Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Proposed Rules 39923 

1 17 CFR 145.9. Commission regulations referred 

to herein are found at 17 CFR chapter I (2018), and 

are accessible on the Commission’s website at 

https://www.cftc.gov/LawRegulation/Commodity

ExchangeAct/index.htm. 

2See Remarks of Acting Chairman J. Christopher 

Giancarlo before the 42nd Annual International 

Futures Industry Conference in Boca Raton, FL, 

Mar. 15, 2017, available at https://www.cftc.gov/ 

PressRoom/SpeechesTestimony/opagiancarlo-20. 

On February 24, 2017, President Donald J. Trump 

issued Executive Order 13777: Enforcing the 

Regulatory Reform Agenda (E.O. 13777). E.O. 13777 

directs federal agencies, among other things, to 

designate a Regulatory Reform Officer and establish 

a Regulatory Reform Task Force. Although the 

CFTC, as an independent federal agency, is not 

bound by E.O. 13777, the Commission is 

nevertheless engaging in an agency-wide review of 

its rules, regulations, and practices to make them 

simpler, less burdensome, and less costly. See 

Request for Information, 82 FR 23756 (May 24, 

2017). 

3 7 U.S.C. 1 et seq. 

4The term ‘‘derivatives clearing organization’’ is 

statutorily defined to mean a clearing organization 

in general. However, for purposes of the discussion 

herein, the term ‘‘DCO’’ refers to a CommissionContinued 

these alternative controls on specific 

types of spraying or fogging systems 

(including ‘‘parts,’’ ‘‘components,’’ 

‘‘accessories,’’ and ‘‘attachments’’ 

therefor) that are currently being 

manufactured and/or sold or that are 

likely to be manufactured and/or sold in 

the foreseeable future. Comments on 

option #4 (where the ECCN 2B352.i 

control text would include the term 

‘‘specially designed’’) should not only 

address this option with reference to the 

four criteria described above, but also 

identify any performance levels, 

characteristics, or functions that clearly 

distinguish commercial spraying or 

fogging systems from those systems 

having properties that are peculiarly 

responsible for achieving the 

dissemination or dispersion of 

chemicals controlled by ECCN 1C350 or 

1C355 or biological agents controlled by 

ECCN 1C351 in a manner likely to cause 

significant harm to humans or livestock 

or serious damage to crops. 

Dated: August 6, 2018. 

Richard E. Ashooh, 

Assistant Secretary for Export 

Administration. 

[FR Doc. 2018–17249 Filed 8–10–18; 8:45 am] 

BILLING CODE 3510–33–P 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Parts 39 and 140 

RIN 3038–AE65 

Exemption From Derivatives Clearing 

Organization Registration 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Commodity Futures 

Trading Commission (Commission) is 

proposing amendments to its 

regulations to establish a regulatory 

framework within which the 

Commission may exempt a clearing 

organization that is organized outside of 

the United States (hereinafter referred to 

as ‘‘non-U.S. clearing organization’’) 

from registration as a derivatives 

clearing organization (DCO) in 

connection with the clearing 

organization’s clearing of swaps. In 

addition, the Commission is proposing 

certain amendments to its delegation 

provisions in its regulations. 

DATES: Comments must be received on 

or before October 12, 2018. 

ADDRESSES: You may submit comments, 

identified by ‘‘Exemption from 

Derivatives Clearing Organization 

Registration’’ and RIN number 3038– 

AE65, by any of the following methods: 

• CFTC Comments Portal: https://

comments.cftc.gov. Select the ‘‘Submit 

Comments’’ link for this rulemaking and 

follow the instructions on the Public 

Comment Form. 

• Mail: Send to Christopher 

Kirkpatrick, Secretary of the 

Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW, 

Washington, DC 20581. 

• Hand Delivery/Courier: Follow the 

same instructions as for Mail, above. 

Please submit your comments using 

only one of these methods. To avoid 

possible delays with mail or in-person 

deliveries, submissions through the 

CFTC Comments Portal are encouraged. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to https://

comments.cftc.gov. You should submit 

only information that you wish to make 

available publicly. If you wish the 

Commission to consider information 

that you believe is exempt from 

disclosure under the Freedom of 

Information Act (FOIA), a petition for 

confidential treatment of the exempt 

information may be submitted according 

to the procedures established in § 145.9 

of the Commission’s regulations.1

The Commission reserves the right, 

but shall have no obligation, to review, 

pre-screen, filter, redact, refuse or 

remove any or all of your submission 

from https://comments.cftc.gov that it 

may deem to be inappropriate for 

publication, such as obscene language. 

All submissions that have been redacted 

or removed that contain comments on 

the merits of the rulemaking will be 

retained in the public comment file and 

will be considered as required under the 

Administrative Procedure Act and other 

applicable laws, and may be accessible 

under the FOIA. 

FOR FURTHER INFORMATION CONTACT: 

Eileen A. Donovan, Deputy Director, 

202–418–5096, edonovan@cftc.gov; 

Parisa Abadi, Associate Director, 202– 

418–6620, pabadi@cftc.gov; Eileen R. 

Chotiner, Senior Compliance Analyst, 

202–418–5467, echotiner@cftc.gov; 

Abigail S. Knauff, Special Counsel, 202– 

418–5123, aknauff@cftc.gov; Division of 

Clearing and Risk, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW, 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Background 

A. Project KISS 

B. Statutory and Regulatory Framework for 

Swaps Execution and Clearing 

C. Statutory and Regulatory Requirements 

for Registration and Operation of DCOs 

II. Proposed Amendments to Part 39 

A. Regulation 39.1—Scope 

B. Regulation 39.2—Definitions 

C. Regulation 39.6—Exemption Provisions 

D. Regulation 39.9—Scope 

III. Proposed Amendments to Part 140— 

Delegations of Authority 

IV. Request for Comments 

V. Consideration of Costs and Benefits 

A. Introduction 

B. Proposed Regulation 39.6 

C. Section 15(a) Factors 

VI. Related Matters 

A. Regulatory Flexibility Act 

B. Paperwork Reduction Act 

I. Background 

A. Project KISS 

The Commission is engaging in an 

agency-wide review of its rules, 

regulations, and practices to make them 

simpler, less burdensome, and less 

costly, and to make progress on G–20 

regulatory reforms. This initiative is 

called Project KISS, which stands for 

‘‘Keep It Simple, Stupid.’’ 2 The 

Commission is proposing to adopt 

regulations that would codify the 

policies and procedures that the 

Commission is currently following with 

respect to granting exemptions from 

DCO registration in order to make such 

policies and procedures transparent to 

all potential applicants. 

B. Statutory and Regulatory Framework 

for Swaps Execution and Clearing 

The Commodity Exchange Act (CEA) 3

provides that a clearing organization 

may not ‘‘perform the functions of a 

[DCO]’’ 4 with respect to swaps unless 


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39924 Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Proposed Rules 

registered DCO, the term ‘‘exempt DCO’’ refers to 

a derivatives clearing organization that is exempt 

from registration, and the term ‘‘clearing 

organization’’ refers to a clearing organization that: 

(a) Is neither registered nor exempt from registration 

with the Commission as a DCO; and (b) falls within 

the definition of ‘‘derivatives clearing organization’’ 

under section 1a(15) of the CEA, 7 U.S.C. 1a(15), 

and ‘‘clearing organization or derivatives clearing 

organization’’ under Regulation 1.3, 17 CFR 1.3. 

5Section 5b(a) of the CEA, 7 U.S.C. 7a–1(a). 

6Section 5b(h) of the CEA, 7 U.S.C. 7a–1(h). 

Section 5b(h) also permits the Commission to 

exempt from DCO registration a securities clearing 

agency registered with the Securities and Exchange 

Commission; however, the Commission is not 

proposing to exempt securities clearing agencies at 

this time. 

7 7 U.S.C. 7a–1(c)(2)(A). 

8See 17 CFR parts 1—190 including, in 

particular, part 39, which implements the DCO Core 

Principles. 

9See CPMI–IOSCO, Principles for financial 

market infrastructures (Apr. 2012), available at 

http://www.iosco.org/library/pubdocs/pdf/ 

IOSCOPD377-PFMI.pdf. The PFMIs define a 

‘‘financial market infrastructure’’ as a ‘‘multilateral 

system among participating institutions, including 

the operator of the system, used for the purposes 

of clearing, settling, or recording payments, 

securities, derivatives, or other financial 

transactions.’’ See PFMIs, paragraph 1.8. 

Additionally, the PFMIs are ‘‘broadly designed to 

apply to all systemically important [financial 

market infrastructures].’’ See PFMIs, paragraph 

1.20. 

10This conclusion is consistent with previous 

Commission determinations. See, e.g., Regulation 

50.52(b)(4)(i)(E), 17 CFR 50.52(b)(4)(i)(E) 

(permitting eligible affiliate counterparties that are 

located in certain jurisdictions to satisfy a condition 

to electing the exemption by clearing the swap 

through a DCO or a clearing organization that is 

subject to supervision by appropriate government 

authorities in the clearing organization’s home 

country and that has been assessed to be in 

compliance with the PFMIs). 

11CPMI was formerly the Committee on Payment 

and Settlement Systems; it was renamed effective 

September 1, 2014. See http://www.bis.org/press/ 

p140901.htm. 

12 In order to promote effective and consistent 

global regulation of swaps, section 752 of the DoddFrank Wall Street Reform and Consumer Protection 

Act (Dodd-Frank Act) directs the Commission to 

consult and coordinate with foreign regulatory 

authorities on the establishment of consistent 

international standards with respect to the 

regulation of swaps, among other things. Section 

752 of the Dodd-Frank Act, Public Law 111–203, 

124 Stat. 1376 (2010), codified at 15 U.S.C. 8325. 

13See, e.g., Derivatives Clearing Organizations 

and International Standards, 78 FR 72476 (Dec. 2, 

2013) (adopting final rules). 

the clearing organization is registered 

with the Commission.5 However, the 

CEA also permits the Commission to 

conditionally or unconditionally 

exempt a clearing organization from 

registration for the clearing of swaps if 

the Commission determines that the 

clearing organization is subject to 

‘‘comparable, comprehensive 

supervision and regulation’’ by 

appropriate government authorities in 

the clearing organization’s home 

country.6

To date, the Commission has 

exempted four non-U.S. clearing 

organizations from DCO registration. 

The Commission is proposing to adopt 

regulations that would codify the 

policies and procedures that the 

Commission is currently following with 

respect to granting exemptions from 

DCO registration and would make such 

policies and procedures transparent to 

all potential applicants. 

C. Statutory and Regulatory 

Requirements for Registration and 

Operation of DCOs 

As previously noted, the CEA requires 

a clearing organization that clears swaps 

to be registered with the Commission as 

a DCO. However, in order to be 

registered and maintain registration as a 

DCO, a clearing organization must 

comply with the core principles for 

DCOs set forth in the CEA (DCO Core 

Principles) 7 and all applicable 

Commission regulations.8

The Commission may conditionally or 

unconditionally exempt a clearing 

organization from registration for the 

clearing of swaps if the Commission 

determines that the clearing 

organization is subject to ‘‘comparable, 

comprehensive supervision and 

regulation’’ by the clearing 

organization’s home country 

regulator(s). The Commission has 

construed ‘‘comparable, comprehensive 

supervision and regulation’’ to mean 

that the home country’s supervisory and 

regulatory framework should be 

consistent with, and achieve the same 

outcome as, the statutory and regulatory 

requirements applicable to registered 

DCOs. This outcomes-based approach 

reflects the Commission’s recognition 

that a foreign jurisdiction’s supervisory 

and regulatory scheme applicable to its 

clearing organizations may differ from 

the Commission’s in certain respects, 

but nevertheless may achieve the same 

underlying goals. This approach also 

supports the Commission’s effort to 

strike an appropriate balance by 

focusing on the risk implications to the 

United States, while promoting global 

harmonization. 

Further, the Commission has deemed 

a supervisory and regulatory framework 

that conforms to the Principles for 

Financial Market Infrastructures 

(PFMIs) 9 to be comparable to, and as 

comprehensive as, the supervisory and 

regulatory requirements applicable to 

registered DCOs.10 Notably, the 

Commission was a key contributor to 

the joint efforts of the Committee on 

Payments and Market Infrastructures 

(CPMI) 11 and the Technical Committee 

of the International Organization of 

Securities Commissions (IOSCO) to 

develop the PFMIs, which apply to 

clearing organizations.12 In addition to 

contributing to the development of the 

PFMIs, the Commission serves as a 

member of the CPMI–IOSCO task force 

that monitors implementation of the 

PFMIs. The PFMIs are comparable to the 

DCO Core Principles and applicable 

Commission regulations in purpose and 

scope. Both address major elements 

critical to the safe and efficient 

operations of clearing organizations, 

such as risk management, adequacy of 

financial resources, default 

management, margin, settlement, and 

participation requirements.13 In light of 

the foregoing, the Commission believes 

that a supervisory and regulatory 

framework that adheres to the 

framework under the PFMIs achieves 

outcomes that are comparable to that of 

the supervisory and regulatory 

requirements applicable to registered 

DCOs. Accordingly, the Commission 

proposes to continue to use the PFMI 

framework as the benchmark for making 

a comparability determination with 

respect to a foreign jurisdiction’s 

supervisory and regulatory scheme. 

