78864 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Notices 

9Exemptive Order Regarding Compliance With 

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

2013). 

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

SpeechesTestimony/opaomalia-29. 

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

SpeechesTestimony/omaliastatement071213b. 

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

originally published proposed and further proposed 

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

respectively. See Cross-Border Application of 

Certain Swaps Provisions of the Commodity 

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

Further Proposed Guidance Regarding Compliance 

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

2013). 

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

Commission failed to complete an important 

piece of the cross-border regime, namely, 

supervisory memoranda of understanding 

(‘‘MOUs’’) between the Commission and 

fellow regulators. 

I have previously stated that these MOUs, 

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

harmonization effort because they provide 

mutually agreed-upon solutions for 

differences in regulatory regimes.10

Accordingly, I stated that the Commission 

should be able to review MOUs alongside the 

respective comparability determinations and 

vote on them at the same time. Without these 

MOUs, our fellow regulators are left 

wondering whether and how any differences, 

such as direct access to books and records, 

will be resolved. 

Finally, as I have consistently maintained, 

the substituted compliance process should 

allow other regulatory bodies to engage with 

the full Commission.11 While I am pleased 

that the Notices are being voted on by the 

Commission, the full Commission only 

gained access to the comment letters from 

foreign regulators on the Commission’s 

comparability determination draft proposals 

a few days ago. This is hardly a transparent 

process. 

Unclear Path Forward 

Looking forward to next steps, the 

Commission must provide answers to several 

outstanding questions regarding these 

comparability determinations. In doing so, 

the Commission must collaborate with 

foreign regulators to increase global 

harmonization. 

First, there is uncertainty surrounding the 

timing and outcome of the MOUs. Critical 

questions regarding information sharing, 

cooperation, supervision, and enforcement 

will remain unanswered until the 

Commission and our fellow regulators 

execute these MOUs. 

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

repository reporting requirements. These 

comparability determinations will be done as 

separate notices. However, the timing and 

process for these determinations remain 

uncertain. 

Third, the Commission has failed to 

provide clarity on the process for addressing 

the comparability determinations that it 

declined to undertake at this time. The 

Notices only state that the Commission may 

address these requests in a separate notice at 

a later date given further developments in the 

law and regulations of other jurisdictions. To 

promote certainty in the financial markets, 

the Commission must provide a clear path 

forward for market participants and foreign 

regulators. 

The following steps would be a better 

approach: (1) The Commission should extend 

the Exemptive Order to allow foreign 

regulators to further implement their 

regulatory regimes and coordinate with them 

to implement a harmonized substituted 

compliance process; (2) the Commission 

should implement a flexible, outcomes-based 

approach to the substituted compliance 

process and apply it similarly to all 

jurisdictions; and (3) the Commission should 

work closely with our fellow regulators to 

expeditiously implement MOUs that resolve 

regulatory differences and address regulatory 

oversight issues. 

Conclusion 

While I support the narrow comparability 

determinations that the Commission has 

made, it was my hope that the Commission 

would work with foreign regulators to 

implement a substituted compliance process 

that would increase the global harmonization 

effort. I am disappointed that the 

Commission has failed to implement such a 

process. 

I do believe that in the longer term, the 

swaps regulations of the major jurisdictions 

will converge. At this time, however, the 

Commission’s comparability determinations 

have done little to alleviate the burden of 

regulatory uncertainty and duplicative 

compliance with both U.S. and foreign 

regulations. 

The G–20 process delineated and put in 

place the swaps market reforms in G–20 

member nations. It is then no surprise that 

the Commission must learn to coordinate 

with foreign regulators to minimize 

confusion and disruption in bringing much 

needed clarity to the swaps market. For all 

these shortcomings, I respectfully dissent 

from the Commission’s approval of the 

Notices. 

[FR Doc. 2013–30975 Filed 12–26–13; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Comparability Determination for 

Australia: Certain Entity-Level 

Requirements 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of Comparability 

Determination for Certain Requirements 

under Australian Regulation. 

SUMMARY: The following is the analysis 

and determination of the Commodity 

Futures Trading Commission 

(‘‘Commission’’) regarding certain parts 

of a request by the Australian Bankers 

Association (‘‘ABA’’) that the 

Commission determine that laws and 

regulations applicable in in the 

Commonwealth of Australia 

(‘‘Australia’’) provide a sufficient basis 

for an affirmative finding of 

comparability with respect to the 

following regulatory obligations 

applicable to swap dealers (‘‘SDs’’) and 

major swap participants (‘‘MSPs’’) 

registered with the Commission: (i) 

Chief compliance officer; (ii) risk 

management; and (iii) swap data 

recordkeeping (collectively, the 

‘‘Internal Business Conduct 

Requirements’’). 

DATES: Effective Date: This 

determination will become effective 

immediately upon publication in the 

Federal Register. 

FOR FURTHER INFORMATION CONTACT: Gary 

Barnett, Director, 202–418–5977, 

gbarnett@cftc.gov, Frank Fisanich, Chief 

Counsel, 202–418–5949, ffisanich@

cftc.gov, Adam Kezsbom, Special 

Counsel, 202–418–5372, akezsbom@

cftc.gov, Israel Goodman, Special 

Counsel, 202–418–6715, igoodman@

cftc.gov, Division of Swap Dealer and 

Intermediary Oversight, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION:

I. Introduction 

On July 26, 2013, the Commission 

published in the Federal Register its 

‘‘Interpretive Guidance and Policy 

Statement Regarding Compliance with 

Certain Swap Regulations’’ (the 

‘‘Guidance’’).1 In the Guidance, the 

Commission set forth its interpretation 

of the manner in which it believes that 

section 2(i) of the Commodity Exchange 

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

provisions to activities outside the U.S. 

and informed the public of some of the 

policies that it expects to follow, 

generally speaking, in applying Title VII 

and certain Commission regulations in 

contexts covered by section 2(i). Among 

other matters, the Guidance generally 

described the policy and procedural 

framework under which the 

Commission would consider a 

substituted compliance program with 

respect to Commission regulations 

applicable to entities located outside the 

U.S. Specifically, the Commission 

addressed a recognition program where 

compliance with a comparable 

regulatory requirement of a foreign 

jurisdiction would serve as a reasonable 

substitute for compliance with the 

attendant requirements of the CEA and 

the Commission’s regulations 

promulgated thereunder. 

In addition to the Guidance, on July 

22, 2013, the Commission issued the 

Exemptive Order Regarding Compliance 

with Certain Swap Regulations (the 


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2 78 FR 43785 (July 22, 2013). 

3The Entity-Level Requirements under the 

Exemptive Order consist of 17 CFR 1.31, 3.3, 

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

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

of the Commission’s regulations. 

4For purposes of this notice, the Internal 

Business Conduct Requirements consist of 17 CFR 

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

23.605, and 23.606. 

5This notice does not address swap data 

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

Commission may provide a comparability 

determination with respect to the SDR Reporting 

requirement in a separate notice. 

6Public Law 111–203, 124 Stat. 1376 (2010). 

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

8The compliance dates are summarized on the 

Compliance Dates page of the Commission’s Web 

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

DoddFrankAct/ComplianceDates/index.htm.) 

9 78 FR 45342–45. 

10See the Guidance, 78 FR 45342–44. 

11Under §§ 23.203 and 23.606, all records 

required by the CEA and the Commission’s 

regulations to be maintained by a registered SD or 

MSP shall be maintained in accordance with 

Commission regulation 1.31 and shall be open for 

inspection by representatives of the Commission, 

the United States Department of Justice, or any 

applicable U.S. prudential regulator. 

In its Final Exemptive Order Regarding 

Compliance with Certain Swap Regulations, 78 FR 

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

applicant for registration as an SD or MSP must file 

a Form 7–R with the National Futures Association 

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

to address existing blocking, privacy, or secrecy 

laws of foreign jurisdictions that applied to the 

books and records of SDs and MSPs acting in those 

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

modifications to Form 7–R were a temporary 

measure intended to allow SDs and MSPs to apply 

for registration in a timely manner in recognition 

of the existence of the blocking, privacy, and 

secrecy laws. In the Guidance, the Commission 

clarified that the change to Form 7–R impacts the 

registration application only and does not modify 

the Commission’s authority under the CEA and its 

regulations to access records held by registered SDs 

and MSPs. Commission access to a registrant’s 

books and records is a fundamental regulatory tool 

necessary to properly monitor and examine each 

registrant’s compliance with the CEA and the 

regulations adopted pursuant thereto. The 

Commission has maintained an ongoing dialogue 

on a bilateral and multilateral basis with foreign 

regulators and with registrants to address books and 

records access issues and may consider appropriate 

measures where requested to do so. 

‘‘Exemptive Order’’).2 Among other 

things, the Exemptive Order provided 

time for the Commission to consider 

substituted compliance with respect to 

six jurisdictions where non-U.S. SDs are 

currently organized. In this regard, the 

Exemptive Order generally provided 

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

jurisdictions with conditional relief 

from certain requirements of 

Commission regulations (those referred 

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

Guidance) until the earlier of December 

21, 2013, or 30 days following the 

issuance of a substituted compliance 

determination.3

On April 22, 2013, the ABA (the 

‘‘applicant’’) submitted a request that 

the Commission determine that laws 

and regulations applicable in Australia 

provide a sufficient basis for an 

affirmative finding of comparability 

with respect to certain Entity-Level 

Requirements, including the Internal 

Business Conduct Requirements.4 The 

applicant provided Commission staff 

with an updated submission on June 7, 

2013. On November 8, 2013, the 

application was further supplemented 

with corrections and additional 

materials. The following is the 

Commission’s analysis and 

determination regarding the Internal 

Business Conduct Requirements, as 

detailed below.5

II. Background 

On July 21, 2010, President Obama 

signed the Dodd-Frank Wall Street 

Reform and Consumer Protection Act 6

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

which, in Title VII, established a new 

regulatory framework for swaps. 

Section 722(d) of the Dodd-Frank Act 

amended the CEA by adding section 

2(i), which provides that the swap 

provisions of the CEA (including any 

CEA rules or regulations) apply to crossborder activities when certain 

conditions are met, namely, when such 

activities have a ‘‘direct and significant 

connection with activities in, or effect 

on, commerce of the United States’’ or 

when they contravene Commission 

rules or regulations as are necessary or 

appropriate to prevent evasion of the 

swap provisions of the CEA enacted 

under Title VII of the Dodd-Frank Act.7

In the three years since its enactment, 

the Commission has finalized 68 rules 

and orders to implement Title VII of the 

Dodd-Frank Act. The finalized rules 

include those promulgated under 

section 4s of the CEA, which address 

registration of SDs and MSPs and other 

substantive requirements applicable to 

SDs and MSPs. With few exceptions, the 

delayed compliance dates for the 

Commission’s regulations implementing 

such section 4s requirements applicable 

to SDs and MSPs have passed and new 

SDs and MSPs are now required to be 

in full compliance with such regulations 

upon registration with the 

Commission.8 Notably, the requirements 

under Title VII of the Dodd-Frank Act 

related to SDs and MSPs by their terms 

apply to all registered SDs and MSPs, 

irrespective of where they are located, 

albeit subject to the limitations of CEA 

section 2(i). 

To provide guidance as to the 

Commission’s views regarding the scope 

of the cross-border application of Title 

VII of the Dodd-Frank Act, the 

Commission set forth in the Guidance 

its interpretation of the manner in 

which it believes that Title VII’s swap 

provisions apply to activities outside 

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

CEA. Among other matters, the 

Guidance generally described the policy 

and procedural framework under which 

the Commission would consider a 

substituted compliance program with 

respect to Commission regulations 

applicable to entities located outside the 

U.S. Specifically, the Commission 

addressed a recognition program where 

compliance with a comparable 

regulatory requirement of a foreign 

jurisdiction would serve as a reasonable 

substitute for compliance with the 

attendant requirements of the CEA and 

the Commission’s regulations. With 

respect to the standards forming the 

basis for any determination of 

comparability (‘‘comparability 

determination’’ or ‘‘comparability 

finding’’), the Commission stated: 

In evaluating whether a particular category 

of foreign regulatory requirement(s) is 

comparable and comprehensive to the 

applicable requirement(s) under the CEA and 

Commission regulations, the Commission 

will take into consideration all relevant 

factors, including but not limited to, the 

comprehensiveness of those requirement(s), 

the scope and objectives of the relevant 

regulatory requirement(s), the 

comprehensiveness of the foreign regulator’s 

supervisory compliance program, as well as 

the home jurisdiction’s authority to support 

and enforce its oversight of the registrant. In 

this context, comparable does not necessarily 

mean identical. Rather, the Commission 

would evaluate whether the home 

jurisdiction’s regulatory requirement is 

comparable to and as comprehensive as the 

corresponding U.S. regulatory 

requirement(s).9

Upon a comparability finding, 

consistent with CEA section 2(i) and 

comity principles, the Commission’s 

policy generally is that eligible entities 

may comply with a substituted 

compliance regime, subject to any 

conditions the Commission places on its 

finding, and subject to the 

Commission’s retention of its 

examination authority and its 

enforcement authority.10

In this regard, the Commission notes 

that a comparability determination 

cannot be premised on whether an SD 

or MSP must disclose comprehensive 

information to its regulator in its home 

jurisdiction, but rather on whether 

information relevant to the 

Commission’s oversight of an SD or 

MSP would be directly available to the 

Commission and any U.S. prudential 

regulator of the SD or MSP.11 The 

Commission’s direct access to the books 

and records required to be maintained 


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

the CEA. 

