Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Rules and Regulations 43785 

1See 17 CFR 145.9. 

2 5 U.S.C. 551, et seq. 

3 5 U.S.C. 552. 

4See Dodd-Frank Wall Street Reform and 

Consumer Protection Act, Public Law 111–203, 124 

Stat. 1376 (July 21, 2010). 

5 7 U.S.C. 1 et seq. (amended 2010). 

6 7 U.S.C. 2(i). 

7 7 U.S.C. 6s. 

8Examples of section 4s implementing rules that 

become effective for SDs and MSPs at the time of 

their registration include requirements relating to 

swap data reporting (Commission regulation 

23.204) and conflicts of interest (Commission 

regulation 23.605(c)–(d)). The chief compliance 

officer requirement (Commission regulations 3.1 

and 3.3) is an example of those rules that have 

specific compliance dates. The compliance dates 

are summarized on the Compliance Dates page of 

the Commission’s Web site. (http://www.cftc.gov/ 

LawRegulation/DoddFrankAct/ComplianceDates/ 

index.htm). The Commission’s regulations are 

codified at 17 CFR Ch. 1. 

9These include rules under CEA section 4s(e),7 

U.S.C. 6s(e) (governing capital and margin 

requirements for SDs and MSPs), and CEA section 

4s(l), 7 U.S.C. 6s(l) (governing segregation 

requirements for uncleared swaps). 

10Cross-Border Application of Certain Swaps 

Provisions of the Commodity Exchange Act, 77 FR 

41214 (Jul. 12, 2012) (‘‘Proposed Guidance’’). 

11 7 U.S.C. 1a(49) (defining the term ‘‘swap 

dealer’’). 

COMMODITY FUTURES TRADING 

COMMISSION 

17 CFR Chapter I 

RIN 3038–AE05 

Exemptive Order Regarding 

Compliance With Certain Swap 

Regulations 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Exemptive order; request for 

comments. 

SUMMARY: On January 7, 2013, the 

Commodity Futures Trading 

Commission (‘‘Commission’’ or 

‘‘CFTC’’) issued a final order (‘‘January 

Order’’) that granted market participants 

temporary conditional relief from 

certain provisions of the Commodity 

Exchange Act (‘‘CEA’’), as amended by 

Title VII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

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

(and Commission regulations 

thereunder). The January Order expires 

on July 12, 2013. In this Exemptive 

Order (‘‘Exemptive Order’’), the 

Commission provides temporary 

conditional relief effective upon the 

expiration of the January Order in order 

to facilitate transition to the Dodd-Frank 

swaps regime. 

DATES: The Exemptive Order is effective 

July 13, 2013, and will expire December 

21, 2013, or such earlier date specified 

in the Exemptive Order. 

ADDRESSES: You may submit comments, 

identified by RIN number 3038–AE05, 

by any of the following methods: 

• The agency’s Web site: at http:// 

comments.cftc.gov. Follow the 

instructions for submitting comments 

through the Web site. 

• Mail: Melissa D. Jurgens, Secretary 

of the Commission, Commodity Futures 

Trading Commission, Three Lafayette 

Centre, 1155 21st Street NW., 

Washington, DC 20581. 

• Hand Delivery/Courier: Same as 

mail above. 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

Please submit your comments using 

only one method. 

All comments must be submitted in 

English, or if not, accompanied by an 

English translation. Comments will be 

posted as received to www.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, 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 www.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 

proposal will be retained in the public 

comment file and will be considered as 

required under the Administrative 

Procedure Act 2 and other applicable 

laws, and may be accessible under the 

Freedom of Information Act.3

FOR FURTHER INFORMATION CONTACT: Gary 

Barnett, Director, Division of Swap 

Dealer and Intermediary Oversight, 

(202) 418–5977, gbarnett@cftc.gov; 

Sarah E. Josephson, Director, Office of 

International Affairs, (202) 418–5684, 

sjosephson@cftc.gov; Mark Fajfar, 

Assistant General Counsel, Office of 

General Counsel, (202) 418–6636, 

mfajfar@cftc.gov; Laura B. Badian, 

Counsel, Office of General Counsel, 

(202) 418–5969, lbadian@cftc.gov; Evan 

H. Winerman, Attorney-Advisor, Office 

of General Counsel, (202) 418–5674, 

ewinerman@cftc.gov; Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Act,4 which 

amended the CEA 5 to establish a new 

regulatory framework for swaps. The 

legislation was enacted to reduce 

systemic risk, increase transparency, 

and promote market integrity within the 

financial system by, among other things: 

(1) Providing for the registration and 

comprehensive regulation of swap 

dealers (‘‘SDs’’) and major swap 

participants (‘‘MSPs’’); (2) imposing 

clearing and trade execution 

requirements on standardized derivative 

products; (3) creating rigorous 

recordkeeping and data reporting 

regimes with respect to swaps, 

including real-time public reporting; 

and (4) enhancing the Commission’s 

rulemaking and enforcement authorities 

over all registered entities, 

intermediaries, and swap counterparties 

subject to the Commission’s oversight. 

Section 722(d) of the Dodd-Frank Act 

also amended the CEA to add section 

2(i), which provides that the swaps 

provisions of the CEA apply to crossborder activities when certain 

conditions are met, namely, when such 

activities have a ‘‘direct and significant 

connection with activities in, or effect 

on, commerce of the United States’’ or 

when they contravene a Commission 

rulemaking.6

In the nearly three years since its 

enactment, the Commission has 

finalized 69 actions to implement Title 

VII of the Dodd-Frank Act. The finalized 

actions include rules promulgated 

under CEA section 4s,7 which address 

registration of SDs and MSPs and other 

substantive requirements applicable to 

SDs and MSPs. Notably, many section 

4s requirements applicable to SDs and 

MSPs are tied to the date on which a 

person is required to register, unless a 

later compliance date is specified.8 A 

number of other rules specifically 

applicable to SDs and MSPs have been 

proposed but are not finalized.9

Further, the Commission published 

for public comment the Proposed 

Guidance,10 which set forth the manner 

in which it proposed to interpret section 

2(i) of the CEA as it applies to the 

requirements under the Dodd-Frank Act 

and the Commission’s regulations 

promulgated thereunder regarding 

cross-border swaps activities. 

Specifically, in the Proposed Guidance, 

the Commission described the general 

manner in which it proposed to 

consider: (1) Whether a non-U.S. 

person’s swap dealing activities are 

sufficient to require registration as a 

‘‘swap dealer,’’ 11 as further defined in a 

joint release adopted by the Commission 


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43786 Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Rules and Regulations 

12See Further Definition of ‘Swap Dealer,’ 

‘Security-Based Swap Dealer,’ ‘Major Swap 

Participant,’ ‘Major Security-Based Swap 

Participant’ and ‘Eligible Contract Participant,’ 77 

FR 305969 (May 23, 2012) (‘‘Final Entities Rules’’). 

13 7 U.S.C. 1a(33) (defining the term ‘‘major swap 

participant’’). 

14 77 FR 41110 (Jul. 12, 2012). 

15 78 FR 858 (Jan. 7, 2013). 

16CFTC Division of Swap Dealer and 

Intermediary Oversight, Re: Time-Limited NoAction Relief: Swaps Only With Certain Persons to 

be Included in Calculation of Aggregate Gross 

Notional Amount for Purposes of Swap Dealer De 

Minimis Exception and Calculation of Whether a 

Person is a Major Swap Participant, No-Action 

Letter No. 12–22 (Oct. 12, 2012). 

17See Interpretive Guidance and Policy 

Statement Regarding Compliance with Certain 

Swap Regulations, (‘‘Guidance’’), adopted 

concurrently with the Exemptive Order. 

18As stated in the Guidance, any comparability 

analysis will be based on a comparison of specific 

foreign requirements against specific related CEA 

provisions and Commission regulations in 13 

categories of regulatory obligations, considering 

certain factors described in the Guidance. 

19The Commission notes that of 78 SDs and two 

MSPs registered as of June 14, 2013, 33 SDs are 

from six non-U.S. jurisdictions: Twenty from the 

European Union; five from Australia; five from 

Canada; one from Japan; one from Hong Kong; and 

one from Switzerland. 

20See 5 U.S.C. 553(b)(B). 

and the Securities and Exchange 

Commission (‘‘SEC’’) (collectively, the 

‘‘Commissions’’); 12 (2) whether a nonU.S. person’s swap positions are 

sufficient to require registration as a 

‘‘major swap participant,’’ 13 as further 

defined in the Final Entities Rules; and 

(3) the treatment of foreign branches, 

agencies, affiliates, and subsidiaries of 

U.S. SDs and U.S. branches of non-U.S. 

SDs. The Proposed Guidance also 

generally described the policy basis and 

procedural framework underlying the 

Commission’s determination to allow 

compliance with a comparable 

regulatory requirement of a foreign 

jurisdiction to substitute for compliance 

with the requirements of the CEA and 

Commission regulations thereunder. 

Last, the Proposed Guidance set forth 

the manner in which the Commission 

proposed to interpret section 2(i) of the 

CEA as it applies to the clearing, 

trading, and certain reporting 

requirements under the Dodd-Frank Act 

with respect to swaps between 

counterparties that are not SDs or MSPs. 

Contemporaneously with the 

Proposed Guidance, the Commission 

published the Exemptive Order 

Regarding Compliance With Certain 

Swap Regulations (‘‘Proposed Order’’) 14

pursuant to section 4(c) of the CEA, in 

order to foster an orderly transition to 

the new swaps regulatory regime and to 

provide market participants greater 

certainty regarding their obligations 

with respect to cross-border swaps 

activities prior to finalization of the 

Proposed Order. The Proposed Order 

would have granted temporary relief 

from certain swaps provisions of Title 

VII of the Dodd-Frank Act. 

On January 7, 2013, the Commission 

published the Final Exemptive Order 

Regarding Compliance with Certain 

Swap Regulations (‘‘January Order’’),15

which finalized the Proposed Order, 

with modifications, and granted 

temporary relief from certain swaps 

provisions of Title VII of the DoddFrank Act. In particular, the January 

Order: (1) Applies, for purposes of the 

January Order, a definition of the term 

‘‘U.S. person’’ based on the counterparty 

criteria set forth in CFTC Letter No. 12– 

22,16 with certain modifications; (2) 

provides relief concerning SD de 

minimis and MSP threshold 

calculations; (3) classifies, for purposes 

of the January Order, requirements of 

the CEA and Commission regulations as 

either ‘‘Entity-Level Requirements’’ or 

‘‘Transaction-Level Requirements;’’ (4) 

allows non-U.S. persons that register as 

SDs or MSPs to delay compliance with 

certain Entity-Level Requirements and 

Transaction-Level Requirements; and (5) 

allows foreign branches of U.S. SDs or 

MSPs to delay compliance with certain 

Transaction-Level Requirements. The 

January Order was effective December 

21, 2012, and expires July 12, 2013. 

