglomerates, risk 

management processes must include 


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43The current version of CRD will soon be 

replaced by CRD IV. CRD IV entered into force on 

June 28, 2013, and shall apply in most of its parts 

from January 1, 2014. The new reference is Article 

74 and there will be additional detailed technical 

rules specifying the arrangements, processes and 

mechanisms that must be adopted to fulfill this 

requirement. Article 88 of Directive 2013/36/EU 

specifies that ’’ the management body defines, 

oversees and is accountable for the implementation 

of the governance arrangements that ensure 

effective and prudent management of an 

institution.’’ Article 76 specifies tasks assigned to 

the management body as regards risk 

management.http://eur-lex.europa.eu/LexUriServ/ 

LexUriServ.do?uri=;OJ:L:2013:

176:0338:0436:EN:PDF. 

44The setting of position limits by the 

Commission, a DCM, or a SEF is subject to 

requirements under the CEA and Commission 

regulations other than § 23.601. The setting of 

position limits and compliance with such limits is 

not subject to the Commission’s substituted 

compliance regime. 

approval and periodical review of the 

strategies and policies by governing 

bodies with respect to all the risks 

assumed; adequate capital adequacy 

policies to anticipate impacts on risk 

profiles and capital requirements; risk 

monitoring and controls at the level of 

the conglomerates. 

• ESMA Guidelines on compliance 

function requirements (ESMA/2012/

388) specify that the assessment of 

compliance risk should involve the 

compliance function, including in the 

case of new business lines or new 

financial products. Identified risks 

should be reviewed on a regular basis as 

well as ad-hoc when necessary to ensure 

that any emerging risks are taken into 

consideration. A monitoring program 

covering all areas of the investment 

firm’s activities should ensure that 

compliance risk is comprehensively 

monitored. Specific measures ensure the 

effectiveness, the permanence and the 

independence of the compliance 

function. 

• MiFID L2D Articles 21 to 23: 

Requirements on conflicts of interests 

include the obligation to adopt 

measures to ensure the appropriate level 

of independence to any person working 

in the firm. This includes measures 

preventing or controlling the exchange 

of information, separating the 

supervision of relevant persons, 

preventing or limiting the possibility for 

a person to exercise inappropriate 

influence over others. Furthermore, 

firms must ensure that performance of 

multiple functions does not prevent 

persons from acting soundly, honestly, 

and professionally. 

• MiFID Article 50: Supervisors can 

access documents for the discharge of 

their supervisory duties. 

• CRD Annex V: Credit institutions 

and investment firms must have in 

place risk management procedures that 

cover credit, operational, counterparty, 

market, concentration, securitization, 

liquidity and interest rate risk. 

• CRD Article 22: Credit institution’s 

conformity with regulation is the 

responsibility of the institution’s 

management body and is subject to 

ongoing supervisory review.43

Commission Determination: The 

Commission finds that the MiFID, 

ESMA, and CRD standards specified 

above are generally identical in intent to 

§ 23.600 by requiring a system of risk 

management that seeks to ensure that 

firms are adequately managing the risks 

of their swaps activities to prevent 

failure of the SD or MSP, which could 

result in losses to counterparties doing 

business with the SD or MSP, and 

systemic risk more generally. 

Specifically, the Commission finds that 

the MiFID, ESMA, and CRD standards 

specified above comprehensively 

require SDs and MSPs to establish risk 

management programs containing the 

following critical elements: 

• Identification of risk categories; 

• Establishment of risk tolerance 

limits for each category of risk and 

approval of such limits by senior 

management and the governing body; 

• An independent risk management 

unit to administer a risk management 

program; and 

• Periodic oversight of risk exposures 

by senior management and the 

governing body. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

risk management program requirements 

of MiFID, ESMA, and CRD, as specified 

above, are comparable to and as 

comprehensive as § 23.600, with the 

exception of § 23.600(c)(2) concerning 

the requirement that each SD and MSP 

produce a quarterly risk exposure report 

and provide such report to its senior 

management, governing body, and the 

Commission. 

Notwithstanding that the Commission 

has not determined that the 

requirements of MiFID, ESMA, and CRD 

are comparable to and as comprehensive 

as § 23.600(c)(2), any SD or MSP to 

which both § 23.600 and the MiFID, 

ESMA, and CRD standards specified 

above are applicable would generally be 

deemed to be in compliance with 

§ 23.600(c)(2) if that SD or MSP 

complies with the MiFID, ESMA, and 

CRD standards specified above, subject 

to compliance with the requirement that 

it produce quarterly risk exposure 

reports and provide such reports to its 

senior management, governing body, 

and the Commission in accordance with 

§ 23.600(c)(2). The Commission notes 

that it generally expects reports 

furnished to the Commission by 

registrants to be in the English language. 

2. Monitoring of Position Limits 

(§ 23.601) 

Commission Requirement: 

Implementing section 4s(j)(1) of the 

CEA, Commission regulation 23.601 

requires each SD or MSP to establish 

and enforce written policies and 

procedures that are reasonably designed 

to monitor for, and prevent violations 

of, applicable position limits established 

by the Commission, a designated 

contract market (‘‘DCM’’), or a swap 

execution facility (‘‘SEF’’).44 The 

policies and procedures must include 

an early warning system and provide for 

escalation of violations to senior 

management (including the firm’s 

governing body). 

Regulatory Objective: Generally, 

position limits are implemented to 

ensure market integrity, fairness, 

orderliness, and accurate pricing in the 

commodity markets. Commission 

regulation 23.601 thus seeks to ensure 

that SDs and MSPs have established the 

necessary policies and procedures to 

monitor the trading of the firm to 

prevent violations of applicable position 

limits established by the Commission, a 

DCM, or a SEF. As part of its Risk 

Management Program, § 23.601 is 

intended to ensure that established 

position limits are not breached by the 

SD or MSP. 

Comparable EU Law and Regulations: 

The applicant has represented to the 

Commission that the following 

provisions of law and regulations 

applicable in the EU are in full force 

and effect in the EU, and comparable to 

and as comprehensive as section 4s(j)(1) 

of the CEA and Commission regulation 

23.601. 

The applicant requests that the 

Commission look to the general risk 

management function requirements 

outlined in subsection VI(B)(1) (Risk 

Management Program) above and the 

general compliance function 

requirements outlined in subsection 

VI(A) (Chief Compliance Officer) above 

for comparable EU law and regulations 

that would require an SD or MSP to 

monitor for and comply with applicable 

position limits. For example: 

• MiFID L2D: A firm’s compliance 

function, under the responsibility of the 

compliance officer, must monitor and 

assess the adequacy and effectiveness of 

measures and procedures to ensure 

compliance with regulatory obligations 

and to address any deficiencies, 


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including obligations to identify and 

manage conflicts of interests and 

maintain effective conflicts of interest 

policies; and 

• MiFID L2D Article 9: Senior 

management (which includes boards of 

directors) must take responsibility for 

firms’ compliance with regulatory 

obligations including risk management. 