13See e.g., §§ 23.203(b) and 23.606. 

14See supra note 10. 

15Because the applicant’s request and the 

Commissions determinations herein are based on 

the comparability of Australian requirements 

applicable to ADIs and AFSL holders, an SD or 

MSP that is not an ADI or AFSL holder, or is 

otherwise not subject to the requirements 

applicable to ADIs and AFSL holders upon which 

the Commission bases its determinations, may not 

be able to rely on the Commission’s comparability 

determinations herein. 

16 78 FR 45343. 

17 78 FR 45343. 

18 78 FR 45343. 

19 78 FR 45343. The Commission’s substituted 

compliance program would generally be available 

for SDR Reporting, as outlined in the Guidance, 

only if the Commission has direct access to all of 

the data elements that are reported to a foreign trade 

repository pursuant to the substituted compliance 

program. Thus, direct access to swap data is a 

threshold matter to be addressed in a comparability 

evaluation for SDR Reporting. Moreover, the 

Commission explains in the Guidance that, due to 

its technical nature, a comparability evaluation for 

SDR Reporting ‘‘will generally entail a detailed 

comparison and technical analysis.’’ A more 

particularized analysis will generally be necessary 

to determine whether data stored in a foreign trade 

repository provides for effective Commission use, in 

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

20A finding of comparability may not be possible 

for a number of reasons, including the fact that the 

foreign jurisdiction has not yet implemented or 

finalized particular requirements. 

21 78 FR 45343. 

by an SD or MSP registered with the 

Commission is a core requirement of the 

CEA 12 and the Commission’s 

regulations,13 and is a condition to 

registration.14

III. Regulation of SDs and MSPs in 

Australia 

On April 22, 2013, the applicant 

submitted a request that the 

Commission assess the comparability of 

laws and regulations applicable in 

Australia with the CEA and the 

Commission’s regulations promulgated 

thereunder. The applicant provided 

Commission staff with an updated 

submission on June 7, 2013. On 

November 8, 2013, the application was 

further supplemented with corrections 

and additional materials. 

As represented to the Commission by 

the applicant, currently all five 

Australian registered SDs are Australian 

authorized deposit-taking institutions 

(‘‘ADIs’’) and holders of an Australian 

financial services license (‘‘AFSL’’). 

Thus, for the purposes of the 

Commission’s comparability 

determination, the Commission will 

consider the laws and regulations 

applicable to the five SD ADIs with 

respect to their swap activities. The 

relevant laws and regulations are 

administered by two agencies; the 

Australian Prudential Regulatory 

Authority (‘‘APRA’’) and the Australian 

Securities and Investments Commission 

(‘‘ASIC’’).15

APRA is the prudential regulator of 

the Australian financial services 

industry and oversees the banking 

industry. It has developed a regulatory 

framework for Australian ADIs under 

the Banking Act 1959 (the ‘‘Banking 

Act’’) that is based on the banking 

supervision principles published by the 

Basel Committee on Banking 

Supervision. This regulatory framework 

is set out in a number of different 

prudential standards that govern the 

activities of ADIs. 

ASIC is Australia’s corporate, 

markets, and financial services 

regulator. ASIC licenses and monitors 

financial services businesses to ensure 

they operate efficiently, honestly, and 

fairly. ASIC administers, among other 

things, the following legislation and 

regulations: the Corporations Act 2001 

(the ‘‘Corporations Act’’), the 

Corporations Regulations 2001, and the 

Australian Securities and Investments 

Commission Act 2001 (the ‘‘ASIC Act’’). 

Under the Corporations Act, an 

Australian entity that undertakes 

specified activities, including dealing or 

market making in derivatives (including 

swaps) is required to hold an AFSL. The 

AFSL regime establishes a number of 

general licensing obligations that all 

licensees must comply with. ASIC has 

also issued regulatory guidance which 

sets out its expectations of how 

licensees may comply with their 

licensing obligations in a range of 

situations and taking into account the 

nature, size, and complexity of their 

financial services business. 

IV. Comparable and 

Comprehensiveness Standard 

The Commission’s comparability 

analysis will be based on a comparison 

of specific foreign requirements against 

the specific related CEA provisions and 

Commission regulations as categorized 

and described in the Guidance. As 

explained in the Guidance, within the 

framework of CEA section 2(i) and 

principles of international comity, the 

Commission may make a comparability 

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

basis of the foreign regime as a whole.16

In making its comparability 

determinations, the Commission may 

include conditions that take into 

account timing and other issues related 

to coordinating the implementation of 

reform efforts across jurisdictions.17

In evaluating whether a particular 

category of foreign regulatory 

requirement(s) is comparable and 

comprehensive to the corollary 

requirement(s) under the CEA and 

Commission regulations, the 

Commission will take into consideration 

all relevant factors, including, but not 

limited to: 

• The comprehensiveness of those 

requirement(s), 

• The scope and objectives of the 

relevant regulatory requirement(s), 

• The comprehensiveness of the 

foreign regulator’s supervisory 

compliance program, and 

• The home jurisdiction’s authority to 

support and enforce its oversight of the 

registrant.18

In making a comparability 

determination, the Commission takes an 

‘‘outcome-based’’ approach. An 

‘‘outcome-based’’ approach means that 

when evaluating whether a foreign 

jurisdiction’s regulatory requirements 

are comparable to, and as 

comprehensive as, the corollary areas of 

the CEA and Commission regulations, 

the Commission ultimately focuses on 

regulatory outcomes (i.e., the home 

jurisdiction’s requirements do not have 

to be identical).19 This approach 

recognizes that foreign regulatory 

systems differ and their approaches vary 

and may differ from how the 

Commission chose to address an issue, 

but that the foreign jurisdiction’s 

regulatory requirements nonetheless 

achieve the regulatory outcome sought 

to be achieved by a certain provision of 

the CEA or Commission regulation. 

In doing its comparability analysis the 

Commission may determine that no 

comparability determination can be 

made 20 and that the non-U.S. SD or 

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

or MSP with respect to its foreign 

branches, or non-registrant, to the extent 

applicable under the Guidance, may be 

required to comply with the CEA and 

Commission regulations. 

The starting point in the 

Commission’s analysis is a 

consideration of the regulatory 

objectives of the foreign jurisdiction’s 

regulation of swaps and swap market 

participants. As stated in the Guidance, 

jurisdictions may not have swap 

specific regulations in some areas, and 

instead have regulatory or supervisory 

regimes that achieve comparable and 

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

general, entity-wide, or prudential, 

basis.21 In addition, portions of a foreign 

regulatory regime may have similar 

regulatory objectives, but the means by 

which these objectives are achieved 

with respect to swaps market activities 

may not be clearly defined, or may not 


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22As explained in the Guidance, such 

‘‘approaches used will vary depending on the 

circumstances relevant to each jurisdiction. One 

example would include coordinating with the 

foreign regulators in developing appropriate 

regulatory changes or new regulations, particularly 

where changes or new regulations already are being 

considered or proposed by the foreign regulators or 

legislative bodies. As another example, the 

Commission may, after consultation with the 

appropriate regulators and market participants, 

include in its substituted compliance determination 

a description of the means by which certain swaps 

market participants can achieve substituted 

compliance within the construct of the foreign 

regulatory regime. The identification of the means 

by which substituted compliance is achieved would 

be designed to address the regulatory objectives and 

outcomes of the relevant Dodd-Frank Act 

requirements in a manner that does not conflict 

with a foreign regulatory regime and reduces the 

likelihood of inconsistent regulatory obligations. 

For example, the Commission may specify that 

[SDs] and MSPs in the jurisdiction undertake 

certain recordkeeping and documentation for swap 

activities that otherwise is only addressed by the 

foreign regulatory regime with respect to financial 

activities generally. In addition, the substituted 

compliance determination may include provisions 

for summary compliance and risk reporting to the 

Commission to allow the Commission to monitor 

whether the regulatory outcomes are being 

achieved. By using these approaches, in the interest 

of comity, the Commission would seek to achieve 

its regulatory objectives with respect to the 

Commission’s registrants that are operating in 

foreign jurisdictions in a manner that works in 

harmony with the regulatory interests of those 

jurisdictions.’’ 78 FR 45343–44. 

23 ‘‘Swaps activities’’ is defined in Commission 

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

registrant, such registrant’s activities related to 

swaps and any product used to hedge such swaps, 

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

swaps or security-based swaps, debt or equity 

securities, foreign currency, physical commodities, 

and other derivatives.’’ The Commission’s 

regulations under 17 CFR Part 23 are limited in 

scope to the swaps activities of SDs and MSPs. 

24No SD or MSP that is not legally required to 

comply with a law or regulation determined to be 

comparable may voluntarily comply with such law 

or regulation in lieu of compliance with the CEA 

and the relevant Commission regulation. Each SD 

or MSP that seeks to rely on a comparability 

determination is responsible for determining 

whether it is subject to the laws and regulations 

found comparable. Currently, there are no MSPs 

organized outside the U.S. and the Commission 

therefore cautions any non-financial entity 

organized outside the U.S. and applying for 

registration as an MSP to carefully consider 

whether the laws and regulations determined to be 

comparable herein are applicable to such entity. 

25The Commission has provided the relevant 

foreign regulator(s) with opportunities to review 

and correct the applicant’s description of such laws 

and regulations on which the Commission will base 

its comparability determination. The Commission 

relies on the accuracy and completeness of such 

review and any corrections received in making its 

comparability determinations. A comparability 

determination based on an inaccurate description of 

foreign laws and regulations may not be valid. 

26 78 FR 45345. 

27See 78 FR 45348–50. The Commission notes 

that registrants and other market participants are 

responsible for determining whether substituted 

compliance is available pursuant to the Guidance 

based on the comparability determination 

contained herein (including any conditions or 

exceptions), and its particular status and 

circumstances. 

28This notice does not address § 23.608 

(Restrictions on counterparty clearing 

relationships). The Commission declines to take up 

the request for a comparability determination with 

respect to this regulation due to the Commission’s 

view that there are not laws or regulations 

applicable in Australia to compare with the 

prohibitions and requirements of § 23.608. The 

Commission may provide a comparability 

determination with respect to this regulation at a 

later date in consequence of further developments 

in the law and regulations applicable in Australia. 

This notice also does not address capital 

adequacy because the Commission has not yet 

finalized rules for SDs and MSPs in this area, nor 

SDR Reporting. The Commission may provide a 

comparability determination with respect to these 

requirements at a later date or in a separate notice. 

29An MOU is one type of arrangement between 

or among regulators. Supervisory arrangements 

could include, as appropriate, cooperative 

arrangements that are memorialized and executed 

as addenda to existing MOUs or, for example, as 

independent bilateral arrangements, statements of 

intent, declarations, or letters. 

30 78 FR 45344. 

31Section 4s(j)(3) and (4) of the CEA and 

Commission regulation 23.606 require a registered 

SD or MSP to make all records required to be 

maintained in accordance with Commission 

regulation 1.31 available promptly upon request to, 

among others, representatives of the Commission. 