II. Proposed Amendments to Part 39 

A. Regulation 39.1—Scope 

The Commission is proposing to 

amend Regulation 39.1 to state that the 

provisions of subpart A of part 39 apply 

to any registered DCO or, as applicable, 

any entity applying to be registered as 

a DCO or applying to be exempt from 

DCO registration. Regulation 39.3, 

which is contained in subpart A and is 

not proposed to be amended, sets forth 

procedures for DCO registration. 

Proposed Regulation 39.6, which also 

would be contained in subpart A, would 

set forth the requirements for an 

exemption from DCO registration, as 

discussed below. 

B. Regulation 39.2—Definitions 

In connection with the proposed 

exemption regulations, the Commission 

is proposing to add five definitions to 

Regulation 39.2, for purposes of part 39 

only. 

The Commission proposes to define 

the term ‘‘exempt derivatives clearing 

organization’’ to mean a derivatives 

clearing organization that the 

Commission has exempted from 

registration under section 5b(a) of the 

CEA, pursuant to section 5b(h) of the 

CEA and Regulation 39.6. 

The Commission proposes to define 

the term ‘‘good regulatory standing’’ to 

mean, with respect to a non-U.S. 

clearing organization that is authorized 

to act as a clearing organization in its 

home country, that either there has been 

no finding by the home country 


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14The Commission proposes to include this 

language to recognize that CPMI–IOSCO could offer 

further interpretation of or guidance on the PFMIs. 

See, e.g., CPMI–IOSCO, Resilience of central 

counterparties: Further guidance on the PFMI (July 

2017), available at https://www.bis.org/cpmi/publ/ 

d163.pdf. 

15See, e.g., CFTC Letter No. 16–56 (May 31, 2016) 

(granting no-action relief to Shanghai Clearing 

House); CFTC Letter No. 14–107 (Aug. 18, 2014) 

(granting no-action relief to Clearing Corporation of 

India Ltd.); CFTC Letter No. 14–87 (June 26, 2014) 

(granting no-action relief to Korea Exchange, Inc.); 

CFTC Letter No. 14–68 (May 7, 2014) (granting noaction relief to OTC Clearing Hong Kong Limited 

and certain of its clearing members); CFTC Letter 

No. 14–07 (Feb. 6, 2014) (granting no-action relief 

to ASX Clear (Futures) Pty Limited); and CFTC 

Letter No. 12–56 (Dec. 17, 2012) (granting no-action 

relief to Japan Securities Clearing Corporation and 

certain of its clearing participants). 

16See ASX Amended Order of Exemption from 

Registration (Jan. 28, 2016), available at http://

www.cftc.gov/idc/groups/public/@otherif/ 

documents/ifdocs/ 

asxclearamdorderdcoexemption.pdf; KRX Order of 

Exemption from Registration (Oct. 26, 2015), 

available at http://www.cftc.gov/idc/groups/public/ 

@otherif/documents/ifdocs/krxdcoexemptorder10- 

26-15.pdf; JSCC Order of Exemption from 

Registration (Oct. 26, 2015), available at http://

www.cftc.gov/idc/groups/public/@otherif/ 

documents/ifdocs/jsccdcoexemptorder10-26-15.pdf; 

OTC Clear Order of Exemption from Registration 

(Dec. 21, 2015), available at http://www.cftc.gov/ 

idc/groups/public/@otherif/documents/ifdocs/ 

otccleardcoexemptorder12-21-15.pdf. 

17The Commission proposes to use the definition 

of ‘‘U.S. person’’ as set forth in the Commission’s 

Interpretive Guidance and Policy Statement 

Regarding Compliance With Certain Swap 

Regulations, 78 FR 45292, 45316–45317 (July 26, 

2013), as such definition may be amended or 

superseded by a definition of the term ‘‘U.S. 

person’’ that is adopted by the Commission and 

applicable to this proposed regulation. 

18The eligibility requirements listed in proposed 

Regulation 39.6(a)(1) and (a)(2) and the conditions 

set forth in proposed Regulation 39.6(b) would be 

pre-conditions to the Commission’s issuance of any 

order exempting a clearing organization from the 

DCO registration requirements of the CEA and 

Commission regulations. Additional conditions that 

are unique to the facts and circumstances specific 

to a particular clearing organization could be 

imposed upon that clearing organization in the 

Commission’s order of exemption, as permitted by 

section 5b(h) of the CEA. 

19The Commission notes that the regulatory 

framework of a particular jurisdiction may consist 

of one or multiple sources of authority. In 

particular, the inclusion of ‘‘policies’’ is intended 

to accommodate a jurisdiction in which a policy 

has the force of law, and a set of policies may, on 

its own, represent the jurisdiction’s regulatory 

framework that is consistent with the PFMIs. 

regulator of material non-observance of 

the PFMIs or other relevant home 

country legal requirements, or there has 

been such a finding by the home 

country regulator, but it has been or is 

being resolved to the satisfaction of the 

home country regulator by means of 

corrective action taken by the clearing 

organization. The Commission believes 

that this is a workable definition from 

the standpoint of both the Commission 

and the home country regulator in that 

it establishes a basis for providing the 

Commission with a high degree of 

assurance as to the clearing 

organization’s observance of the PFMIs, 

while only seeking from the home 

country regulator a representation that it 

can reasonably make. 

The Commission proposes to define 

the term ‘‘home country’’ to mean, with 

respect to a non-U.S. clearing 

organization, the jurisdiction in which 

the clearing organization is organized. 

The Commission proposes to define 

the term ‘‘home country regulator,’’ with 

respect to a non-U.S. clearing 

organization, as an appropriate 

government authority which licenses, 

regulates, supervises, or oversees the 

clearing organization’s clearing 

activities in the home country. The 

proposed definition is consistent with 

section 5b(h) of the CEA, which 

provides, in relevant part, that the 

Commission may exempt a clearing 

organization from registration for the 

clearing of swaps if the Commission 

determines that the clearing 

organization is subject to comparable, 

comprehensive supervision and 

regulation by the appropriate 

government authorities in the home 

country of the clearing organization. Use 

of the term ‘‘an appropriate government 

authority’’ rather than ‘‘the appropriate 

government authority’’ is intended to 

recognize that in some foreign 

jurisdictions there may be more than 

one government authority that 

supervises and regulates a clearing 

organization. 

The Commission proposes to define 

the term ‘‘Principles for Financial 

Market Infrastructures’’ as the PFMIs 

published by CPMI–IOSCO in April 

2012, as updated, revised, or otherwise 

amended.14

C. Regulation 39.6—Exemption 

Provisions 

Proposed Regulation 39.6 would 

implement section 5b(h) of the CEA by 

setting forth the regulatory framework 

within which the Commission may 

exempt a clearing organization from 

DCO registration in connection with the 

clearing of swaps. After section 5b(h) 

was enacted in 2010, clearing 

organizations outside the United States 

began inquiring as to how they could go 

about obtaining an exemption. Because 

the Commission had not yet developed 

a framework for granting exemptions, 

the Commission’s Division of Clearing 

and Risk (DCR) began granting timelimited no-action relief to these clearing 

organizations which permit them to 

engage in swap clearing activity that 

would otherwise require registration as 

a DCO.15 After careful consideration of 

the issues involved, DCR staff presented 

initial thoughts on granting exemptions 

at a May 2014 meeting of the 

Commission’s Global Markets Advisory 

Committee. Finally, in November 2014, 

DCR sent a letter to those clearing 

organizations that had received noaction relief, advising them on how to 

petition the Commission for an 

exemption. In response to petitions 

submitted in accordance with the terms 

of the letter, the Commission issued 

orders of exemption from DCO 

registration to ASX Clear (Futures) Pty 

Limited (ASX), Korea Exchange, Inc. 

(KRX), Japan Securities Clearing 

Corporation (JSCC), and OTC Clearing 

Hong Kong Limited (OTC Clear).16

Proposed Regulation 39.6 would codify 

the policies and procedures that the 

Commission is currently following with 

respect to granting exemptions from 

DCO registration and would make such 

policies and procedures transparent to 

all potential applicants for an 

exemption. 

1. Eligibility for Exemption 

Proposed Regulation 39.6(a) would 

provide that the Commission may 

exempt, conditionally or 

unconditionally, a non-U.S. clearing 

organization from registration as a DCO 

for the clearing of swaps for certain U.S. 

persons,17 and thereby exempt such 

clearing organization from compliance 

with the provisions of the CEA and 

Commission regulations applicable to 

DCOs, if the Commission determines 

that all of the eligibility requirements 

listed in proposed Regulation 39.6(a)(1) 

and (a)(2) are met, and the clearing 

organization satisfies the conditions set 

forth in Regulation 39.6(b).18 Each of 

these requirements is described below. 

Proposed Regulation 39.6(a)(1) would 

codify the statutory requirement that the 

Commission may only exempt a clearing 

organization from DCO registration for 

the clearing of swaps if the Commission 

determines that the clearing 

organization is subject to comparable, 

comprehensive supervision and 

regulation. Proposed Regulation 

39.6(a)(1)(i) would require that, in order 

to be eligible for an exemption from 

DCO registration, a clearing organization 

must be organized in a jurisdiction in 

which a home country regulator applies 

to the clearing organization, on an 

ongoing basis, statutes, rules, 

regulations, policies, or a combination 

thereof that, taken together, are 

consistent with the PFMIs.19 Under 

proposed Regulation 39.6(a)(1)(ii) and 


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39926 Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Proposed Rules 

20 In addition to the principles applicable to 

central counterparties and other FMIs, the PFMIs 

provide that central banks, market regulators, and 

other relevant authorities should observe five 

responsibilities. Consistent with this, the 

Commission expects that, in order to meet the 

standard of being subject to comparable, 

comprehensive supervision and regulation, a 

clearing organization’s home country regulator will 

observe these responsibilities. In particular, 

Responsibility D Explanatory Note 4.4.1 provides 

that the home country regulator should adopt the 

PFMIs, and, ‘‘[w]hile the precise means through 

which the principles are applied may vary from 

jurisdiction to jurisdiction, all [CPMI] and IOSCO 

members are expected to apply the principles to the 

relevant FMIs in their jurisdictions to the fullest 

extent allowed by the legal framework in their 

jurisdiction.’’ PFMIs, paragraph 4.4.1. Therefore, 

the Commission would not find a home country 

regulator’s statement that it requires a clearing 

organization to observe the PFMIs to be sufficient 

to meet the above standard for exemption, if the 

home country regulator has not itself adopted a 

regulatory framework that is consistent with the 

PFMIs. 

21 In foreign jurisdictions where more than one 

regulator supervises and regulates a clearing 

organization, the Commission would expect to enter 

into an MOU or similar arrangement with more 

than one regulator. 

22 7 U.S.C. 6d(f)(1). This provision establishes a 

customer protection regime for swaps customers 

that is broadly similar to the regime for futures 

customers and options on futures customers under 

sections 4d(a) and (b) of the CEA. 7 U.S.C. 6d(a) and 

(b). 

23See Section 761(2) of the Bankruptcy Code, 11 

U.S.C. 761(2) (defining a ‘‘clearing organization’’ as 

a derivatives clearing organization registered under 

the CEA), and Regulation 190.01(f), 17 CFR 

190.01(f) (stating that for purposes of the part 190 

bankruptcy rules, ‘‘clearing organization’’ has the 

same meaning as that set forth in section 761(2) of 

the Bankruptcy Code). 

24 11 U.S.C. 761–767. 

25 7 U.S.C. 2(h)(1)(B). 

(iii), a clearing organization would be 

required to observe the PFMIs in all 

material respects and be in good 

regulatory standing in its home country. 

