15260 Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices 

a. Record the date, time, and location 

(or closest point of ingress) of each visit 

to the research site. 

b. Collect the following information 

for each visit: Composition of the 

marine mammals sighted, such as 

species, gender and life history. 

7. Reporting 

The holder of this Authorization is 

required to: 

a. Report observations of unusual 

behaviors of pinnipeds to West Coast 

Region fishery biologist so that the 

appropriate personnel in the Regional 

Office may conduct any potential 

follow-up observations. 

b. Draft Report: Submit a draft final 

report to the Chief, Permits and 

Conservation Division, Office of 

Protected Resources, Headquarters, 

NMFS within 60 days after the 

expiration of the Authorization. The 

report will include the information 

gathered pursuant to the monitoring 

requirements listed in item 6, along 

with an executive summary. 

c. The Draft Report shall be subject to 

review and comment by NMFS. Any 

recommendations made by NMFS must 

be addressed in the Final Report prior 

to submission to NMFS. If we decide 

that the draft final report needs no 

comments, the draft final report will be 

considered to be the final report. 

d. Final Report: Submit a final report 

to the Chief, Permits and Conservation 

Division, Office of Protected Resources, 

Headquarters, NMFS within 30 days 

after receiving comments from us on the 

draft final report. 

8. Reporting Prohibited Take 

In the unanticipated event that Point 

Blue’s activities cause any taking of a 

marine mammal in a manner prohibited 

by the Authorization, such as an injury 

(Level A harassment), serious injury or 

mortality (e.g., vessel-strike), Point Blue 

shall immediately cease the specified 

activities and immediately report the 

incident to the Chief, Permits and 

Conservation Division, Office of 

Protected Resources, and the Assistant 

West Coast Regional Stranding 

Coordinator. The report must include 

the following information: 

Time, date, and location (latitude/

longitude) of the incident; the name and 

type of vessel involved; the vessel’s 

speed during and leading up to the 

incident; description of the incident; 

water depth; environmental conditions 

(e.g., wind speed and direction, Beaufort 

sea state, cloud cover, and visibility); 

description of marine mammal 

observations in the 24 hours preceding 

the incident; species identification or 

description of the animal(s) involved; 

the fate of the animal(s); and 

photographs or video footage of the 

animal (if equipment is available). 

Point Blue shall not resume its 

activities until NMFS is able to review 

the circumstances of the prohibited 

take. NMFS will work with Point Blue 

to determine what is necessary to 

minimize the likelihood of further 

prohibited take and ensure MMPA 

compliance. Point Blue may not resume 

their activities until notified by NMFS 

in writing via a letter or email or via the 

telephone. 

9. Reporting an Injured or Dead Marine 

Mammal With an Unknown Cause of 

Death 

In the event that Point Blue discovers 

an injured or dead marine mammal, and 

the lead researcher determines that the 

cause of the injury or death is unknown 

and the death is relatively recent (i.e., in 

less than a moderate state of 

decomposition as described in the next 

paragraph), Point Blue will immediately 

report the incident to the Chief, Permits 

and Conservation Division, Office of 

Protected Resources and the Assistant 

West Coast Regional Stranding 

Coordinator. The report must include 

the same information identified in the 

paragraph above this section. Activities 

may continue while we review the 

circumstances of the incident. NMFS 

will work with Point Blue to determine 

whether modifications to the activities 

are appropriate. 

10. Reporting an Injured or Dead Marine 

Mammal Not Related to Point Blue’s 

Activities 

In the event that Point Blue discovers 

an injured or dead marine mammal, and 

the lead researcher determines that the 

injury or death is not associated with or 

related to the activities authorized in the 

Authorization (e.g., previously wounded 

animal, carcass with moderate to 

advanced decomposition, or scavenger 

damage), Point Blue will report the 

incident to the Chief, Permits and 

Conservation Division, Office of 

Protected Resources and the Assistant 

West Coast Regional Stranding 

Coordinator within 24 hours of the 

discovery. Point Blue will provide 

photographs or video footage (if 

available) or other documentation of the 

stranded animal sighting to us and the 

Marine Mammal Stranding Network. 