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

Guidance, the Commission states that it ‘‘reserves 

this right to access records held by registered [SDs] 

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

persons who may comply with the Dodd-Frank 

recordkeeping requirement through substituted 

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

45342 n. 461 (affirming the Commission’s authority 

under the CEA and its regulations to access books 

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

fundamental regulatory tool necessary to properly 

monitor and examine each registrant’s compliance 

with the CEA and the regulations adopted pursuant 

thereto’’). 

32The Commission retains its examination 

authority, both during the application process as 

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

Continued 

expressly include specific regulatory 

elements that the Commission 

concludes are critical to achieving the 

regulatory objectives or outcomes 

required under the CEA and the 

Commission’s regulations. In these 

circumstances, the Commission will 

work with the regulators and registrants 

in these jurisdictions to consider 

alternative approaches that may result 

in a determination that substituted 

compliance applies.22

Finally, the Commission will 

generally rely on an applicant’s 

description of the laws and regulations 

of the foreign jurisdiction in making its 

comparability determination. The 

Commission considers an application to 

be a representation by the applicant that 

the laws and regulations submitted are 

in full force and effect, that the 

description of such laws and regulations 

is accurate and complete, and that, 

unless otherwise noted, the scope of 

such laws and regulations encompasses 

the swaps activities23 thnsp; of SDs 

and MSPs 24 in the relevant 

jurisdictions.25 Further, as stated in the 

Guidance, the Commission expects that 

an applicant would notify the 

Commission of any material changes to 

information submitted in support of a 

comparability determination (including, 

but not limited to, changes in the 

relevant supervisory or regulatory 

regime) as, depending on the nature of 

the change, the Commission’s 

comparability determination may no 

longer be valid.26

The Guidance provided a detailed 

discussion of the Commission’s policy 

regarding the availability of substituted 

compliance 27 for the Internal Business 

Conduct Requirements.28

V. Supervisory Arrangement 

In the Guidance, the Commission 

stated that, in connection with a 

determination that substituted 

compliance is appropriate, it would 

expect to enter into an appropriate 

memorandum of understanding 

(‘‘MOU’’) or similar arrangement 29 with 

the relevant foreign regulator(s). 

Although existing arrangements would 

indicate a foreign regulator’s ability to 

cooperate and share information, ‘‘going 

forward, the Commission and relevant 

foreign supervisor(s) would need to 

establish supervisory MOUs or other 

arrangements that provide for 

information sharing and cooperation in 

the context of supervising [SDs] and 

MSPs.’’ 30

The Commission is in the process of 

developing its registration and 

supervision regime for provisionallyregistered SDs and MSPs. This new 

initiative includes setting forth 

supervisory arrangements with 

authorities that have joint jurisdiction 

over SDs and MSPs that are registered 

with the Commission and subject to 

U.S. law. Given the developing nature of 

the Commission’s regime and the fact 

that the Commission has not negotiated 

prior supervisory arrangements with 

certain authorities, the negotiation of 

supervisory arrangements presents a 

unique opportunity to develop close 

working relationships between and 

among authorities, as well as highlight 

any potential issues related to 

cooperation and information sharing. 

Accordingly, the Commission is 

negotiating such a supervisory 

arrangement with each applicable 

foreign regulator of an SD or MSP. The 

Commission expects that the 

arrangement will establish expectations 

for ongoing cooperation, address direct 

access to information,31 provide for 

notification upon the occurrence of 

specified events, memorialize 

understandings related to on-site 

visits,32 and include protections related 


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See 78 FR 45342 (stating Commission policy that 

‘‘eligible entities may comply with a substituted 

compliance regime under certain circumstances, 

subject, however, to the Commission’s retention of 

its examination authority’’) and 45344 n. 471 

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

appropriate and necessary, conduct an on-site 

examination of the applicant’’). 

to the use and confidentiality of nonpublic information shared pursuant to 

the arrangement. 

These arrangements will establish a 

roadmap for how authorities will 

consult, cooperate, and share 

information. As with any such 

arrangement, however, nothing in these 

arrangements will supersede domestic 

laws or resolve potential conflicts of 

law, such as the application of domestic 

secrecy or blocking laws to regulated 

entities. 

VI. Comparability Determination and 

Analysis 

The following section describes the 

requirements imposed by specific 

sections of the CEA and the 

Commission’s regulations for the 

Internal Business Conduct 

Requirements that are the subject of this 

comparability determination, and the 

Commission’s regulatory objectives with 

respect to such requirements. 

Immediately following a description of 

the requirement(s) and regulatory 

objective(s) of the specific Internal 

Business Conduct Requirements that the 

requestor submitted for a comparability 

determination, the Commission 

provides a description of the foreign 

jurisdiction’s comparable laws, 

regulations, or rules and whether such 

laws, regulations, or rules meet the 

applicable regulatory objective. 

The Commission’s determinations in 

this regard and the discussion in this 

section are intended to inform the 

public of the Commission’s views 

regarding whether the foreign 

jurisdiction’s laws, regulations, or rules 

may be comparable and comprehensive 

as those requirements in the DoddFrank Act (and Commission regulations 

promulgated thereunder) and therefore, 

may form the basis of substituted 

compliance. In turn, the public (in the 

foreign jurisdiction, in the United 

States, and elsewhere) retains its ability 

to present facts and circumstances that 

would inform the determinations set 

forth in this notice. 

As was stated in the Guidance, the 

Commission recognizes the complex 

and dynamic nature of the global swap 

market and the need to take an 

adaptable approach to cross-border 

issues, particularly as it continues to 

work closely with foreign regulators to 

address potential conflicts with respect 

to each country’s respective regulatory 

regime. In this regard, the Commission 

may review, modify, or expand the 

determinations herein in light of 

comments received and future 

developments. 

A. Chief Compliance Officer (§ 3.3) 

Commission Requirement: 

Implementing section 4s(k) of the CEA, 

Commission regulation 3.3 generally 

sets forth the following requirements for 

SDs and MSPs: 

• An SD or MSP must designate an 

individual as Chief Compliance Officer 

(‘‘CCO’’); 

• The CCO must have the 

responsibility and authority to develop 

the regulatory compliance policies and 

procedures of the SD or MSP; 

• The CCO must report to the board 

of directors or the senior officer of the 

SD or MSP; 

• Only the board of directors or a 

senior officer may remove the CCO; 

• The CCO and the board of directors 

must meet at least once per year; 

• The CCO must have the background 

and skills appropriate for the 

responsibilities of the position; 

• The CCO must not be subject to 

disqualification from registration under 

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

• Each SD and MSP must include a 

designation of a CCO in its registration 

application; 

• The CCO must administer the 

regulatory compliance policies of the SD 

or MSP; 

• The CCO must take reasonable steps 

to ensure compliance with the CEA and 

Commission regulations, and resolve 

conflicts of interest; 

• The CCO must establish procedures 

for detecting and remediating noncompliance issues; 

• The CCO must annually prepare 

and sign an ‘‘annual compliance report’’ 

containing: (i) A description of policies 

and procedures reasonably designed to 

ensure compliance; (ii) an assessment of 

the effectiveness of such policies and 

procedures; (iii) a description of 

material non-compliance issues and the 

action taken; (iv) recommendations of 

improvements in compliance policies; 

and (v) a certification by the CCO or 

CEO that, to the best of such officer’s 

knowledge and belief, the annual report 

is accurate and complete under penalty 

of law; and 

• The annual compliance report must 

be furnished to the CFTC within 90 days 

after the end of the fiscal year of the SD 

or MSP, simultaneously with its annual 

financial condition report. 

Regulatory Objective: The 

Commission believes that compliance 

by SDs and MSPs with the CEA and the 

Commission’s rules greatly contributes 

to the protection of customers, orderly 

and fair markets, and the stability and 

integrity of the market intermediaries 

registered with the Commission. The 

Commission expects SDs and MSPs to 

strictly comply with the CEA and the 

Commission’s rules and to devote 

sufficient resources to ensuring such 

compliance. Thus, through its CCO rule, 

the Commission seeks to ensure firms 

have designated a qualified individual 

as CCO that reports directly to the board 

of directors or the senior officer of the 

firm and that has the independence, 

responsibility, and authority to develop 

and administer compliance policies and 

procedures reasonably designed to 

ensure compliance with the CEA and 

Commission regulations, resolve 

conflicts of interest, remediate 

noncompliance issues, and report 

annually to the Commission and the 

board or senior officer on compliance of 

the firm. 

Comparable Australian Law and 

Regulations: The applicant has 

represented to the Commission that the 

following provisions of law and 

regulations applicable in Australia are 

in full force and effect in Australia, and 

comparable to and as comprehensive as 

section 4s(k) of the CEA and 

Commission regulation 3.3. 

• APRA prudential standard CPS 

520—Fit and Proper (‘‘CPS 520’’) 

requires the appointment of 

‘‘responsible persons.’’ CPS 520 states 

that responsible persons must be fit and 

proper, and that the ultimate 

responsibility for ensuring that an 

institution’s responsible persons are fit 

and proper remains with the board of 

directors. 

• ASIC Regulatory Guide 105 

Licensing: Organisational competence 

requires AFSL licensees to appoint 

‘‘responsible managers’’ who have direct 

responsibility for significant day-to-day 

decisions about the financial services 

provided, and for maintaining 

organizational competence of the entity. 

Such responsible managers must have 

the relevant skill and experience and be 

of good fame and character. 

• ASIC Regulatory Guide 104 

Licensing: Meeting the general 

obligations (‘‘RG 104’’) also requires 

AFSL holders to allocate to a director or 

senior manager responsibility for 

overseeing the AFSL holder’s 

compliance measures, and reporting to 

the governing body (including having 

ready access to the governing body). 

• When ASIC assesses an application 

for an AFSL, ASIC requires applicants 

to describe whether their compliance 

arrangements are generally consistent 

with ‘‘Australian Standard 3806’’ (‘‘AS 


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33AS 3806 is a standard published by ‘‘Standards 

Australia,’’ a non-government standards 

organization. Australian Standards are not legal 

documents, but can be referenced in Australian 

legislation and become mandatory. 

34Not relevant for the Commission’s 

comparability determination herein, the applicant 

also referenced APRA draft prudential standard 

CPS 220 Risk Management (‘‘Draft CPS 220’’), 

which was released by APRA on May 9, 2013. This 

draft prudential standard, if finalized in a form 

similar to its draft form, will require each ADI 

(including SD ADIs) to have a designated 

compliance function that assists senior management 

in effectively managing compliance risks. It will 

also require that the compliance function be 

adequately staffed by appropriately trained and 

competent persons who have sufficient authority to 

perform their role effectively, and have a reporting 

line independent from business lines. APRA 

expects to finalize Draft CPS 220 prior to its 

implementation date of January 1, 2015. 

35 7 U.S.C. 6s(j). 

36See Final Swap Dealer and MSP Recordkeeping 

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

management program, monitoring of position 

limits, business continuity and disaster recovery, 

conflicts of interest policies and procedures, and 

general information availability, respectively). 

37See Customer Documentation Rule, 77 FR 

21278. Also, SDs must comply with Commission 

regulation 23.608, which prohibits SDs providing 

clearing services to customers from entering into 

agreements that would: (i) Disclose the identity of 

a customer’s original executing counterparty; (ii) 

limit the number of counterparties a customer may 

trade with; (iii) impose counterparty-based position 

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

of a trade on terms that have a reasonable 

relationship to the best terms available; or (v) 

prevent compliance with specified time frames for 

acceptance of trades into clearing. 

38 ‘‘Swaps activities’’ is defined in Commission 

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

registrant, such registrant’s activities related to 

swaps and any product used to hedge such swaps, 

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

swaps or security-based swaps, debt or equity 

securities, foreign currency, physical commodities, 

and other derivatives.’’ The Commission’s 

regulations under 17 CFR Part 23 are limited in 

scope to the swaps activities of SDs and MSPs. 

39As stated above, this notice does not address 

§ 23.608 (Restrictions on counterparty clearing 

relationships). The Commission declines to take up 

Continued 

3806’’).33 AS 3806 provides principles 

and guidance for designing, developing, 

implementing, maintaining and 

improving a flexible, responsive 

effective and measurable compliance 

program within an organization. 

Although this is a non-governmental 

standard, ASIC refers to AS 3806 in its 

regulatory guidance for AFSL licensees 

and asks AFSL holders to refer to the 

standards when complying with their 

regulatory obligations. 