The applicant states that the foregoing 

MiFID standards to monitor the 

effectiveness of procedures to ensure 

compliance with regulatory obligations 

includes regulatory obligations of an SD 

or MSP, that is subject to such MiFID 

standards, to comply with applicable 

standards under the CEA, Commission 

regulations, and position limits set by 

the Commission, a DCM, or a SEF. 

Commission Determination: The 

Commission finds that the MiFID 

standards specified above are generally 

identical in intent to § 23.601 by 

requiring SDs and MSPs to establish 

necessary policies and procedures to 

monitor the trading of the firm to 

prevent violations of applicable position 

limits established by applicable laws 

and regulations, including those of the 

Commission, a DCM, or a SEF. 

Specifically, the Commission finds that 

the MiFID standards specified above, 

while not specific to the issue of 

position limit compliance, nevertheless 

comprehensively require SDs and MSPs 

to monitor for regulatory compliance 

generally, which includes monitoring 

for compliance with position limits set 

pursuant to applicable law and the 

responsibility of senior management 

(including the board of directors) for 

such compliance. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

compliance monitoring requirements of 

MiFID, as specified above, are 

comparable to and as comprehensive as 

§ 23.601. For the avoidance of doubt, the 

Commission notes that this 

determination may not be relied on to 

relieve an SD or MSP from its obligation 

to strictly comply with any applicable 

position limit established by the 

Commission, a DCM, or a SEF. 

3. Diligent Supervision (§ 23.602) 

Commission Requirement: 

Commission regulation 23.602 

implements section 4s(h)(1)(B) of the 

CEA and requires each SD and MSP to 

establish a system to diligently 

supervise all activities relating to its 

business performed by its partners, 

members, officers, employees, and 

agents. The system must be reasonably 

designed to achieve compliance with 

the CEA and CFTC regulations. 

Commission regulation 23.602 requires 

that the supervisory system must 

specifically designate qualified persons 

with authority to carry out the 

supervisory responsibilities of the SD or 

MSP for all activities relating to its 

business as an SD or MSP. 

Regulatory Objective: The 

Commission’s diligent supervision rule 

seeks to ensure that SDs and MSPs 

strictly comply with the CEA and the 

Commission’s rules. To this end, 

through § 23.602, the Commission seeks 

to ensure that each SD and MSP not 

only establishes the necessary policies 

and procedures that would lead to 

compliance with the CEA and 

Commission regulations, but also 

establishes an effective system of 

internal oversight and enforcement of 

such policies and procedures to ensure 

that such policies and procedures are 

diligently followed. 

Comparable EU Law and Regulations: 

The applicant has represented to the 

Commission that the following 

provisions of law and regulations 

applicable in the EU are in full force 

and effect in the EU, and comparable to 

and as comprehensive as section 

4s(h)(1)(B) of the CEA and Commission 

regulation 23.602. 

Under MiFID Article 13, MiFID L2D 

Articles 5, 6, 11, and 12, and ESMA/

2012/388, firms must establish policies 

and procedures sufficient to ensure 

compliance of the firm, as well as its 

managers, employees and agents, with 

all of their compliance obligations as 

well as rules on personal transactions by 

these persons. The applicant represents 

to the Commission that the compliance 

obligations of firms that are subject to 

MiFID would cover those of an SD or 

MSP under the CEA and the 

Commission’s regulations. 

Under MiFID Article 9, directors are 

subject to fit and proper criteria. Under 

MiFID Article 13, firms must establish 

and maintain decision-making processes 

and an organizational structure 

specifying reporting lines and allocate 

functions and responsibilities; 

personnel must have skills, knowledge 

and expertise necessary for the 

discharge of their responsibilities; and 

internal control mechanisms must be 

maintained to secure compliance as 

well as internal reporting and 

communication of information at all 

relevant levels of the firm. 

Commission Determination: The 

Commission finds that the MiFID 

standards specified above are generally 

identical in intent to § 23.602 because 

such standards seek to ensure that SDs 

and MSPs strictly comply with 

applicable law, which would include 

the CEA and the Commission’s 

regulations. Through the MiFID 

standards specified above, EU laws and 

regulations seek to ensure that each SD 

and MSP not only establishes the 

necessary policies and procedures that 

would lead to compliance with 

applicable law, which would include 

the CEA and Commission regulations, 

but also establishes an effective system 

of internal oversight and enforcement of 

such policies and procedures to ensure 

that such policies and procedures are 

diligently followed. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

internal supervision requirements of 

MiFID, as specified above, are 

comparable to and as comprehensive as 

§ 23.602. 

4. Business Continuity and Disaster 

Recovery (§ 23.603) 

Commission Requirement: To ensure 

the proper functioning of the swaps 

markets and the prevention of systemic 

risk more generally, Commission 

regulation 23.603 requires each SD and 

MSP, as part of its risk management 

program, to establish a business 

continuity and disaster recovery plan 

that includes procedures for, and the 

maintenance of, back-up facilities, 

systems, infrastructure, personnel, and 

other resources to achieve the timely 

recovery of data and documentation and 

to resume operations generally within 

the next business day after the 

disruption. 

Regulatory Objective: Commission 

regulation 23.603 is intended to ensure 

that any market disruption affecting SDs 

and MSPs, whether caused by natural 

disaster or otherwise, is minimized in 

length and severity. To that end, this 

requirement seeks to ensure that entities 

adequately plan for disruptions and 

devote sufficient resources capable of 

carrying out an appropriate plan within 

one business day, if necessary. 

Comparable EU Law and Regulations: 

The applicant has represented to the 

Commission that the following 

provisions of law and regulations 

applicable in the EU are in full force 

and effect in the EU, and comparable to 

and as comprehensive as Commission 

regulation 23.603. 

• Under MiFID L2D Article 5(3), 

firms must establish, implement, and 

maintain an adequate business 

continuity policy aimed at insuring the 

preservation of essential data and 

functions, the maintenance of services, 

and the timely recovery of such data 

and functions and timely resumption of 

services. 

• Under MiFID Article 13(4), firms 

must take reasonable steps to ensure 

continuity and regularity in the 


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performance of investment services and 

activities, including employing 

appropriate systems, resources, and 

procedures to accomplish this 

requirement. 

Commission Determination: The 

Commission finds that the MiFID 

standards specified above are generally 

identical in intent to § 23.603 because 

such standards seek to ensure that any 

market disruption affecting SDs and 

MSPs, whether caused by natural 

disaster or otherwise, is minimized in 

length and severity. To that end, the 

Commission finds that the MiFID 

standards specified above seek to ensure 

that entities adequately plan for 

disruptions and devote sufficient 

resources capable of carrying out an 

appropriate plan in a timely manner. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

business continuity and disaster 

recovery requirements of MiFID, as 

specified above, are comparable to and 

as comprehensive as § 23.603. 