II. Need for Further Exemptive Relief 

With Request for Comments 

In issuing the January Order, the 

Commission attempted to be responsive 

to industry’s concerns regarding 

implementation and thereby ensure that 

market practices would not be 

unnecessarily disrupted during the 

transition to the new swaps regulatory 

regime. At the same time, however, the 

Commission endeavored to comply with 

the Congressional mandate to 

implement the new SD and MSP 

regulatory scheme in a timely manner. 

Accordingly, the January Order was 

carefully tailored both in scope and 

duration in order to strike the proper 

balance between these competing 

demands. 

Following the issuance of the January 

Order, Commission staff addressed 

various implementation issues through 

no-action letters and interpretative 

letters in order to ensure a smooth 

transition to the new swaps regulatory 

regime. Furthermore, the Commission 

and its staff have closely consulted with 

SEC staff and with foreign regulators in 

an effort to harmonize cross-border 

regulatory approaches. As a result, 

significant progress has been made 

towards implementation of the DoddFrank swaps regime. Under these 

circumstances, the Commission does 

not believe that an extension of the 

January Order is necessary or 

appropriate. The Commission believes, 

however, that further transitional relief 

is necessary in order to avoid 

unnecessary market disruptions and to 

facilitate market participants’ transition 

to the new Dodd-Frank swaps regime. 

Specifically, with the expiration of the 

January Order, the temporary definition 

of the term ‘‘U.S. person’’ will no longer 

be available. As a result, market 

participants will need additional time to 

adjust their operational and compliance 

systems in order to incorporate the 

revised scope of the term ‘‘U.S. person.’’ 

The Commission also recognizes that 

implementation of the Commission’s 

substituted compliance program would 

benefit from additional time.17 Under 

this ‘‘substituted compliance program,’’ 

the Commission may determine that 

certain laws and regulations of a foreign 

jurisdiction are comparable to, and as 

comprehensive as, a corresponding 

category of U.S. laws and regulations.18

A finding of comparability, however, 

may not be possible at this time for a 

number of reasons, including that the 

foreign jurisdiction has not yet 

implemented or finalized particular 

requirements and that the Commission 

does not have sufficient information to 

make the comparability determinations 

(‘‘Substituted Compliance 

Determinations’’). Moreover, the 

Commission has only recently received 

requests for Substituted Compliance 

Determinations from parties located in 

Australia, Canada, the European Union, 

Hong Kong, Japan, and Switzerland.19

The Commission is issuing the 

Exemptive Order today, with a request 

for comments, as it is cognizant that, in 

the absence of immediate exemptive 

relief, market participants will be faced 

with significant legal uncertainty and 

the risk of adverse consequences to their 

global business, especially in light of the 

ongoing discussions with foreign 

regulatory entities and their evolving 

regulatory regimes. For all of the 

foregoing reasons, the Commission finds 

that public notice and comment on this 

Exemptive Order would be 

impracticable, unnecessary, and 

contrary to the public interest.20

Because the Commission understands 

that the transition to the Guidance is 

complex and could apply in varied 

ways to different situations, the 

Commission is seeking public comment 

on any issues that are not fully 

addressed by the Exemptive Order. 

Thus, the Exemptive Order is effective 

as of July 13, 2013, and the Commission 

is soliciting comments for 30 days. The 


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Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Rules and Regulations 43787 

21 7 U.S.C. 1a(49) and 1a(33). See Final Entities 

Rules. 

22Section 1a(49)(D) of the CEA, 7 U.S.C. 

1a(49)(D), provides that ‘‘[t]he Commission shall 

exempt from designation as a swap dealer an entity 

that engages in a de minimis quantity of swap 

dealing in connection with transactions with or on 

behalf of its customers. The Commission shall 

promulgate regulations to establish factors with 

respect to the making of this determination to 

exempt.’’ This provision is implemented in 

Commission regulation 1.3(ggg)(4). 23As used in the Exemptive Order, the meaning 

of the term ‘‘swap dealing’’ is consistent with that 

used in the Final Entities Rules. 

24Under Commission regulations 3.10(a)(1)(v)(C) 

and 23.21, a person is required to register as an SD 

when, on or after October 12, 2012, the person falls 

within the definition of an SD. However, the rule 

defining ‘‘swap dealer’’ includes a de minimis 

threshold so that an entity is not an SD if it, together 

with the entities controlling, controlled by, and 

under common control with it, engages in swap 

dealing activity during the prior 12 months in an 

aggregate gross notional amount of less than the 

specified thresholds. The rule further specifies that 

swap dealing activity engaged in before the effective 

date of both the ‘‘swap dealer’’ and ‘‘swap’’ 

definition rules (i.e., before October 12, 2012) does 

not count toward the de minimis threshold. The 

rule also provides that an entity that exceeds the de 

minimis threshold must register as an SD two 

months after the end of the month in which it 

exceeds the threshold. See Commission regulation 

1.3(ggg)(4). 

25On the other hand, the Commission believes 

that it is not appropriate to provide a non-U.S. 

person with relief from the registration requirement 

when the aggregate level of its swap dealing with 

U.S. persons, as that term is defined in the 

Guidance, exceeds the de minimis level of swap 

dealing, or when the level of its swap positions 

with U.S. persons, again as that term is defined 

above, exceeds one of the MSP thresholds. In the 

Commission’s view, such relief from the registration 

requirement is inappropriate when a level of swaps 

activities that is substantial enough to require 

registration as an SD or an MSP when conducted 

by a U.S. person, is conducted by a non-U.S. person 

with U.S. persons as counterparties. 

26For this purpose, the Commission construes 

‘‘affiliates’’ to include persons under common 

control as stated in the Commission’s final rule 

further defining the term ‘‘swap dealer,’’ which 

defines control as ‘‘the possession, direct or 

indirect, of the power to direct or cause the 

direction of the management and policies of a 

person, whether through the ownership of voting 

securities, by contract or otherwise.’’ See Final 

Entities Rules, 77 FR at 30631 n. 437. 

Commission will take into consideration 

arguments made in all comments 

received and make adjustments to the 

Exemptive Order, as necessary. 

In summary, like the January Order, 

the Exemptive Order will provide 

targeted, time-limited relief from certain 

Dodd-Frank requirements to facilitate an 

orderly transition to the Dodd-Frank 

regulatory regime, while, at the same 

time, ensuring that the Dodd-Frank 

swaps market reform is implemented 

without undue delay. 

III. Scope of Exemptive Order 

A. Definition of ‘‘U.S. Person’’ and 

Phase-In of Guaranteed Affiliates and 

‘‘Affiliate Conduits’’ 

As discussed above, the Commission 

recognizes that market participants may 

need additional time to facilitate their 

transition to the interpretation of the 

term ‘‘U.S. person.’’ Accordingly, under 

the Exemptive Order, the definition of 

the term ‘‘U.S. person’’ contained in the 

January Order will continue to apply 

from July 13, 2013 (the date on which 

the Exemptive Order is effective) until 

75 days after the Final Guidance is 

published in the Federal Register. The 

Commission expects that this step, and 

the other relief provided in this 

Exemptive Order, will substantially 

address concerns regarding the 

complexity of implementing the swap 

requirements for the interim period 

during which the Exemptive Order is in 

effect. In addition, guaranteed affiliates 

and affiliate conduits do not need to 

comply with Transaction-Level 

Requirements relating to swaps with 

non-U.S. persons and foreign branches 

of U.S. swap dealers and MSPs until 75 

days after the Final Guidance is 

published in the Federal Register. 

B. De Minimis Calculation 

The Commission has adopted final 

rules and interpretive guidance 

implementing the statutory definitions 

of the terms ‘‘swap dealer’’ and ‘‘major 

swap participant’’ in CEA sections 

1a(49) and 1a(33).21 The Final Entities 

Rules delineate the activities that cause 

a person to be an SD and the level of 

swap positions that cause a person to be 

an MSP. In addition, the Commission 

has adopted rules concerning the 

statutory exceptions from the definition 

of an SD, including the de minimis 

exception.22 Commission regulation 

1.3(ggg)(4) sets forth a de minimis 

threshold of swap dealing, which takes 

into account the notional amount of a 

person’s swap dealing activity over the 

prior 12 months.23 When a person 

engages in swap dealing transactions 

above that threshold, the person meets 

the SD definition in section 1a(49) of the 

CEA.24 Commission regulations 

1.3(jjj)(1) and 1.3(lll)(1) set forth swap 

position thresholds for the MSP 

definition in Commission regulation 

1.3(hhh). When a person holds swap 

positions above those thresholds, such 

person meets the MSP definition in 

section 1a(39) of the CEA. 

As described in the January Order, the 

Commission believed it appropriate to 

provide, during the pendency of the 

Commission’s cross-border interpretive 

guidance, temporary relief for non-U.S. 

persons (regardless of whether the nonU.S. persons’ swap obligations are 

guaranteed by U.S. persons) from the 

requirement that a person include all its 

swaps in its calculation of the aggregate 

gross notional amount of swaps 

connected with its swap dealing activity 

for SD purposes or in its calculations for 

MSP purposes.25 In order to facilitate an 

orderly transition to the revised scope of 

the term ‘‘U.S. person,’’ the Exemptive 

Order provides that until 75 days after 

the Guidance is published in the 

Federal Register, a non-U.S. person 

(regardless of whether the non-U.S. 

person’s swaps obligations are 

guaranteed by U.S. persons) does not 

need to include in its calculation of the 

aggregate gross notional amount of 

swaps connected with its swap dealing 

activity for purposes of Commission 

regulation 1.3(ggg)(4) or in its 

calculation of whether it is an MSP for 

purposes of Commission regulation 

1.3(hhh), any swaps where the 

counterparty is a non-U.S. person, or 

any swap where the counterparty is a 

foreign branch of a U.S. person that is 

registered as a swap dealer. 

C. Aggregation 

Commission regulation 1.3(ggg)(4) 

requires that a person include, in 

determining whether its swap dealing 

activities exceed the de minimis 

threshold, the aggregate notional value 

of swap dealing transactions entered by 

its affiliates under common control. 

Under the January Order, a non-U.S. 

person that is engaged in swap dealing 

activities with U.S. persons as of the 

effective date of the January Order is not 

required to include, in its calculation of 

the aggregate gross notional amount of 

swaps connected with its swap dealing 

activity for purposes of Commission 

regulation 1.3(ggg)(4), the aggregate 

gross notional amount of swaps 

connected with the swap dealing 

activity of its U.S. affiliates under 

common control.26 Further, a non-U.S. 

person that is engaged in swap dealing 

activities with U.S. persons as of the 

effective date of the January Order and 

is an affiliate under common control 

with a person that is registered as an SD 

is also not required to include, in its 

calculation of the aggregate gross 

notional amount of swaps connected 

with its swap dealing activity for 

purposes of Commission regulation 

1.3(ggg)(4), the aggregate gross notional 

amount of swaps connected with the 

swap dealing activity of any non-U.S. 

affiliate under common control that is 

either (i) engaged in swap dealing 

activities with U.S. persons as of the 

effective date of the January Order or (ii) 

registered as an SD. Also, under the 

January Order, a non-U.S. person is not 

required to include, in its calculation of 

the aggregate gross notional amount of 

swaps connected with its swap dealing 


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43788 Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Rules and Regulations 

27Because, as described in the Guidance, 

substituted compliance is not possible with respect 

to Large Trader Reporting (‘‘LTR’’) requirements 

(i.e., non-U.S. persons that are subject to part 20 of 

the Commission’s regulations would comply with it 

in the same way that U.S. persons comply), LTR 

requirements are not included within the term 

‘‘Entity-Level Requirements’’ for purposes of the 

Exemptive Order. 