Point Blue can continue their research 

activities. 

11. A copy of this Authorization must 

be in the possession of Point Blue and 

its designees (including contractors and 

marine mammal monitors) operating 

under the authority of this Incidental 

Harassment Authorization at all times. 

Request for Public Comments 

NMFS requests comment on the 

analyses, the draft Authorization, and 

any other aspect of the Notice of 

Proposed Incidental Harassment 

Authorization for Point Blue’s seabird 

research activities. Please include any 

supporting data or literature citations 

with your comments to help inform our 

final decision on Point Blue’s request 

for an Authorization. 

Dated: March 16, 2016. 

Perry F. Gayaldo, 

Deputy Director, Office of Protected 

Resources, National Marine Fisheries Service. 

[FR Doc. 2016–06317 Filed 3–21–16; 8:45 am] 

BILLING CODE 3510–22–P 

COMMODITY FUTURES TRADING 

COMMISSION 

Comparability Determination for the 

European Union: Dually-Registered 

Derivatives Clearing Organizations and 

Central Counterparties 

AGENCY: Commodity Futures Trading 

Commission. 

ACTION: Notice of Comparability 

Determination for Certain Requirements 

Under the European Market 

Infrastructure Regulation. 

SUMMARY: The Commodity Futures 

Trading Commission (the 

‘‘Commission’’ or ‘‘CFTC’’) has 

determined that certain laws and 

regulations applicable in the European 

Union (‘‘EU’’) provide a sufficient basis 

for an affirmative finding of 

comparability with respect to certain 

regulatory obligations applicable to 

derivatives clearing organizations 

(‘‘DCOs’’) that are registered with the 

Commission and are authorized to 

operate as central counterparties 

(‘‘CCPs’’) in the EU. The Commission’s 

determination provides for substituted 

compliance with respect to 

requirements for financial resources, 

risk management, settlement 

procedures, and default rules and 

procedures. 

DATES: This determination will become 

effective upon publication in the 

Federal Register. 

FOR FURTHER INFORMATION CONTACT: 

Jeffrey M. Bandman, Acting Director, 

202–418–5044, jbandman@cftc.gov; 

Robert B. Wasserman, Chief Counsel, 

202–418–5092, rwasserman@cftc.gov; 

Tracey Wingate, Special Counsel, 202– 

418–5319, twingate@cftc.gov, in each 

case at the Division of Clearing and 

Risk, Commodity Futures Trading 

Commission, Three Lafayette Centre, 

1155 21st Street NW., Washington, DC 


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Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices 15261 

1See Regulation (EU) No 648/2012 of the 

European Parliament and the Council on OTC 

derivatives, central counterparties and trade 

repositories of 4 July 2012 (‘EMIR’), Art. 25(6). 

2 7 U.S.C. 7a–1(a). 

3See generally 7 U.S.C. 7(d)(9)(iii) and (11); 17 

CFR 38.601. 

4 7 U.S.C. 7a–1(a); 17 CFR 39.3; see also 7 U.S.C. 

2(i) (providing that the CEA’s swap-related 

provisions shall not apply to activities outside the 

United States unless those activities have a direct 

and significant connection with activities in, or 

effect on, commerce of the United States or 

contravene such rules or regulations as the 

Commission may prescribe or promulgate as are 

necessary or appropriate to prevent the evasion of 

any provision of the CEA). 

5Regulation (EU) No 648/2012 on OTC 

derivatives, central counterparties and trade 

repositories. 

6 7 U.S.C. 7a–1(h). 

7The PFMIs were jointly issued by the Committee 

on Payment and Settlement Systems (now, the 

Committee on Payments and Market Infrastructures 

(‘‘CPMI’’)) of the Bank for International Settlements 

and the Technical Committee of the International 

Organization of Securities Commissions (‘‘IOSCO’’) 

in April 2012. The PFMIs are available at http://

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

IOSCOPD377.pdf. 

20581; or Michael H. Margolis, Special 

Counsel, 312–596–0576, mmargolis@

cftc.gov, Division of Clearing and Risk, 

Commodity Futures Trading 

Commission, 525 W. Monroe Street, 

Suite 1100, Chicago, IL 60661. 