As previously noted, the Commission 

believes that operating within a 

regulatory framework consistent with 

the PFMIs would meet the CEA’s 

requirement in section 5b(h) that, in 

order to qualify for an exemption, a 

clearing organization must be subject to 

comparable, comprehensive supervision 

and regulation by the appropriate 

government authorities in its home 

country.20

Proposed Regulation 39.6(a)(2) would 

provide that, in order for a clearing 

organization to be eligible for an 

exemption from DCO registration, a 

memorandum of understanding (MOU) 

or similar arrangement satisfactory to 

the Commission must be in effect 

between the Commission and the 

clearing organization’s home country 

regulator,21 pursuant to which, among 

other things, the home country regulator 

agrees to provide to the Commission any 

information that the Commission deems 

necessary to evaluate the clearing 

organization’s initial and continued 

eligibility for exemption or to review 

compliance with any conditions of such 

exemption. The Commission has 

customarily entered into MOUs or 

similar arrangements in connection with 

the supervision of non-U.S. clearing 

organizations that are registered as 

DCOs. In the context of exempt DCOs, 

satisfactory MOUs or similar 

arrangements with the home country 

regulator would include provisions for 

information sharing and cooperation, as 

well as for notification upon the 

occurrence of certain events, but the 

Commission would not expect to 

conduct routine site visits to exempt 

DCOs. 

2. Conditions of Exemption 

Proposed Regulation 39.6(b) sets forth 

conditions to which an exempt DCO 

would be subject. These conditions are 

consistent with the conditions that the 

Commission has imposed on each of the 

clearing organizations to which it has 

previously issued orders of exemption. 

Under proposed Regulation 

39.6(b)(1)(i), a U.S. person that is a 

clearing member of an exempt DCO 

would be permitted to clear swaps for 

itself and those persons identified in the 

definition of ‘‘proprietary account’’ set 

forth in Regulation 1.3. This provision 

is intended to permit a U.S. clearing 

member to clear for affiliates (including 

a parent or subsidiary) that are either 

U.S. or non-U.S. persons. The 

Commission recognizes that in some 

foreign jurisdictions, affiliates are 

considered to be ‘‘customers’’ and their 

positions are held in customer accounts. 

Clearing for affiliates under these 

circumstances would be permissible 

even if the affiliate positions are not 

held in an account that is an analogue 

to a proprietary account under the 

Commission’s regulations. 

Similarly, proposed Regulation 

39.6(b)(1)(ii) would provide that a nonU.S. person that is a clearing member of 

an exempt DCO may clear swaps for any 

affiliated U.S. person identified in the 

definition of ‘‘proprietary account’’ in 

Regulation 1.3. This complements the 

standard in paragraph (b)(1)(i) by 

clarifying that an exempt DCO may clear 

for affiliated entities when one or more 

of those entities is a U.S. person, even 

if the clearing member itself is not a 

U.S. person. 

Proposed Regulation 39.6(b)(1)(iii) 

would provide that a futures 

commission merchant (FCM) may be a 

clearing member of an exempt DCO, or 

maintain an account with an affiliated 

broker that is a clearing member, for the 

purpose of clearing swaps for the FCM 

itself and those persons identified in the 

definition of ‘‘proprietary account’’ in 

Regulation 1.3. Again, this provision is 

intended to permit what would be 

considered clearing of ‘‘proprietary’’ 

positions under the Commission’s 

regulations, even if the positions would 

qualify as ‘‘customer’’ positions under 

the laws and regulations of an exempt 

DCO’s home country. This provision 

would clarify that an exempt DCO may 

clear positions for FCMs if the positions 

are not ‘‘customer’’ positions under the 

Commission’s regulations. 

The effect of proposed Regulation 

39.6(b)(1) is to prohibit the clearing of 

FCM customer positions at an exempt 

DCO. Section 4d(f)(1) of the CEA makes 

it unlawful for any person to accept 

money, securities, or property (i.e., 

funds) from a swaps customer to margin 

a swap cleared through a DCO unless 

the person is registered as an FCM.22

Any swaps customer funds held by a 

DCO are also subject to the segregation 

requirements of section 4d(f)(2) of the 

CEA, and in order for a swaps customer 

to receive protection under this regime, 

particularly in an insolvency context, its 

funds must be carried by an FCM and 

deposited with a registered DCO.23

Absent that chain of registration, the 

swaps customer’s funds may not be 

treated as customer property under the 

U.S. Bankruptcy Code 24 and the 

Commission’s regulations. Because of 

this, it has been the Commission’s 

policy to allow exempt DCOs to clear 

only proprietary positions of U.S. 

persons and FCMs. The proposed 

regulations would codify this approach. 

Proposed Regulation 39.6(b)(2) would 

codify the ‘‘open access’’ requirements 

of section 2(h)(1)(B) of the CEA with 

respect to swaps cleared by an exempt 

DCO to which one or more of the 

counterparties is a U.S. person.25

Paragraph (b)(2)(i) would require an 

exempt DCO to maintain rules 

providing that all such swaps with the 

same terms and conditions (as defined 

by product specifications established 

under the exempt DCO’s rules) 

submitted to the exempt DCO for 

clearing are economically equivalent 

and may be offset with each other, to the 

extent that offsetting is permitted by the 

exempt DCO’s rules. Paragraph (b)(2)(ii) 

would require an exempt DCO to 

maintain rules providing for nondiscriminatory clearing of such a swap 

executed either bilaterally or on or 

subject to the rules of an unaffiliated 

electronic matching platform or trade 

execution facility, e.g., a swap execution 

facility. 

Proposed Regulation 39.6(b)(3) would 

provide that an exempt DCO must 


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26See also Regulation 1.31, 17 CFR 1.31 

(requiring, among other things, that books and 

records of DCOs and other registered entities be 

made available for inspection by Commission 

representatives). 

27Although an MOU or similar arrangement 

would provide for information sharing whereby the 

home country regulator agrees to provide to the 

Commission any information that the Commission 

deems necessary to evaluate the clearing 

organization’s initial and continued eligibility for 

exemption or to review compliance with any 

conditions of such exemption, the Commission 

would retain the authority to access books and 

records directly from an exempt DCO. 

28Regulation 39.19(b), 17 CFR 39.19(b), requires 

that a DCO submit reports electronically and in a 

format and manner specified by the Commission, 

defines the term ‘‘business day,’’ and establishes the 

relevant time zone for any stated time, unless 

otherwise specified by the Commission. The 

Commission has specified that U.S. Central time 

will apply with respect to the daily reports that 

must be filed by exempt DCOs pursuant to 

proposed Regulation 39.6(c)(2)(i). 

29Specifically, Regulation 39.19(c)(1) requires 

registered DCOs to submit daily reports to the 

Commission, by 10:00 a.m. on the following 

business day, which contain, among other things, 

initial margin requirements, initial margin on 

deposit, and daily variation margin for each 

clearing member. See Regulation 39.19(c)(1)(i)(A) 

and (c)(1)(i)(B), 17 CFR 39.19(c)(1)(i)(A) and 

(c)(1)(i)(B). These provisions require such 

information to be provided for each clearing 

member by house origin and by each customer 

origin. This distinction would not apply to an 

exempt DCO, which will only be permitted to clear 

transactions that the Commission would treat as 

‘‘proprietary.’’ See discussion of proprietary and 

customer clearing supra section II.C.2. 

consent to jurisdiction in the United 

States and designate an agent in the 

United States, for notice or service of 

process, pleadings, or other documents 

issued by or on behalf of the 

Commission or the U.S. Department of 

Justice in connection with any actions 

or proceedings against, or any 

investigations relating to, the exempt 

DCO or any U.S. person or FCM that is 

a clearing member or that clears swaps 

through an affiliated clearing member. 

The name of the designated agent would 

be submitted as part of the clearing 

organization’s application for 

exemption. If an exempt DCO appoints 

another agent to accept such notice or 

service of process, the exempt DCO 

would be required to promptly inform 

the Commission of this change. This is 

consistent with requirements currently 

imposed in the registration orders of 

DCOs that are organized outside of the 

United States as well as in each of the 

orders of exemption that the 

Commission has issued. 

Proposed Regulation 39.6(b)(4) is a 

general provision that would require an 

exempt DCO to comply, and 

demonstrate compliance as requested by 

the Commission, with any condition of 

the exempt DCO’s order of exemption. 

Proposed Regulation 39.6(b)(5) would 

require an exempt DCO to make all 

documents, books, records, reports, and 

other information related to its 

operation as an exempt DCO (books and 

records) open to inspection and copying 

by any Commission representative, and 

to promptly make its books and records 

available and provide them directly to 

Commission representatives, upon the 

request of a Commission representative. 

This condition of exemption is 

consistent with section 5b(h) of the 

CEA, which provides that the 

Commission may exempt a DCO from 

registration with conditions that may 

include requiring that the DCO be 

available for inspection by the 

Commission and make available all 

information requested by the 

Commission.26 The Commission notes 

that it does not anticipate conducting 

routine site visits to exempt DCOs. 

However, the Commission may request 

an exempt DCO to provide books and 

records related to its operation as an 

exempt DCO in order for the 

Commission to ensure that, among other 

things, the exempt DCO continues to 

meet the eligibility requirements for an 

exemption as well as the conditions of 

its exemption.27

Proposed Regulation 39.6(b)(6) would 

require that the exempt DCO provide an 

annual certification that it continues to 

observe the PFMIs in all material 

respects, within 60 days following the 

end of its fiscal year. Proposed 

Regulation 39.6(b)(7) would require that 

the Commission receive an annual 

written representation from a home 

country regulator that the exempt DCO 

is in good regulatory standing, within 60 

days following the end of the exempt 

DCO’s fiscal year. These requirements 

would help the Commission to assess an 

exempt DCO’s continued eligibility for 

an exemption. 

3. Reporting Requirements 

Proposed Regulation 39.6(c) and (d) 

would require an exempt DCO to meet 

certain reporting requirements, which 

are consistent with the reporting 

requirements exempt DCOs currently 

meet. 

a. General Reporting Requirements 

Proposed Regulation 39.6(c)(1) sets 

forth general reporting requirements 

pursuant to which an exempt DCO must 

provide certain information directly to 

the Commission: (1) On a periodic basis 

(daily or quarterly); and (2) after the 

occurrence of a specified event, each in 

accordance with the submission 

requirements of Regulation 39.19(b).28

Such information may be used by the 

Commission, among other things, for the 

purposes of the Commission evaluating 

the continued eligibility of the exempt 

DCO for exemption, reviewing the 

exempt DCO’s compliance with any 

conditions of its exemption, or 

conducting oversight of U.S. persons 

and their affiliates, and the swaps that 

they clear through the exempt DCO. 

Proposed Regulation 39.6(c)(2)(i) 

would require an exempt DCO to 

compile a report as of the end of each 

trading day, and submit it to the 

Commission by 10:00 a.m. U.S. Central 

time on the following business day, 

containing with respect to swaps: (A) 

Initial margin requirements and initial 

margin on deposit for each U.S. person; 

and (B) daily variation margin, 

separately listing the mark-to-market 

amount collected from or paid to each 

U.S. person. However, if a clearing 

member margins on a portfolio basis its 

own positions and the positions of its 

affiliates, and either the clearing 

member or any of its affiliates is a U.S. 

person, the exempt DCO would be 

required to report initial margin 

requirements and initial margin on 

deposit for all such positions on a 

combined basis for each such clearing 

member and to separately list the markto-market amount collected from or paid 

to each such clearing member, on a 

combined basis. These requirements are 

similar to certain reporting requirements 

in Regulation 39.19(c)(1) that apply to 

registered DCOs.29 These reports would 

provide the Commission with 

information regarding the cash flows 

associated with U.S. persons clearing 

swaps through exempt DCOs in order to 

analyze the risks presented by such U.S. 

persons and to assess the extent to 

which U.S. business is being cleared by 

each exempt DCO. 

Proposed Regulation 39.6(c)(2)(ii) 

would require an exempt DCO to 

compile a report as of the last day of 

each fiscal quarter, and submit the 

report to the Commission no later than 

17 business days after the end of the 

fiscal quarter, containing: (A) The 

aggregate clearing volume of U.S. 

persons during the fiscal quarter, and 

(B) the average open interest of U.S. 

persons during the fiscal quarter. If a 

clearing member is a U.S. person, this 

data would include the transactions and 

positions of the clearing member and all 

affiliates for which the clearing member 

clears; if a clearing member is not a U.S. 

person, the data would only have to 

include the transactions and positions 

of affiliates that are U.S. persons. 

Paragraph (C) of proposed Regulation 

39.6(c)(2)(ii) would require that an 

exempt DCO’s quarterly report to the 

Commission contain a list of U.S. 


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30Such FCMs may or may not be U.S. persons. 

The Commission is not proposing to require that 

exempt DCOs provide daily information regarding 

initial margin requirements, initial margin on 

deposit, and daily variation margin, or quarterly 

aggregate clearing volume or average open interest, 

with respect to swaps, for FCMs that are not U.S. 

persons (unless reporting would otherwise be 

required because such FCMs are affiliates of U.S. 

persons). However, the Commission has a 

supervisory interest in receiving information 

regarding which of its registered FCMs are clearing 

members or affiliates of clearing members, with 

respect to the clearing of swaps on an exempt DCO. 