5. Conflicts of Interest (§ 23.605) 

Commission Requirement: Section 

4s(j)(5) of the CEA and Commission 

regulation 23.605(c) generally require 

each SD or MSP to establish structural 

and institutional safeguards to ensure 

that the activities of any person within 

the firm relating to research or analysis 

of the price or market for any 

commodity or swap are separated by 

appropriate informational partitions 

within the firm from the review, 

pressure, or oversight of persons whose 

involvement in pricing, trading, or 

clearing activities might potentially bias 

their judgment or supervision. 

In addition, section 4s(j)(5) of the CEA 

and Commission regulation 23.605(d)(1) 

generally prohibits an SD or MSP from 

directly or indirectly interfering with or 

attempting to influence the decision of 

any clearing unit of any affiliated 

clearing member of a DCO to provide 

clearing services and activities to a 

particular customer, including: 

• Whether to offer clearing services to 

a particular customer; 

• Whether to accept a particular 

customer for clearing derivatives; 

• Whether to submit a customer’s 

transaction to a particular DCO; 

• Whether to set or adjust risk 

tolerance levels for a particular 

customer; or 

• Whether to set a customer’s fees 

based on criteria other than those 

generally available and applicable to 

other customers. 

Commission regulation 23.605(d)(2) 

generally requires each SD or MSP to 

create and maintain an appropriate 

informational partition between 

business trading units of the SD or MSP 

and clearing units of any affiliated 

clearing member of a DCO to reasonably 

ensure compliance with the Act and the 

prohibitions set forth in § 23.605(d)(1) 

outlined above. 

The Commission observes that 

§ 23.605(d) works in tandem with 

Commission regulation 1.71, which 

requires futures commission merchants 

(‘‘FCMs’’) that are clearing members of 

a DCO and affiliated with an SD or MSP 

to create and maintain an appropriate 

informational partition between 

business trading units of the SD or MSP 

and clearing units of the FCM to 

reasonably ensure compliance with the 

Act and the prohibitions set forth in 

§ 1.71(d)(1), which are the same as the 

prohibitions set forth in § 23.605(d)(1) 

outlined above. 

Finally, § 23.605(e) requires that each 

SD or MSP have policies and 

procedures that mandate the disclosure 

to counterparties of material incentives 

or conflicts of interest regarding the 

decision of a counterparty to execute a 

derivative on a SEF or DCM or to clear 

a derivative through a DCO. 

Regulatory Objective: Commission 

regulation 23.605(c) seeks to ensure that 

research provided to the general public 

by an SD or MSP is unbiased and free 

from the influence of the interests of an 

SD or MSP arising from the SD’s or 

MSP’s trading business. 

In addition, § 23.605(d) (working in 

tandem with § 1.71) seeks to ensure 

open access to the clearing of swaps by 

requiring that access to and the 

provision of clearing services provided 

by an affiliate of an SD or MSP are not 

influenced by the interests of an SD’s or 

MSP’s trading business. 

Finally, § 23.605(e) seeks to ensure 

equal access to trading venues and 

clearinghouses, as well as orderly and 

fair markets, by requiring that each SD 

and MSP disclose to counterparties any 

material incentives or conflicts of 

interest regarding the decision of a 

counterparty to execute a derivative on 

a SEF or DCM, or to clear a derivative 

through a DCO. 

Comparable EU Law and Regulations: 

The applicant has represented to the 

Commission that the following 

provisions of law and regulations 

applicable in the EU are in full force 

and effect in the EU, and comparable to 

and as comprehensive as Commission 

regulation 23.605(c). 

• MiFID Articles 13(3) and 18 require 

that SDs maintain and operate effective 

organizational and administrative 

arrangements with a view to preventing 

conflicts of interest from adversely 

affecting the interests of its clients. 

• Under MiFID L2D Articles 21 to 23, 

SDs are obligated to adopt measures to 

ensure the appropriate level of 

independence of any person working in 

the firm. This includes measures 

preventing or controlling the exchange 

of information, separating the 

supervision of relevant persons, and 

preventing or limiting the possibility for 

a person to exercise inappropriate 

influence over others. Furthermore, 

firms must ensure that performance of 

multiple functions does not prevent 

persons from acting soundly, honestly, 

and professionally. 

• Under MiFID L2D Articles 24 to 25, 

SDs must maintain and operate effective 

organizational and administrative 

arrangements and take all reasonable 

steps designed to prevent conflicts of 

interest from adversely affecting the 

interests of its clients. 

• Under MiFID Articles 18 and MiFID 

L2D Article 22, SDs must develop a 

written conflicts of interest policy 

appropriate to the size and organization 

of the firm that identifies circumstances 

that might give rise to conflicts entailing 

a material risk of damage to the interests 

of one or more clients and specify 

procedures to be followed to manage 

such conflicts. The general conflicts 

policy has to be disclosed to clients. 

Disclosure is also needed when 

organizational arrangements to manage 

conflicts are not sufficient to ensure, 

with reasonable confidence, that the risk 

of damage to client interests will be 

prevented. 

• Under MiFID L2D Article 25, an SD 

that prepares or disseminates research 

recommendations must take reasonable 

care to ensure that research 

recommendations are fairly presented 

and must disclose its interests or 

indicate conflicts of interest concerning 

relevant investments. 

• Under MiFID L2D Article 25, in 

addition to the conflicts of interest 

requirements set out above, steps must 

be taken to ensure that restrictions are 

in place to avoid conflicts with respect 

to research personnel (e.g., financial 

analysts), including restrictions on 

personal account dealing and 

inducements. 

• Under MiFID L2D Article 24, 

research recommendations must also 

include a disclosure of interests or 

indicate conflicts of interests concerning 

the relevant investments. 

The applicant states that the foregoing 

MiFID standards would require any SD 

or MSP that is subject to such MiFID 

standards to resolve or mitigate conflicts 

of interests in the provision of clearing 

services by a clearing member that is 

linked to that SD or MSP, or conflicts of 

interests in the execution of a derivative 


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by a client on a particular execution 

venue, including an eligible SEF or 

DCM, or conflicts of interests in the 

clearing of a derivative through a CCP, 

including an eligible DCO, through 

measures including appropriate 

information firewalls and disclosures. 

Commission Determination: The 

Commission finds that the MiFID 

standards specified above with respect 

to conflicts of interest that may arise in 

producing or distributing research are 

generally identical in intent to 

§ 23.605(c) because such standards seek 

to ensure that research provided to the 

general public by an SD is unbiased and 

free from the influence of the interests 

of an SD arising from the SD’s trading 

business. 