28 17 CFR 3.3. 

29 17 CFR 23.600, 23.601, 23.602, 23.603, 23.605, 

23.606, 23.608, and 23.609. 

30 17 CFR 1.31, 23.201 and 23.203. 

31 17 CFR parts 45 and 46. 

32 17 CFR 23.506, 23.610, and part 50. 

33The Commission has adopted regulations for 

determining when a swap is ‘‘available to trade’’ 

and a compliance schedule for the trade execution 

requirement that applies when a swap subject to 

mandatory clearing is available to trade. At the 

present time, no swap either has been determined 

to be made available to trade or is subject to the 

trade execution requirement. See Process for a 

Designated Contract Market or Swap Execution 

Facility To Make a Swap Available to Trade, Swap 

Transaction Compliance and Implementation 

Schedule, and Trade Execution Requirement Under 

the Commodity Exchange Act, 78 FR 33606 (Jun. 4, 

2013). See CEA section 2(h)(8) and 17 CFR 37.12 

or 38.11. 

34 17 CFR 23.504 and 23.505. 

35 17 CFR 23.502 and 23.503. 

36 17 CFR 23.205 and part 43. 

37 17 CFR 23.501. 

38 17 CFR 23.202. 

39 17 CFR 23.400 to 23.451. 

40As detailed in the Guidance, non-U.S. SDs and 

MSPs may generally rely on substituted compliance 

with respect to capital adequacy, chief compliance 

officer, risk management, and certain swap data 

recordkeeping. Non-U.S persons may also generally 

rely on substituted compliance with respect to SDR 

reporting and certain aspects of swap data 

recordkeeping relating to complaints and marketing 

and sales materials, but only for transactions with 

non-U.S. counterparties. 

41The Commission anticipates that non-U.S. SDs/ 

MSPs may require additional time after a 

Substituted Compliance Determination in order to 

phase in compliance with the relevant requirements 

of the jurisdiction in which the non-U.S. SDs or 

MSP is established. The Commission and its staff 

intend to address the need for any further 

transitional relief in connection with the subject 

Substituted Compliance Determination. 

In addition, if an SD or MSP established in 

another jurisdiction files a request for registration 

before December 21, 2013, the Commission may 

consider a request for deferring compliance with 

the Entity-Level Requirements if a substituted 

compliance request is filed concurrently with the 

application. 

activity for purposes of Commission 

regulation 1.3(ggg)(4), the aggregate 

gross notional amount of swaps 

connected with the swap dealing 

activity of its non-U.S. affiliates under 

common control with other non-U.S. 

persons as counterparties. 

In order to facilitate transition to the 

expanded scope of the term ‘‘U.S. 

person,’’ the Exemptive Order allows all 

non-U.S. persons to apply the 

aggregation principle applied in the 

January Order until 75 days after the 

Guidance is published in the Federal 

Register. 

D. Swap Dealer Registration 

A non-U.S. person that was 

previously exempt from registration as 

an SD because of the temporary relief 

extended to such person under the 

Commission’s January Order, but that is 

required to register as an SD under 

Commission regulation 1.3(ggg)(4) 

because of changes to the scope of the 

term ‘‘U.S. person’’ or changes in the de 

minimis SD calculation or aggregation 

for purposes of the de minimis 

calculation, is not required to register as 

an SD until two months after the end of 

the month in which such person 

exceeds the de minimis threshold for SD 

registration. 

E. Entity-Level and Transaction-Level 

Requirements 

1. Categorization 

For purposes of the Exemptive Order, 

the Dodd-Frank swaps provisions 

applicable to SDs and MSPs are 

categorized as Entity-Level or 

Transaction-Level Requirements in the 

same way as they are categorized in the 

Guidance.27 In particular, for purposes 

of the Exemptive Order, Entity-Level 

Requirements consist of: (1) Capital 

adequacy; (2) chief compliance 

officer; 28 (3) risk management; 29 (4) 

swap data recordkeeping; 30 and (5) 

swap data repository (‘‘SDR’’) 

Reporting.31 The Transaction-Level 

Requirements consist of: (1) Clearing 

and swap processing; 32 (2) margin and 

segregation requirements for uncleared 

swaps; (3) trade execution; 33 (4) swap 

trading relationship documentation; 34

(5) portfolio reconciliation and 

compression; 35 (6) real-time public 

reporting; 36 (7) trade confirmation; 37 (8) 

daily trading records; 38 and (9) external 

business conduct standards.39 Under 

the Guidance, Transaction-Level 

Requirements (1) to (8) are the 

‘‘Category A Transaction-Level 

Requirements,’’ while external business 

conduct standards are the ‘‘Category B 

Transaction-Level Requirements.’’ 

The Commission notes that it has not 

yet finalized regulations regarding 

capital adequacy or margin and 

segregation for uncleared swaps. In the 

event that the Commission finalizes 

regulations regarding capital adequacy 

or margin and segregation for uncleared 

swaps before December 21, 2013, nonU.S. SDs and non-U.S. MSPs would 

comply with such requirements in 

accordance with any compliance date 

provided in the relevant rulemaking. 

2. Application of Entity-Level 

Requirements 

i. Application to non-U.S. SDs and nonU.S. MSPs 

As described in the Guidance, nonU.S. SDs and non-U.S. MSPs can 

generally comply with specified EntityLevel Requirements by complying with 

regulations of the jurisdiction in which 

the non-U.S. SD or non-U.S. MSP is 

established, assuming the Commission 

has made a Substituted Compliance 

Determination with respect to the 

particular regulatory regime.40 In 

addition to SDs in the United States, 

there are provisionally registered SDs 

that are established in Australia, 

Canada, the European Union, Hong 

Kong, Japan, and Switzerland. Market 

participants or regulators in all of these 

jurisdictions have recently submitted 

requests for Substituted Compliance 

Determinations. Given that the 

Guidance is being issued now, and that 

the Commission did not receive any 

submissions in support of Substituted 

Compliance Determinations with 

sufficient time to review them and reach 

a final determination, the Commission 

has determined to temporarily delay 

compliance with Entity-Level 

Requirements in these jurisdictions. 

Accordingly, under the Exemptive 

Order, a non-U.S. SD or non-U.S. MSP 

established in Australia, Canada, the 

European Union, Hong Kong, Japan or 

Switzerland may defer compliance with 

any Entity-Level Requirement for which 

substituted compliance would be 

possible, as described in the 

Commission’s Guidance, until the 

earlier of December 21, 2013 or 30 days 

following the issuance of a Substituted 

Compliance Determination for the 

relevant regulatory requirements of the 

jurisdiction in which the non-U.S. SD or 

non-U.S. MSP is established.41

Under the January Order, non-U.S. 

SDs and non-U.S. MSPs are required to 

comply with SDR Reporting for all 

swaps with U.S. counterparties. 

However, non-U.S. SDs and non-U.S. 

MSPs that are not part of an affiliated 

group in which the ultimate parent 

entity is a U.S. SD, U.S. MSP, U.S. bank, 

U.S. financial holding company or U.S. 

bank holding company are relieved, 

during the pendency of the January 

Order, from complying with the SDR 

Reporting requirements for swaps with 

non-U.S. counterparties. In order to 

facilitate the transition to fully 

compliant SDR Reporting, the 

Commission will provide non-U.S. SDs 

and non-U.S. MSPs established in 

Australia, Canada, the European Union, 

Hong Kong, Japan or Switzerland that 

are not part of an affiliated group in 

which the ultimate parent entity is a 

U.S. SD, U.S. MSP, U.S. bank, U.S. 

financial holding company, or U.S. bank 


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42 If an SD or MSP established in any other 

jurisdiction files an application for registration 

before December 21, 2013, the Commission may 

consider a request for deferring compliance with 

the Transaction-Level Requirements if a substituted 

compliance request is filed concurrently with the 

application. 

The Commission notes that Transaction-Level 

Requirements apply on a transaction-by-transaction 

basis. As described in the Guidance, if a Substituted 

Compliance Determination is applicable to the 

jurisdiction in which a foreign branch of a U.S. 

bank is located for the relevant regulatory 

requirements and the branch enters into a swap 

(either in the jurisdiction in which it is located or 

another jurisdiction), then the branch can elect to 

comply with either the regulatory regime of the 

jurisdiction in which it is located for which the 

Substituted Compliance Determination has been 

made, or the comparable Category A TransactionLevel Requirements. 

43For purposes of this Exemptive Order, market 

participants must use the term ‘‘foreign branch’’ 

and the interpretation of when a swap is with a 

foreign branch set forth in the Guidance. See 

Guidance regarding the types of offices which the 

Commission would consider to be a ‘‘foreign 

branch’’ of a U.S. bank, and the circumstances in 

which a swap is with such foreign branch. 

44The Commission has adopted regulations for 

determining when a swap is ‘‘available to trade’’ 

and a compliance schedule for the trade execution 

requirement that applies when a swap subject to 

mandatory clearing is available to trade. At the 

present time, no swap either has been determined 

to be made available to trade or is subject to the 

trade execution requirement. See Process for a 

Designated Contract Market or Swap Execution 

Facility To Make a Swap Available to Trade, Swap 

Transaction Compliance and Implementation 

Schedule, and Trade Execution Requirement Under 

the Commodity Exchange Act, 78 FR 33606 (Jun. 4, 

2013). See CEA section 2(h)(8) and 17 CFR 37.12 

or 38.11. 

45As used in the Exemptive Order, the term 

‘‘guaranteed affiliate’’ refers to a non-U.S. person 

that is affiliated with a U.S. person and guaranteed 

by a U.S. person. In addition, for purposes of the 

Exemptive Order, the Commission interprets the 

term ‘‘guarantee’’ generally to include not only 

traditional guarantees of payment or performance of 

the related swaps, but also other formal 

arrangements that, in view of all the facts and 

circumstances, support the non-U.S. person’s 

ability to pay or perform its swap obligations with 

respect to its swaps. See Proposed Guidance, 77 FR 

at 41221 n. 47. The term ‘‘guarantee’’ encompasses 

the different financial arrangements and structures 

that transfer risk directly back to the United States. 

In this regard, it is the substance, rather than the 

form, of the arrangement that determines whether 

the arrangement should be considered a guarantee 

for purposes of the Exemptive Order. 

46 77 FR 47170, 47209 (Aug. 7, 2012). 

47The ODSG’s group of 14 dealers included: Bank 

of America-Merrill Lynch; Barclays Capital; BNP 

Paribas; Citi; Credit Suisse; Deutsche Bank AG; 

Continued 

holding company with temporary relief 

from the SDR reporting requirements of 

part 45 and part 46 of the Commission’s 

regulations with respect to swaps with 

non-U.S. counterparties on the 

condition that, during the relief period: 

(i) Such non-U.S. SDs and non-U.S. 