31Such an international organization may include 

the International Monetary Fund or World Bank. 

See PFMIs, paragraph 1.33. 

32While the Commission recognizes that the 

counterparties to the original swap would otherwise 

be required to report the two new swaps under part 

45 of the Commission’s regulations, because an 

exempt DCO would be required to implement rules 

to the contrary at the direction of the Commission, 

such counterparties would be expected to comply 

with the rules of the exempt DCO in this case. 

33As noted above, proposed Regulation 39.6(b) 

sets forth the pre-conditions that would apply to 

any exemption from registration as a DCO. 

persons and FCMs 30 that are either 

clearing members or affiliates of any 

clearing member, with respect to the 

clearing of swaps, as of the last day of 

the fiscal quarter. This information 

would enable the Commission, in 

conducting risk surveillance of U.S. 

persons and swaps markets more 

broadly, to better understand and 

evaluate the nature and extent of the 

cleared swaps activity of U.S. persons. 

Paragraphs (c)(2)(iii) through 

(c)(2)(viii) of proposed Regulation 39.6 

each would require an exempt DCO to 

provide information to the Commission 

upon the occurrence of certain specified 

events. Several of the proposed required 

notifications are intended to provide the 

Commission with information relevant 

to the exempt DCO’s continued 

eligibility for an exemption or its 

compliance with the conditions of its 

exemption. Proposed Regulation 

39.6(c)(2)(iii) would require an exempt 

DCO to provide prompt notice to the 

Commission regarding any change in its 

home country regulatory regime that is 

material to the exempt DCO’s 

continuing observance of the PFMIs, 

any requirements set forth in proposed 

Regulation 39.6, or the order of 

exemption issued by the Commission. 

In this regard, the Commission requests 

comment on whether an exempt DCO 

should make the determination of 

whether a change to the home country 

regulatory regime constitutes a 

‘‘material’’ change to the exempt DCO’s 

continuing observance of the PFMIs, 

any requirements set forth in proposed 

Regulation 39.6, or the Commission’s 

order of exemption. Alternatively, the 

Commission requests comment on 

whether the Commission should require 

an exempt DCO to provide prompt 

notice of any change in its home 

country regulatory regime thereby 

allowing the Commission to determine 

whether a change is ‘‘material’’ to the 

exempt DCO’s continuing observance of 

the PFMIs, any requirements set forth in 

proposed Regulation 39.6, or the 

Commission’s order of exemption. 

Proposed Regulation 39.6(c)(2)(iv) 

would require an exempt DCO to 

provide to the Commission, to the 

extent that it is available to the exempt 

DCO, any assessment of the exempt 

DCO’s observance (or the home country 

regulator’s observance) of any of the 

PFMIs by a home country regulator or 

other national authority, or an 

international financial institution or 

international organization.31 Proposed 

Regulation 39.6(c)(2)(v) would require 

an exempt DCO to provide to the 

Commission, to the extent that it is 

available to the exempt DCO, any 

examination report, examination 

findings, or notification of the 

commencement of any enforcement or 

disciplinary action by a home country 

regulator. Proposed Regulation 

39.6(c)(2)(vi) would require an exempt 

DCO to provide immediate notice to the 

Commission of any change with respect 

to its licensure, registration, or other 

authorization to act as a clearing 

organization in its home country. 

Two of the event-specific required 

notifications would assist the 

Commission in its oversight of U.S. 

persons and FCMs clearing swaps. 

Proposed Regulation 39.6(c)(2)(vii) 

would require an exempt DCO to 

provide immediate notice to the 

Commission in the event of a default (as 

defined by the exempt DCO in its rules) 

by a U.S. person or FCM clearing swaps, 

including the name of the U.S. person 

or FCM, a list of the positions held by 

the U.S. person or FCM, and the amount 

of the U.S. person’s or FCM’s financial 

obligation. Proposed Regulation 

39.6(c)(2)(viii) would require an exempt 

DCO to provide notice of any action that 

it has taken against a U.S. person or 

FCM, no later than two business days 

after the exempt DCO takes such action 

against a U.S. person or FCM. In 

particular, these provisions would 

require such reporting with respect to a 

default of, or an action taken against, an 

FCM, which may or may not be a U.S. 

person, in furtherance of the 

Commission’s supervisory 

responsibilities with respect to 

registered FCMs. Proposed paragraphs 

(c)(2)(vii) and (c)(2)(viii) of Regulation 

39.6 are similar to paragraphs (c)(4)(vii) 

and (c)(4)(xi) of Regulation 39.19, which 

apply to registered DCOs, respectively. 

b. Swap Data Reporting Requirements 

Proposed Regulation 39.6(d) would 

require that if a clearing member clears 

through an exempt DCO a swap that has 

been reported to a registered swap data 

repository (SDR) pursuant to part 45 of 

the Commission’s regulations, the 

exempt DCO must report to an SDR data 

regarding the two swaps resulting from 

the novation of the original swap that 

had been submitted to the exempt DCO 

for clearing. In addition, an exempt DCO 

would be required to report the 

termination of the original swap 

accepted for clearing by the exempt 

DCO to the SDR to which the original 

swap was reported. Further, in order to 

avoid duplicative reporting for such 

transactions, an exempt DCO would be 

required to have rules that prohibit the 

part 45 reporting of the two new swaps 

by the counterparties to the original 

swap.32

4. Application Procedures 

Proposed Regulation 39.6(e) would 

describe the relevant application 

procedures for a clearing organization 

that seeks to be exempt from DCO 

registration, which are consistent with 

the application procedures the 

Commission has been using to evaluate 

petitions for exemption. Specifically, 

under proposed Regulation 39.6(e)(1), a 

clearing organization would be required 

to file an application for exemption with 

the Secretary of the Commission in the 

format and manner specified by the 

Commission. After reviewing the 

application, the Commission could: (1) 

Grant the exemption without 

conditions; (2) grant the exemption with 

conditions; or (3) deny the application 

for exemption.33 This provision mirrors 

language in Regulation 39.3(a)(1), which 

addresses the application procedures for 

registration as a DCO. 

Proposed Regulation 39.6(e)(2) would 

require an applicant to submit a 

complete application, including all 

applicable information and 

documentation as detailed in proposed 

Regulation 39.6(e)(2) and discussed 

below. It would provide that the 

Commission will not commence 

processing an application unless the 

application is complete. Proposed 

Regulation 39.6(e)(2) would further 

provide that an applicant may file with 

its completed application additional 

information that may be necessary or 

helpful to the Commission in processing 

the application. This provision is 

similar to certain provisions of 

Regulation 39.3(a)(2), which sets forth 

requirements with respect to 

applications for registration as a DCO. 


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34See CPMI–IOSCO, Principles for financial 

market infrastructures: Disclosure framework and 

Assessment methodology (Dec. 2012), at 82 et seq., 

available at http://www.iosco.org/library/pubdocs/ 

pdf/IOSCOPD396.pdf. 

35PFMI Explanatory Note 3.23.7 provides that the 

Principle 23, Key Consideration 5 standard that 

responses to the Disclosure Framework should be 

completed ‘‘regularly’’ means that an FMI should 

review its responses ‘‘[a]t a minimum . . . every 

two years to ensure continued accuracy and 

usefulness.’’ PFMIs, paragraph 3.23.7. 

36A QCCP is defined as an entity that (i) is 

licensed to operate as a central counterparty (CCP) 

and is permitted by the appropriate regulator to 

operate as such, and (ii) is prudentially supervised 

in a jurisdiction where the relevant regulator has 

established and publicly indicated that it applies to 

the CCP, on an ongoing basis, domestic rules and 

regulations that are consistent with the PFMIs. The 

failure of a CCP to achieve QCCP status could result 

in significant costs to its bank customers due to 

certain financial incentives for banks, including 

their subsidiaries and affiliates, to clear financial 

derivatives through QCCPs. See Basel Committee on 

Banking Supervision, Capital Requirements for 

Bank Exposures to Central Counterparties (Apr. 10, 

2014), available at https://www.bis.org/publ/ 

bcbs282.htm. 

37The Disclosure Framework contemplates that 

central counterparties will make public disclosures 

pursuant to the Disclosure Framework. See CPMI– 

IOSCO, Principles for financial market 

infrastructures: Disclosure framework and 

Assessment methodology (Dec. 2012), at 1, available 

at http://www.iosco.org/library/pubdocs/pdf/ 

IOSCOPD396.pdf. 

Under proposed Regulation 

39.6(e)(2)(i), an applicant would be 

required to submit a cover letter 

providing general information 

identifying the applicant, its regulatory 

licenses or registrations, and relevant 

contact information. Proposed 

Regulation 39.6(e)(2)(ii)–(viii) would 

require an applicant for exemption to 

submit documents that would establish 

the applicant’s eligibility for exemption 

under proposed Regulation 39.6(a), and 

would contain representations that the 

applicant would comply with the 

conditions of exemption, the general 

reporting requirements, and the swap 

data reporting requirements set forth in 

proposed Regulation 39.6(b), (c), and 

(d), respectively, and the terms and 

conditions of its order of exemption as 

issued by the Commission. 

Additionally, proposed Regulation 

39.6(e)(2)(v) would require an applicant 

to submit to the Commission copies of 

its most recent disclosures necessary to 

observe the PFMIs, including the 

financial market infrastructure (FMI) 

disclosure template set forth in Annex 

A to the Disclosure Framework and 

Assessment Methodology (Disclosure 

Framework) for the PFMIs.34 The FMI 

disclosure template requires a clearing 

organization to provide a general 

description of itself and the markets it 

serves, a description of its general 

organization, an overview of the 

relevant legal and regulatory framework, 

a description of how it processes a 

transaction, and a summary narrative 

detailing its approach to observing each 

of the PFMIs. The Commission expects 

that the FMI disclosure template 

provided to the Commission would 

have been reviewed and updated within 

the previous two years.35 The FMI 

disclosure template is generally 

required by home country regulators 

that enforce the PFMIs and is necessary 

to achieve status as a qualified central 

counterparty (QCCP).36

Proposed Regulation 39.6(e)(3) would 

provide that, at any time during the 

Commission’s review of an application 

for exemption from registration as a 

DCO, the Commission may request that 

the applicant submit supplemental 

information in order for the Commission 

to process the application, and would 

require that the applicant file such 

supplemental information in the format 

and manner specified by the 

Commission. A similar provision is 

contained in Regulation 39.3(a)(3), 

which applies to applications for DCO 

registration. 

Proposed Regulation 39.6(e)(4) would 

state that an applicant for exemption 

from registration as a DCO must 

promptly amend its application if it 

discovers a material omission or error, 

or if there is a material change in the 

information provided to the 

Commission in the application or other 

information provided in connection 

with the application. This provision is 

virtually identical to Regulation 

39.3(a)(4), which addresses amendments 

to applications for DCO registration. 

Proposed Regulation 39.6(e)(5) would 

identify those sections of an application 

for exemption from registration that will 

be made public, including the cover 

letter required in proposed Regulation 

39.6(e)(2)(i); documents demonstrating 

that the applicant is organized in a 

jurisdiction in which its home country 

regulator applies to the applicant 

statutes, rules, regulations, and/or 

policies that are consistent with the 

PFMIs; disclosures necessary to observe 

the PFMIs; 37 rules that meet the 

requirements of proposed Regulation 

39.6(b)(2) and (d), as applicable; and 

any other part of the application not 

covered by a request for confidential 

treatment, subject to Regulation 145.9. 

This provision is similar to Regulation 

39.3(a)(5), which identifies those 

portions of an application for 

registration as a DCO that are made 

public. 

5. Modification of an Exemption 

Proposed Regulation 39.6(f) would 

provide that the Commission may 

modify the terms and conditions of an 

order of exemption, either at the request 

of the exempt DCO or on the 

Commission’s own initiative, based on 

changes to or omissions in material facts 

or circumstances pursuant to which the 

order of exemption was issued, or for 

any reason in the Commission’s 

discretion. This is a further expression 

of the Commission’s discretionary 

authority under section 5b(h) of the CEA 

to exempt a clearing organization from 

registration ‘‘conditionally or 

unconditionally,’’ and it reflects the 

Commission’s authority to act with 

flexibility in responding to changed 

circumstances affecting an exempt DCO. 

6. Termination of Exemption Upon 

Request by an Exempt DCO 

Proposed Regulation 39.6(g) would set 

forth the framework under which an 

exempt DCO may petition the 

Commission to terminate its exemption 

and the applicable procedures. 