With respect to conflicts of interest 

that may arise in the provision of 

clearing services by an affiliate of an SD 

or MSP, the Commission further finds 

that although the general conflicts of 

interest prevention requirements under 

the MiFID standards specified above do 

not require with specificity that access 

to and the provision of clearing services 

provided by an affiliate of an SD or MSP 

not be improperly influenced by the 

interests of an SD’s or MSP’s trading 

business, such general requirements 

would require prevention and 

remediation of such improper influence 

when recognized or discovered. Thus 

such standards would ensure open 

access to clearing. 

Finally, although not as specific as the 

requirements of § 23.605(e) (Undue 

influence on counterparties), the 

Commission finds that the general 

disclosure requirements of the MiFID 

standards specified above would ensure 

equal access to trading venues and 

clearinghouses by requiring that each 

SD and MSP disclose to counterparties 

any material incentives or conflicts of 

interest regarding the decision of a 

counterparty to execute a derivative on 

a SEF or DCM, or to clear a derivative 

through a DCO. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

requirements found in the MiFID 

standards specified above in relation to 

conflicts of interest are comparable to 

and as comprehensive as § 23.605. 

6. Availability of Information for 

Disclosure and Inspection (§ 23.606) 

Commission Requirement: 

Commission regulation 23.606 

implements sections 4s(j)(3) and (4) of 

the CEA, and requires each SD and MSP 

to disclose to the Commission, and an 

SD’s or MSP’s U.S. prudential regulator 

(if any) comprehensive information 

about its swap activities, and to 

establish and maintain reliable internal 

data capture, processing, storage, and 

other operational systems sufficient to 

capture, process, record, store, and 

produce all information necessary to 

satisfy its duties under the CEA and 

Commission regulations. Such systems 

must be designed to provide such 

information to the Commission and an 

SD’s or MSP’s U.S. prudential regulator 

within the time frames set forth in the 

CEA and Commission regulations and 

upon request. 

Regulatory Objective: Commission 

regulation 23.606 seeks to ensure that 

each SD and MSP captures and 

maintains comprehensive information 

about their swap activities, and is able 

to retrieve and disclose such 

information to the Commission and its 

U.S. prudential regulator, if any, as 

necessary for compliance with the CEA 

and the Commission’s regulations and 

for purposes of Commission oversight, 

as well as oversight by the SD’s or 

MSP’s U.S. prudential regulator, if any. 

The Commission observes that it 

would be impossible to meet the 

regulatory objective of § 23.606 unless 

the required information is available to 

the Commission and any U.S. 

prudential regulator under the foreign 

legal regime. Thus, a comparability 

determination with respect to the 

information access provisions of 

§ 23.606 would be premised on whether 

the relevant information would be 

available to the Commission and any 

U.S. prudential regulator of the SD or 

MSP, not on whether an SD or MSP 

must disclose comprehensive 

information to its regulator in its home 

jurisdiction. 

Comparable EU Law and Regulations: 

The applicant has represented to the 

Commission that the following 

provisions of law and regulations 

applicable in the EU are in full force 

and effect in the EU, and comparable to 

and as comprehensive as Commission 

regulation 23.606. 

Under MiFID Article 13(6) & 25(2) & 

50, investment firms are required to 

maintain adequate and orderly records 

of their business and internal 

organization. Firms must maintain at 

the disposal of the regulator, for at least 

five years, the relevant data relating to 

their transactions in financial 

instruments. Among other things, 

supervisors have the authority to access 

any document in any form whatsoever 

and to receive a copy of it, to demand 

information from any person, and to 

carry out on-site inspections. 

Commission Determination: The 

Commission finds that the MiFID 

standards specified above are generally 

identical in intent to § 23.606 because 

such standards seek to ensure that each 

SD and MSP captures and stores 

comprehensive information about their 

swap activities, and are able to retrieve 

and disclose such information as 

necessary for compliance with 

applicable law and for purposes of 

regulatory oversight. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

requirements of MiFID with respect to 

the availability of information for 

inspection and disclosure, as specified 

above, are comparable to, and as 

comprehensive as, § 23.606, with the 

exception of § 23.606(a)(2) concerning 

the requirement that an SD or MSP 

make information required by 

§ 23.606(a)(1) available promptly upon 

request to Commission staff and the staff 

of an applicable prudential regulator. 

The applicant has not submitted any 

provision of law or regulations 

applicable in the EU upon which the 

Commission could make a finding that 

SDs and MSPs would be required to 

retrieve and disclose comprehensive 

information about their swap activities 

to the Commission or any U.S. 

prudential regulator as necessary for 

compliance with the CEA and 

Commission regulations, and for 

purposes of Commission oversight and 

the oversight of any U.S. prudential 

regulator. 

Notwithstanding that the Commission 

has not determined that the 

requirements of MiFID are comparable 

to and as comprehensive as 

§ 23.606(a)(2), any SD or MSP to which 

both § 23.606 and the MiFID standards 

specified above are applicable would 

generally be deemed to be in 

compliance with § 23.606(a)(2) if that 

SD or MSP complies with the MiFID 

standards specified above, subject to 

compliance with the requirement that it 

produce information to Commission 

staff and the staff of an applicable U.S. 

prudential regulator in accordance with 

§ 23.606(a)(2). 

7. Clearing Member Risk Management 

(§ 23.609) 

Commission Requirement: 

Commission regulation 23.609 generally 

requires each SD or MSP that is a 

clearing member of a DCO to: 

• Establish risk-based limits based on 

position size, order size, margin 

requirements, or similar factors; 

• Screen orders for compliance with 

the risk-based limits; 

• Monitor for adherence to the riskbased limits intra-day and overnight; 

• Conduct stress tests under extreme 

but plausible conditions of all positions 

at least once per week; 


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45The current version of CRD will soon be 

replaced by CRD IV. CRD IV entered into force on 

June 28, 2013, and shall apply in most of its parts 

from January 1, 2014. The new reference is Article 

74 and there will be additional detailed technical 

rules specifying the arrangements, processes and 

mechanisms that must be adopted to fulfill this 

requirement. Article 88 of Directive 2013/36/EU 

specifies that ’’ the management body defines, 

oversees and is accountable for the implementation 

of the governance arrangements that ensure 

effective and prudent management of an 

institution.’’ Article 76 specifies tasks assigned to 

the management body as regards risk management. 

http://eur-lex.europa.eu/LexUriServ/LexUriServ

.do?uri=OJ:L:2013:176:0338:0436:EN:PDF. 

• Evaluate its ability to meet initial 

margin requirements at least once per 

week; 

• Evaluate its ability to meet variation 

margin requirements in cash at least 

once per week; 

• Evaluate its ability to liquidate 

positions it clears in an orderly manner, 

and estimate the cost of liquidation; and 

• Test all lines of credit at least once 

per year. 