MSPs are in compliance with the swap 

data recordkeeping and reporting 

requirements of their home 

jurisdictions; or (ii) where no swap data 

reporting requirements have been 

implemented in their home 

jurisdictions, such non-U.S. SDs and 

non-U.S. MSPs comply with the 

recordkeeping requirements of 

Commission regulations 45.2, 45.6, 46.2 

and 46.4. This relief will expire the 

earlier of December 21, 2013 or, in the 

event of a Substituted Compliance 

Determination for the regulatory 

requirements of parts 45 and 46 for the 

jurisdiction in which the non-U.S. SD or 

non-U.S. MSP is established, 30 days 

following the issuance of such 

Substituted Compliance Determination. 

3. Application of Transaction-Level 

Requirements 

i. Application to U.S. SDs and MSPs 

Generally, U.S. SDs and MSPs must 

comply with all Transaction-Level 

Requirements that are in effect. As 

described in the Guidance, however, a 

foreign branch of a U.S. SD or MSP that 

enters into a swap with a non-U.S. 

counterparty would be able to comply 

with the requirements of the local law 

and regulations in the foreign location 

of the branch in lieu of compliance with 

Category A Transaction-Level 

Requirements if the Commission has 

made a Substituted Compliance 

Determination with respect to those 

regulatory requirements. Additionally, 

as described in the Guidance, a foreign 

branch of a U.S. bank that is an SD or 

MSP need not comply with Category B 

Transaction-Level Requirements unless 

its swap counterparty is a U.S. person 

other than a foreign branch of a U.S. 

bank that is an SD or MSP. 

Given that the Guidance is being 

issued now, and that the Commission 

did not receive any submissions in 

support of Substituted Compliance 

Determinations with sufficient time to 

review them and reach a final 

determination, the Commission has 

determined to temporarily defer 

compliance with the Category A 

Transaction-Level Requirements by 

foreign branches of U.S. banks if they 

are located in any of the six 

jurisdictions for which the Commission 

has received, or expects to receive in the 

near term, a request for substituted 

compliance determinations, for 

transactions for which substituted 

compliance is possible under the 

Guidance for such entities.42

Accordingly, under the Exemptive 

Order, a foreign branch 43 of a U.S. bank 

that is an SD or MSP, and which is 

located in Australia, Canada, the 

European Union, Hong Kong, Japan, or 

Switzerland, may comply with any law 

and regulations of the jurisdiction 

where the foreign branch is located (and 

only to the extent required by such 

jurisdiction) in lieu of complying with 

any Category A Transaction-Level 

Requirement for which substituted 

compliance would be possible under the 

Guidance (other than a clearing 

requirement under CEA section 2(h)(1), 

Commission regulations under part 50, 

and Commission regulation 23.506; a 

trade execution requirement under CEA 

section 2(h)(8) and regulation 37.12 or 

38.11; 44 or a real-time reporting 

requirement under part 43 of the 

Commission regulations for swaps with 

guaranteed affiliates 45 of a U.S. person), 

until the earlier of December 21, 2013 or 

30 days following the issuance of a 

Substituted Compliance Determination 

for the relevant regulatory requirements 

of the country in which the foreign 

branch is located. For swaps 

transactions with guaranteed affiliates of 

a U.S. person, a foreign branch of a U.S. 

SD or MSP established in Australia, 

Canada, the European Union, Hong 

Kong, Japan or Switzerland may comply 

with the law and regulations of the 

jurisdiction where the foreign branch is 

located related to real-time reporting 

(and only to the extent required by such 

jurisdiction) in lieu of complying with 

the real-time reporting requirements of 

part 43 of the Commission regulations 

until September 30, 2013. In the case of 

swaps with guaranteed affiliates of a 

U.S. person, the Commission believes 

that it the real-time reporting 

requirements of part 43 of the 

Commission’s regulations should be 

effective as expeditiously as possible in 

order to achieve their underlying 

statutory objectives. Therefore, the 

Commission has determined that it 

would not be in the public interest to 

further delay reporting under part 43 of 

the Commission’s regulations with 

respect to such swaps beyond 

September 30, 2013. 

With respect to a swap that is subject 

to the clearing requirement under CEA 

section 2(h)(1), Commission regulations 

under part 50, and Commission 

regulation 23.506, any foreign branch of 

a U.S. bank that is an SD or MSP that 

was not required to clear under the 

January Order may delay complying 

with such clearing requirement until 75 

days after the publication of the 

Guidance in the Federal Register. As 

the Commission explained in the 

Clearing Requirement Determination 

proposal,46 the movement of swaps into 

central clearing by swap dealers has 

been taking place for many years. As 

part of the OTC Derivatives Supervisors’ 

Group (‘‘ODSG’’), the Federal Reserve 

Bank of New York led an effort along 

with the primary supervisors of certain 

swap dealers 47 to enhance risk 


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Goldman Sachs & Co.; HSBC Group, J.P. Morgan; 

Morgan Stanley; The Royal Bank of Scotland Group; 

Socie ́te ́ Ge ́ne ́rale; UBS AG; and Wells Fargo Bank 

N.A. 

48See Clearing Requirement Determination under 

Section 2(h) of the CEA, 77 FR 74284, 74285 (Dec. 

13, 2013). 

49See Guidance regarding when a non-U.S. 

person generally would be considered to be an 

affiliate conduit. 

50The Commission notes that Transaction-Level 

Requirements apply on a transaction-by-transaction 

basis. As described in the Guidance, if a Substituted 

Compliance Determination is applicable to the 

jurisdiction in which a non-U.S. SD or non-U.S. 

MSP is established and that entity enters into a 

swap (either in the jurisdiction in which it is 

established or another jurisdiction), then the entity 

can elect to comply with either the regulatory 

regime of the jurisdiction in which it is established 

for which the Substituted Compliance 

Determination has been made, or the comparable 

Category A Transaction-Level Requirements. 

51 If an SD or MSP established in any other 

jurisdiction files an application for registration 

before December 21, 2013, the Commission may 

consider a request for deferring compliance with 

the Transaction-Level Requirements if a substituted 

compliance request is filed concurrently with the 

application. 

52The Commission has adopted regulations for 

determining when a swap is ‘‘available to trade’’ 

and a compliance schedule for the trade execution 

requirement that applies when a swap subject to 

mandatory clearing is available to trade. At the 

present time, no swap either has been determined 

to be made available to trade or is subject to the 

trade execution requirement. See Process for a 

Designated Contract Market or Swap Execution 

Facility To Make a Swap Available to Trade, Swap 

Transaction Compliance and Implementation 

Schedule, and Trade Execution Requirement Under 

the Commodity Exchange Act, 78 FR 33606 (Jun. 4, 

2013). See CEA section 2(h)(8) and 17 CFR 37.12 

or 38.11. 

53The Commission anticipates that non-U.S. SD 

and MSPs may require additional time after a 

Substituted Compliance Determination in order to 

phase in compliance with the relevant requirements 

of the jurisdiction in which the non-US SD or MSP 

is established. The Commission and its staff intend 

to address the need for any further transitional 

relief at the time that the subject Substituted 

Compliance Determination is made. 

mitigation practices for OTC derivatives, 

a key element of which was 

introduction of and commitment to 

central clearing of swaps, including 

clearing CDS (credit default swap) 

indices and interest rate swaps. Clearing 

is at the heart of the Dodd-Frank 

financial reform.48

With regard to the CDS indices that 

are subject to the Commission’s clearing 

determination rules, SDs and other 

market participants have been working 

since 2008 to comply with their 

commitment to their ODSG supervisors 

to clear CDS. Similarly, while clearing 

of interest rate swaps began in the late 

1990s, SDs and other market 

participants began committing in the 

mid-2000s to clear interest rate swaps in 

significant volumes. The SD 

commitments included both dealer-todealer clearing, as well as clearing by 

buy-side participants and others. 

Because SDs and MSPs have been 

committed to clearing their CDS and 

interest rate swaps for many years, and 

indeed have been voluntarily clearing 

for many years, any further delay of the 

Commission’s clearing requirement is 

unwarranted. 

In addition, under this Exemptive 

Order, a foreign branch of a U.S. SD or 

MSP located in any jurisdiction other 

than Australia, Canada, European 

Union, Hong Kong, Japan or 

Switzerland may comply with any law 

and regulations of the jurisdiction 

where the foreign branch is located (and 

only to the extent required by such 

jurisdiction) for the relevant 

Transaction-Level Requirement in lieu 

of complying with any TransactionLevel Requirement for which 

substituted compliance would be 

possible under the Commission’s 

Guidance until 75 days after the 

publication of the Guidance in the 

Federal Register. 

ii. Application to Non-U.S. SDs and 

Non-U.S. MSPs 

As described in the Guidance, a nonU.S. SD or non-U.S. MSP should 

generally comply with the Category A 

Transaction-Level Requirements for its 

swaps with U.S. persons and with nonU.S. persons that are guaranteed by, or 

are affiliate conduits of,49 a U.S. person 

(although substituted compliance would 

generally be available to a non-U.S. SD 

or non-U.S. MSP for transactions with 

(1) foreign branches of a U.S. bank that 

is an SD or MSP and (2) guaranteed 

affiliates or affiliate conduits of a U.S. 

person). Additionally, as described in 

the Guidance, a non-U.S. SD or non-U.S. 

MSP would generally need to comply 

with Category B Transaction-Level 

Requirements for all swaps with a U.S. 

person (other than a foreign branch of a 

U.S. bank that is an SD or an MSP). 

Given that the Guidance is being 

issued now, and that the Commission 

did not receive any submissions in 

support of Substituted Compliance 

Determinations with sufficient time to 

review them and reach a final 

determination, the Commission has 

determined to temporarily defer 

compliance with the Category A 

Transaction-Level Requirements by nonU.S. SDs and non-U.S. MSPs established 

in any of the six jurisdictions for which 

the Commission has received, or expects 

to receive in the near term, a request for 

substituted compliance determinations 

for transactions for which substituted 

compliance is possible under the 

Guidance for such entities.50

Accordingly, under the Exemptive 

Order, a non-U.S. SD or non-U.S. MSP 

established in Australia, Canada, 

European Union, Hong Kong, Japan or 

Switzerland 51 may comply with any 

law and regulations of the home 

jurisdiction where such non-U.S. SD or 

non-U.S. MSP is established (and only 

to the extent required by such 

jurisdiction) in lieu of complying with 

any Category A Transaction-Level 

Requirement for which substituted 

compliance would be possible under the 

Commission’s Guidance (other than a 

clearing requirement under CEA section 

2(h)(1), Commission regulations under 

part 50, and Commission regulation 

23.506; a trade execution requirement 

under CEA section 2(h)(8) and 

regulation 37.12 or 38.11; 52 or a realtime reporting requirement under part 

43 of the Commission regulations for 

swaps with guaranteed affiliates of a 

U.S. person), until the earlier of 

December 21, 2013 or 30 days following 

the issuance of a Substituted 

Compliance Determination for the 

relevant regulatory requirements of the 

jurisdiction in which the non-U.S. SD or 

non-U.S. MSP is established.53 For swap 

transactions with guaranteed affiliates of 

a U.S. person under the Commission’s 

Guidance, a non-U.S. SD or non-U.S. 