• AFSL licensees must comply with 

section 912A of the Corporations Act, 

which, among other obligations, 

requires that such entities: Do all things 

necessary to ensure that the financial 

services covered by the license are 

provided efficiently, honestly and fairly; 

have adequate arrangements in place for 

managing conflicts of interest that may 

arise wholly, or partially, in relation to 

activities undertaken by the licensee or 

a representative of the licensee in the 

provision of financial services as part of 

the financial services business of the 

licensee or the representative; comply 

with any conditions on the license; 

comply with the financial services laws; 

take reasonable steps to ensure that 

representatives comply with the 

financial services laws; maintain the 

competence to provide the financial 

services covered by the license; ensure 

that representatives are adequately 

trained and competent to provide those 

financial services; and if those financial 

services are provided to retail clients, 

have a dispute resolution system. 

• AFSL licensees are also required 

under section 912D of the Corporations 

Act to report to ASIC any significant 

breach (or likely breach) of its regulatory 

obligations. ASIC Regulatory Guide 78 

Breach reporting by AFS licensees 

expands on this obligation and requires 

AFSL holders to have a documented 

process for, amongst other things, 

rectifying breaches and ensuring that 

arrangements are in place to prevent the 

recurrence of the breach. 

• ADIs are also required under APRA 

prudential standard APS 310 Audit and 

Related Matters (‘‘APS 310’’) to provide 

APRA a high-level description of its risk 

management systems covering all major 

areas of risk and annually, within three 

months of its annual balance date, 

provide APRA with a declaration from 

its CEO endorsed by the board that 

attests that: they have established 

systems to monitor and manage those 

risk including, where appropriate, by 

setting and requiring adherence to a 

series of prudent limits, and by 

adequate and timely reporting 

processes; the risk management systems 

are operating effectively and are 

adequate with regard to the risks they 

are designed to control; and the 

descriptions of risk management 

systems provided to APRA are accurate 

and current.34

Commission Determination: The 

Commission finds that the provisions 

and requirements under the Australian 

regimes specified above are generally 

identical in intent to § 3.3 by seeking to 

ensure firms have designated a qualified 

individual as the compliance officer that 

reports directly to a sufficiently senior 

function of the firm and that has the 

independence, responsibility, and 

authority to develop and administer 

compliance policies and procedures 

reasonably designed to ensure 

compliance with the CEA and 

Commission regulations, resolve 

conflicts of interest, remediate 

noncompliance issues, and report 

annually on compliance of the firm. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

CCO requirements of the provisions of 

Australian law and regulations specified 

above are comparable to and as 

comprehensive as § 3.3, with the 

exception of § 3.3(e) concerning 

preparing and signing an annual 

compliance report and § 3.3(f) 

concerning certifying and furnishing an 

annual compliance report to the 

Commission. 

Notwithstanding that the Commission 

has not determined that the 

requirements of Australian law and 

regulations are comparable to and as 

comprehensive as §§ 3.3(e) and 3.3(f), 

any SD or MSP to which both § 3.3 and 

the Australian law and regulations 

specified above are applicable would 

generally be deemed to be in 

compliance with §§ 3.3(e) and (f) if that 

SD or MSP complies with the Australian 

law and regulations specified above, 

subject to preparing and signing an 

annual compliance report in accordance 

with § 3.3(e) and certifying and 

furnishing the Commission with an 

annual compliance report in accordance 

with § 3.3(f). The Commission notes that 

it generally expects registrants to submit 

required reports to the Commission in 

the English language. 

B. Risk Management Duties (§§ 23.600— 

23.609) 

Section 4s(j) of the CEA requires each 

SD and MSP to establish internal 

policies and procedures designed to, 

among other things, address risk 

management, monitor compliance with 

position limits, prevent conflicts of 

interest, and promote diligent 

supervision, as well as maintain 

business continuity and disaster 

recovery programs.35 The Commission 

adopted regulations 23.600, 23.601, 

23.602, 23.603, 23.605, and 23.606 to 

implement the statute.36 The 

Commission also adopted regulation 

23.609, which requires certain risk 

management procedures for SDs or 

MSPs that are clearing members of a 

derivatives clearing organization 

(‘‘DCO’’).37 Collectively, these 

requirements help to establish a robust 

and comprehensive internal risk 

management program for SDs and MSPs 

with respect to their swaps activities,38

which is critical to effective systemic 

risk management for the overall swaps 

market. In making its comparability 

determination with regard to these risk 

management duties, the Commission 

will consider each regulation 

individually.39


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the request for a comparability determination with 

respect to this regulation due to the Commission’s 

view that there are not laws or regulations 

applicable in Australia to compare with the 

prohibitions and requirements of § 23.608. The 

Commission may provide a comparability 

determination with respect to this regulation at a 

later date in consequence of further developments 

in the law and regulations applicable in Australia. 

40Not relevant for the Commission’s 

comparability determination herein, the applicant 

also referenced Draft CPS 220. Draft CPS 220 seeks 

to introduce additional requirements in respect of 

the risk management framework for ADIs. APRA 

expects to finalize CPS 220 prior to its 

implementation date of January 1, 2015. Under 

Draft CPS 220, an APRA-regulated institution must 

have policies and procedures that provide the board 

with a comprehensive institution-wide view of its 

material risks. Draft CPS 220 also requires the risk 

management function of an ADI be ‘‘operationally 

independent’’ and must be headed by a designated 

Chief Risk Officer (‘‘CRO’’). The CRO must be 

involved in, and have the authority to provide 

effective challenge to, activities and decisions that 

may materially affect the institution’s risk profile. 

41The Corporations Act requires AFSL holders to 

comply with risk management requirements, 

however, this requirement does not apply where an 

entity is regulated by APRA. See section 912A(1)(h). 

1. Risk Management Program for SDs 

and MSPs (§ 23.600) 

Commission Requirement: 

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

CEA, Commission regulation 23.600 

generally requires that: 

• Each SD or MSP must establish and 

enforce a risk management program 

consisting of a system of written risk 

management policies and procedures 

designed to monitor and manage the 

risks associated with the swap activities 

of the firm, including without 

limitation, market, credit, liquidity, 

foreign currency, legal, operational, and 

settlement risks, and furnish a copy of 

such policies and procedures to the 

CFTC upon application for registration 

and upon request; 

• The SD or MSP must establish a 

risk management unit independent from 

the business trading unit; 

• The risk management policies and 

procedures of the SD or MSP must be 

approved by the firm’s governing body; 

• Risk tolerance limits and exceptions 

therefrom must be reviewed and 

approved quarterly by senior 

management and annually by the 

governing body; 

• The risk management program must 

have a system for detecting breaches of 

risk tolerance limits and alerting 

supervisors and senior management, as 

appropriate; 

• The risk management program must 

account for risks posed by affiliates and 

be integrated at the consolidated entity 

level; 

• The risk management unit must 

provide senior management and the 

governing body with quarterly risk 

exposure reports and upon detection of 

any material change in the risk exposure 

of the SD or MSP; 

• Risk exposure reports must be 

furnished to the CFTC within five 

business days following provision to 

senior management; 

• The risk management program must 

have a new product policy for assessing 

the risks of new products prior to 

engaging in such transactions; 

• The risk management program must 

have policies and procedures providing 

for trading limits, monitoring of trading, 

processing of trades, and separation of 

personnel in the trading unit from 

personnel in the risk management unit; 

and 

• The risk management program must 

be reviewed and tested at least annually 

and upon any material change in the 

business of the SD or MSP. 

Regulatory Objective: Through the 

required system of risk management, the 

Commission seeks to ensure that firms 

are adequately managing the risks of 

their swaps activities to prevent failure 

of the SD or MSP, which could result in 

losses to counterparties doing business 

with the SD or MSP, and systemic risk 

more generally. To this end, the 

Commission believes the risk 

management program of an SD or MSP 

must contain at least the following 

critical elements: 

• Identification of risk categories; 

• Establishment of risk tolerance 

limits for each category of risk and 

approval of such limits by senior 

management and the governing body; 

• An independent risk management 

unit to administer a risk management 

program; and 

• Periodic oversight of risk exposures 

by senior management and the 

governing body. 

Comparable Australian Law and 

Regulations: The applicant has 

represented to the Commission that the 

following provisions of law and 

regulations applicable in Australia are 

in full force and effect in Australia, and 

comparable to and as comprehensive as 

section 4s(j)(2) of the CEA and 

Commission regulation 23.600.40

• The regulatory framework for ADIs 

under the Banking Act is based on the 

banking supervision principles 

published by the Basel Committee on 

Banking Supervision.41 This prudential 

framework includes requirements 

(largely set out in detailed and separate 

prudential standards) regarding capital 

adequacy, credit risk, market risk, 

liquidity, credit quality, large exposures, 

associations with related entities, 

outsourcing, business continuity 

management, audit and related 

arrangements for prudential reporting, 

governance, and fit and proper 

management. 

• In particular, APS 310 (discussed 

above) requires an ADI’s board and 

management to ensure that the ADI 

meets prudential and statutory 

requirements and has management 

practices to limit risks to prudent levels. 

APS 310 mandates that the ADI’s risk 

management practices must be detailed 

in descriptions of risk management 

systems that must be regularly reviewed 

and updated, at least annually, to take 

account of changing circumstances. 

• APRA Prudential standard APS 116 

Capital Adequacy: Market Risk (‘‘APS 

116’’) states that the board, or a board 

committee, of an ADI must ensure that 

the ADI has in place adequate systems 

to identify, measure and manage market 

risk, including identifying 

responsibilities, providing adequate 

separation of duties and avoiding 

conflicts of interest. 

• For certain trading positions, APS 

116 states that an ADI must have 

‘‘clearly defined policies and 

procedures for the active management of 

positions such that: positions are 

managed on a trading desk; position 

limits are set and monitored for 

appropriateness; positions are markedto-market daily and when marking-tomodel the parameters are assessed on a 

daily basis; and positions are reported to 

senior management as an integral part of 

the institution’s risk management 

process. 

• If an ADI has received approval to 

apply an ‘‘internal model’’ for market 

risk, as opposed to the ‘‘standard 

method’’ of calculating capital 

requirements, APS 116 requires the ADI 

to have an independent risk control unit 

that is responsible for the design and 

implementation of the ADI’s market risk 

management system. The risk control 

unit must produce and analyze daily 

reports on the output of the ADI’s risk 

measurement model, including an 

evaluation of limit utilization. This risk 

control unit must be independent from 

business trading and other risk taking 

units and must report directly to senior 

management of the ADI. 

• If an ADI has received approval to 

apply an ‘‘internal model’’ for market 

risk, APS 116 states that the board or a 

board committee and senior 

management of an ADI must be actively 

involved in the risk control process. 

Daily reports must be prepared by the 

independent risk control unit and must 

be reviewed by a level of management 

with sufficient seniority and authority 

to enforce reductions of positions. 

• APS 116 states that an ADI must 

ensure that an independent review of 

the risk measurement system and 


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42The setting of position limits by the 

Commission, a DCM, or a SEF is subject to 

requirements under the CEA and Commission 

regulations other than § 23.601. The setting of 

position limits and compliance with such limits is 

not subject to the Commission’s substituted 

compliance regime. 

overall risk management process is 

carried out initially (i.e., at the time 

when model approval is sought) and 

then regularly as part of the ADI’s 

internal audit process. 

Commission Determination: The 

Commission finds that the provisions of 

Australian law and regulations specified 

above are generally identical in intent to 

§ 23.600 by requiring a system of risk 

management that seeks to ensure that 

firms are adequately managing the risks 

of their swaps activities to prevent 

failure of the SD or MSP, which could 

result in losses to counterparties doing 

business with the SD or MSP, and 

systemic risk more generally. 

Specifically, the Commission finds that 

the Australian provisions specified 

above comprehensively require SDs and 

MSPs to establish risk management 

programs containing the following 

critical elements: 

• Identification of risk categories; 

• Establishment of risk tolerance 

limits for each category of risk and 

approval of such limits by senior 

management and the governing body; 

• An independent risk management 

unit to administer a risk management 

program; and 

• Periodic oversight of risk exposures 

by senior management and the 

governing body. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

risk management program requirements 

of the provisions of Australian law and 

regulations specified above, are 

comparable to and as comprehensive as 

§ 23.600, with the exception of 

§ 23.600(c)(2) concerning the 

requirement that each SD and MSP 

produce a quarterly risk exposure report 

and provide such report to its senior 

management, governing body, and the 

Commission. 