Regulatory Objective: Through 

Commission regulation 23.609, the 

Commission seeks to ensure the 

financial integrity of the markets and 

the clearing system, to avoid systemic 

risk, and to protect customer funds. 

Effective risk management by SDs and 

MSPs that are clearing members is 

essential to achieving these objectives. 

A failure of risk management can cause 

a clearing member to become insolvent 

and default to a DCO. Such default can 

disrupt the markets and the clearing 

system and harm customers. 

Comparable EU Law and Regulations: 

The applicant has represented to the 

Commission that the following 

provisions of law and regulations 

applicable in the EU are in full force 

and effect in the EU, and comparable to 

and as comprehensive as Commission 

regulation 23.609. 

• Under MiFID Article 13(5) & MiFID 

L2D Article 5, investment firms must 

have effective procedures for risk 

assessment, effective control, and 

safeguard arrangements for information 

processing systems, sound 

administrative and accounting 

procedures, and internal control 

mechanisms. 

• Under MiFID L2D Article 6, 

investment firms must, subject to a 

proportionality principle dependent on 

the size and nature of a firm’s business, 

establish and maintain an independent 

risk management function that is 

responsible for the implementation of 

risk management policies and 

procedures and that provides reports 

and advice to senior management 

regarding risk management. 

• MiFID L2D Article 9: Senior 

management (which includes boards of 

directors) must take responsibility for 

firms’ compliance with regulatory 

obligations including risk management. 

• MiFID L2D Article 9: Senior 

management must receive on a frequent 

basis, and at least annually, written 

reports on risk management issues, 

including any appropriate action taken 

in the event of deficiencies; 

• MiFID L2D Article 7: Investment 

firms must identify the risks relating to 

the firms’ activities, processes and 

systems, and set the level of risk 

tolerated by the firm in appropriate 

instances; must adopt effective 

arrangements, processes, and 

mechanisms to manage the risks relating 

to the firm’s activities, processes and 

systems, in light of the established level 

of risk tolerance; must monitor the 

adequacy and effectiveness of its risk 

management policies and procedures, 

the level of compliance with 

arrangements, processes and 

mechanisms for risk management; and 

must monitor the adequacy and 

effectiveness of measures taken to 

address any deficiencies. The risk 

management strategy should address 

credit and counterparty risk; residual 

risk; market risk; interest rate risk; 

operational risk; liquidity risk; 

securitization risk; concentration risk; 

and risk of excessive leverage. 

• Directive 2002/87/EC Article 9: In 

the case of financial conglomerates, risk 

management processes must include 

approval and periodical review of the 

strategies and policies by governing 

bodies with respect to all the risks 

assumed; adequate capital adequacy 

policies to anticipate impacts on risk 

profiles and capital requirements; risk 

monitoring and controls at the level of 

the conglomerates. 

• ESMA Guidelines on compliance 

function requirements (ESMA/2012/

388) specify that the assessment of 

compliance risk should involve the 

compliance function, including in the 

case of new business lines or new 

financial products. Identified risks 

should be reviewed on a regular basis as 

well as ad-hoc when necessary to ensure 

that any emerging risks are taken into 

consideration. A monitoring program 

covering all areas of the investment 

firm’s activities should ensure that 

compliance risk is comprehensively 

monitored. Specific measures ensure the 

effectiveness, the permanence and the 

independence of the compliance 

function. 

• MiFID L2D Articles 21 to 23: 

Requirements on conflicts of interests 

include the obligation to adopt 

measures to ensure the appropriate level 

of independence to any person working 

in the firm. This includes measures 

preventing or controlling the exchange 

of information, separating the 

supervision of relevant persons, 

preventing or limiting the possibility for 

a person to exercise inappropriate 

influence over others. Furthermore, 

firms must ensure that performance of 

multiple functions does not prevent 

persons from acting soundly, honestly, 

and professionally. 

• MiFID Article 50: Supervisors can 

access documents for the discharge of 

their supervisory duties. 

• CRD Annex V: Credit institutions 

and investment firms must have in 

place risk management procedures that 

cover credit, operational, counterparty, 

market, concentration, securitization, 

liquidity and interest rate risk. 

• CRD Article 22: Credit institution’s 

conformity with regulation is the 

responsibility of the institution’s 

management body and is subject to 

ongoing supervisory review.45

Specifically, the applicants state that 

any SD or MSP subject to MiFID and 

CRD that is a clearing member of a CCP, 

including an eligible DCO, would be 

required under the foregoing EU law 

and regulations to: 

• Establish risk-based limits based on 

position size, order size, margin 

requirements, or similar factors; 

• Screen orders for compliance with 

the risk-based limits; 

• Monitor for adherence to the riskbased limits intra-day and overnight; 

• Conduct stress tests under extreme 

but plausible conditions of all positions 

at least once per week; 

• Evaluate its ability to meet initial 

margin requirements at least once per 

week; 

• Evaluate its ability to meet variation 

margin requirements in cash at least 

once per week; 

• Evaluate its ability to liquidate 

positions it clears in an orderly manner, 

and estimate the cost of liquidation; and 

• Test all lines of credit at least once 

per year. 

Commission Determination: The 

Commission finds that the MiFID, 

ESMA, and CRD standards specified 

above are generally identical in intent to 

§ 23.609 because such standards seek to 

ensure the financial integrity of the 

markets and the clearing system, to 

avoid systemic risk, and to protect 

customer funds. 

The Commission notes that the 

MiFID, ESMA, and CRD standards 

specified above are not as specific as 

§ 23.609 with respect to ensuring that 

SDs and MSPs that are clearing 

members of a DCO establish detailed 

procedures and limits for clearing 

member risk management purposes. 


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46See the Guidance for a discussion of the 

availability of substituted compliance with respect 

to swap data recordkeeping, 78 FR 45332–33. 

Nevertheless, the Commission finds that 

the general requirements under the 

MiFID, ESMA, and CRD standards 

specified above, implemented in the 

context of clearing member risk 

management and pursuant to the 

statements of the applicants, meet the 

Commission’s regulatory objective 

specified above. 

Based on the foregoing and the 

statements of the applicants above, the 

Commission hereby determines that the 

clearing member risk management 

requirements of the MiFID, ESMA, and 

CRD standards specified above are 

comparable to and as comprehensive as 

§ 23.609. 

C. Swap Data Recordkeeping (§§ 23.201 

and 23.203) 

Commission Requirement: Sections 

4s(f)(1)(B) and 4s(g)(1) of the CEA, and 

Commission regulation 23.201 generally 

require SDs and MSPs to retain records 

of each transaction, each position held, 

general business records (including 

records related to complaints and sales 

and marketing materials), records 

related to governance, financial records, 

records of data reported to SDRs, and 

records of real-time reporting data along 

with a record of the date and time the 

SD or MSP made such reports. 

Transaction records must be kept in a 

form and manner identifiable and 

searchable by transaction and 

counterparty. 