MSP established in Australia, Canada, 

the European Union, Hong Kong, Japan 

or Switzerland may comply with any 

law and regulations of the home 

jurisdiction where such non-U.S. SD or 

non-U.S. MSP is established related to 

real-time reporting requirements (and 

only to the extent required by such 

home jurisdiction) in lieu of complying 

with the real-time reporting 

requirements of part 43 of the 

Commission regulations, until 

September 30, 2013. In the case of 

swaps with guaranteed affiliates of a 

U.S. person, the Commission believes 

that the real-time reporting 

requirements of part 43 of the 

Commission’s regulations should be 

effective as expeditiously as possible in 

order to achieve their underlying 

statutory objectives. Therefore, the 

Commission has determined that it 

would not be in the public interest to 

further delay reporting under part 43 of 

the Commission’s regulations with 

respect to such swaps beyond 

September 30, 2013. 

With respect to a swap that is subject 

to the clearing requirement under CEA 

section 2(h)(1), Commission regulations 

under part 50, and Commission 

regulation 23.506, any non-U.S. SD or 

non-U.S. MSP that was not required to 

clear under the January Order may delay 

complying with such clearing 

requirement until 75 days after the 


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54See discussion, supra. 

55CEA section 4(c)(1), 7 U.S.C. 6(c)(1). 

56H.R. Conf. Rep. No. 102–978, 1992 

U.S.C.C.A.N. 3179, 3213 (1992). 

57See section 752(a) of the Dodd-Frank Act. 

58 44 U.S.C. 3501 et seq. 

59 7 U.S.C. 19(a). 

publication of the Guidance in the 

Federal Register.54

In addition, under this Exemptive 

Order, for swaps transactions with 

guaranteed affiliates of a U.S. person, a 

non-U.S. SD or a non-U.S. MSP 

established in any jurisdiction other 

than Australia, Canada, European 

Union, Hong Kong, Japan or 

Switzerland may comply with any law 

and regulations of the home jurisdiction 

where such non-U.S. SD or non-U.S. 

MSP is established (and only to the 

extent required by such jurisdiction) in 

lieu of complying with any TransactionLevel Requirement for which 

substituted compliance would be 

possible under the Commission’s 

Guidance until 75 days after the 

publication of the Guidance in the 

Federal Register. 

iii. Application to Non-Registrants 

Under this Exemptive Order, for 

swaps transactions between a 

guaranteed affiliate of a U.S. person 

(established in any jurisdiction outside 

the United States) that is not registered 

as a SD or MSP and another guaranteed 

affiliate of a U.S. person(established in 

any jurisdiction outside the United 

States) that is not registered as a SD or 

MSP, such non-registrants may comply 

with any law and regulations of the 

jurisdiction where they are established 

(and only to the extent required by such 

jurisdictions) for the relevant 

Transaction-Level Requirement in lieu 

of complying with any TransactionLevel Requirement for which 

substituted compliance would be 

possible under the Commission’s 

Guidance until 75 days after the 

publication of the Guidance in the 

Federal Register. 

IV. Section 4(c) of the CEA 

Section 4(c)(1) of the CEA authorizes 

the Commission to ‘‘promote 

responsible economic or financial 

innovation and fair competition’’ by 

exempting any transaction or class of 

transaction from any of the provisions of 

the CEA (subject to certain exceptions) 

where the Commission determines that 

the exemption would be consistent with 

the public interest and the purposes of 

the CEA.55 Under section 4(c)(2) of the 

CEA, the Commission may not grant 

exemptive relief unless it determines 

that: (1) The exemption is appropriate 

for the transaction and consistent with 

the public interest; (2) the exemption is 

consistent with the purposes of the 

CEA; (3) the transaction will be entered 

into solely between ‘‘appropriate 

persons;’’ and (4) the exemption will not 

have a material adverse effect on the 

ability of the Commission or any 

contract market to discharge its 

regulatory or self-regulatory 

responsibilities under the CEA. 

The Commission has determined that 

the Exemptive Order meets the 

requirements of CEA section 4(c). First, 

in enacting section 4(c), Congress noted 

that the purpose of the provision ‘‘is to 

give the Commission a means of 

providing certainty and stability to 

existing and emerging markets so that 

financial innovation and market 

development can proceed in an effective 

and competitive manner.’’ 56 Like the 

January Order, the Commission is 

issuing this relief in order to ensure an 

orderly transition to the Dodd-Frank 

regulatory regime. 

This exemptive relief also will 

advance the congressional mandate 

concerning harmonization of 

international standards with respect to 

swaps, consistent with section 752(a) of 

the Dodd-Frank Act. In that section, 

Congress directed that, in order to 

‘‘promote effective and consistent global 

regulation of swaps and security-based 

swaps,’’ the Commission, ‘‘as 

appropriate, shall consult and 

coordinate with foreign regulatory 

authorities on the establishment of 

consistent international standards with 

respect to the regulation’’ of swaps and 

security-based swaps.57 This relief, by 

providing non-U.S. registrants the 

latitude necessary to develop and 

modify their compliance plans as the 

regulatory structure in their respective 

home jurisdictions evolve, will promote 

the adoption and enforcement of robust 

and consistent standards across 

jurisdictions. The Commission 

emphasizes that the Exemptive Order is 

temporary in duration and reserves the 

Commission’s enforcement authority, 

including its anti-fraud and antimanipulation authority. As such, the 

Commission has determined that the 

Exemptive Order is consistent with the 

public interest and purposes of the CEA. 

For similar reasons, the Commission has 

determined that the Exemptive Order 

will not have a material adverse effect 

on the ability of the Commission or any 

contract market to discharge its 

regulatory or self-regulatory duties 

under the CEA. Finally, the Commission 

has determined that the Exemptive 

Order is limited to appropriate persons 

within the meaning of CEA section 

4c(3), since the SDs and MSPs eligible 

for the relief are likely to be the types 

of entities enumerated in that section 

and active in the swaps market. 

Therefore, upon due consideration, 

pursuant to its authority under section 

4(c) of the CEA, the Commission hereby 

issues the Exemptive Order. 

V. Paperwork Reduction Act 

The Paperwork Reduction Act 

(‘‘PRA’’) 58 imposes certain 

requirements on Federal agencies in 

connection with their conducting or 

sponsoring any collection of 

information as defined by the PRA. An 

agency may not conduct or sponsor, and 

a person is not required to respond to, 

a collection of information unless it 

displays a currently valid control 

number. 

The Exemptive Order does not require 

the collection of any information as 

defined by the PRA. 

VI. Cost-Benefit Considerations 

Section 15(a) of the CEA 59 requires 

the Commission to consider the costs 

and benefits of its actions before 

promulgating a regulation under the 

CEA or issuing certain orders. 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. 

A. Introduction 

Throughout the Dodd-Frank 

rulemaking process, the Commission 

has strived to ensure that new 

regulations designed to achieve DoddFrank’s protections are implemented in 

a manner that is both timely and also 

minimizes unnecessary market 

disruption. In its effort to implement the 

Dodd-Frank regulations on a crossborder basis, the Commission’s 

approach has not been different. In this 

respect, the Commission has attempted 

to be responsive to industry’s concerns 

regarding implementation and the 

timing of new compliance obligations, 

and thereby to ensure that market 

practices would not be unnecessarily 

disrupted during the transition to the 

new swaps regulatory regime. At the 

same time, however, the Commission 

has endeavored to comply with the 


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60See generally CFTC–SEC Joint Report on 

International Swap Regulation Required by Section 

719(c) of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act at 105–09 (Jan. 31, 2012), 

available at http://www.cftc.gov/ucm/groups/ 

public/@swaps/documents/file/ 

dfstudy_isr_013112.pdf. 

Congressional mandate to implement 

the new SD and MSP regulatory scheme 

in a timely manner. The Commission, 

therefore, also seeks to ensure that the 

implementation of these requirements is 

not subject to undue delay. The 

Commission believes that the Exemptive 

Order strikes the proper balance 

between promoting an orderly transition 

to the new regulatory regime under the 

Dodd-Frank Act, while appropriately 

tailoring relief to ensure that market 

practices are not unnecessarily 

disrupted during such transition. 

The Exemptive Order also reflects the 

Commission’s recognition that 

international coordination is essential in 

this highly interconnected global 

market, where risks are transmitted 

across national borders and market 

participants operate in multiple 

jurisdictions.60 The Exemptive Order 

would allow market participants to 

implement the calculations related to 

SD and MSP registration on a uniform 

basis and to delay compliance with 

certain Dodd-Frank requirements while 

the Commission continues to work 

closely with other domestic financial 

regulatory agencies and its foreign 

counterparts in an effort to further 

harmonize the cross-border regulatory 

framework. 

B. Consideration of Costs and Benefits 

of the Exemptive Order 

The Exemptive Order permits, subject 

to the conditions specified therein, 

market participants outside the United 

States to: (i) Apply the January Order’s 

limited, interim definition of the term 

‘‘U.S. person’’ for a period of 75 days; 

(ii) make the SD and MSP registration 

calculations in accordance with the 

January Order’s guidance for a period of 

75 days; and (iii) delay compliance with 

certain Dodd-Frank requirements 

specified in the Exemptive Order. The 

Exemptive Order reflects the 

Commission’s determination to protect 

U.S. persons and markets through the 

cross-border application of the 

provisions of the Dodd-Frank Act and 

the Commission’s regulations in a 

manner consistent with section 2(i) of 

the CEA and longstanding principles of 

international comity. By carefully 

tailoring the scope and extent of the 

phasing-in provided by the Exemptive 

Order, the Commission believes that it 

achieves an appropriately balanced 

approach to implementation that 

mitigates the costs of compliance while 

avoiding open-ended delay in protecting 

the American public from swaps 

activities overseas. To be sure, the 

conditions attached to the Exemptive 

Order are not without cost, but the 

Commission believes that the phasing-in 

of certain Dodd-Frank requirements as 

permitted by the Exemptive Order will 

reduce overall costs to market 

participants. 

In the absence of the Exemptive 

Order, non-U.S. SDs or MSPs would be 

required to be fully compliant with the 

Dodd-Frank regulatory regime without 

further delay. The Exemptive Order 

allows non-U.S. SDs and MSPs (and 

foreign branches of U.S. SDs and MSPs) 

to delay compliance with a number of 

these requirements until (at latest) 

December 21, 2013. With respect to 

these entities, therefore, the benefits 

include not only the avoided costs of 

compliance with certain requirements 

during the time that the Exemptive 

Order is in effect, but also increased 

efficiency, because the additional time 

allowed to phase in compliance will 

allow market participants more 

flexibility to implement compliance in a 

way that is compatible with their 

systems and practices. The additional 

time provided by the Exemptive Order 

will also give foreign regulators more 

time to adopt regulations covering 

similar topics, which could increase the 

likelihood that substituted compliance 

will be an option for market 

participants. Thus, the Exemptive Order 

is expected to help reduce the costs to 

market participants of implementing 

compliance with certain Dodd-Frank 

requirements. These and other costs and 

benefits are considered below. 