Notwithstanding that the Commission 

has not determined that the 

requirements of Australian law and 

regulations are comparable to and as 

comprehensive as § 23.600(c)(2), any SD 

or MSP to which both § 23.600 and the 

Australian law and regulations specified 

above are applicable would generally be 

deemed to be in compliance with 

§ 23.600(c)(2) if that SD or MSP 

complies with the Australian law and 

regulations specified above, subject to 

compliance with the requirement that it 

produce quarterly risk exposure reports 

and provide such reports to its senior 

management, governing body, and the 

Commission in accordance with 

§ 23.600(c)(2). The Commission notes 

that it generally expects reports 

furnished to the Commission by 

registrants to be in the English language. 

2. Monitoring of Position Limits 

(§ 23.601) 

Commission Requirement: 

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

CEA, Commission regulation 23.601 

requires each SD or MSP to establish 

and enforce written policies and 

procedures that are reasonably designed 

to monitor for, and prevent violations 

of, applicable position limits established 

by the Commission, a designated 

contract market (‘‘DCM’’), or a swap 

execution facility (‘‘SEF’’).42 The 

policies and procedures must include 

an early warning system and provide for 

escalation of violations to senior 

management (including the firm’s 

governing body). 

Regulatory Objective: Generally, 

position limits are implemented to 

ensure market integrity, fairness, 

orderliness, and accurate pricing in the 

commodity markets. Commission 

regulation 23.601 thus seeks to ensure 

that SDs and MSPs have established the 

necessary policies and procedures to 

monitor the trading of the firm to 

prevent violations of applicable position 

limits established by the Commission, a 

DCM, or a SEF. As part of its Risk 

Management Program, § 23.601 is 

intended to ensure that established 

position limits are not breached by the 

SD or MSP. 

Comparable Australian Law and 

Regulations: The applicant has 

represented to the Commission that the 

following provisions of law and 

regulations applicable in Australia are 

in full force and effect in Australia, and 

comparable to and as comprehensive as 

section 4s(j)(1) of the CEA and 

Commission regulation 23.601. 

• Section 912A(1)(ca) of the 

Corporations Act, which requires AFSL 

holders to take reasonable steps to 

ensure its representatives comply with 

the financial services laws, which 

would include regulatory position 

limits. 

• APS 310 (discussed above) requires 

an ADI’s board and management to 

ensure that the ADI meets prudential 

and statutory requirements and has 

management practices to limit risks to 

prudent levels. 

In addition to the foregoing, the 

applicant also submitted various 

guidelines and required best practices 

concerning the setting of internal risk 

tolerance limits and monitoring for 

compliance with such internal limits. 

Although the Commission recognizes 

these as prudent risk management 

practices, the Commission does not 

believe that these provisions are 

comparable to § 23.601 because § 23.601 

requires monitoring for compliance with 

external position limits set by the 

Commission, a DCM, or a SEF. 

Commission Determination: The 

Commission finds that the Australian 

provisions specified above are generally 

identical in intent to § 23.601 by 

requiring SDs and MSPs to establish 

necessary policies and procedures to 

monitor the trading of the firm to 

prevent violations of applicable position 

limits established by applicable laws 

and regulations, including those of the 

Commission, a DCM, or a SEF. 

Specifically, the Commission finds that 

the provisions of Australian law and 

regulations specified above, while not 

specific to the issue of position limit 

compliance, nevertheless 

comprehensively require SDs and MSPs 

to monitor for regulatory compliance 

generally, which includes monitoring 

for compliance with position limits set 

pursuant to applicable law and the 

responsibility of senior management 

(including the board of directors) for 

such compliance. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

compliance monitoring requirements of 

Australian law and regulations, as 

specified above, are comparable to and 

as comprehensive as § 23.601. For the 

avoidance of doubt, the Commission 

notes that this determination may not be 

relied on to relieve an SD or MSP from 

its obligation to strictly comply with 

any applicable position limit 

established by the Commission, a DCM, 

or a SEF. 

3. Diligent Supervision (§ 23.602) 

Commission Requirement: 

Commission regulation 23.602 

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

CEA and requires each SD and MSP to 

establish a system to diligently 

supervise all activities relating to its 

business performed by its partners, 

members, officers, employees, and 

agents. The system must be reasonably 

designed to achieve compliance with 

the CEA and CFTC regulations. 

Commission regulation 23.602 requires 

that the supervisory system must 

specifically designate qualified persons 

with authority to carry out the 

supervisory responsibilities of the SD or 

MSP for all activities relating to its 

business as an SD or MSP. 

Regulatory Objective: The 

Commission’s diligent supervision rule 

seeks to ensure that SDs and MSPs 


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strictly comply with the CEA and the 

Commission’s rules. To this end, 

through § 23.602, the Commission seeks 

to ensure that each SD and MSP not 

only establishes the necessary policies 

and procedures that would lead to 

compliance with the CEA and 

Commission regulations, but also 

establishes an effective system of 

internal oversight and enforcement of 

such policies and procedures to ensure 

that such policies and procedures are 

diligently followed. 

Comparable Australian Law and 

Regulations: The applicant has 

represented to the Commission that the 

following provisions of law and 

regulations applicable in Australia are 

in full force and effect in Australia, and 

comparable to and as comprehensive as 

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

Commission regulation 23.602. 

• CPS 520 (discussed above) sets 

forth the fitness requirements for all 

APRA regulated institutions. These 

standards apply to all directors and 

senior managers of an ADI as well as 

other ‘‘responsible persons.’’ The 

applicable key requirements of this 

prudential standard are: an ADI must 

have a Fit and Proper policy that meets 

certain standards; the fitness and 

propriety of a responsible person must 

generally be assessed prior to initial 

appointment and then re-assessed 

annually; and an ADI must take steps to 

ensure that a person is not appointed to, 

or does not continue to hold, a 

responsible person position for which 

they are not qualified. 

• Section 912A(1)(ca) of the 

Corporations Act requires that an AFSL 

licensee take reasonable steps to ensure 

that its representatives comply with the 

financial services laws. 

• RG 104 (discussed above) sets forth 

guidance for an AFSL licensee with 

respect to supervision. These regulatory 

guidelines require that an AFSL licensee 

have measures for monitoring and 

supervising their representatives to 

determine whether they are complying 

with the financial services laws. They 

also require that an AFSL licensee take 

measures to ensure that their 

representatives who provide financial 

services have, and maintain the 

necessary knowledge and skills, to 

competently provide those services. 

Commission Determination: The 

Commission finds that the provisions of 

Australian law and regulations specified 

above are generally identical in intent to 

§ 23.602 because such standards seek to 

ensure that SDs and MSPs strictly 

comply with applicable law, which 

would include the CEA and the 

Commission’s regulations. Through the 

provisions specified above, Australian 

law and regulations seek to ensure that 

each SD and MSP not only establishes 

the necessary policies and procedures 

that would lead to compliance with 

applicable law, which would include 

the CEA and Commission regulations, 

but also establishes an effective system 

of internal oversight and enforcement of 

such policies and procedures to ensure 

that such policies and procedures are 

diligently followed. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

internal supervision requirements of the 

provisions of Australian law and 

regulations, as specified above, are 

comparable to and as comprehensive as 

§ 23.602. 

4. Business Continuity and Disaster 

Recovery (§ 23.603) 

Commission Requirement: To ensure 

the proper functioning of the swaps 

markets and the prevention of systemic 

risk more generally, Commission 

regulation 23.603 requires each SD and 

MSP, as part of its risk management 

program, to establish a business 

continuity and disaster recovery plan 

that includes procedures for, and the 

maintenance of, back-up facilities, 

systems, infrastructure, personnel, and 

other resources to achieve the timely 

recovery of data and documentation and 

to resume operations generally within 

the next business day after the 

disruption. 

Regulatory Objective: Commission 

regulation 23.603 is intended to ensure 

that any market disruption affecting SDs 

and MSPs, whether caused by natural 

disaster or otherwise, is minimized in 

length and severity. To that end, this 

requirement seeks to ensure that entities 

adequately plan for disruptions and 

devote sufficient resources capable of 

carrying out an appropriate plan within 

one business day, if necessary. 

Comparable Australian Law and 

Regulations: The applicant has 

represented to the Commission that the 

following provisions of law and 

regulations applicable in Australia are 

in full force and effect in Australia, and 

comparable to and as comprehensive as 

Commission regulation 23.603. 

APRA prudential standard CPS 232 

Business Continuity Management (‘‘CPS 

232’’) requires each ADI to implement a 

whole-of-business approach to business 

continuity management. Specifically, 

CPS 232 states that: 

• A regulated institution must 

identify, assess, and manage potential 

business continuity risks to ensure that 

it is able to meet its financial and 

service obligations to its depositors, 

policyholders and other creditors; 

• The board of a regulated institution 

must consider business continuity risks 

and controls as part of its overall risk 

management systems and approve a 

Business Continuity Management 

Policy; 

• A regulated institution must 

develop and maintain a Business 

Continuity Plan that documents 

procedures and information which 

enable the regulated institution to 

manage business disruptions; 

• A regulated institution must review 

the Business Continuity Plan annually 

and periodically arrange for its review 

by the internal audit function or an 

external expert; and 

• A regulated institution must notify 

APRA in the event of certain 

disruptions. 

Commission Determination: The 

Commission finds that the provisions of 

Australian law and regulations specified 

above are generally identical in intent to 

§ 23.603 because such standards seek to 

ensure that any market disruption 

affecting SDs and MSPs, whether caused 

by natural disaster or otherwise, is 

minimized in length and severity. To 

that end, the Commission finds that the 

provisions of Australian law and 

regulations specified above seek to 

ensure that entities adequately plan for 

disruptions and devote sufficient 

resources capable of carrying out an 

appropriate plan in a timely manner. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

business continuity and disaster 

recovery requirements of the provisions 

of Australian law and regulations, as 

specified above, are comparable to and 

as comprehensive as § 23.603. 

5. Conflicts of Interest (§ 23.605) 

Commission Requirement: Section 

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

regulation 23.605(c) generally require 

each SD or MSP to establish structural 

and institutional safeguards to ensure 

that the activities of any person within 

the firm relating to research or analysis 

of the price or market for any 

commodity or swap are separated by 

appropriate informational partitions 

within the firm from the review, 

pressure, or oversight of persons whose 

involvement in pricing, trading, or 

clearing activities might potentially bias 

their judgment or supervision. 

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

and Commission regulation 23.605(d)(1) 

generally prohibits an SD or MSP from 

directly or indirectly interfering with or 

attempting to influence the decision of 

any clearing unit of any affiliated 

clearing member of a DCO to provide 


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43 In addition to the foregoing, the applicant 

referenced Draft CPS 220. This draft prudential 

standard, if finalized in a form similar to its draft 

form, will require each ADI (including SD ADIs) to 

have policies and procedures for identifying, 

monitoring, and managing potential and actual 

conflicts of interest. 

clearing services and activities to a 

particular customer, including: 

• Whether to offer clearing services to 

a particular customer; 

• Whether to accept a particular 

customer for clearing derivatives; 

• Whether to submit a customer’s 

transaction to a particular DCO; 

• Whether to set or adjust risk 

tolerance levels for a particular 

customer; or 

• Whether to set a customer’s fees 

based on criteria other than those 

generally available and applicable to 

other customers. 

Commission regulation 23.605(d)(2) 

generally requires each SD or MSP to 

create and maintain an appropriate 

informational partition between 

business trading units of the SD or MSP 

and clearing units of any affiliated 

clearing member of a DCO to reasonably 

ensure compliance with the Act and the 

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

outlined above. 

The Commission observes that 

§ 23.605(d) works in tandem with 

Commission regulation 1.71, which 

requires FCMs that are clearing 

members of a DCO and affiliated with 

an SD or MSP to create and maintain an 

appropriate informational partition 

between business trading units of the 

SD or MSP and clearing units of the 

FCM to reasonably ensure compliance 

with the Act and the prohibitions set 

forth in § 1.71(d)(1), which are the same 

as the prohibitions set forth in 

§ 23.605(d)(1) outlined above. 

Finally, § 23.605(e) requires that each 

SD or MSP have policies and 

procedures that mandate the disclosure 

to counterparties of material incentives 

or conflicts of interest regarding the 

decision of a counterparty to execute a 

derivative on a swap execution facility 

or DCM or to clear a derivative through 

a DCO. 