Commission regulation 23.203, 

requires SDs and MSPs to maintain 

records of a swap transaction until the 

termination, maturity, expiration, 

transfer, assignment, or novation date of 

the transaction, and for a period of five 

years after such date. Records must be 

‘‘readily accessible’’ for the first two 

years of the five year retention period 

(consistent with § 1.31). 

The Commission notes that the 

comparability determination below with 

respect to §§ 23.201 and 23.203 

encompasses both swap data 

recordkeeping generally and swap data 

recordkeeping relating to complaints 

and marketing and sales materials in 

accordance with § 23.201(b)(3) and 

(4).46

Regulatory Objective: Through the 

Commission’s regulations requiring SDs 

and MSPs to keep comprehensive 

records of their swap transactions and 

related data, the Commission seeks to 

ensure the effectiveness of the internal 

controls of SDs and MSPs, and 

transparency in the swaps market for 

regulators and market participants. 

The Commission’s regulations require 

SDs and MSPs to keep swap data in a 

level of detail sufficient to enable 

regulatory authorities to understand an 

SD’s or MSP’s swaps business and to 

assess its swaps exposure. 

By requiring comprehensive records 

of swap data, the Commission seeks to 

ensure that SDs and MSPs employ 

effective risk management, and strictly 

comply with Commission regulations. 

Further, such records facilitate effective 

regulatory oversight. 

The Commission observes that it 

would be impossible to meet the 

regulatory objective of §§ 23.201 and 

23.203 unless the required information 

is available to the Commission and any 

U.S. prudential regulator under the 

foreign legal regime. Thus, a 

comparability determination with 

respect to the information access 

provisions of § 23.203 would be 

premised on whether the relevant 

information would be available to the 

Commission and any U.S. prudential 

regulator of the SD or MSP, not on 

whether an SD or MSP must disclose 

comprehensive information to its 

regulator in its home jurisdiction. 

Comparable EU Law and Regulations: 

The applicant has represented to the 

Commission that the following 

provisions of law and regulations 

applicable in the EU are in full force 

and effect in the EU, and comparable to 

and as comprehensive as sections 

4s(f)(1)(B) and 4s(g)(1) of the CEA and 

§§ 23.201 and 23.203. 

• MiFID Article 13(6): Firms are 

required to maintain records of all 

services and transactions undertaken by 

the firm that are sufficient to enable 

regulatory authorities to monitor 

compliance with MiFID and to ascertain 

whether the firm has complied with all 

obligations with respect to clients or 

potential clients. 

• MiFID L2R Article 7: Firms are 

required to keep detailed records in 

relation to every client order and 

decision to deal, and every client order 

executed or transmitted. 

• MiFID L2D Article 51: All required 

records must be retained in a medium 

available for future reference by the 

regulator, and in a form/manner that: 

o Allows the regulator to access them 

readily and reconstitute each key stage 

of processing each transaction; 

o Allows corrections or other 

amendments, and the contents of the 

records prior to such corrections or 

amendments, to be easily ascertained; 

and 

o Ensures that records are not 

manipulated or altered. 

• MiFID Article 25(2): Firms must 

keep at the disposal of the regulator, for 

at least five years, the relevant data 

relating to all transactions in financial 

instruments which they have carried 

out, whether on their own account or on 

behalf of a client. 

• CESR (now ESMA) developed 

recommendations on the list of 

minimum records to be kept by firms in 

accordance with MiFID L2D and the 

point in time at which the record should 

be created. It includes marketing 

communications, client information, 

internal procedures, complaints records, 

complaints handling, etc. 

Commission Determination: The 

Commission finds that the MiFID and 

ESMA standards specified above are 

generally identical in intent to §§ 23.201 

and 23.203 because such standards seek 

to ensure the effectiveness of the 

internal controls of SDs and MSPs, and 

transparency in the swaps market for 

regulators and market participants. 

In addition, the Commission finds 

that the MiFID and ESMA standards 

specified above require SDs and MSPs 

to keep swap data in a level of detail 

sufficient to enable regulatory 

authorities to understand an SD’s or 

MSP’s swaps business and to assess its 

swaps exposure. 

Finally, the Commission finds that the 

MiFID and ESMA standards specified 

above, by requiring comprehensive 

records of swap data, seek to ensure that 

SDs and MSPs employ effective risk 

management, seek to ensure that SDs 

and MSPs strictly comply with 

applicable regulatory requirements 

(including the CEA and Commission 

regulations), and that such records 

facilitate effective regulatory oversight. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

requirements of MiFID and ESMA with 

respect to swap data recordkeeping, as 

specified above, are comparable to, and 

as comprehensive as, §§ 23.201 and 

23.203, with the exception of 

§ 23.203(b)(2) concerning the 

requirement that an SD or MSPs make 

records required by § 23.201 open to 

inspection by any representative of the 

Commission, the United States 

Department of Justice, or any applicable 

U.S. prudential regulator. The applicant 

has not submitted any provision of law 

or regulations applicable in the EU upon 

which the Commission could make a 

finding that SDs and MSPs would be 

required to make records required by 

§ 23.201 open to inspection by any 

representative of the Commission, the 

United States Department of Justice, or 

any applicable U.S. prudential 

regulator. 

Notwithstanding that the Commission 

has not determined that the 


tkelley on DSK3SPTVN1PROD with NOTICES
78936 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Notices 

1 Interpretive Guidance and Policy Statement 

Regarding Compliance with Certain Swap 

Regulations, 78 FR 45292 (Jul. 26, 2013). 

2http://www.cftc.gov/PressRoom/ 

SpeechesTestimony/omaliastatement071213b. 

3CEA section 2(j); 7 U.S.C. 2(j). 

4Title VII of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act, Public Law 111–203, 

124 Stat. 1376 (2010). 

5http://www.cftc.gov/PressRoom/PressReleases/ 

pr6678-13. 

6http://www.cftc.gov/ucm/groups/public/ 

@newsroom/documents/file/odrgreport.pdf. The 

ODRG agreed to six understandings. Understanding 

number 2 states that ‘‘[a] flexible, outcomes-based 

approach should form the basis of final assessments 

regarding equivalence or substituted compliance.’’ 

7The Commission made a positive comparability 

determination for Commission regulations 

23.504(a)(2), (b)(1), (b)(2), (b)(3), (b)(4), (c), and (d), 

but not for Commission regulations 23.504(b)(5) and 

(b)(6). 

requirements of MiFID and ESMA are 

comparable to and as comprehensive as 

§ 23.203(b)(2), any SD or MSP to which 

both § 23.203 and the MiFID and ESMA 

standards specified above are applicable 

would generally be deemed to be in 

compliance with § 23.203(b)(2) if that 

SD or MSP complies with the MiFID 

and ESMA standards specified above, 

subject to compliance with the 

requirement that it make records 

required by § 23.201 open to inspection 

by any representative of the 

Commission, the United States 

Department of Justice, or any applicable 

U.S. prudential regulator in accordance 

with § 23.203(b)(2). 