1. Costs 

The costs of the Exemptive Order are 

similar to those of the January Order. 

One potential cost, which is difficult to 

quantify, is the potential that the relief 

provided herein—which will delay the 

application of certain Dodd-Frank 

requirements to non-US SDs and MSPs 

and to foreign branches of U.S. SDs and 

MSPs—will leave market participants 

without certain protections and will 

leave U.S. taxpayers exposed to 

systemic risks. As with the January 

Order, however, the Commission 

believes that these risks are mitigated by 

the relatively short time period of the 

Exemptive Order’s application. 

When the Commission issued the 

January Order, it also considered the 

possibility that the order could result in 

competitive disparities from the delay 

in compliance permitted to non-U.S. 

market participants, discouraging 

potential non-U.S. counterparties from 

engaging in swaps with U.S. persons. As 

the Commission noted in the January 

Order, it was difficult to estimate 

quantitatively the potential negative 

effects that the January Order would 

have on U.S. SDs and MSPs. Similarly, 

while the Commission cannot exclude 

the possibility that the Exemptive Order 

could result in negative competitive 

effects on U.S. SDs and MSPs, it would 

be difficult to estimate those potential 

negative effects quantitatively. 

Nevertheless, the Commission notes 

that, in the six months since it issued 

the January Order, it has not observed 

significant competitive disparities that 

discouraged potential non-U.S. 

counterparties from engaging in swaps 

with U.S. SDs and MSPs. Given the 

short time period of the Exemptive 

Order’s application, the Commission 

believes it is unlikely that the 

Exemptive Order (which is more limited 

in scope than the January Order) will 

cause significant competitive disparities 

that will harm U.S. SDs and MSPs. 

2. Benefits 

As with the January Order, the 

primary benefit of the Exemptive Order 

is that it affords entities additional time 

to come into compliance with certain of 

the Commission’s regulations. By 

phasing in (1) the term ‘‘U.S. person,’’ 

(2) SD and MSP calculations, and (3) the 

application of various Entity- and 

Transaction-Level requirements to 

persons in six jurisdictions outside the 

U.S., the Exemptive Order will reduce 

compliance costs for such persons. This 

relief will provide market participants 

with the additional time that they need 

for an orderly transition and will allow 

market participants to apply the DoddFrank requirements flexibly to their 

particular circumstances. 

Importantly, the Exemptive Order 

allows non-U.S. SDs and non-U.S. MSPs 

and foreign branches of U.S. SDs and 

MSPs from six jurisdictions to delay 

compliance with Entity-Level 

Requirements (as defined in the 

Exemptive Order) and TransactionLevel Requirements (other than clearing 

and trade execution) for which 

substituted compliance is possible, as 

described in the Guidance. This delay 

will permit the Commission to properly 

develop the scope and standards of its 

‘‘substituted compliance’’ regime by 

allowing foreign regulators additional 

time to implement regulatory changes 

necessary to facilitate the Commission’s 

determination of comparability. 


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Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Rules and Regulations 43793 

61For this purpose, the Commission construes 

‘‘affiliates’’ to include persons under common 

control as stated in the Commission’s final rule 

further defining the term ‘‘swap dealer,’’ which 

defines control as ‘‘the possession, direct or 

indirect, of the power to direct or cause the 

direction of the management and policies of a 

person, whether through the ownership of voting 

securities, by contract or otherwise.’’ See Final 

Entities Rules, 77 FR at 30631, n. 437. 

C. Section 15(a) Factors 

1. Protection of Market Participants and 

the Public 

The exemptive relief provided in the 

Exemptive Order will protect market 

participants and the public by 

facilitating a more orderly transition to 

the new regulatory regime than might 

otherwise occur in the absence of the 

order. In particular, non-U.S. persons 

are afforded additional time to come 

into compliance than would otherwise 

be the case, which contributes to greater 

stability and reliability of the swaps 

markets during the transition process. 

2. Efficiency, Competitiveness, and 

Financial Integrity of the Markets 

The Commission believes that the 

efficiency and integrity of the markets 

will be furthered by the additional 

compliance time provided in the 

Exemptive Order. As discussed above, 

the Commission is mindful of the 

possibility that the Exemptive Order 

could potentially cause competitive 

disparities, but believes it is unlikely 

that the Exemptive Order will cause 

significant competitive disparities that 

will harm U.S. SDs and MSPs. 

3. Price Discovery 

The Commission has not identified 

any costs or benefits of the Exemptive 

Order with respect to price discovery. 

4. Risk Management 

As with the January Order, 

application of Entity-Level risk 

management and capital requirements 

to non-U.S. SDs and MSPs could be 

delayed by operation of the Exemptive 

Order, which could weaken risk 

management. However, such potential 

risk is limited by the fact that the 

Exemptive Order is applicable for a 

finite time. 

5. Other Public Interest Considerations 

The Commission has not identified 

any other public interest considerations 

relating to costs or benefits of the 

Exemptive Order. 

VII. Exemptive Order 

The Commission, in order to provide 

for an orderly implementation of Title 

VII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 

(‘‘Dodd-Frank Act’’), and consistent 

with the determinations set forth above, 

which are incorporated in the 

Exemptive Order by reference, hereby 

grants, pursuant to section 4(c) of the 

Commodity Exchange Act (‘‘CEA’’), 

time-limited relief to non-U.S. swap 

dealers (‘‘SDs’’) and major swap 

participants (‘‘MSPs’’) and to foreign 

branches of U.S. SDs and MSPs, from 

certain swap provisions of the CEA, 

subject to the terms and conditions 

below. 

(1) Phase-in of ‘‘U.S. Person’’ 

Definition: For purposes of the 

Exemptive Order, from July 13, 2013 

until 75 days after the Interpretive 

Guidance and Policy Statement 

Regarding Compliance with Certain 

Swap Regulations (‘‘Guidance’’) is 

published in the Federal Register, all 

market participants, including a 

prospective or registered SD or MSP, 

must apply a ‘‘U.S. person’’ definition 

which would define the term as: 

(i) A natural person who is a resident 

of the United States; 

(ii) A corporation, partnership, 

limited liability company, business or 

other trust, association, joint-stock 

company, fund or any form of enterprise 

similar to any of the foregoing, in each 

case that is (A) organized or 

incorporated under the laws of a state or 

other jurisdiction in the United States or 

(B) for all such entities other than funds 

or collective investment vehicles, 

having its principal place of business in 

the United States; 

(iii) A pension plan for the 

employees, officers or principals of a 

legal entity described in (ii) above, 

unless the pension plan is primarily for 

foreign employees of such entity; 

(iv) An estate of a decedent who was 

a resident of the United States at the 

time of death, or a trust governed by the 

laws of a state or other jurisdiction in 

the United States if a court within the 

United States is able to exercise primary 

supervision over the administration of 

the trust; or 

(v) An individual account or joint 

account (discretionary or not) where the 

beneficial owner (or one of the 

beneficial owners in the case of a joint 

account) is a person described in (i) 

through (iv) above. 

Until 75 days after the Guidance is 

published in the Federal Register, any 

person not listed in (i) to (v) above is a 

‘‘non-U.S. person’’ for purposes of the 

Exemptive Order. 

(2) Phase-In of Guaranteed Affiliates 

and ‘‘Affiliate Conduits’’: Guaranteed 

affiliates and affiliate conduits do not 

need to comply with Transaction-Level 

Requirements relating to swaps with 

non-U.S. persons and foreign branches 

of U.S. swap dealers and MSPs until 75 

days after the Final Guidance is 

published in the Federal Register. 

(3) De Minimis SD and MSP 

Threshold Calculations: From July 13, 

2013 until 75 days after the Guidance is 

published in the Federal Register, a 

non-U.S. person is not required to 

include, in its calculation of the 

aggregate gross notional amount of 

swaps connected with its swap dealing 

activity for purposes of Commission 

regulation 1.3(ggg)(4), or in its 

calculation of whether it is an MSP for 

purposes of Commission regulation 

1.3(hhh): 

(i) Any swap where the counterparty 

is not a U.S. person, or 

(ii) Any swap where the counterparty 

is a foreign branch of a U.S. person that 

is registered as an SD. 

(4) Aggregation for Purposes of the De 

Minimis Calculation: From July 13, 2013 

until 75 days after the Guidance is 

published in the Federal Register, a 

non-U.S. person that was engaged in 

swap dealing activities with U.S. 

persons as of December 21, 2012 is not 

required to include, in its calculation of 

the aggregate gross notional amount of 

swaps connected with its swap dealing 

activity for purposes of Commission 

regulation 1.3(ggg)(4), the aggregate 

gross notional amount of swaps 

connected with the swap dealing 

activity of its U.S. affiliates under 

common control.61 Further, from July 

13, 2013 until 75 days after the 

Guidance is published in the Federal 

Register, a non-U.S. person that was 

engaged in swap dealing activities with 

U.S. persons as of December 21, 2012 

and is an affiliate under common 

control with a person that is registered 

as an SD is also not required to include, 

in its calculation of the aggregate gross 

notional amount of swaps connected 

with its swap dealing activity for 

purposes of Commission regulation 

1.3(ggg)(4), the aggregate gross notional 

amount of swaps connected with the 

swap dealing activity of any non-U.S. 

affiliate under common control that is 

either (i) engaged in swap dealing 

activities with U.S. persons as of 

December 21, 2012 or (ii) registered as 

an SD. Also, from July 13, 2013 until 75 

days after the Guidance is published in 

the Federal Register, a non-U.S. person 

is not required to include, in its 

calculation of the aggregate gross 

notional amount of swaps connected 

with its swap dealing activity for 

purposes of Commission regulation 

1.3(ggg)(4), the aggregate gross notional 

amount of swaps connected with the 

swap dealing activity of its non-U.S. 

affiliates under common control with 


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43794 Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Rules and Regulations 

62Final Exemptive Order Regarding Compliance 

with Certain Swap Regulations, 78 FR 858 (Jan. 7, 

2013) (‘‘January Order’’). 

63For purposes of the Exemptive Order, the term 

‘‘Entity-Level Requirements’’ refers to the 

requirements set forth in Commission regulations 

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

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

The Commission notes that it has not yet finalized 

regulations regarding capital adequacy or margin 

and segregation for uncleared swaps. In the event 

that the Commission finalizes regulations regarding 

capital adequacy or margin and segregation for 

uncleared swaps before December 21, 2013, nonU.S. SDs and non-U.S. MSPs would comply with 

such requirements in accordance with any 

compliance date provided in the relevant 

rulemaking. 