Specifically, pursuant to proposed 

Regulation 39.6(g)(1), an exempt DCO 

may request that the Commission 

terminate its exemption if the exempt 

DCO: (i) No longer qualifies for an 

exemption as a result of changed 

circumstances; (ii) intends to cease 

clearing swaps for U.S. persons; or (iii) 

submits a completed Form DCO in order 

to become a registered DCO in 

conjunction with its petition. Proposed 

Regulation 39.6(g)(2) would provide that 

the petition for termination must 

include an explanation for the request 

and describe the exempt DCO’s plans 

for liquidation or transfer of the 

positions and related collateral of U.S. 

persons, if applicable. Pursuant to 

proposed Regulation 39.6(g)(3), the 

Commission would issue an order of 

termination within a reasonable time 

appropriate to the circumstances or in 

conjunction with the issuance of an 

order of registration, if applicable. 

D. Regulation 39.9—Scope 

The Commission is proposing to 

revise Regulation 39.9 to make it clear 

that the provisions of subpart B apply to 

any DCO, as defined under section 

1a(15) of the CEA and Regulation 1.3, 

that is registered with the Commission 

as a DCO pursuant to section 5b of the 

CEA, but do not apply to any exempt 

DCO. This revision would clarify that 

the subpart B regulations that address 

compliance with the DCO Core 

Principles applicable to registered DCOs 

do not impose any obligations upon 

exempt DCOs. 

III. Proposed Amendments to Part 

140—Delegations of Authority 

The proposed amendments to 

Regulation 140.94(c)(4) would delegate 


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38 7 U.S.C. 19(a). 

to the Director of DCR all functions 

reserved to the Commission under 

proposed Regulation 39.6 except for the 

following: (i) Granting an exemption 

under paragraph (a); (ii) prescribing any 

conditions to an exemption under 

paragraph (b); (iii) modifying an 

exemption under paragraph (f); and (iv) 

terminating an exemption under 

paragraph (g)(3). Such delegation would 

expedite consideration of exemption 

requests by permitting DCR to more 

efficiently carry out tasks associated 

with the processing of an exemption 

application. Certain technical 

amendments have also been proposed to 

Regulation 140.94 in order to adjust the 

paragraph numbering to accommodate 

the proposed amendments to Regulation 

140.94(c)(4). 

IV. Request for Comments 

The Commission generally requests 

comments on all aspects of the proposed 

rules. Additionally, the Commission 

requests comments on the following 

specific issues: 

• Exempt DCOs are permitted to clear 

only proprietary positions of U.S. 

persons and FCMs. The proposed 

regulations would codify this approach. 

Should the Commission consider 

permitting an exempt DCO to clear 

swaps for FCM customers? 

• Should the Commission impose any 

additional conditions on an exempt 

DCO or modify any of the existing 

conditions? 

• Should any of the conditions 

imposed on an exempt DCO lead to an 

automatic termination of the exemption 

if the condition is not met? 

V. Consideration of Costs and Benefits 

A. Introduction 

Section 15(a) of the CEA requires the 

Commission to consider the costs and 

benefits of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders.38 Section 

15(a) further specifies that the costs and 

benefits shall be evaluated in light of 

five broad areas of market and public 

concern: (1) Protection of market 

participants and the public; (2) 

efficiency, competitiveness, and 

financial integrity of futures markets; (3) 

price discovery; (4) sound risk 

management practices; and (5) other 

public interest considerations. The 

Commission considers the costs and 

benefits resulting from its discretionary 

determinations with respect to the 

Section 15(a) factors. 

B. Proposed Regulation 39.6 

1. Summary 

Section 5b(a) of the CEA requires a 

clearing organization that clears swaps 

to be registered with the Commission as 

a DCO. Section 5b(h) of the CEA, 

however, permits the Commission to 

exempt a clearing organization from 

DCO registration for the clearing of 

swaps to the extent that the Commission 

determines that such clearing 

organization is subject to comparable, 

comprehensive supervision by 

appropriate government authorities in 

the clearing organization’s home 

country. Pursuant to this authority, the 

Commission has exempted four nonU.S. clearing organizations from DCO 

registration to clear proprietary swap 

positions of U.S. persons and FCMs. 

The proposed regulation would codify 

the policies and procedures that the 

Commission is currently following with 

respect to granting exemptions from 

DCO registration. Accordingly, the 

baseline for this consideration of costs 

and benefits is the current status, where 

the Commission has implemented a set 

of conditions and procedures for 

granting exemptions from DCO 

registration, but has not codified those 

conditions and procedures under 

Commission regulations. 

Specifically, the proposed regulation 

would set forth the process by which a 

non-U.S. clearing organization could 

obtain an exemption from DCO 

registration for the clearing of swaps 

provided that it meets the specified 

eligibility standards and can meet the 

conditions of an exemption. The 

eligibility standards require, among 

other things, that a clearing organization 

applying for exemption must be 

organized in a jurisdiction in which a 

home country regulator applies to the 

clearing organization, on an ongoing 

basis, statutes, rules, regulations, 

policies, or a combination thereof that, 

taken together, are consistent with the 

PFMIs, and the clearing organization 

must observe the PFMIs in all material 

respects. The conditions of exemption 

describe, among other things, the 

circumstances in which an exempt DCO 

would be permitted to clear swaps for 

U.S. persons. An exempt DCO is and 

would be permitted to clear only 

‘‘proprietary’’ positions as defined in 

Regulation 1.3, and it is not and would 

not be permitted to clear ‘‘customer’’ 

positions subject to section 4d(f) of the 

CEA. 

2. Benefits 

Proposed Regulation 39.6 would 

provide several benefits. First, an 

exempt DCO may clear proprietary swap 

positions for U.S. persons without 

having to prepare and submit an 

application for DCO registration, which 

involves the submission of extensive 

documentation to the Commission. 

Similarly, an exempt DCO is not 

required to comply with Commission 

regulations applicable to registered 

DCOs, except as required under 

Regulation 39.6 or the exempt DCO’s 

order of exemption. Thus, the 

significantly reduced application and 

ongoing compliance requirements for 

exempt DCOs may encourage clearing 

organizations to seek an exemption from 

registration. This mitigation of 

registration-related requirements may 

also benefit market participants and the 

public more generally. That is, non-U.S. 

clearing organizations that are exempt 

from registration may incur lower 

compliance costs, which may, in turn, 

result in lower costs to their clearing 

members. In addition, U.S. persons (as 

clearing members or affiliates of clearing 

members) would likely have access to 

more clearing organizations in order to 

clear their proprietary swaps. Access to 

more clearing organizations may also 

encourage voluntary clearing of swaps 

that are not required to be cleared, as 

certain swaps may not be cleared by any 

registered DCOs. This may, in turn, 

serve to diversify the potential risk of 

cleared swaps, because any such risk 

would become less concentrated if a 

larger number of registered and exempt 

DCOs were clearing swaps for U.S. 

persons, and the volume of those swaps 

could become more evenly distributed 

among those registered and exempt 

DCOs. 

Finally, the proposed regulation may 

also promote competition among 

registered and exempt DCOs by 

encouraging more clearing organizations 

to seek an exemption, and it would 

permit exempt DCOs to clear the same 

types of swap transactions for the 

proprietary accounts of U.S. persons 

that may be cleared by registered DCOs. 

The Commission requests comment 

on the potential benefits of proposed 

Regulation 39.6, including, where 

possible, quantitative data. More 

specifically, the Commission requests 

comment on the potential benefits to 

clearing organizations that are eligible to 

become exempt DCOs and thereby clear 

swaps for U.S. persons and their 

affiliates, and the potential benefits to 

other market participants or the 

financial system as a whole. The 

Commission further requests comment 

on any alternative proposals that might 

achieve the objectives of the proposed 

regulation, and the benefits associated 

with any such alternatives. 


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39For purposes of this analysis, it is assumed that 

any clearing organization that is not granted an 

exemption will be required to register as a DCO if 

it clears swaps for any U.S. person. This 

assumption, however, is not intended to be a legal 

conclusion that, with respect to the particular facts 

and circumstances of any particular clearing 

organization, the CEA would require registration 

with the Commission as a DCO. 

40See supra section II.C.4 for more detail. 

41See Derivatives Clearing Organization General 

Provisions and Core Principles, 76 FR 69334, 69410 

(Nov. 8, 2011). 

42See infra section VI.B for more detail. 

43 Derivatives Clearing Organization General 

Provisions and Core Principles, 76 FR at 69426. 

3. Costs 

A clearing organization seeking an 

exemption incurs some costs in 

preparing an application for exemption. 

If a clearing organization were not able 

to seek an exemption, however, it would 

be required to register with the 

Commission and to submit a Form 

DCO.39 While the Form DCO and the 

FMI disclosure template set forth in 

Annex A to the Disclosure Framework 

require certain similar types of 

information to be provided to the 

Commission, the Form DCO would 

require the clearing organization to 

provide additional documentation that 

is not required pursuant to the 

Disclosure Framework. Moreover, a 

clearing organization is likely to have 

already prepared the FMI disclosure 

template in order to comply with the 

requirements of its home country 

regulator, which must be consistent 

with the PFMIs, and to achieve QCCP 

status.40 Therefore, the costs involved in 

applying for an exemption are less than 

the costs involved in applying for 

registration, and the proposed 

regulation would not change this. Based 

on the Commission’s Paperwork 

Reduction Act estimates, the cost 

burden to submit Form DCO is 

approximately $100,000 per entity,41

while that for submitting an application 

for exemption is approximately $10,500 

per entity.42 Thus, there is an estimated 

cost savings associated with submitting 

an application for exemption rather than 

Form DCO of approximately $89,500 per 

entity, and the proposed regulation 

would codify the procedures for 

submitting an application for 

exemption. The Commission seeks 

comment about whether these cost 

estimates are reasonable. 

Other potential administrative costs 

associated with maintaining an 

exemption from DCO registration are 

minimal. For example, an exempt DCO 

would be required to make its books and 

records relating to its operation as an 

exempt DCO available for inspection by 

Commission staff upon request. This 

condition of exemption is consistent 

with section 5b(h) of the CEA, which 

provides that the Commission may 

exempt a DCO from registration with 

conditions that may include requiring 

that the DCO be available for inspection 

by the Commission and make available 

all information requested by the 

Commission. In addition, this 

requirement is imposed on registered 

DCOs; as a result, an exempt DCO 

would be held to this requirement even 

if it were to choose to register as a DCO. 

The Commission notes that there would 

be no costs imposed on an exempt DCO 

in connection with this condition unless 

and until the Commission requests to 

inspect its books and records. 

Furthermore, an exempt DCO’s home 

country regulator is and would be 

required to provide to the Commission 

an annual written representation that 

the exempt DCO is in good regulatory 

standing. The Commission believes that 

the costs associated with this 

requirement are minimal, as home 

country regulators typically provide a 

standard letter and are required to 

provide it only once a year. 

Lastly, exempt DCOs would be held to 

certain reporting requirements, the costs 

of which are limited to providing them 

to the Commission on either a regular or 

event-specific basis. The Commission 

has previously considered the costs of 

regular and event-specific reporting 

requirements when adopting Regulation 

39.19(c) for registered DCOs.43 The 

reporting requirements for exempt DCOs 

are substantially less extensive than 

those specified in Regulation 39.19(c). 

The Commission believes the costs of 

the exempt DCO reporting requirements 

are not significant but welcomes 

comment on such costs, particularly 

from existing exempt DCOs. 

An exempt DCO may incur costs 

related to establishing and maintaining 

connections to an SDR in order to report 

the swap data that would be required by 

proposed Regulation 39.6(d). In 

connection with the analysis required 

by the Paperwork Reduction Act, the 

Commission has estimated an initial 

cost of $85,478 per exempt DCO to 

establish an SDR connection, and an 

annual cost of $93,750 to maintain this 

connection. 

As discussed in section VI.B below, 

an exempt DCO would likely realize 

some administrative cost savings with 

respect to its ongoing compliance 

obligations with the Commission. The 

Commission acknowledges that it is 

difficult to differentiate the ongoing 

costs of complying with a home 

country’s regulatory requirements from 

those of complying with the CEA and 

Commission regulations given that there 

may be costs common to both. 

Furthermore, the Commission lacks 

reliable data upon which to base many 

of these cost estimates, which it 

acknowledges could vary greatly among 

clearing organizations. Thus, the 

Commission seeks comment about such 

costs. 