Issued in Washington, DC on December 20, 

2013, by the Commission. 

Christopher J. Kirkpatrick, 

Deputy Secretary of the Commission. 

Appendices to Comparability 

Determination for the European Union: 

Certain Entity-Level Requirements 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Chilton and Wetjen voted in 

the affirmative. Commissioner O’Malia voted 

in the negative. 

Appendix 2—Joint Statement of 

Chairman Gary Gensler and 

Commissioners Bart Chilton and Mark 

Wetjen 

We support the Commission’s approval of 

broad comparability determinations that will 

be used for substituted compliance purposes. 

For each of the six jurisdictions that has 

registered swap dealers, we carefully 

reviewed each regulatory provision of the 

foreign jurisdictions submitted to us and 

compared the provision’s intended outcome 

to the Commission’s own regulatory 

objectives. The resulting comparability 

determinations for entity-level requirements 

permit non-U.S. swap dealers to comply with 

regulations in their home jurisdiction as a 

substitute for compliance with the relevant 

Commission regulations. 

These determinations reflect the 

Commission’s commitment to coordinating 

our efforts to bring transparency to the swaps 

market and reduce its risks to the public. The 

comparability findings for the entity-level 

requirements are a testament to the 

comparability of these regulatory systems as 

we work together in building a strong 

international regulatory framework. 

In addition, we are pleased that the 

Commission was able to find comparability 

with respect to swap-specific transactionlevel requirements in the European Union 

and Japan. 

The Commission attained this benchmark 

by working cooperatively with authorities in 

Australia, Canada, the European Union, Hong 

Kong, Japan, and Switzerland to reach 

mutual agreement. The Commission looks 

forward to continuing to collaborate with 

both foreign authorities and market 

participants to build on this progress in the 

months and years ahead. 

Appendix 3—Statement of Dissent by 

Commissioner Scott D. O’Malia 

I respectfully dissent from the Commodity 

Futures Trading Commission’s 

(‘‘Commission’’) approval of the Notices of 

Comparability Determinations for Certain 

Requirements under the laws of Australia, 

Canada, the European Union, Hong Kong, 

Japan, and Switzerland (collectively, 

‘‘Notices’’). While I support the narrow 

comparability determinations that the 

Commission has made, moving forward, the 

Commission must collaborate with foreign 

regulators to harmonize our respective 

regimes consistent with the G–20 reforms. 

However, I cannot support the Notices 

because they: (1) Are based on the legally 

unsound cross-border guidance 

(‘‘Guidance’’); 1 (2) are the result of a flawed 

substituted compliance process; and (3) fail 

to provide a clear path moving forward. If the 

Commission’s objective for substituted 

compliance is to develop a narrow rule-byrule approach that leaves unanswered major 

regulatory gaps between our regulatory 

framework and foreign jurisdictions, then I 

believe that the Commission has successfully 

achieved its goal today. 

Determinations Based on Legally Unsound 

Guidance 

As I previously stated in my dissent, the 

Guidance fails to articulate a valid statutory 

foundation for its overbroad scope and 

inconsistently applies the statute to different 

activities.2 Section 2(i) of the Commodity 

Exchange Act (‘‘CEA’’) states that the 

Commission does not have jurisdiction over 

foreign activities unless ‘‘those activities 

have a direct and significant connection with 

activities in, or effect on, commerce of the 

United States * * *’’ 3 However, the 

Commission never properly articulated how 

and when this limiting standard on the 

Commission’s extraterritorial reach is met, 

which would trigger the application of Title 

VII of the Dodd-Frank Act 4 and any 

Commission regulations promulgated 

thereunder to swap activities that are outside 

of the United States. Given this statutorily 

unsound interpretation of the Commission’s 

extraterritorial authority, the Commission 

often applies CEA section 2(i) inconsistently 

and arbitrarily to foreign activities. 

Accordingly, because the Commission is 

relying on the legally deficient Guidance to 

make its substituted compliance 

determinations, and for the reasons discussed 

below, I cannot support the Notices. The 

Commission should have collaborated with 

foreign regulators to agree on and implement 

a workable regime of substituted compliance, 

and then should have made determinations 

pursuant to that regime. 

Flawed Substituted Compliance Process 

Substituted compliance should not be a 

case of picking a set of foreign rules identical 

to our rules, determining them to be 

‘‘comparable,’’ but then making no 

determination regarding rules that require 

extensive gap analysis to assess to what 

extent each jurisdiction is, or is not, 

comparable based on overall outcomes of the 

regulatory regimes. While I support the 

narrow comparability determinations that the 

Commission has made, I am concerned that 

in a rush to provide some relief, the 

Commission has made substituted 

compliance determinations that only afford 

narrow relief and fail to address major 

regulatory gaps between our domestic 

regulatory framework and foreign 

jurisdictions. I will address a few examples 

below. 

First, earlier this year, the OTC Derivatives 

Regulators Group (‘‘ODRG’’) agreed to a 

number of substantive understandings to 

improve the cross-border implementation of 

over-the-counter derivatives reforms.5 The 

ODRG specifically agreed that a flexible, 

outcomes-based approach, based on a broad 

category-by-category basis, should form the 

basis of comparability determinations.6

However, instead of following this 

approach, the Commission has made its 

comparability determinations on a rule-byrule basis. For example, in Japan’s 

Comparability Determination for 

Transaction-Level Requirements, the 

Commission has made a positive 

comparability determination for some of the 

detailed requirements under the swap trading 

relationship documentation provisions, but 

not for other requirements.7 This detailed 

approach clearly contravenes the ODRG’s 

understanding. 

Second, in several areas, the Commission 

has declined to consider a request for a 

comparability determination, and has also 

failed to provide an analysis regarding the 

extent to which the other jurisdiction is, or 

is not, comparable. For example, the 

Commission has declined to address or 

provide any clarity regarding the European 

Union’s regulatory data reporting 

determination, even though the European 

Union’s reporting regime is set to begin on 

February 12, 2014. Although the Commission 

has provided some limited relief with respect 

to regulatory data reporting, the lack of 

clarity creates unnecessary uncertainty, 

especially when the European Union’s 

reporting regime is set to begin in less than 

two months. 

Similarly, Japan receives no consideration 

for its mandatory clearing requirement, even 

though the Commission considers Japan’s 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Notices 78937 

8 Yen-denominated interest rate swaps are subject 

to the mandatory clearing requirement in both the 

U.S. and Japan. 9Exemptive Order Regarding Compliance With 

Certain Swap Regulations, 78 FR 43785 (Jul. 22, 

2013). 10http://www.cftc.gov/PressRoom/ 

SpeechesTestimony/opaomalia-29. 