SUPPLEMENTARY INFORMATION: 

I. Introduction 

On February 10, 2016 Commission 

Chairman Timothy Massad issued a 

joint statement with Commissioner 

Jonathan Hill of the European 

Commission setting forth a common 

approach regarding the regulation of 

CCPs. Under the common approach, the 

European Commission (‘‘EC’’) will 

propose a third-country equivalence 

decision (‘‘Equivalence Decision’’) 

regarding the Commission’s regulatory 

regime for DCOs, which is a prerequisite 

for the European Securities and Markets 

Authority (‘‘ESMA’’) to recognize U.S. 

DCOs as equivalent third-country CCPs. 

Once recognized by ESMA, U.S. DCOs 

may continue to operate and provide 

clearing services in the EU. 

This Notice is being issued in 

connection with the resolution of 

equivalence for U.S. DCOs. For an 

Equivalence Decision under Article 25 

of the European Market Infrastructure 

Regulation (‘‘EMIR’’), one of the 

conditions requires that the legal and 

supervisory regime of the United States 

must include an ‘‘effective equivalent 

system’’ for the recognition of CCPs 

authorized in the EU under EMIR.1 As 

described below, U.S. law and CFTC 

regulations require that foreign-based 

CCPs register with the CFTC in certain 

circumstances. If registered, they must 

comply with the relevant U.S. 

requirements, including the 

Commission regulations applicable to 

registered DCOs. 

Under this Notice, EU-based CCPs 

that register with or are currently 

registered with the Commission as 

DCOs and that are authorized to operate 

in the EU may comply with certain 

Commission requirements for financial 

resources, risk management, settlement 

procedures, and default rules and 

procedures (as set forth in this Notice) 

by complying with the terms of 

corresponding requirements under the 

EMIR Framework, as defined below. 

II. Statutory and Regulatory 

Framework for Registration of non-U.S. 

CCPs 

The Commodity Exchange Act 

(‘‘CEA’’) does not impose geographic 

limitations on the registration of DCOs. 

Nor does it mandate that clearing of 

futures traded on U.S. exchanges must 

take place in the United States.2 To the 

contrary, it permits futures traded on 

exchanges in the United States to be 

cleared outside the United States. 

However, the CEA and CFTC 

regulations require that foreign-based 

CCPs that wish to clear such futures be 

registered with the Commission and 

comply with CFTC regulations.3 In 

addition, consistent with Section 2(i) of 

the CEA, foreign-based CCPs that clear 

swaps with a sufficient nexus to U.S. 

commerce must register with the 

Commission.4

Thus, under this regulatory 

framework, a number of foreign-based 

CCPs have been registered with the 

Commission for some time. 

LCH.Clearnet Ltd., which is based in 

London, for example, has been 

registered with the Commission since 

2001, and thus has been subject to dual 

supervision by UK authorities and the 

Commission since long before the EU 

adopted its current regulatory scheme— 

EMIR.5 This dual registration system 

has been a foundation on which the 

cleared swaps market grew to be a 

global market. In addition to 

LCH.Clearnet Ltd., there are currently 

five other foreign-based DCOs that are 

registered both with the Commission 

and their home country regulators: 

Singapore Exchange Derivatives 

Clearing Limited (home country 

regulator is the Monetary Authority of 

Singapore), LCH.Clearnet SA (home 

country regulators are the Autorite ́ de 

controˆle prudentiel et re ́solution, the 

Autorite ́ des marche ́s financiers, and the 

Banque de France), ICE Clear Europe 

Ltd. (home country regulator is Bank of 

England), Natural Gas Exchange (home 

country regulator is the Alberta 

Securities Commission), and Eurex 

Clearing AG (home country regulators 

are Bundesanstalt fu ̈r 

Finanzdienstleistungsaufsicht (BaFin) 

and Deutsche Bundesbank). Two 

additional foreign-based CCPs have 

applications pending before the 

Commission for registration as DCOs 

(CME Clearing Europe Ltd. and Japan 

Securities Clearing Corporation). 