Regulatory Objective: Commission 

regulation 23.605(c) seeks to ensure that 

research provided to the general public 

by an SD or MSP is unbiased and free 

from the influence of the interests of an 

SD or MSP arising from the SD’s or 

MSP’s trading business. 

In addition, the § 23.605(d) (working 

in tandem with § 1.71) seeks to ensure 

open access to the clearing of swaps by 

requiring that access to and the 

provision of clearing services provided 

by an affiliate of an SD or MSP are not 

influenced by the interests of an SD’s or 

MSP’s trading business. 

Finally, § 23.605(e) seeks to ensure 

equal access to trading venues and 

clearinghouses, as well as orderly and 

fair markets, by requiring that each SD 

and MSP disclose to counterparties any 

material incentives or conflicts of 

interest regarding the decision of a 

counterparty to execute a derivative on 

a SEF or DCM, or to clear a derivative 

through a DCO. 

Comparable Australian Law and 

Regulations: The applicant has 

represented to the Commission that the 

following provisions of law and 

regulations applicable in Australia are 

in full force and effect in Australia, and 

comparable to and as comprehensive as 

Commission regulation 23.605(c). 

• Section 912A(1)(aa) of the 

Corporations Act requires AFSL 

licensees to have adequate arrangements 

for the management of conflicts of 

interest that may arise wholly, or 

partially, in relation to activities 

undertaken by a licensee or a 

representative of the licensee in the 

provision of financial services. 

• ASIC Regulatory Guide 181 

Licensing: Managing conflicts of interest 

and ASIC Regulatory Guide 79 Research 

report providers: Improving the quality 

of investment research (specific to 

research reports provided in Australia), 

set out ASIC’s expectations regarding 

how financial service licensees are to 

manage conflicts of interest that arise in 

relation to the financial services that 

they provide. The conflicts management 

obligation requires that all conflicts of 

interest be adequately managed, 

recognizing that many conflicts of 

interest can be managed by a 

combination of internal controls and 

disclosures. Where conflicts cannot be 

adequately managed through internal 

controls and/or disclosure, the ASIC 

guidelines require that an AFSL holder 

must avoid the conflict or refrain from 

providing the affected financial service. 

• Section 941A of the Corporations 

Act requires AFSL licensees to provide 

a Financial Services Guide to retail 

clients if they provide a financial 

service to the client. 

• Section 942B(2)(f) of the 

Corporations Act states that the 

Financial Services Guide must provide 

disclosures about relationships that may 

influence the provision of the financial 

service.43

The applicant has represented to the 

Commission that ASIC and APRA, in 

the process of their oversight and 

enforcement of the foregoing Australian 

law and regulations for ADIs and ASFL 

licensees, would require any SD or MSP 

subject to such law and regulations to 

resolve or mitigate conflicts of interests 

in the provision of clearing services by 

a clearing member of a DCO that is an 

affiliate of the SD or MSP, or the 

decision of a counterparty to execute a 

derivative on a SEF or DCM, or clear a 

derivative through a DCO, through 

appropriate information firewalls and 

disclosures. 

Commission Determination: The 

Commission finds that the provisions of 

Australian law and regulations specified 

above with respect to conflicts of 

interest that may arise in producing or 

distributing research are generally 

identical in intent to § 23.605(c) because 

such standards seek to ensure that 

research provided to the general public 

by an SD is unbiased and free from the 

influence of the interests of an SD 

arising from the SD’s trading business. 

With respect to conflicts of interest 

that may arise in the provision of 

clearing services by an affiliate of an SD 

or MSP, the Commission further finds 

that although the general conflicts of 

interest prevention requirements under 

the Australian law and regulations 

specified above do not require with 

specificity that access to and the 

provision of clearing services provided 

by an affiliate of an SD or MSP not be 

improperly influenced by the interests 

of an SD’s or MSP’s trading business, 

such general requirements would 

require prevention and remediation of 

such improper influence when 

recognized or discovered. Thus such 

standards would ensure open access to 

clearing. 

Finally, although not as specific as the 

requirements of § 23.605(e) (Undue 

influence on counterparties), the 

Commission finds that the general 

disclosure requirements of the 

Australian law and regulations specified 

above would ensure equal access to 

trading venues and clearinghouses by 

requiring that each SD and MSP 

disclose to counterparties any material 

incentives or conflicts of interest 

regarding the decision of a counterparty 

to execute a derivative on a SEF or 

DCM, or to clear a derivative through a 

DCO. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

provisions of Australian law and 

regulations specified above in relation 

to conflicts of interest are comparable to 

and as comprehensive as § 23.605. 

6. Availability of Information for 

Disclosure and Inspection (§ 23.606) 

Commission Requirement: 

Commission regulation 23.606 

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

the CEA, and requires each SD and MSP 

to disclose to the Commission, and an 


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

(if any) comprehensive information 

about its swap activities, and to 

establish and maintain reliable internal 

data capture, processing, storage, and 

other operational systems sufficient to 

capture, process, record, store, and 

produce all information necessary to 

satisfy its duties under the CEA and 

Commission regulations. Such systems 

must be designed to provide such 

information to the Commission and an 

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

within the time frames set forth in the 

CEA and Commission regulations and 

upon request. 

Regulatory Objective: Commission 

regulation 23.606 seeks to ensure that 

each SD and MSP captures and 

maintains comprehensive information 

about their swap activities, and is able 

to retrieve and disclose such 

information to the Commission and its 

U.S. prudential regulator, if any, as 

necessary for compliance with the CEA 

and the Commission’s regulations and 

for purposes of Commission oversight, 

as well as oversight by the SD’s or 

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

The Commission observes that it 

would be impossible to meet the 

regulatory objective of § 23.606 unless 

the required information is available to 

the Commission and any U.S. 

prudential regulator under the foreign 

legal regime. Thus, a comparability 

determination with respect to the 

information access provisions of 

§ 23.606 would be premised on whether 

the relevant information would be 

available to the Commission and any 

U.S. prudential regulator of the SD or 

MSP, not on whether an SD or MSP 

must disclose comprehensive 

information to its regulator in its home 

jurisdiction. 

Comparable Australian Law and 

Regulations: The applicant has 

represented to the Commission that the 

following provisions of law and 

regulations applicable in Australia are 

in full force and effect in Australia, and 

comparable to and as comprehensive as 

Commission regulation 23.606. 

Section 912C of the Corporations Act 

and sections 29–33 of the ASIC Act 

enable ASIC to gather information from 

AFSL licensees, including: 

• A statement containing specified 

information about the financial services 

provided by the AFSL holder or its 

representatives, or the financial services 

business carried on by the licensee; 

• Inspection of books without charge; 

• Issuance of a notice to a body 

corporate to produce books about the 

affairs of the body corporate; 

• Issuance of a notice to a person who 

carries out a financial services business 

to produce books relating to, among 

other things, a dealing in financial 

products, or the character or financial 

position of the business; 

• Issuance of a notice to produce 

books relating to the supply of financial 

services; and 

• Issuance of a notice to produce 

documents in the person’s possession 

that relate to the affairs of the body 

corporate. 

In addition, Section 988A of the 

Corporations Act requires AFSL license 

holders to keep financial records that 

correctly record and explain the 

transactions and financial position of 

the financial services business carried 

out by the licensee. 

Part 2.3 of the ASIC Derivative 

Transaction Rules (Reporting) 2013 

places certain requirements on reporting 

entities (which includes the five SD 

ADIs as reporting entities from October 

1, 2013). Specifically, Rule 2.3.1 

requires reporting entities to keep 

records in relation to OTC derivatives 

transactions (including swaps) that 

enable the reporting entity to 

demonstrate it has complied with the 

Derivative Transaction Rules, and must 

keep the records for a period of at least 

five years from the date the record is 

made or amended. Reporting entities 

must also keep a record of all 

information that it is required to be 

reported under such rules. 

Rule 2.3.2 further requires a reporting 

entity to, on request by ASIC, provide 

ASIC within a reasonable time with 

records or other information relating to 

compliance with or determining 

whether there has been compliance with 

the Rules. 

Commission Determination: The 

Commission finds that the Australian 

law and regulations specified above are 

generally identical in intent to § 23.606 

because such standards seek to ensure 

that each SD and MSP captures and 

stores comprehensive information about 

their swap activities, and are able to 

retrieve and disclose such information 

as necessary for compliance with 

applicable law and for purposes of 

regulatory oversight. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

Australian law and regulations with 

respect to the availability of information 

for inspection and disclosure, as 

specified above, are comparable to, and 

as comprehensive as, § 23.606, with the 

exception of § 23.606(a)(2) concerning 

the requirement that an SD or MSP 

make information required by 

§ 23.606(a)(1) available promptly upon 

request to Commission staff and the staff 

of an applicable U.S. prudential 

regulator. The applicant has not 

submitted any provision of law or 

regulations applicable in Australia upon 

which the Commission could make a 

finding that SDs and MSPs would be 

required to retrieve and disclose 

comprehensive information about their 

swap activities to the Commission or 

any U.S. prudential regulator as 

necessary for compliance with the CEA 

and Commission regulations, and for 

purposes of Commission oversight and 

the oversight of any U.S. prudential 

regulator. 

Notwithstanding that the Commission 

has not determined that the 

requirements of Australian law and 

regulations are comparable to and as 

comprehensive as § 23.606(a)(2), any SD 

or MSP to which both § 23.606 and the 

Australian law and regulations specified 

above are applicable would generally be 

deemed to be in compliance with 

§ 23.606(a)(2) if that SD or MSP 

complies with the Australian law and 

regulations specified above, subject to 

compliance with the requirement that it 

produce information to Commission 

staff and the staff of an applicable U.S. 

prudential regulator in accordance with 

§ 23.606(a)(2). 

7. Clearing Member Risk Management 

(§ 23.609) 

Commission Requirement: 

Commission regulation 23.609 generally 

requires each SD or MSP that is a 

clearing member of a DCO to: 

• Establish risk-based limits based on 

position size, order size, margin 

requirements, or similar factors; 

• Screen orders for compliance with 

the risk-based limits; 

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

• Conduct stress tests under extreme 

but plausible conditions of all positions 

at least once per week; 

• Evaluate its ability to meet initial 

margin requirements at least once per 

week; 

• Evaluate its ability to meet variation 

margin requirements in cash at least 

once per week; 

• Evaluate its ability to liquidate 

positions it clears in an orderly manner, 

and estimate the cost of liquidation; and 

• Test all lines of credit at least once 

per year. 

Regulatory Objective: Through 

Commission regulation 23.609, the 

Commission seeks to ensure the 

financial integrity of the markets and 

the clearing system, to avoid systemic 

risk, and to protect customer funds. 

Effective risk management by SDs and 

MSPs that are clearing members is 

essential to achieving these objectives. 

A failure of risk management can cause 


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44The Corporations Act requires AFSL holders to 

comply with risk management requirements, 

however, this requirement does not apply where an 

entity is regulated by APRA. See section 912A(1)(h). 

a clearing member to become insolvent 

and default to a DCO. Such default can 

disrupt the markets and the clearing 

system and harm customers. 

Comparable Australian Law and 

Regulations: The applicant has 

represented to the Commission that the 

following provisions of law and 

regulations applicable in Australia are 

in full force and effect in Australia, and 

comparable to and as comprehensive as 

Commission regulation 23.609. 

• The regulatory framework for ADIs 

under the Banking Act is based on the 

banking supervision principles 

published by the Basel Committee on 

Banking Supervision.44 This prudential 

framework includes requirements 

(largely set out in detailed and separate 

prudential standards) regarding capital 

adequacy, credit risk, market risk, 

liquidity, credit quality, large exposures, 

associations with related entities, 

outsourcing, business continuity 

management, audit and related 

arrangements for prudential reporting, 

governance, and fit and proper 

management. 

• In particular, APS 310 (discussed 

above) requires an ADI’s board and 

management to ensure that the ADI 

meets prudential and statutory 

requirements and has management 

practices to limit risks to prudent levels. 

APS 310 mandates that the ADI’s risk 

management practices must be detailed 

in descriptions of risk management 

systems that must be regularly reviewed 

and updated, at least annually, to take 

account of changing circumstances. 

• APRA Prudential standard APS 116 

Capital Adequacy: Market Risk (‘‘APS 

116’’) states that the board, or a board 

committee, of an ADI must ensure that 

the ADI has in place adequate systems 

to identify, measure and manage market 

risk, including identifying 

responsibilities, providing adequate 

separation of duties and avoiding 

conflicts of interest. 