11http://www.cftc.gov/PressRoom/ 

SpeechesTestimony/omaliastatement071213b. 

legal framework to be comparable to the U.S. 

framework. While the Commission has 

declined to provide even a partial 

comparability determination, at least in this 

instance the Commission has provided a 

reason: the differences in the scope of entities 

and products subject to the clearing 

requirement.8 Such treatment creates 

uncertainty and is contrary to increased 

global harmonization efforts. 

Third, in the Commission’s rush to meet 

the artificial deadline of December 21, 2013, 

as established in the Exemptive Order 

Regarding Compliance with Certain Swap 

Regulations (‘‘Exemptive Order’’),9 the 

Commission failed to complete an important 

piece of the cross-border regime, namely, 

supervisory memoranda of understanding 

(‘‘MOUs’’) between the Commission and 

fellow regulators. 

I have previously stated that these MOUs, 

if done right, can be a key part of the global 

harmonization effort because they provide 

mutually agreed-upon solutions for 

differences in regulatory regimes.10

Accordingly, I stated that the Commission 

should be able to review MOUs alongside the 

respective comparability determinations and 

vote on them at the same time. Without these 

MOUs, our fellow regulators are left 

wondering whether and how any differences, 

such as direct access to books and records, 

will be resolved. 

Finally, as I have consistently maintained, 

the substituted compliance process should 

allow other regulatory bodies to engage with 

the full Commission.11 While I am pleased 

that the Notices are being voted on by the 

Commission, the full Commission only 

gained access to the comment letters from 

foreign regulators on the Commission’s 

comparability determination draft proposals 

a few days ago. This is hardly a transparent 

process. 

Unclear Path Forward 

Looking forward to next steps, the 

Commission must provide answers to several 

outstanding questions regarding these 

comparability determinations. In doing so, 

the Commission must collaborate with 

foreign regulators to increase global 

harmonization. 

First, there is uncertainty surrounding the 

timing and outcome of the MOUs. Critical 

questions regarding information sharing, 

cooperation, supervision, and enforcement 

will remain unanswered until the 

Commission and our fellow regulators 

execute these MOUs. 

Second, the Commission has issued timelimited no-action relief for the swap data 

repository reporting requirements. These 

comparability determinations will be done as 

separate notices. However, the timing and 

process for these determinations remain 

uncertain. 

Third, the Commission has failed to 

provide clarity on the process for addressing 

the comparability determinations that it 

declined to undertake at this time. The 

Notices only state that the Commission may 

address these requests in a separate notice at 

a later date given further developments in the 

law and regulations of other jurisdictions. To 

promote certainty in the financial markets, 

the Commission must provide a clear path 

forward for market participants and foreign 

regulators. 

The following steps would be a better 

approach: (1) The Commission should extend 

the Exemptive Order to allow foreign 

regulators to further implement their 

regulatory regimes and coordinate with them 

to implement a harmonized substituted 

compliance process; (2) the Commission 

should implement a flexible, outcomes-based 

approach to the substituted compliance 

process and apply it similarly to all 

jurisdictions; and (3) the Commission should 

work closely with our fellow regulators to 

expeditiously implement MOUs that resolve 

regulatory differences and address regulatory 

oversight issues. 

Conclusion 

While I support the narrow comparability 

determinations that the Commission has 

made, it was my hope that the Commission 

would work with foreign regulators to 

implement a substituted compliance process 

that would increase the global harmonization 

effort. I am disappointed that the 

Commission has failed to implement such a 

process. 

I do believe that in the longer term, the 

swaps regulations of the major jurisdictions 

will converge. At this time, however, the 

Commission’s comparability determinations 

have done little to alleviate the burden of 

regulatory uncertainty and duplicative 

compliance with both U.S. and foreign 

regulations. 

The G–20 process delineated and put in 

place the swaps market reforms in G–20 

member nations. It is then no surprise that 

the Commission must learn to coordinate 

with foreign regulators to minimize 

confusion and disruption in bringing much 

needed clarity to the swaps market. For all 

these shortcomings, I respectfully dissent 

from the Commission’s approval of the 

Notices. 

[FR Doc. 2013–30980 Filed 12–26–13; 8:45 am] 

BILLING CODE 6351–01–P 

CORPORATION FOR NATIONAL AND 

COMMUNITY SERVICE 

Proposed Information Collection; 

Comment Request 

AGENCY: Corporation for National and 

Community Service. 

ACTION: Notice. 

SUMMARY: The Corporation for National 

and Community Service (CNCS), as part 

of its continuing effort to reduce 

paperwork and respondent burden, 

conducts a pre-clearance consultation 

program to provide the general public 

and federal agencies with an 

opportunity to comment on proposed 

and/or continuing collections of 

information in accordance with the 

Paperwork Reduction Act of 1995 

(PRA95) (44 U.S.C. Sec. 3506(c)(2)(A)). 

This program helps to ensure that 

requested data can be provided in the 

desired format, reporting burden (time 

and financial resources) is minimized, 

collection instruments are clearly 

understood, and the impact of collection 

requirement on respondents can be 

properly assessed. 

Currently, CNCS is soliciting 

comments concerning its new 

AmeriCorps VISTA Sponsor 

Recruitment Practices Survey. 

AmeriCorps VISTA sponsor 

organizations will provide information 

about their approach to VISTA member 

recruitment in order for CNCS to design 

recruitment strategies and materials for 

the VISTA program. Completion of this 

information collection is not required to 

be considered for or to obtain grant 

funding support. 

Copies of the information collection 

request can be obtained by contacting 

the office listed in the Addresses section 

of this notice. 

DATES: Written comments must be 

submitted to the individual and office 

listed in the ADDRESSES section by 

February 25, 2014. 

ADDRESSES: You may submit comments, 

identified by the title of the information 

collection activity, by any of the 

following methods: 

(1) By mail sent to: Corporation for 

National and Community Service, 

AmeriCorps VISTA; Elizabeth 

Matthews, Outreach Specialist, 9110B; 

1201 New York Avenue NW., 

Washington, DC 20525. 

(2) By hand delivery or by courier to 

the CNCS mailroom at Room 8100 at the 

mail address given in paragraph (1) 

above, between 9:00 a.m. and 4:00 p.m. 

Eastern Time, Monday through Friday, 

except Federal holidays. 

(3) Electronically through 

www.regulations.gov. 

Individuals who use a 

telecommunications device for the deaf 

(TTY–TDD) may call 1–800–833–3722 

between 8:00 a.m. and 8:00 p.m. Eastern 

Time, Monday through Friday. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Matthews, (202–606–6774) or 

by email at ematthews@cns.gov. 

SUPPLEMENTARY INFORMATION: CNCS is 

particularly interested in comments 

that: 

• Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 


tkelley on DSK3SPTVN1PROD with NOTICES