C. Section 15(a) Factors 

1. Protection of Market Participants and 

the Public 

The proposed amendments to Part 39 

would protect market participants and 

the public by requiring, among other 

things, that an exempt DCO: (i) May 

only clear swaps for U.S. persons for 

their proprietary accounts, and not for 

‘‘swaps customers’’ within the meaning 

of the CEA and Commission regulations; 

(ii) must be organized in a jurisdiction 

in which it is subject to supervision and 

regulation by a government authority 

that applies to the clearing organization 

statutes, rules, regulations, policies, or a 

combination thereof that, taken together, 

are consistent with the PFMIs; (iii) must 

submit to the Commission the FMI 

disclosure template set forth in Annex 

A to the Disclosure Framework required 

to observe the PFMIs establishing that it 

does observe the PFMIs, and must 

provide information to the Commission, 

upon request, that the Commission 

deems necessary to evaluate its 

continued eligibility for exemption or to 

review its compliance with any 

conditions of exemption; and (iv) must 

be licensed, registered, or otherwise 

authorized to act as a clearing 

organization in its home country, and its 

home country regulator must not have 

made any findings of material nonobservance of the PFMIs or other 

relevant home country legal 

requirements that have not resulted in 

corrective action. Furthermore, the 

proposed amendments to part 39 would 

provide additional market safeguards 

through requiring an MOU or other 

similar arrangement with the home 

country regulator that would enable the 

Commission to obtain any information 

that the Commission deems necessary to 

evaluate the initial and continued 

eligibility of the DCO for exemption 

from registration or to review its 

compliance with any conditions of such 

exemption. 

These requirements would protect 

market participants and the public by 

ensuring that U.S. ‘‘swaps customers’’ 

would remain subject to the customer 

protection regime established in the 

CEA and Commission regulations, and 

that exempt DCOs would be subject to 

the internationally recognized PFMI 

standards. 


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44 5 U.S.C. 601 et seq. 

45 47 FR 18618 (Apr. 30, 1982). 

46See 66 FR 45604, 45609 (Aug. 29, 2001). 

47 44 U.S.C. 3501 et seq. 

48 5 CFR 1320.3(c)(4)(i). 

2. Efficiency, Competitiveness, and 

Financial Integrity 

Proposed Regulation 39.6 would 

promote efficiency in the design of an 

exempt DCO’s settlement and clearing 

arrangements, operating structure and 

procedures, scope of products cleared, 

and use of technology because it would 

permit an exempt DCO to clear 

proprietary transactions for U.S. persons 

through observance of the PFMIs, 

subject to supervision and regulation by 

a home country regulator. Moreover, the 

use of a single set of standards to 

determine eligibility, namely the 

internationally recognized PFMIs, 

would promote operational efficiency 

because it would (i) permit a non-U.S. 

clearing organization to obtain an 

exemption from registration that would 

mitigate duplicative compliance 

requirements and (ii) facilitate 

uniformity in supervision and 

regulation of both registered and exempt 

DCOs. 

Proposed Regulation 39.6 may also 

promote competition among registered 

and exempt DCOs because it would 

permit exempt DCOs to clear the same 

types of swap transactions for the 

proprietary accounts of U.S. persons 

that may be cleared by registered DCOs. 

Unlike their foreign counterparts, U.S.- 

based DCOs would still be required to 

register with the Commission in order to 

clear proprietary swap positions for U.S. 

persons and would not be eligible for an 

exemption under the proposed 

regulation (or under section 5b(h) of the 

CEA). Potentially, this different 

treatment may create a competitive 

disadvantage for U.S.-based DCOs, 

which would be subject to the 

requirements of the CEA and 

Commission regulations. However, 

exempt DCOs would be subject to a 

foreign supervisory and regulatory 

framework that is consistent with the 

internationally recognized standards set 

forth in the PFMIs. 

Proposed Regulation 39.6 would be 

expected to maintain the financial 

integrity of clearing organizations that 

clear proprietary transactions for U.S. 

persons because exempt clearing 

organizations would be subject to 

supervision and regulation by a home 

country regulator within a legal 

framework that is consistent with the 

PFMIs. Such supervision and regulation 

is comparable to that applicable to 

DCOs under the CEA and Commission 

regulations, and is sufficiently 

comprehensive. In addition, the 

proposed regulation may contribute to 

the financial integrity of the broader 

financial system by spreading the 

potential risk of particular cleared 

swaps among a greater number of 

registered and exempt DCOs. 

3. Price Discovery 

Price discovery is the process by 

which prices for underlying instruments 

may be determined by, or inferred from, 

prices of derivative contracts. The 

Commission has not identified any 

impact that proposed Regulation 39.6 

would have on price discovery. 

4. Sound Risk Management Practices 

Proposed Regulation 39.6 would 

contribute to the sound risk 

management practices of clearing 

organizations that provide clearing 

services to U.S. persons for their 

proprietary transactions because exempt 

DCOs would be subject to the risk 

management standards that are included 

in the PFMIs. Although the risk 

management requirements of the CEA 

and the Commission regulations 

applicable to registered DCOs would not 

be binding upon exempt DCOs, the risk 

management standards in the PFMIs are 

substantially similar. 

5. Other Public Interest Considerations 

The Commission notes the public 

interest in access to clearing 

organizations outside the United States 

in light of the international nature of 

many swap transactions. The proposed 

amendments to part 39 would codify the 

exemption process for non-U.S. clearing 

organizations that would permit them to 

clear proprietary swap transactions for 

certain U.S. persons, when such 

clearing organizations meet the 

eligibility requirements and conditions 

of the proposed rule. Having a more 

open and transparent process for 

obtaining an exemption from 

registration may encourage more nonU.S. clearing organizations to seek an 

exemption, providing greater 

harmonization of the U.S. and global 

financial markets. 

VI. Related Matters 

A. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires that agencies consider whether 

the regulations they propose will have 

a significant economic impact on a 

substantial number of small entities 

and, if so, provide a regulatory 

flexibility analysis on the impact.44 The 

regulations proposed by the 

Commission will affect only clearing 

organizations. The Commission has 

previously established certain 

definitions of ‘‘small entities’’ to be used 

by the Commission in evaluating the 

impact of its regulations on small 

entities in accordance with the RFA.45

The Commission has previously 

determined that clearing organizations 

are not small entities for the purpose of 

the RFA.46 Accordingly, the Chairman, 

on behalf of the Commission, hereby 

certifies pursuant to 5 U.S.C. 605(b) that 

the proposed regulations will not have 

a significant economic impact on a 

substantial number of small entities. 

B. Paperwork Reduction Act 

The Paperwork Reduction Act 

(PRA) 47 provides that Federal agencies, 

including the Commission, may not 

conduct or sponsor, and a person is not 

required to respond to, a collection of 

information unless it displays a valid 

control number from the Office of 

Management and Budget (OMB). This 

proposed rulemaking contains reporting 

requirements that are collections of 

information within the meaning of the 

PRA. Although the Commission 

anticipates that fewer than ten persons 

will be subject to these requirements, 

which is below the ‘‘ten or more 

persons’’ threshold for PRA compliance, 

the PRA applies to any recordkeeping, 

reporting, or disclosure requirement 

contained in a rule of general 

applicability.48 The Commission is 

proposing to revise Information 

Collection 3038–0076, which contains 

the requirements for applications for 

registration as a DCO, and Information 

Collection 3038–0096, which contains 

swap data reporting requirements, to 

include the collection of information in 

proposed Regulation 39.6. The 

responses to the collection of 

information would be necessary to 

obtain the requested exemption from 

DCO registration. 

1. Application for Exemption and 

Ongoing Reporting Obligations Under 

Proposed Regulation 39.6 

The number of potential respondents 

was estimated based on the number of 

non-U.S. clearing organizations that 

have already applied for, or been 

granted, an exemption from DCO 

registration by the Commission. Based 

on its experience in addressing petitions 

for exemption, the Commission 

anticipates receiving one or two 

applications for exemption per year. 

Burden hours and costs were estimated 

based on existing information 

collections for DCO registration and 

reporting, adjusted to reflect the 

significantly lower burden of the 

proposed regulations. The number of 


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49 Details of the estimated burden related to nonrecurring and recurring costs under part 45 are 

discussed in the part 45 adopting release. See Swap 

Data Recordkeeping and Reporting Requirements, 

77 FR at 2171–2176. 

respondents for the daily and quarterly 

reporting and annual certification 

requirements is conservatively 

estimated at a maximum of seven, based 

on the number of existing exempt DCOs 

and the number of pending petitions. 

Reporting of specific events and 

termination of an exemption are 

expected to occur infrequently. The 

burden is estimated conservatively at 

two per year for event-specific reporting 

and at one per year for reporting of an 

exemption termination. The 

Commission has estimated the burden 

hours for this proposed collection of 

information as follows: 

Application for exemption 

Estimated number of respondents: 2 

Estimated number of reports per 

respondent: 1 

Average number of hours per report: 

32 

Estimated gross annual reporting 

burden: 64 

Information requested by the 

Commission 

Estimated number of respondents: 2 

Estimated number of reports per 

respondent: 1 

Average number of hours per report: 

3 

Estimated gross annual reporting 

burden: 6 

Daily reporting 

Estimated number of respondents: 7 

Estimated number of reports per 

respondent: 250 

Average number of hours per report: 

0.1 

Estimated gross annual reporting 

burden: 175 

Quarterly reporting 

Estimated number of respondents: 7 

Estimated number of reports per 

respondent: 4 

Average number of hours per report: 

2 

Estimated gross annual reporting 

burden: 56 

Event-specific reporting 

Estimated number of respondents: 2 

Estimated number of reports per 

respondent: 1 

Average number of hours per report: 

0.5 

Estimated gross annual reporting 

burden: 1 

Annual certification 

Estimated number of respondents: 7 

Estimated number of reports per 

respondent: 1 

Average number of hours per report: 

1.5 

Estimated gross annual reporting 

burden: 21 

Termination of exemption by request of 

clearing organization 

Estimated number of respondents: 1 

Estimated number of reports per 

respondent: 1 

Average number of hours per report: 

2 

Estimated gross annual reporting 

burden: 2 

Notice to clearing members of 

termination of exemption 

Estimated number of respondents: 1 

Estimated number of reports per 

respondent: 22 

Average number of hours per report: 

0.1 

Estimated gross annual reporting 

burden: 2.2 

2. Reporting by Exempt DCOs in 

Accordance With Part 45 

Proposed Regulation 39.6(d) would 

require an exempt DCO to report data 

regarding the two swaps resulting from 

the novation of an original swap to a 

registered SDR, if the original swap had 

been reported to a registered SDR 

pursuant to part 45 of the Commission’s 

regulations. The Commission is 

proposing to revise the information 

collection for part 45 to add exempt 

DCOs as an additional category of 

reporting entity. The burden for exempt 

DCOs reporting in accordance with part 

45 is estimated to be approximately onequarter of the burden for registered 

DCOs with respect to both non-recurring 

and recurring costs because exempt 

DCOs will not be required to report all 

swaps, only those that result from the 

novation of original swaps that have 

been reported to an SDR.49

Consequently, the burden hours for the 

proposed collection of information in 

this rulemaking have been estimated as 

follows: 

Reporting in accordance with part 45 

Estimated number of respondents: 7 

Estimated number of reports per 

respondent: 1,987 

Average number of hours per report: 

0.1 

Estimated gross annual reporting 

burden: 1,393 

List of Subjects 

17 CFR Part 39 

Commodity futures, Default rules and 

procedures, Exemption, Risk 

management, Settlement procedures, 

System safeguards. 

17 CFR Part 140 

Authority delegations (Government 

agencies), Organization and functions 

(Government agencies). 

For the reasons stated in the 

preamble, the Commodity Futures 

Trading Commission proposes to amend 

17 CFR chapter I as follows: 

PART 39—DERIVATIVES CLEARING 

ORGANIZATIONS 

■ 1. The authority citation for part 39 

continues to read as follows: 

Authority: 7 U.S.C. 2, 7a–1, and 12a; 12 

U.S.C. 5464; 15 U.S.C. 8325. 

■ 2. Revise § 39.1 to read as follows: 

§ 39.1 Scope. 

The provisions of this subpart A 

apply to any derivatives clearing 

organization, as defined under section 

1a(15) of the Act and § 1.3 of this 

chapter, that is registered or is required 

to register with the Commission as a 

derivatives clearing organization 

pursuant to section 5b(a) of the Act, or 

that is applying for an exemption from 

registration pursuant to section 5b(h) of 

the Act. 

■ 3. In § 39.2, add the following 

definitions in alphabetical order to read 

as follows: 

§ 39.2 Definitions. 

* * * * * 

Exempt derivatives clearing 

organization means a derivatives 

clearing organization that the 

Commission has exempted from 

registration under section 5b(a) of the 

Act, pursuant to section 5b(h) of the Act 

and § 39.6. 

Good regulatory standing means, with 

respect to a derivatives clearing 

organization that is organized outside of 

the United States, and is licensed, 

registered, or otherwise authorized to 

act as a clearing organization in its 

home country, that either: 

(1) There has been no finding by the 

home country regulator of material nonobservance of the Principles for 

Financial Market Infrastructures or 

other relevant home country legal 

requirements, or 

(2) There has been a finding by the 

home country regulator of material nonobservance of the Principles for 

Financial Market Infrastructures or 

other relevant home country legal 

requirements but any such finding has 

been or is being resolved to the 

satisfaction of the home country 

regulator by means of corrective action 

taken by the derivatives clearing 

organization. 