• For certain trading positions, APS 

116 states that an ADI must have 

‘‘clearly defined policies and 

procedures for the active management of 

positions such that: Positions are 

managed on a trading desk; position 

limits are set and monitored for 

appropriateness; positions are markedto-market daily and when marking-tomodel the parameters are assessed on a 

daily basis; and positions are reported to 

senior management as an integral part of 

the institution’s risk management 

process. 

• If an ADI has received approval to 

apply an ‘‘internal model’’ for market 

risk, as opposed to the ‘‘standard 

method’’ of calculating capital 

requirements, APS 116 requires the ADI 

to have an independent risk control unit 

that is responsible for the design and 

implementation of the ADI’s market risk 

management system. The risk control 

unit must produce and analyze daily 

reports on the output of the ADI’s risk 

measurement model, including an 

evaluation of limit utilization. This risk 

control unit must be independent from 

business trading and other risk taking 

units and must report directly to senior 

management of the ADI. 

• If an ADI has received approval to 

apply an ‘‘internal model’’ for market 

risk, APS 116 states that the board or a 

board committee and senior 

management of an ADI must be actively 

involved in the risk control process. 

Daily reports must be prepared by the 

independent risk control unit and must 

be reviewed by a level of management 

with sufficient seniority and authority 

to enforce reductions of positions. 

• APS 116 states that an ADI must 

ensure that an independent review of 

the risk measurement system and 

overall risk management process is 

carried out initially (i.e., at the time 

when model approval is sought) and 

then regularly as part of the ADI’s 

internal audit process. 

Further, on June 4, 2013, APRA 

issued a letter to all ADIs, including the 

Australian SDs outlining the framework 

for the application of risk management 

requirements to the Australian banks’ 

membership of CCPs. Such a framework 

should include, at a minimum: 

application of appropriate systems and 

controls to monitor, on a continuing 

basis, the risk that membership of and 

conduct of business through a CCP or 

multiple CCPs may create and to 

manage such risk. This would include 

application of limits on potential risk 

exposures. These clearly articulated 

conditions together with APRA’s 

prudential standards are designed to 

achieve a comparable regulatory 

outcome as Commission regulation 

23.609. 

Specifically, APRA has represented to 

the Commission that, in the process of 

its oversight and enforcement of the 

foregoing Australian law, regulations, 

and prudential standards, any SD or 

MSP subject to such standards that is a 

clearing member of a DCO would be 

expected to have established risk-based 

limits and a compliance and assessment 

framework for these limits consistent 

with the Commission’s requirements for 

a clearing member and set out in the 

SD’s or MSP’s risk management policy 

framework. APRA would expect banks 

in Australia to adhere to their risk limit 

policies and any targeted review would 

examine the banks’ risk management 

policy framework that captures these 

regulatory obligations. 

Commission Determination: The 

Commission finds that the Australian 

law and regulations specified above are 

generally identical in intent to § 23.609 

because such standards seek to ensure 

the financial integrity of the markets 

and the clearing system, to avoid 

systemic risk, and to protect customer 

funds. 

The Commission notes that the 

Australian law and regulations specified 

above are not as specific as § 23.609 

with respect to ensuring that SDs and 

MSPs that are clearing members of a 

DCO establish detailed procedures and 

limits for clearing member risk 

management purposes. Nevertheless, 

the Commission finds that the general 

requirements under the Australian law 

and regulations specified above, 

implemented in the context of clearing 

member risk management and pursuant 

to the representations of ASIC and 

APRA, meet the Commission’s 

regulatory objective specified above. 

Based on the foregoing and the 

representations above, the Commission 

hereby determines that the clearing 

member risk management requirements 

of the Australian law and regulations 

specified above are comparable to and 

as comprehensive as § 23.609. 

C. Swap Data Recordkeeping (§§ 23.201 

and 23.203) 

Commission Requirement: Sections 

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

Commission regulation 23.201 generally 

require SDs and MSPs to retain records 

of each transaction, each position held, 

general business records (including 

records related to complaints and sales 

and marketing materials), records 

related to governance, financial records, 

records of data reported to SDRs, and 

records of real-time reporting data along 

with a record of the date and time the 

SD or MSP made such reports. 

Transaction records must be kept in a 

form and manner identifiable and 

searchable by transaction and 

counterparty. 

Commission regulation 23.203, 

requires SDs and MSPs to maintain 

records of a swap transaction until the 

termination, maturity, expiration, 

transfer, assignment, or novation date of 

the transaction, and for a period of five 

years after such date. Records must be 

‘‘readily accessible’’ for the first 2 years 

of the 5 year retention period (consistent 

with § 1.31). 


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45See the Guidance for a discussion of the 

availability of substituted compliance with respect 

to swap data recordkeeping, 78 FR 45332–33. 

The Commission notes that the 

comparability determination below with 

respect to §§ 23.201 and 23.203 

encompasses both swap data 

recordkeeping generally and swap data 

recordkeeping relating to complaints 

and marketing and sales materials in 

accordance with § 23.201(b)(3) and 

(4).45

Regulatory Objective: Through the 

Commission’s regulations requiring SDs 

and MSPs to keep comprehensive 

records of their swap transactions and 

related data, the Commission seeks to 

ensure the effectiveness of the internal 

controls of SDs and MSPs, and 

transparency in the swaps market for 

regulators and market participants. 

The Commission’s regulations require 

SDs and MSPs to keep swap data in a 

level of detail sufficient to enable 

regulatory authorities to understand an 

SD’s or MSP’s swaps business and to 

assess its swaps exposure. 

By requiring comprehensive records 

of swap data, the Commission seeks to 

ensure that SDs and MSPs employ 

effective risk management, and strictly 

comply with Commission regulations. 

Further, such records facilitate effective 

regulatory oversight. 

The Commission observes that it 

would be impossible to meet the 

regulatory objective of §§ 23.201 and 

23.203 unless the required information 

is available to the Commission and any 

U.S. prudential regulator under the 

foreign legal regime. Thus, a 

comparability determination with 

respect to the information access 

provisions of § 23.203 would be 

premised on whether the relevant 

information would be available to the 

Commission and any U.S. prudential 

regulator of the SD or MSP, not on 

whether an SD or MSP must disclose 

comprehensive information to its 

regulator in its home jurisdiction. 

Comparable Australian Law and 

Regulations: The applicant has 

represented to the Commission that the 

following provisions of law and 

regulations applicable in Australia are 

in full force and effect in Australia, and 

comparable to and as comprehensive as 

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

CEA and §§ 23.201 and 23.203. 

• Section 286 of the Corporations Act 

requires firms to keep financial records 

that correctly record and explain its 

transactions, financial position and 

performance for 7 years after the 

transactions are completed. 

• Section 988A of the Corporations 

Act requires AFSL licensees to keep 

financial records that correctly record 

and explain the transactions and 

financial position of the licensee’s 

financial services business. 

• Section 988E of the Corporations 

Act specifies a list of categories of 

information to be shown in the records 

of an AFSL licensee, including records 

of all money received or paid by the 

licensee; acquisitions and disposals of 

financial products, the charges and 

credits arising from them, and the 

names of the person acquiring or 

disposing of each of those products; all 

income from commissions, interest and 

other sources and all payments of 

interest, commissions and other 

expenses; and records pertaining to the 

securities or managed investment 

products that are the property of the 

licensee or held by the licensee for other 

persons. 

• Corporations regulation 7.8.11 

further specifies categories of 

information to be shown in records, 

including all financial products dealt 

with by the AFSL licensee under 

instructions from another person; and 

records pertaining to property held by 

the licensee for another person. 

• Corporations regulation 7.8.12 

further specifies categories of 

information to be shown in records, 

including separate particulars of every 

transaction by the AFSL licensee, the 

date of such transactions, and copies of 

acknowledgments of the receipt of 

financial products or documents of title 

to financial products. 

Part 2.3 of the ASIC Derivative 

Transaction Rules (Reporting) 2013 

places certain requirements on reporting 

entities (which includes the five SD 

ADIs as reporting entities from October, 

1 2013). Specifically, Rule 2.3.1 requires 

reporting entities to keep records in 

relation to OTC derivatives transactions 

(including swaps) that enable the 

reporting entity to demonstrate it has 

complied with the Derivative 

Transaction Rules, and must keep the 

records for a period of at least five years 

from the date the record is made or 

amended. Reporting entities must also 

keep a record of all information that it 

is required to be reported under such 

rules. 

Rule 2.3.2 further requires a reporting 

entity to, on request by ASIC, provide 

ASIC within a reasonable time with 

records or other information relating to 

compliance with or determining 

whether there has been compliance with 

the Rules. 

Commission Determination: The 

Commission finds that the provisions of 

Australian law and regulations specified 

above are generally identical in intent to 

§§ 23.201 and 23.203 because such 

provisions seek to ensure the 

effectiveness of the internal controls of 

SDs and MSPs, and transparency in the 

swaps market for regulators and market 

participants. 

In addition, the Commission finds 

that the provisions of Australian law 

and regulations specified above require 

SDs and MSPs to keep swap data in a 

level of detail sufficient to enable 

regulatory authorities to understand an 

SD’s or MSP’s swaps business and to 

assess its swaps exposure. 

Finally, the Commission finds that the 

provisions of Australian law and 

regulations specified above, by requiring 

comprehensive records of swap data, 

seek to ensure that SDs and MSPs 

employ effective risk management, seek 

to ensure that SDs and MSPs strictly 

comply with applicable regulatory 

requirements (including the CEA and 

Commission regulations), and that such 

records facilitate effective regulatory 

oversight. 

Based on the foregoing and the 

representations of the applicant, the 

Commission hereby determines that the 

requirements of Australian law and 

regulation with respect to swap data 

recordkeeping, as specified above, are 

comparable to, and as comprehensive 

as, §§ 23.201 and 23.203, with the 

exception of § 23.203(b)(2) concerning 

the requirement that an SD or MSP 

make records required by § 23.201 open 

to inspection by any representative of 

the Commission, the United States 

Department of Justice, or any applicable 

U.S. prudential regulator. The applicant 

has not submitted any provision of 

Australian law or regulation upon 

which the Commission could make a 

finding that SDs and MSPs would be 

required to make records required by 

§ 23.201 open to inspection by any 

representative of the Commission, the 

United States Department of Justice, or 

any applicable U.S. prudential 

regulator. 

Notwithstanding that the Commission 

has not determined that the 

requirements of Australian law and 

regulations are comparable to and as 

comprehensive as § 23.203(b)(2), any SD 

or MSP to which both § 23.203 and the 

Australian law and regulations specified 

above are applicable would generally be 

deemed to be in compliance with 

§ 23.203(b)(2) if that SD or MSP 

complies with the Australian law and 

regulations specified above, subject to 

compliance with the requirement that it 

make records required by § 23.201 open 

to inspection by any representative of 

the Commission, the United States 

Department of Justice, or any applicable 

U.S. prudential regulator in accordance 

with § 23.203(b)(2). 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Notices 78877 

1 Interpretive Guidance and Policy Statement 

Regarding Compliance with Certain Swap 

Regulations, 78 FR 45292 (Jul. 26, 2013). 2http://www.cftc.gov/PressRoom/

SpeechesTestimony/omaliastatement071213b. 3CEA section 2(i); 7 U.S.C. 2(i). 

4Title VII of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act, Public Law 111–203, 

124 Stat. 1376 (2010). 

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

pr6678–13. 

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

newsroom/documents/file/odrgreport.pdf. The 

ODRG agreed to six understandings. Understanding 

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

approach should form the basis of final assessments 

regarding equivalence or substituted compliance.’’ 

7The Commission made a positive comparability 

determination for Commission regulations 

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

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

(b)(6). 

8 Yen-denominated interest rate swaps are subject 

to the mandatory clearing requirement in both the 

U.S. and Japan. 

9Exemptive Order Regarding Compliance With 

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

2013). 

Issued in Washington, DC on December 20, 

2013, by the Commission. 

Melissa D. Jurgens, 

Secretary of the Commission. 

Appendices to Comparability 

Determination for Australia: Certain 

Entity-Level Requirements 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Gensler and 

Commissioners Chilton and Wetjen voted in 

the affirmative. Commissioner O’Malia voted 

in the negative. 