Additionally, the Commission has 

provided exemptions from registration 

for foreign-based CCPs that clear 

proprietary swaps positions for their 

U.S. members and affiliates but not for 

U.S. customers generally. (These 

foreign-based DCOs also do not clear 

futures traded on U.S. designated 

contract markets (‘‘DCMs’’).) These 

exemptions have been issued pursuant 

to Section 5b(h) of the CEA, which 

permits the Commission to exempt a 

clearing organization from DCO 

registration for the clearing of swaps to 

the extent that the Commission 

determines that such clearing 

organization is subject to comparable, 

comprehensive supervision by 

appropriate government authorities in 

the clearing organization’s home 

country.6

For purposes of the granting of 

exemptions to foreign-based CCPs that 

are not clearing futures traded on U.S. 

DCMs nor clearing swaps for U.S. 

customers, the Commission has 

determined that a supervisory and 

regulatory framework that is consistent 

with the Principles for Financial Market 

Infrastructures (‘‘PFMIs’’) can be 

considered to be comparable to and as 

comprehensive as the supervisory and 

regulatory framework established by the 

CEA and part 39 of the Commission’s 

regulations.7 Pursuant to this authority, 

the Commission has granted exemptions 

to clearing organizations in Australia, 

Japan, South Korea, and Hong Kong, 

provided that each exempt CCP not offer 

customer clearing services for U.S. 

persons and limit direct clearing by U.S. 

persons and futures commission 

merchants (‘‘FCMs’’) to the following 

circumstances: (1) ‘‘A U.S. person that 

is a clearing member of [the exempt 

CCP] may clear swaps for itself and 

those persons identified in the 

Commission’s definition of ‘proprietary 

account’ set forth in Regulation 1.3(y)’’; 

(2) ‘‘A non-U.S. person that is a clearing 

member of [the exempt CCP] may clear 

swaps for any affiliated U.S. person 

identified in the definition of 

‘proprietary account’ set forth in 

Regulation 1.3(y)’’; and (3) ‘‘An entity 

that is registered with the Commission 


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15262 Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices 

8See In re Petition of ASX Clear (Futures) Pty 

Limited for Exemption from Registration as a 

Derivatives Clearing Organization (Aug. 18, 2015); 

In re Petition of Japan Securities Clearing Corp. for 

Exemption from Registration as a Derivatives 

Clearing Organization (Oct. 26, 2015); In re Petition 

of Korea Exchange, Inc. for Exemption from 

Registration as a Derivatives Clearing Organization 

(Oct. 26, 2015); In re Petition of OTC Clearing Hong 

Kong Ltd. for Exemption from Registration as a 

Derivatives Clearing Organization (Dec. 21, 2015). 

9 7 U.S.C. 6d(a), (b), and (f). 

10Section 4d(f)(l) of the CEA, 7 U.S.C 6d(f)(l), 

states, in relevant part, that it shall be unlawful for 

any person to accept any money, securities, or 

property (or to extend any credit in lieu of money, 

securities, or property) from, for, or on behalf of a 

swaps customer to margin, guarantee, or secure a 

swap cleared by or through a derivatives clearing 

organization (including money, securities, or 

property accruing to the customer as the result of 

such a swap), unless the person shall have 

registered under the CEA with the Commission as 

a futures commission merchant, and the registration 

shall not have expired nor been suspended nor 

revoked. 

11 7 U.S.C 6d(f)(2) and (6). 

12See 11 U.S.C. 761–767; see also Section 101(6) 

of the Bankruptcy Code, 11 U.S.C. 101(6). 

13For the purposes of this Notice the Commission 

only considered those EMIR Framework provisions 

published as of the date of this Notice. The relevant 

RTS include: Commission Delegated Regulation No. 

152/2013 with regard to regulatory technical 

standards on capital requirements for central 

counterparties (‘‘RTS–CR’’); and Commission 

Delegated Regulation No. 153/2013 with regard to 

regulatory technical standards on requirements for 

central counterparties (‘‘RTS–CCP’’). 

14See EMIR (stating that ‘‘[t]his Regulation shall 

be binding in its entirety and directly applicable in 

all Member States.’’). 

15EMIR Article 13(1). 

16See EMIR Articles 21 and 22. 