Home country means, with respect to 

a derivatives clearing organization that 

is organized outside of the United 

States, the jurisdiction in which the 

derivatives clearing organization is 

organized. 


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Home country regulator means, with 

respect to a derivatives clearing 

organization that is organized outside of 

the United States, an appropriate 

government authority which licenses, 

regulates, supervises, or oversees the 

derivatives clearing organization’s 

clearing activities in the home country. 

* * * * * 

Principles for Financial Market 

Infrastructures means the Principles for 

Financial Market Infrastructures jointly 

published by the Committee on 

Payments and Market Infrastructures 

and the Technical Committee of the 

International Organization of Securities 

Commissions in April 2012, as updated, 

revised, or otherwise amended. 

* * * * * 

■ 4. Add § 39.6 to read as follows: 

§ 39.6 Exemption from derivatives clearing 

organization registration. 

(a) Eligibility for exemption. The 

Commission may exempt, conditionally 

or unconditionally, a derivatives 

clearing organization that is organized 

outside of the United States, from 

registration as a derivatives clearing 

organization for the clearing of swaps 

for U.S. persons, and thereby exempt 

such derivatives clearing organization 

from compliance with provisions of the 

Act and Commission regulations 

applicable to derivatives clearing 

organizations, if: 

(1) The derivatives clearing 

organization is subject to comparable, 

comprehensive supervision and 

regulation by a home country regulator 

as demonstrated by the following: 

(i) The derivatives clearing 

organization is organized in a 

jurisdiction in which a home country 

regulator applies to the derivatives 

clearing organization, on an ongoing 

basis, statutes, rules, regulations, 

policies, or a combination thereof that, 

taken together, are consistent with the 

Principles for Financial Market 

Infrastructures; 

(ii) The derivatives clearing 

organization observes the Principles for 

Financial Market Infrastructures in all 

material respects; and 

(iii) The derivatives clearing 

organization is in good regulatory 

standing in its home country; and 

(2) A memorandum of understanding 

or similar arrangement satisfactory to 

the Commission is in effect between the 

Commission and the derivatives 

clearing organization’s home country 

regulator, pursuant to which, among 

other things, the home country regulator 

agrees to provide to the Commission any 

information that the Commission deems 

necessary to evaluate the initial and 

continued eligibility of the derivatives 

clearing organization for exemption 

from registration or to review its 

compliance with any conditions of such 

exemption. 

(b) Conditions of exemption. An 

exemption from registration as a 

derivatives clearing organization shall 

be subject to any conditions the 

Commission may prescribe including, 

but not limited to: 

(1) Clearing by or for U.S. persons and 

futures commission merchants. The 

exempt derivatives clearing organization 

shall maintain rules that limit swaps 

clearing services for U.S. persons and 

futures commission merchants to the 

following circumstances: 

(i) A U.S. person that is a clearing 

member of the exempt derivatives 

clearing organization may clear swaps 

for itself and those persons identified in 

the definition of ‘‘proprietary account’’ 

set forth in § 1.3 of this chapter; 

(ii) A non-U.S. person that is a 

clearing member of the exempt 

derivatives clearing organization may 

clear swaps for any affiliated U.S. 

person identified in the definition of 

‘‘proprietary account’’ set forth in § 1.3 

of this chapter; and 

(iii) An entity that is registered with 

the Commission as a futures 

commission merchant may be a clearing 

member of the exempt derivatives 

clearing organization, or otherwise 

maintain an account with an affiliated 

broker that is a clearing member, for the 

purpose of clearing swaps for itself and 

those persons identified in the 

definition of ‘‘proprietary account’’ set 

forth in § 1.3 of this chapter. 

(2) Open access. The exempt 

derivatives clearing organization shall 

maintain rules with respect to swaps to 

which one or more of the counterparties 

is a U.S. person. Such rules shall: 

(i) Provide that all swaps with the 

same terms and conditions, as defined 

by product specifications established 

under the exempt derivatives clearing 

organization’s rules, submitted to the 

exempt derivatives clearing organization 

for clearing are economically equivalent 

within the exempt derivatives clearing 

organization and may be offset with 

each other within the exempt 

derivatives clearing organization, to the 

extent offsetting is permitted by the 

exempt derivatives clearing 

organization’s rules; and 

(ii) Provide that there shall be nondiscriminatory clearing of a swap 

executed bilaterally or on or subject to 

the rules of an unaffiliated electronic 

matching platform or trade execution 

facility. 

(3) Consent to jurisdiction; 

designation of agent for service of 

process. The exempt derivatives 

clearing organization shall: 

(i) Consent to jurisdiction in the 

United States; 

(ii) Designate, authorize, and identify 

to the Commission, an agent in the 

United States who shall accept any 

notice or service of process, pleadings, 

or other documents, including any 

summons, complaint, order, subpoena, 

request for information, or any other 

written or electronic documentation or 

correspondence issued by or on behalf 

of the Commission or the United States 

Department of Justice to the exempt 

derivatives clearing organization, in 

connection with any actions or 

proceedings brought against, or 

investigations relating to, the exempt 

derivatives clearing organization or any 

U.S. person or futures commission 

merchant that is a clearing member, or 

that clears swaps through an affiliated 

clearing member, of the exempt 

derivatives clearing organization; and 

(iii) Promptly inform the Commission 

of any change in its designated and 

authorized agent. 

(4) Compliance. The exempt 

derivatives clearing organization shall 

comply, and shall demonstrate 

compliance as requested by the 

Commission, with any condition of its 

exemption. 

(5) Inspection of books and records. 

The exempt derivatives clearing 

organization shall make all documents, 

books, records, reports, and other 

information related to its operation as 

an exempt derivatives clearing 

organization open to inspection and 

copying by any representative of the 

Commission; and in response to a 

request by any representative of the 

Commission, the exempt derivatives 

clearing organization shall, promptly 

and in the form specified, make the 

requested books and records available 

and provide them directly to 

Commission representatives. 

(6) Observance of the Principles for 

Financial Market Infrastructures. On an 

annual basis, within 60 days following 

the end of its fiscal year, the exempt 

derivatives clearing organization shall 

provide to the Commission a 

certification that it continues to observe 

the Principles for Financial Market 

Infrastructures in all material respects. 

(7) Representation of good regulatory 

standing. On an annual basis, within 60 

days following the end of its fiscal year, 

the Commission shall receive from a 

home country regulator, at the request of 

the exempt derivatives clearing 

organization, a written representation 

that the exempt derivatives clearing 

organization is in good regulatory 

standing. 


sradovich on DSK3GMQ082PROD with PROPOSALS
Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Proposed Rules 39935 

(c) General reporting requirements. (1) 

An exempt derivatives clearing 

organization shall provide to the 

Commission the information specified 

in this paragraph and any other 

information that the Commission deems 

necessary, including, but not limited to, 

information for the purpose of the 

Commission evaluating the continued 

eligibility of the exempt derivatives 

clearing organization for exemption 

from registration, reviewing compliance 

by the exempt derivatives clearing 

organization with any conditions of the 

exemption, or conducting oversight of 

U.S. persons and their affiliates, and the 

swaps that are cleared by such persons 

through the exempt derivatives clearing 

organization. Information provided to 

the Commission under this paragraph 

shall be submitted in accordance with 

§ 39.19(b). 

(2) Each exempt derivatives clearing 

organization shall provide to the 

Commission the following information: 

(i) A report compiled as of the end of 

each trading day and submitted to the 

Commission by 10:00 a.m. U.S. Central 

time on the following business day, 

containing: 

(A) Initial margin requirements and 

initial margin on deposit for each U.S. 

person, with respect to swaps; provided, 

however, if a clearing member margins 

on a portfolio basis its own positions 

and the positions of its affiliates, and 

either the clearing member or any of its 

affiliates is a U.S. person, the exempt 

derivatives clearing organization shall 

report initial margin requirements and 

initial margin on deposit for all such 

positions on a combined basis for each 

such clearing member; and 

(B) Daily variation margin, separately 

listing the mark-to-market amount 

collected from or paid to each U.S. 

person, with respect to swaps; provided, 

however, if a clearing member margins 

on a portfolio basis its own positions 

and the positions of its affiliates, and 

either the clearing member or any of its 

affiliates is a U.S. person, the exempt 

derivatives clearing organization shall 

separately list the mark-to-market 

amount collected from or paid to each 

such clearing member, on a combined 

basis. 

(ii) A report compiled as of the last 

day of each fiscal quarter of the exempt 

derivatives clearing organization and 

submitted to the Commission no later 

than 17 business days after the end of 

the exempt derivatives clearing 

organization’s fiscal quarter, containing 

the following information: 

(A) The aggregate clearing volume of 

U.S. persons during the fiscal quarter, 

with respect to swaps. If a clearing 

member is a U.S. person, the volume 

figure shall include the transactions of 

the clearing member and all affiliates. If 

a clearing member is not a U.S. person, 

the volume figure shall include only 

transactions of affiliates that are U.S. 

persons. 

(B) The average open interest of U.S. 

persons during the fiscal quarter, with 

respect to swaps. If a clearing member 

is a U.S. person, the open interest figure 

shall include the positions of the 

clearing member and all affiliates. If a 

clearing member is not a U.S. person, 

the open interest figure shall include 

only positions of affiliates that are U.S. 

persons. 

(C) A list of U.S. persons and futures 

commission merchants that are either 

clearing members or affiliates of any 

clearing member, with respect to the 

clearing of swaps, as of the last day of 

the fiscal quarter. 

(iii) Prompt notice regarding any 

change in the home country regulatory 

regime that is material to the exempt 

derivatives clearing organization’s 

continuing observance of the Principles 

for Financial Market Infrastructures or 

with any of the requirements set forth in 

this section or in the order of exemption 

issued by the Commission; 

(iv) As available to the exempt 

derivatives clearing organization, any 

assessment of the exempt derivatives 

clearing organization’s or the home 

country regulator’s observance of the 

Principles for Financial Market 

Infrastructures, or any portion thereof, 

by a home country regulator or other 

national authority, or an international 

financial institution or international 

organization; 

(v) As available to the exempt 

derivatives clearing organization, any 

examination report, examination 

findings, or notification of the 

commencement of any enforcement or 

disciplinary action by a home country 

regulator; 

(vi) Immediate notice of any change 

with respect to the exempt derivatives 

clearing organization’s licensure, 

registration, or other authorization to act 

as a derivatives clearing organization in 

its home country; 

(vii) In the event of a default by a U.S. 

person or futures commission merchant 

clearing swaps, with such event of 

default determined in accordance with 

the rules of the exempt derivatives 

clearing organization, immediate notice 

of the default including the name of the 

U.S. person or futures commission 

merchant, a list of the positions held by 

the U.S. person or futures commission 

merchant, and the amount of the U.S. 

person’s or futures commission 

merchant’s financial obligation; and 

(viii) Notice of action taken against a 

U.S. person or futures commission 

merchant by an exempt derivatives 

clearing organization, no later than two 

business days after the exempt 

derivatives clearing organization takes 

such action against a U.S. person or 

futures commission merchant. 

(d) Swap data reporting requirements. 

If a clearing member clears through an 

exempt derivatives clearing organization 

a swap that has been reported to a 

registered swap data repository 

pursuant to part 45 of this chapter, the 

exempt derivatives clearing organization 

shall report to a registered swap data 

repository data regarding the two swaps 

resulting from the novation of the 

original swap that had been submitted 

to the exempt derivatives clearing 

organization for clearing. The exempt 

derivatives clearing organization shall 

also report the termination of the 

original swap accepted for clearing by 

the exempt derivatives clearing 

organization, to the swap data 

repository to which the original swap 

was reported. In order to avoid 

duplicative reporting for such 

transactions, the exempt derivatives 

clearing organization shall have rules 

that prohibit the reporting, pursuant to 

part 45 of this chapter, of the two new 

swaps by the original counterparties to 

the original swap. 

(e) Application procedures. (1) An 

entity seeking to be exempt from 

registration as a derivatives clearing 

organization shall file an application for 

exemption with the Secretary of the 

Commission in the format and manner 

specified by the Commission. The 

Commission will review the application 

for exemption and may approve or deny 

the application or, if deemed 

appropriate, exempt the applicant from 

registration as a derivatives clearing 

organization subject to conditions in 

addition to those set forth in paragraph 

(b) of this section. 