Appendix 2—Statement of Chairman 

Gary Gensler and Commissioners 

Chilton and Wetjen 

We support the Commission’s approval of 

broad comparability determinations that will 

be used for substituted compliance purposes. 

For each of the six jurisdictions that has 

registered swap dealers, we carefully 

reviewed each regulatory provision of the 

foreign jurisdictions submitted to us and 

compared the provision’s intended outcome 

to the Commission’s own regulatory 

objectives. The resulting comparability 

determinations for entity-level requirements 

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

regulations in their home jurisdiction as a 

substitute for compliance with the relevant 

Commission regulations. 

These determinations reflect the 

Commission’s commitment to coordinating 

our efforts to bring transparency to the swaps 

market and reduce its risks to the public. The 

comparability findings for the entity-level 

requirements are a testament to the 

comparability of these regulatory systems as 

we work together in building a strong 

international regulatory framework. 

In addition, we are pleased that the 

Commission was able to find comparability 

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

and Japan. 

The Commission attained this benchmark 

by working cooperatively with authorities in 

Australia, Canada, the European Union, Hong 

Kong, Japan, and Switzerland to reach 

mutual agreement. The Commission looks 

forward to continuing to collaborate with 

both foreign authorities and market 

participants to build on this progress in the 

months and years ahead. 

Appendix 3—Dissenting Statement of 

Commissioner Scott D. O’Malia 

I respectfully dissent from the Commodity 

Futures Trading Commission’s 

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

Comparability Determinations for Certain 

Requirements under the laws of Australia, 

Canada, the European Union, Hong Kong, 

Japan, and Switzerland (collectively, 

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

comparability determinations that the 

Commission has made, moving forward, the 

Commission must collaborate with foreign 

regulators to harmonize our respective 

regimes consistent with the G–20 reforms. 

However, I cannot support the Notices 

because they: (1) Are based on the legally 

unsound cross-border guidance 

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

substituted compliance process; and (3) fail 

to provide a clear path moving forward. If the 

Commission’s objective for substituted 

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

regulatory gaps between our regulatory 

framework and foreign jurisdictions, then I 

believe that the Commission has successfully 

achieved its goal today. 

Determinations Based on Legally Unsound 

Guidance 

As I previously stated in my dissent, the 

Guidance fails to articulate a valid statutory 

foundation for its overbroad scope and 

inconsistently applies the statute to different 

activities.2 Section 2(i) of the Commodity 

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

Commission does not have jurisdiction over 

foreign activities unless ‘‘those activities 

have a direct and significant connection with 

activities in, or effect on, commerce of the 

United States * * *’’ 3 However, the 

Commission never properly articulated how 

and when this limiting standard on the 

Commission’s extraterritorial reach is met, 

which would trigger the application of Title 

VII of the Dodd-Frank Act 4 and any 

Commission regulations promulgated 

thereunder to swap activities that are outside 

of the United States. Given this statutorily 

unsound interpretation of the Commission’s 

extraterritorial authority, the Commission 

often applies CEA section 2(i) inconsistently 

and arbitrarily to foreign activities. 

Accordingly, because the Commission is 

relying on the legally deficient Guidance to 

make its substituted compliance 

determinations, and for the reasons discussed 

below, I cannot support the Notices. The 

Commission should have collaborated with 

foreign regulators to agree on and implement 

a workable regime of substituted compliance, 

and then should have made determinations 

pursuant to that regime. 

Flawed Substituted Compliance Process 

Substituted compliance should not be a 

case of picking a set of foreign rules identical 

to our rules, determining them to be 

‘‘comparable,’’ but then making no 

determination regarding rules that require 

extensive gap analysis to assess to what 

extent each jurisdiction is, or is not, 

comparable based on overall outcomes of the 

regulatory regimes. While I support the 

narrow comparability determinations that the 

Commission has made, I am concerned that 

in a rush to provide some relief, the 

Commission has made substituted 

compliance determinations that only afford 

narrow relief and fail to address major 

regulatory gaps between our domestic 

regulatory framework and foreign 

jurisdictions. I will address a few examples 

below. 

First, earlier this year, the OTC Derivatives 

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

number of substantive understandings to 

improve the cross-border implementation of 

over-the-counter derivatives reforms.5 The 

ODRG specifically agreed that a flexible, 

outcomes-based approach, based on a broad 

category-by-category basis, should form the 

basis of comparability determinations.6

However, instead of following this 

approach, the Commission has made its 

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

Comparability Determination for 

Transaction-Level Requirements, the 

Commission has made a positive 

comparability determination for some of the 

detailed requirements under the swap trading 

relationship documentation provisions, but 

not for other requirements.7 This detailed 

approach clearly contravenes the ODRG’s 

understanding. 

Second, in several areas, the Commission 

has declined to consider a request for a 

comparability determination, and has also 

failed to provide an analysis regarding the 

extent to which the other jurisdiction is, or 

is not, comparable. For example, the 

Commission has declined to address or 

provide any clarity regarding the European 

Union’s regulatory data reporting 

determination, even though the European 

Union’s reporting regime is set to begin on 

February 12, 2014. Although the Commission 

has provided some limited relief with respect 

to regulatory data reporting, the lack of 

clarity creates unnecessary uncertainty, 

especially when the European Union’s 

reporting regime is set to begin in less than 

two months. 

Similarly, Japan receives no consideration 

for its mandatory clearing requirement, even 

though the Commission considers Japan’s 

legal framework to be comparable to the U.S. 

framework. While the Commission has 

declined to provide even a partial 

comparability determination, at least in this 

instance the Commission has provided a 

reason: the differences in the scope of entities 

and products subject to the clearing 

requirement.8 Such treatment creates 

uncertainty and is contrary to increased 

global harmonization efforts. 

Third, in the Commission’s rush to meet 

the artificial deadline of December 21, 2013, 

as established in the Exemptive Order 

Regarding Compliance with Certain Swap 

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


tkelley on DSK3SPTVN1PROD with NOTICES
78878 Federal Register / Vol. 78, No. 249 / Friday, December 27, 2013 / Notices 

9Exemptive Order Regarding Compliance With 

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

2013). 

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

SpeechesTestimony/opaomalia-29. 

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

SpeechesTestimony/omaliastatement071213b. 

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

originally published proposed and further proposed 

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

respectively. See Cross-Border Application of 

Certain Swaps Provisions of the Commodity 

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

Further Proposed Guidance Regarding Compliance 

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

2013). 

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

Commission failed to complete an important 

piece of the cross-border regime, namely, 

supervisory memoranda of understanding 

(‘‘MOUs’’) between the Commission and 

fellow regulators. 

I have previously stated that these MOUs, 

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

harmonization effort because they provide 

mutually agreed-upon solutions for 

differences in regulatory regimes.10

Accordingly, I stated that the Commission 

should be able to review MOUs alongside the 

respective comparability determinations and 

vote on them at the same time. Without these 

MOUs, our fellow regulators are left 

wondering whether and how any differences, 

such as direct access to books and records, 

will be resolved. 

Finally, as I have consistently maintained, 

the substituted compliance process should 

allow other regulatory bodies to engage with 

the full Commission.11 While I am pleased 

that the Notices are being voted on by the 

Commission, the full Commission only 

gained access to the comment letters from 

foreign regulators on the Commission’s 

comparability determination draft proposals 

a few days ago. This is hardly a transparent 

process. 

Unclear Path Forward 

Looking forward to next steps, the 

Commission must provide answers to several 

outstanding questions regarding these 

comparability determinations. In doing so, 

the Commission must collaborate with 

foreign regulators to increase global 

harmonization. 

First, there is uncertainty surrounding the 

timing and outcome of the MOUs. Critical 

questions regarding information sharing, 

cooperation, supervision, and enforcement 

will remain unanswered until the 

Commission and our fellow regulators 

execute these MOUs. 

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

repository reporting requirements. These 

comparability determinations will be done as 

separate notices. However, the timing and 

process for these determinations remain 

uncertain. 

Third, the Commission has failed to 

provide clarity on the process for addressing 

the comparability determinations that it 

declined to undertake at this time. The 

Notices only state that the Commission may 

address these requests in a separate notice at 

a later date given further developments in the 

law and regulations of other jurisdictions. To 

promote certainty in the financial markets, 

the Commission must provide a clear path 

forward for market participants and foreign 

regulators. 

The following steps would be a better 

approach: (1) The Commission should extend 

the Exemptive Order to allow foreign 

regulators to further implement their 

regulatory regimes and coordinate with them 

to implement a harmonized substituted 

compliance process; (2) the Commission 

should implement a flexible, outcomes-based 

approach to the substituted compliance 

process and apply it similarly to all 

jurisdictions; and (3) the Commission should 

work closely with our fellow regulators to 

expeditiously implement MOUs that resolve 

regulatory differences and address regulatory 

oversight issues. 

Conclusion 

While I support the narrow comparability 

determinations that the Commission has 

made, it was my hope that the Commission 

would work with foreign regulators to 

implement a substituted compliance process 

that would increase the global harmonization 

effort. I am disappointed that the 

Commission has failed to implement such a 

process. 

I do believe that in the longer term, the 

swaps regulations of the major jurisdictions 

will converge. At this time, however, the 

Commission’s comparability determinations 

have done little to alleviate the burden of 

regulatory uncertainty and duplicative 

compliance with both U.S. and foreign 

regulations. 

The G–20 process delineated and put in 

place the swaps market reforms in G–20 

member nations. It is then no surprise that 

the Commission must learn to coordinate 

with foreign regulators to minimize 

confusion and disruption in bringing much 

needed clarity to the swaps market. For all 

these shortcomings, I respectfully dissent 

from the Commission’s approval of the 

Notices. 

[FR Doc. 2013–30974 Filed 12–26–13; 8:45 am] 

BILLING CODE 6351–01–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Comparability Determination for the 

European Union: Certain TransactionLevel Requirements 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of Comparability 

Determination for Certain Requirements 

under the European Market 

Infrastructure Regulation. 

SUMMARY: The following is the analysis 

and determination of the Commodity 

Futures Trading Commission 

(‘‘Commission’’) regarding certain parts 

of a joint request by the European 

Commission (‘‘EC’’) and the European 

Securities and Markets Authority 

(‘‘ESMA’’) that the Commission 

determine that laws and regulations 

applicable in the European Union 

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

affirmative finding of comparability 

with respect to the following regulatory 

obligations applicable to swap dealers 

(‘‘SDs’’) and major swap participants 

(‘‘MSPs’’) registered with the 

Commission: (i) swap trading 

relationship documentation; (ii) swap 

portfolio reconciliation and 

compression; (iii) trade confirmation; 

and (iv) daily trading records 

(collectively, the ‘‘Business Conduct 

Requirements’’). 

DATES: Effective Date: This 

determination will become effective 

immediately upon publication in the 

Federal Register. 

FOR FURTHER INFORMATION CONTACT: Gary 

Barnett, Director, 202–418–5977, 

gbarnett@cftc.gov, Frank Fisanich, Chief 

Counsel, 202–418–5949, ffisanich@

cftc.gov, and Ellie Jester, Special 

Counsel, 202–418–5874, ajester@

cftc.gov, Division of Swap Dealer and 

Intermediary Oversight, Commodity 

Futures Trading Commission, Three 

Lafayette Centre, 1155 21st Street, NW., 

Washington, DC 20581. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

On July 26, 2013, the Commission 

published in the Federal Register its 

‘‘Interpretive Guidance and Policy 

Statement Regarding Compliance with 

Certain Swap Regulations’’ 

(‘‘Guidance’’).1 In the Guidance, the 

Commission set forth its interpretation 

of the manner in which it believes that 

section 2(i) of the Commodity Exchange 

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

provisions to activities outside the U.S. 

and informed the public of some of the 

policies that it expects to follow, 

generally speaking, in applying Title VII 

and certain Commission regulations in 

contexts covered by section 2(i). Among 

other matters, the Guidance generally 

described the policy and procedural 

framework under which the 

Commission would consider a 

substituted compliance program with 

respect to Commission regulations 

applicable to entities located outside the 

U.S. Specifically, the Commission 

addressed a recognition program where 

compliance with a comparable 

regulatory requirement of a foreign 

jurisdiction would serve as a reasonable 

substitute for compliance with the 

attendant requirements of the CEA and 

the Commission’s regulations 

promulgated thereunder. 

In addition to the Guidance, on July 

22, 2013, the Commission issued the 


tkelley on DSK3SPTVN1PROD with NOTICES