64Commission staff also extended no-action relief 

regarding reporting in the cross-border context to 

address privacy law conflicts. See CFTC Division of 

Market Oversight, Time-Limited No-Action Relief 

Permitting Part 45 and Part 46 Reporting 

Counterparties to Mask Legal Entity Identifiers, 

Other Enumerated Identifiers and Other Identifying 

Terms and Permitting Part 20 Reporting Entities to 

Mask Identifying Information, with respect to 

certain Enumerated Jurisdictions, No-Action Letter 

No. 13–41 (Jun. 28, 2013). 

65For purposes of the Exemptive Order, the term 

‘‘Transaction-Level Requirements’’ refers to the 

requirements set forth in Commission regulations 

23.202, 23.205, 23.400 to 23.451, 23.501, 23.502, 

23.503, 23.504, 23.505, 23.506, 23.610 and parts 43 

and 50. The Commission notes that (1) it has not 

yet finalized regulations regarding margin and 

segregation for uncleared swaps and (2) it has not 

yet determined that any swap is ‘‘available to trade’’ 

such that a trade execution requirement applies to 

the swap. 

In addition, to the extent that a guaranteed 

affiliate is given exemptive relief from any 

particular Transaction-Level Requirement under 

this Exemptive Order, the same exemptive relief 

would apply to affiliate conduits. 

66The Commission has adopted regulations for 

determining when a swap is ‘‘available to trade’’ 

and a compliance schedule for the trade execution 

requirement that applies when a swap subject to 

mandatory clearing is available to trade. At the 

present time, no swaps no swap either has been 

determined to be made available to trade or is 

subject to a trade execution requirement. See 

Process for a Designated Contract Market or Swap 

Execution Facility To Make a Swap Available to 

Trade, Swap Transaction Compliance and 

Implementation Schedule, and Trade Execution 

Requirement Under the Commodity Exchange Act, 

78 FR 33606 (Jun. 4, 2013). See CEA section 2(h)(8) 

and 17 CFR 37.12 or 38.11. 

67As used in the Exemptive Order, the term 

‘‘guaranteed affiliate’’ refers to a non-U.S. person 

that is affiliated with a U.S. person and guaranteed 

by a U.S. person. In addition, for purposes of the 

Exemptive Order, the Commission interprets the 

term ‘‘guarantee’’ generally to include not only 

traditional guarantees of payment or performance of 

the related swaps, but also other formal 

arrangements that, in view of all the facts and 

circumstances, support the non-U.S. person’s 

ability to pay or perform its swap obligations with 

respect to its swaps. See Cross-Border Application 

of Certain Swaps Provisions of the Commodity 

Exchange Act, 77 FR 41214, 41221 n. 47 (Jul. 12, 

2012). The term ‘‘guarantee’’ encompasses the 

different financial arrangements and structures that 

transfer risk directly back to the United States. In 

this regard, it is the substance, rather than the form, 

of the arrangement that determines whether the 

arrangement should be considered a guarantee for 

purposes of the Exemptive Order. 

other non-U.S. persons as 

counterparties. 

(5) SD Registration: A non-U.S. person 

that was previously exempt from 

registration as an SD because of the 

temporary relief extended to such 

person under the Commission’s 

exemptive order issued on January 7, 

2013,62 but that is required to register as 

an SD under Commission regulation 

§ 1.3(ggg)(4) because of changes to the 

scope of the term ‘‘U.S. person’’ or 

changes in the de minimis SD 

calculation or aggregation for purposes 

of the de minimis calculation, is not 

required to register as an SD until two 

months after the end of the month in 

which such person exceeds the de 

minimis threshold for SD registration. 

(6) Entity-Level Requirements: 

(i) Non-U.S. SDs and non-U.S. MSPs. 

Except as provided in (ii) of this 

paragraph 6, a non-U.S. SD or non-U.S. 

MSP established in Australia, Canada, 

the European Union, Hong Kong, Japan 

or Switzerland need not comply with 

any Entity-Level Requirement 63 for 

which substituted compliance is 

possible under the Commission’s 

Guidance until the earlier of December 

21, 2013 or 30 days following the 

issuance of an applicable substituted 

compliance determination under the 

Guidance (‘‘Substituted Compliance 

Determination’’) for the relevant EntityLevel Requirement of the jurisdiction in 

which the non-U.S. SD or non-U.S. MSP 

is established. 

(ii) Notwithstanding paragraph (6)(i), 

non-U.S. SDs and non-U.S. MSPs 

established in Australia, Canada, the 

European Union, Hong Kong, Japan or 

Switzerland that are not part of an 

affiliated group in which the ultimate 

parent entity is a U.S. SD, U.S. MSP, 

U.S. bank, U.S. financial holding 

company, or U.S. bank holding 

company may delay compliance with 

the swap data repository (‘‘SDR’’) 

reporting requirements of part 45 and 

part 46 of the Commission’s regulations 

with respect to swaps with non-U.S. 

counterparties on the condition that, 

during the relief period: (1) Such nonU.S. SDs and non-U.S. MSPs are in 

compliance with the swap data 

recordkeeping and reporting 

requirements of their home 

jurisdictions; or (2) where no swap data 

reporting requirements have been 

implemented in their home 

jurisdictions, such non-U.S. SDs and 

non-U.S. MSPs comply with the 

recordkeeping requirements of 

Regulations 45.2, 45.6, 46.2 and 46.4. 

This relief will expire the earlier of 

December 21, 2013 or, in the event of a 

Substituted Compliance Determination 

for the regulatory requirements of parts 

45 and 46 of the jurisdiction in which 

the non-U.S. SD or non-U.S. MSP is 

established, 30 days following the 

issuance of such Substituted 

Compliance Determination.64

(7) Transaction-Level Requirements 

Applicable to Non-U.S. SDs and 

MSPs.65 A non-U.S. SD or non-U.S. MSP 

established in Australia, Canada, the 

European Union, Hong Kong, Japan or 

Switzerland may comply with any law 

and regulations of the home jurisdiction 

where such non-U.S. SD or non-U.S. 

MSP is established (and only to the 

extent required by such jurisdiction) in 

lieu of complying with any TransactionLevel Requirement for which 

substituted compliance would be 

possible under the Commission’s 

Guidance (other than a clearing 

requirement under CEA section 2(h)(1), 

Commission regulations under part 50, 

and Commission regulation 23.506; a 

trade execution requirement under CEA 

section 2(h)(8) and regulation 37.12 or 

38.11; 66 or a real-time reporting 

requirement under part 43 of the 

Commission regulations for swaps with 

guaranteed affiliates of a U.S. person),67

until the earlier of December 21, 2013 or 

30 days following the issuance of a 

Substituted Compliance Determination 

for the relevant regulatory requirement 

of the jurisdiction in which the non-U.S. 

SD or non-U.S. MSP is established. 

(8) With respect to a swap that is 

subject to a clearing requirement under 

CEA section 2(h)(1), Commission 

regulations under part 50, and 

Commission regulation 23.506, any nonU.S. SD or non-U.S. MSP that was not 

required to clear under the January 

Order may delay complying with such 

clearing requirement until 75 days after 

the publication of the Guidance in the 

Federal Register. 

(9) For swaps transactions with 

guaranteed affiliates of a U.S. person, a 

non-U.S. SD or non-U.S. MSP 

established in Australia, Canada, the 

European Union, Hong Kong, Japan or 

Switzerland may comply with any law 

and regulations of the home jurisdiction 

where such non-U.S. SD or non-U.S. 

MSP is established related to real-time 

reporting requirements (and only to the 

extent required by such home 

jurisdiction) in lieu of complying with 

the real-time reporting requirements of 

part 43 of the Commission regulations, 

until September 30, 2013. 

(10) For swaps transactions with 

guaranteed affiliates of a U.S. person, a 

non-U.S. SD or a non-U.S. MSP 

established in jurisdiction other than 

Australia, Canada, European Union, 

Hong Kong, Japan or Switzerland may 

comply with any law and regulations of 


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Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Rules and Regulations 43795 

68The Commission has adopted regulations for 

determining when a swap is ‘‘available to trade’’ 

and a compliance schedule for the trade execution 

requirement that applies when a swap subject to 

mandatory clearing is available to trade. At the 

present time, no swap either has been determined 

to be made available to trade or is subject to a trade 

execution requirement. See Process for a Designated 

Contract Market or Swap Execution Facility To 

Make a Swap Available to Trade, Swap Transaction 

Compliance and Implementation Schedule, and 

Trade Execution Requirement Under the 

Commodity Exchange Act, 78 FR 33606 (Jun. 4, 

2013). See CEA section 2(h)(8) and 17 CFR 37.12 

or 38.11. 

the home jurisdiction where such nonU.S. SD or non-U.S. MSP is established 

(and only to the extent required by such 

jurisdiction) in lieu of complying with 

any Transaction-Level Requirement for 

which substituted compliance would be 

possible under the Commission’s 

Guidance until 75 days after the 

publication of the Guidance in the 

Federal Register. 

(11) U.S. Registrants: The Exemptive 

Order does not apply to a U.S. person 

that is required to register as an SD or 

MSP. Notwithstanding the previous 

sentence, a foreign branch of a U.S. SD 

or MSP located in Australia, Canada, the 

European Union, Hong Kong, Japan or 

Switzerland may comply with any law 

and regulations of the jurisdiction 

where the foreign branch is located (and 

only to the extent required by such 

jurisdiction) for the relevant 

Transaction-Level Requirement in lieu 

of complying with any TransactionLevel Requirement for which 

substituted compliance would be 

possible under the Commission’s 

Guidance (other than a clearing 

requirement under CEA section 2(h)(1), 

Commission regulations under part 50, 

and Commission regulation 23.506; a 

trade execution requirement under CEA 

section 2(h)(8) and regulation 37.12 or 

38.11; 68 or a real-time reporting 

requirement under part 43 of the 

Commission regulations for swaps with 

guaranteed affiliates of a U.S. person), 

until the earlier of December 21, 2013 or 

30 days following the issuance of a 

Substituted Compliance Determination 

for the relevant Transaction-Level 

Requirement in the applicable 

jurisdiction in which the foreign branch 

is located. 

(12) With respect to a swap that is 

subject to the clearing requirement 

under CEA section 2(h)(1), Commission 

regulations under part 50, and 

Commission regulation 23.506, any 

foreign branch of a U.S. SD or MSP that 

was not required to clear under the 

January Order may delay complying 

with such clearing requirement until 75 

days after the publication of the 

Guidance in the Federal Register. 

(13) For swaps transactions with 

guaranteed affiliates of a U.S. person, a 

foreign branch of a U.S. SD or MSP 

located in Australia, Canada, the 

European Union, Hong Kong, Japan or 

Switzerland may comply with the law 

and regulations of the jurisdiction 

where the foreign branch is located 

related to real-time reporting (and only 

to the extent required by such 

jurisdiction) in lieu of complying with 

the real-time reporting requirements of 

part 43 of the Commission regulations 

until September 30, 2013. 

(14) A foreign branch of a U.S. SD or 

MSP located in any jurisdiction other 

than Australia, Canada, European 

Union, Hong Kong, Japan or 

Switzerland may comply with any law 

and regulations of the jurisdiction 

where the foreign branch is located (and 

only to the extent required by such 

jurisdiction) for the relevant 

Transaction-Level Requirement in lieu 

of complying with any TransactionLevel Requirement for which 

substituted compliance would be 

possible under the Commission’s 

Guidance until 75 days after the 

publication of the Guidance in the 

Federal Register. 