(2) Application. An applicant for 

exemption from registration as a 

derivatives clearing organization shall 

submit to the Commission the 

information and documentation 

described in this section. Such 

information and documentation shall be 

clearly labeled as outlined in this 

section. The Commission will not 

commence processing an application 

unless the applicant has filed a 

complete application. Upon its own 

initiative, an applicant may file with its 

completed application for exemption 

additional information that may be 

necessary or helpful to the Commission 

in processing the application. The 

application shall include: 


sradovich on DSK3GMQ082PROD with PROPOSALS
39936 Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Proposed Rules 

(i) A cover letter containing the 

following information: 

(A) Exact name of applicant as 

specified in its charter, and the name 

under which business will be conducted 

(including acronyms); 

(B) Address of applicant’s principal 

office; 

(C) List of principal office(s) and 

address(es) where clearing activities are/ 

will be conducted; 

(D) A list of all regulatory licenses or 

registrations of the applicant (or 

exemptions from any licensing 

requirement) and the regulator granting 

such license or registration; 

(E) Date of the applicant’s fiscal year 

end; 

(F) Contact information for the person 

or persons to whom the Commission 

should address questions and 

correspondence regarding the 

application; and 

(G) A signature and date by a duly 

authorized representative of the 

applicant. 

(ii) A description of the applicant’s 

business plan for providing clearing 

services as an exempt derivatives 

clearing organization, including 

information as to the classes of swaps 

that will be cleared and whether the 

swaps are subject to a clearing 

requirement issued by the Commission 

or the applicant’s home country 

regulator; 

(iii) Documents that demonstrate that 

applicant is organized in a jurisdiction 

in which its home country regulator 

applies to the applicant, on an ongoing 

basis, statutes, rules, regulations, 

policies, or a combination thereof that, 

taken together, are consistent with the 

Principles for Financial Market 

Infrastructures; 

(iv) A written representation from the 

applicant’s home country regulator that 

the applicant is in good regulatory 

standing; 

(v) Copies of the applicant’s most 

recent disclosures that are necessary to 

observe the Principles for Financial 

Market Infrastructures, including the 

financial market infrastructure 

disclosure template set forth in Annex 

A to the Disclosure Framework and 

Assessment Methodology for the 

Principles for Financial Market 

Infrastructures, any other such 

disclosure framework issued under the 

authority of the International 

Organization of Securities Commissions 

that is required for observance of the 

Principles for Financial Market 

Infrastructures, and the URL to the 

specific page(s) on the applicant’s 

website where such disclosures may be 

found; 

(vi) A representation that the 

applicant will comply with each of the 

requirements and conditions of 

exemption set forth in paragraphs (b), 

(c), and (d) of this section, and the terms 

and conditions of its order of exemption 

as issued by the Commission; 

(vii) A copy of the applicant’s rules 

that meet the requirements of 

paragraphs (b)(2) and (d) of this section, 

as applicable; and 

(viii) The applicant’s consent to 

jurisdiction in the United States, and 

the name and address of the applicant’s 

designated agent in the United States, 

pursuant to paragraph (b)(3) of this 

section. 

(3) Submission of supplemental 

information. At any time during its 

review of the application for exemption 

from registration as a derivatives 

clearing organization, the Commission 

may request that the applicant submit 

supplemental information in order for 

the Commission to process the 

application, and the applicant shall file 

such supplemental information in the 

format and manner specified by the 

Commission. 

(4) Amendments to pending 

application. An applicant for exemption 

from registration as a derivatives 

clearing organization shall promptly 

amend its application if it discovers a 

material omission or error, or if there is 

a material change in the information 

provided to the Commission in the 

application or other information 

provided in connection with the 

application. 

(5) Public information. The following 

sections of an application for exemption 

from registration as a derivatives 

clearing organization will be public: The 

cover letter set forth in paragraph 

(e)(2)(i) of this section; the 

documentation required in paragraphs 

(e)(2)(iii) and (e)(2)(v) of this section; 

rules that meet the requirements of 

paragraphs (b)(2) and (d) of this section, 

as applicable; and any other part of the 

application not covered by a request for 

confidential treatment, subject to § 145.9 

of this chapter. 

(f) Modification of an exemption. The 

Commission may, either at the request 

of the exempt derivatives clearing 

organization or on its own initiative, 

modify the terms and conditions of an 

order of exemption, based on changes to 

or omissions in material facts or 

circumstances pursuant to which the 

order of exemption was issued, or for 

any reason in its discretion. 

(g) Termination of exemption upon 

request by an exempt derivatives 

clearing organization. (1) An exempt 

derivatives clearing organization may 

petition the Commission to terminate its 

exemption if: 

(i) Changed circumstances result in 

the exempt derivatives clearing 

organization no longer qualifying for an 

exemption; 

(ii) The exempt derivatives clearing 

organization intends to cease clearing 

swaps for U.S. persons; or 

(iii) In conjunction with the petition, 

the exempt derivatives clearing 

organization submits a completed Form 

DCO to become a registered derivatives 

clearing organization pursuant to 

section 5b(a) of the Act. 

(2) The petition for termination of 

exemption shall include a detailed 

explanation of the facts and 

circumstances supporting the request 

and the exempt derivatives clearing 

organization’s plans for, as may be 

applicable, the liquidation or transfer of 

the swaps positions and related 

collateral of U.S. persons. 

(3) The Commission shall issue an 

order of termination within a reasonable 

time appropriate to the circumstances 

or, as applicable, in conjunction with 

the issuance of an order of registration. 

(h) Notice to clearing members of 

termination of exemption. Following the 

Commission’s issuance of an order of 

termination (unless issued in 

conjunction with the issuance of an 

order of registration), the exempt 

derivatives clearing organization shall 

provide immediate notice of such 

termination to its clearing members. 

Such notice shall include: 

(1) A copy of the Commission’s order 

of termination; 

(2) A description of the procedures for 

orderly disposition of any open swaps 

positions that were cleared for U.S. 

persons; and 

(3) An instruction to clearing 

members, requiring that they provide 

the exempt derivatives clearing 

organization’s notice of such 

termination to all U.S. persons clearing 

swaps through such clearing members. 

■ 5. Revise § 39.9 to read as follows: 

§ 39.9 Scope. 

The provisions of this subpart B apply 

to any derivatives clearing organization, 

as defined under section 1a(15) of the 

Act and § 1.3 of this chapter, that is 

registered with the Commission as a 

derivatives clearing organization 

pursuant to section 5b of the Act. The 

provisions of this subpart B do not 

apply to any exempt derivatives clearing 

organization, as defined under § 39.2. 


sradovich on DSK3GMQ082PROD with PROPOSALS
Federal Register / Vol. 83, No. 156 / Monday, August 13, 2018 / Proposed Rules 39937 

PART 140—ORGANIZATION, 

FUNCTIONS, AND PROCEDURES OF 

THE COMMISSION 

■ 6. The authority citation for part 140 

continues to read as follows: 

Authority: 7 U.S.C. 2(a)(12), 12a, 13(c), 

13(d), 13(e), and 16(b). 

■ 7. Amend § 140.94 as follows: 

■ a. Revise the introductory text of 

paragraph (c); 

■ b. Redesignate paragraphs (c)(4) 

through (c)(13) as paragraphs (c)(5) 

through (c)(14); and 

■ c. Add new paragraph (c)(4). 

The revisions and additions read as 

follows: 

§ 140.94 Delegation of authority to the 

Director of the Division of Swap Dealer and 

Intermediary Oversight and the Director of 

the Division of Clearing and Risk. 

* * * * * 

(c) The Commission hereby delegates, 

until such time as the Commission 

orders otherwise, the following 

functions to the Director of the Division 

of Clearing and Risk and to such 

members of the Commission’s staff 

acting under his or her direction as he 

or she may designate from time to time: 

* * * * * 

(4) All functions reserved to the 

Commission in § 39.6 of this chapter, 

except for the authority to: 

(i) Grant an exemption under § 39.6(a) 

of this chapter; 

(ii) Prescribe conditions to an 

exemption under § 39.6(b) of this 

chapter; 

(iii) Modify an exemption under 

§ 39.6(f) of this chapter; and 

(iv) Terminate an exemption under 

§ 39.6(g)(3) of this chapter. 

* * * * * 

Issued in Washington, DC, on August 8, 

2018, by the Commission. 

Christopher Kirkpatrick, 

Secretary of the Commission. 

Note: The following appendices will not 

appear in the Code of Federal Regulations. 

Appendices to Exemption From 

Derivatives Clearing Organization 

Registration—Commission Voting 

Summary and Chairman’s Statement 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Giancarlo and 

Commissioners Quintenz and Behnam voted 

in the affirmative. No Commissioner voted in 

the negative. 

Appendix 2—Statement of Chairman J. 

Christopher Giancarlo 

This proposal is part of Project KISS’s 

simple and straightforward efforts to make 

what has been an internal process public and 

transparent. Under the Commodity Exchange 

Act (CEA), the Commission may 

conditionally or unconditionally exempt a 

derivatives clearing organization (DCO) from 

registration for the clearing of swaps if the 

Commission determines that the clearing 

organization is subject to ‘‘comparable, 

comprehensive supervision and regulation’’ 

by appropriate government authorities in the 

clearing organization’s home country. 

Pursuant to this authority, the Commission 

has exempted four non-U.S. clearing 

organizations from DCO registration. 

The Commission is proposing to adopt 

regulations that would codify the policies 

and procedures that the Commission is 

currently following with respect to granting 

exemptions from DCO registration. The 

proposed regulations are consistent with the 

policies and procedures that the Commission 

is currently following, and with the terms 

and conditions that the Commission has 

imposed on each of the clearing 

organizations to which it has previously 

issued orders of exemption. 

The exempt DCO process applies a 

comparable, outcomes-based approach to 

reflect the Commission’s recognition that a 

foreign jurisdiction may have different 

regulations for its central counterparties 

(CCP) but share the same regulatory goals. 

Under the proposal, for CCPs in foreign 

jurisdictions, a framework that conforms to 

the Committee on Payments and Market 

Infrastructures (CPMI) and the International 

Organization of Securities Commissions 

(IOSCO) Principles for Financial Market 

Infrastructures (PFMI) would be deemed 

comparable to the CFTC’s requirements for 

domestic CCPs. 

The proposal is part of the Commission’s 

continued efforts to foster cross-border 

cooperation and show deference to home 

country regulation that is deemed 

comparable to the Commission’s regulations. 

As our regulatory counterparts continue to 

implement swaps reforms in their markets, it 

is critical that the Commission endeavor to 

ensure that its rules do not unnecessarily 

conflict and fragment the global marketplace. 

For this reason, the Commission should 

operate on the basis of comity, not 

uniformity, with non-U.S. regulators. This 

avoids the untenable state of overlapping and 

duplicative regulations. The current proposal 

reflects this vision. 

I support this proposed rule from the 

Division of Clearing and Risk (DCR). I look 

forward to hearing comments on the 

proposal. 

[FR Doc. 2018–17335 Filed 8–10–18; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket Number USCG–2018–0723] 

RIN 1625–AA00 

Safety Zone; Delaware River; Penn’s 

Landing; Philadelphia, PA; Fireworks 

Display 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Coast Guard proposes to 

establish a temporary safety zone on a 

portion of the Delaware River in 

Philadelphia, PA. This action is 

necessary to protect the surrounding 

public and vessels on these navigable 

waters adjacent to Penn’s Landing, 

Philadelphia, PA, during a fireworks 

display on September 16, 2018. This 

proposed rulemaking would prohibit 

persons and vessels from entering, 

transiting, or remaining within the 

safety zone unless authorized by the 

Captain of the Port Delaware Bay or a 

designated representative. We invite 

your comments on this proposed 

rulemaking. 

DATES: Comments and related material 

must be received by the Coast Guard on 

or before August 28, 2018. 

ADDRESSES: You may submit comments 

identified by docket number USCG– 

2018–0723 using the Federal 

eRulemaking Portal at http://

www.regulations.gov. See the ‘‘Public 

Participation and Request for 

Comments’’ portion of the 

SUPPLEMENTARY INFORMATION section for 

further instructions on submitting 

comments. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions about this proposed 

rulemaking, call or email Petty Officer 

Thomas Welker, U.S. Coast Guard, 

Sector Delaware Bay, Waterways 

Management Division; telephone 215– 

271–4814, email Thomas.j.welker@

uscg.mil. 

SUPPLEMENTARY INFORMATION: 

I. Table of Abbreviations 

CFR Code of Federal Regulations 

DHS Department of Homeland Security 

FR Federal Register 

NPRM Notice of proposed rulemaking 

§ Section 

U.S.C. United States Code 

II. Background, Purpose, and Legal 

Basis 

On July 18, 2018, the Mexican 

Cultural Society notified the Coast 


sradovich on DSK3GMQ082PROD with PROPOSALS