(15) For swaps transactions between a 

guaranteed affiliate of a U.S. person 

(established in any jurisdiction outside 

the United States) that is not registered 

as a SD or MSP and another guaranteed 

affiliate of a U.S. person (established in 

any jurisdiction outside the United 

States) that is not registered as a SD or 

MSP, such non-registrants may comply 

with any law and regulations of the 

jurisdiction where they are established 

(and only to the extent required by such 

jurisdiction) for the relevant 

Transaction-Level Requirement in lieu 

of complying with any TransactionLevel Requirement for which 

substituted compliance would be 

possible under the Commission’s 

Guidance until 75 days after the 

publication of the Guidance in the 

Federal Register. 

(16) Inter-Affiliate Exemption. Where 

one of the counterparties is electing the 

Inter-Affiliate Exemption, nothing in 

this Exemptive Order affects or 

eliminates the obligation of any party to 

comply with the conditions of the InterAffiliate Exemption, including the 

treatment of outward-facing swaps 

condition in Commission regulation 

50.52(b)(4)(i). 

(17) Expiration of Relief: The relief 

provided to non-U.S. SDs, non-U.S. 

MSPs and foreign branches of a U.S. SD 

or U.S. MSP in this order shall be 

effective on July 13, 2013 and expire on 

December 21, 2013 or such earlier date 

specified in the Order. 

(18) Scope of Relief: The time-limited 

relief provided in this order: (i) Shall 

not affect, with respect to any swap 

within the scope of this order, the 

applicability of any other CEA provision 

or Commission regulation (i.e., those 

outside the Entity-Level and 

Transaction-Level Requirements); (ii) 

shall not limit the applicability of any 

CEA provision or Commission 

regulation to any person, entity or 

transaction except as provided in this 

order; (iii) shall not affect the 

applicability of any provision of the 

CEA or Commission regulation to 

futures contracts, or options on futures 

contracts; and (iv) shall not affect any 

effective or compliance date set forth in 

any Dodd-Frank Act rulemaking by the 

Commission. Nothing in this order 

affects the Commission’s enforcement 

authority, including its anti-fraud and 

anti-manipulation authority. 

Issued in Washington, DC, on July 16, 

2013, by the Commission. 

Melissa D. Jurgens, 

Secretary of the Commission. 

Appendices to Exemptive Order Regarding 

Compliance With Certain Swap 

Regulations—Commission Voting Summary 

and Chairman’s Statement 

Appendix 1—Commission Voting Summary 

On this matter, Chairman Gensler and 

Commissioners Chilton and Wetjen voted in 

the affirmative. Commissioner O’Malia voted 

in the negative. 

Appendix 2—Statement of Chairman Gary 

Gensler 

I support the Exemptive Order Regarding 

Compliance with Certain Swap Regulations 

(Order). With this Commission action 

another important step has been taken to 

make swaps market reform a reality. 

Since the enactment of the Dodd-Frank 

Wall Street Reform and Consumer Protection 

Act (Dodd Frank Act), the Commission has 

worked steadfastly toward a transition from 

an opaque unregulated marketplace to a 

transparent, regulated swaps marketplace 

and has phased in the timing for compliance 

to give market participants time to adjust to 

the new regulatory regime and smooth the 

transition. The Order provides a phased-in 

compliance period for foreign swap dealers 

(including overseas affiliates of U.S. persons) 

and overseas branches of U.S. swap dealers 

with respect to certain requirements of the 

Dodd-Frank Act. 

Today’s Order is a continuation of the 

Commission’s commitment to this phasing of 

compliance—in this case for foreign market 

participants—and follows upon the 

Commission’s January 2013 phase-in 

exemptive order, which expired on July 12, 

2013. The Order will remain in effect until 

December 21, 2013, and is intended to 

complement other Commission and staff 

actions that facilitate an orderly transition. 

As of July 12th, 80 swap dealers have 

registered with the Commission. Of these, 35 


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43796 Federal Register / Vol. 78, No. 140 / Monday, July 22, 2013 / Rules and Regulations 

1Available online at http://www.dtic.mil/whs/ 

directives/corres/pdf/134409p.pdf 

2Available online at http:// 

comptroller.defense.gov/fmr/archive/07aarch/ 

07a50.pdf 

are established in jurisdictions other than 

United States, including Australia, Canada, 

the European Union, Hong Kong, Japan, and 

Switzerland. 

The Order provides for a phase-in of the 

cross-border application of Dodd-Frank 

requirements. Such phase-in period provides 

for 75 days following the publication of the 

Order in the Federal Register for market 

participants to adapt to the cross-border 

application of the Dodd-Frank requirements. 

This relates to, for example, who is a U.S. 

person, swap activity conducted by or with 

affiliates that are guaranteed by a U.S. 

person, swap activity conducted by or with 

overseas branches of U.S. based swap 

dealers, the aggregation guidelines applicable 

to a group of affiliates for the purpose of 

determining whether a specific affiliate is 

required to register as a swap dealer, and 

identifying relevant transactions for the 

purpose of the swap dealer registration de 

minimis calculation. 

Thus, within several months, the public 

will gain greater protections as hedge funds, 

organized in the Cayman Islands, but with 

their principal place of business here in the 

U.S., will be subject to reforms applicable to 

all other U.S. persons, including the clearing 

requirement. 

Secondly, during the transitional period 

through December 21st, a foreign swap dealer 

may phase in compliance with certain entitylevel requirements. In addition, those entities 

(as well as foreign branches of U.S. swap 

dealers) are provided time-limited relief from 

specified transaction-level requirements 

when transacting with overseas affiliates 

guaranteed by U.S. entities (as well as with 

foreign branches of U.S. swap dealers). 

The phase-in period provides time for the 

Commission to work with foreign regulators 

to consider their jurisdictions’ submissions 

related to substituted compliance. 

Substituted compliance, where appropriate, 

would allow for foreign swap dealers to meet 

the reform requirements of the Dodd-Frank 

Act by complying with comparable and 

comprehensive foreign regulatory 

requirements. With respect to any transaction 

with a U.S. person, though, compliance will 

be required in accordance with previously 

issued rules and staff guidance. 

To this end, the Commission has received 

substituted compliance submissions from 

market participants or regulators located in 

Australia, Canada, the European Union, Hong 

Kong, Japan and Switzerland. Commission 

staff has actively engaged in substantive 

discussions and active coordination with the 

appropriate regulators in these jurisdictions 

as an integral part of the submission review 

process. 

Now, 3-years after the passage of financial 

reform, and a full year after the Commission 

proposed guidance with regard to the cross 

border application of reform, it is time for 

reforms to properly apply to and cover those 

activities that, as identified by Congress in 

section 722(d) of the Dodd-Frank Act, have 

‘‘a direct and significant connection with 

activities in, or effect on, commerce of the 

United States.’’ With the additional 

transitional phase in period provided by this 

Order, it is now time for the public to get the 

full benefit of the transparency and the 

measures to reduce risk included in Dodd 

Frank reforms. 

[FR Doc. 2013–17467 Filed 7–19–13; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF DEFENSE 

Department of the Army 

32 CFR Part 513 

Indebtedness of Military Personnel 

AGENCY: Department of the Army, DoD. 

ACTION: Final rule; removal. 

SUMMARY: This action removes 

regulations concerning indebtedness of 

military personnel. The regulations are 

being removed because they are obsolete 

and no longer govern policies and 

procedures for handling debt claims 

against soldiers. These rules in the 

Army Regulation have been superseded. 

Program responsibility has been 

transferred to the Defense Finance and 

Accounting Services (DFAS), which 

directs all policy for personnel finances 

across the services. The removal of the 

regulations is part of DoD’s retrospective 

plan under Executive Order 13563 

completed in August 2011. 

DATES: Effective July 22, 2013. 

ADDRESSES: Department of the Army, 

Office of the Deputy Chief of Staff, 

G–1, DAPE–HR, 200 Army Pentagon, 

Washington, DC 20310–0300. 

DoD’s full retrospective plan under 

E.O. 13563 can be accessed at: http:// 

exchange.regulations.gov/exchange/ 

topic/eo-13563. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Cheryl Moman, (703) 325–0050. 

SUPPLEMENTARY INFORMATION: The 

responsibility for this program was 

originally with the Department of the 

Army and was published as 32 CFR Part 

513. The program responsibility was 

transferred to DFAS and now covered 

by Department of Defense policy and 

guidance codified at 32 CFR Part 112, 

‘‘Indebtedness of Military Personnel,’’ 

and DoD Financial Management Review 

(FMR), Volume 7a, ‘‘Stoppages and 

Collections.’’ Therefore, to avoid 

confusion with the public, 32 CFR Part 

513 is removed, which was established 

in the Federal Register, March 3, 1986 

(51 FR 7268). Rules in the Army 

Regulation have been superseded by 

Department of Defense (DoD) policy and 

guidance covered in DoD Instruction 

1344.09, ‘‘Indebtedness of Military 

Personnel,’’ 1 and codified at 32 CFR 

Part 112, and DoD Financial 

Management Review (FMR), Volume 7a, 

‘‘Stoppages and Collections.’’ 2

List of Subjects in 32 CFR Part 513 

Credit, Military personnel. 

PART 513—[REMOVED] 

Accordingly, for reasons stated in the 

preamble, under the authority of 10 

U.S.C. 3012, 32 CFR part 513, 

Indebtedness of Military Personnel, is 

removed in its entirety. 

Brenda S. Bowen, 

Army Federal Register Liaison Officer. 

[FR Doc. 2013–17490 Filed 7–19–13; 8:45 am] 

BILLING CODE 3710–08–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 117 

[Docket No. USCG–2013–0535] 

Drawbridge Operation Regulation; 

China Basin, San Francisco, CA 

AGENCY: Coast Guard, DHS. 

ACTION: Notice of deviation from 

drawbridge regulation. 

SUMMARY: The Coast Guard has issued a 

temporary deviation from the operating 

schedule that governs the Third Street 

Drawbridge across the China Basin, mile 

0.0 at San Francisco, CA. The deviation 

is necessary to allow the bridge to be 

part of the staging area for runners 

participating in the scheduled Giant 

Race event. This deviation allows the 

bridge to remain in the closed-tonavigation position during the deviation 

period. 

DATES: This deviation is effective from 

6 a.m. to 11:30 a.m. on August 4, 2013. 

ADDRESSES: The docket for this 

deviation, [USCG–2013–0535], is 

available at http://www.regulations.gov. 

Type the docket number in the 

‘‘SEARCH’’ box and click ‘‘SEARCH.’’ 

Click on Open Docket Folder on the line 

associated with this deviation. You may 

also visit the Docket Management 

Facility in Room W12–140 on the 

ground floor of the Department of 

Transportation West Building, 1200 

New Jersey Avenue SE., Washington, 

DC 20590, between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this temporary 


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