17 Id. at Article 18. 

18 Id. at Articles 12 and 21. 

19See ESMA: Board of Supervisors and NCAs, 

https://www.esma.europa.eu/about-esma/

governance/board-supervisors-and-ncas. 

as an FCM may be a clearing member of 

[the exempt CCP], or otherwise maintain 

an account with an affiliated broker that 

is a clearing member, for the purpose of 

clearing swaps for itself and those 

persons identified in the definition of 

‘proprietary account’ set forth in 

Regulation 1.3(y).’’ 8

To clear U.S. customer transactions, 

the Commission requires that a CCP 

register with the Commission as a DCO 

and such a DCO becomes subject to 

Section 4d of the CEA, which 

establishes a customer protection regime 

for futures, options, and swaps 

customers.9 For example, with respect 

to swaps customers, Section 4d(f)(1) 

states that it shall be unlawful for any 

person to accept money, securities, or 

property (funds) from a swaps customer 

to margin a swap cleared through a DCO 

unless the person is registered as an 

FCM.10 Additionally, Section 4d(f)(2) 

requires segregation of cleared swaps 

customer funds from the funds of the 

FCM, and Section 4d(f)(6) extends these 

segregation requirements to DCOs.11

These provisions of the CEA interlock 

with the commodity broker provisions 

of the Bankruptcy Code, Subchapter IV 

of Chapter 7.12 No EU-based CCP has 

sought an exemption from registration. 

This is because EU-based CCPs offer, or 

are seeking to offer, clearing for U.S. 

customers and thus have obtained or are 

seeking to obtain, registration as DCOs. 

Nevertheless, EU-based CCPs that do 

not clear swaps for U.S. customers may 

petition the Commission for exempt 

DCO status. 

Additionally, in all instances in 

which the Commission has granted 

registration to a foreign-based CCP, it 

also has entered into a memorandum of 

understanding or similar arrangement 

(‘‘MOU’’) with the CCP’s home country 

regulator(s). Such MOUs establish a 

framework pursuant to which the 

Commission and the CCP’s home 

country regulator(s) intend to cooperate 

with each other in fulfilling their 

respective regulatory responsibilities 

with respect to covered cross-border 

entities, including CCPs licensed by the 

home country regulator(s) and registered 

with the Commission. Specifically, such 

an MOU sets forth procedures for, 

among other things, information sharing 

between the CFTC and the home 

country regulator(s), notification of 

certain material information, conduct of 

on-site visits, and the use and treatment 

of non-public information. 

III. Regulation of CCPs in the EU 

EU-based CCPs are subject to the 

regulations laid down in EMIR and the 

Regulatory Technical Standards (‘‘RTS’’) 

(collectively, the ‘‘EMIR Framework’’).13

EMIR and the RTS establish uniform 

legal requirements for EU CCPs that, as 

EU-level legislation, have an immediate, 

binding, and direct effect in all EU 

member states without the need for 

additional action by national 

authorities.14 Moreover, where the 

European Parliament and the European 

Council have passed EU-level 

legislation, EU member states cannot 

legislate laws that duplicate or conflict 

with EMIR.15

The European Parliament and the 

European Council passed EMIR on July 

4, 2012, which entered into force on 

August 16, 2012. The relevant technical 

standards for CCPs, including the RTS 

for capital requirements (‘‘RTS–CR’’) 

and the RTS for central counterparties 

(‘‘RTS–CCP’’), generally entered into 

force on March 15, 2013. 

Pursuant to EMIR, each EU member 

state is responsible for implementing 

the EMIR Framework by designating a 

national competent authority(s) 

(‘‘NCA’’) to authorize and supervise the 

day-to-day operations of CCPs 

established in its territory. The NCAs 

are required to regularly review how the 

CCP complies with EMIR by examining 

the CCP’s rules, arrangements, 

procedures, and mechanisms, and to 

evaluate the risks to which such CCPs 

are, or might be, exposed. At a 

minimum, these reviews and 

examinations must occur at least 

annually. As part of such reviews and 

evaluations, the CCP is subject to on-site 

inspections.16

Additionally, for each authorized 

CCP, a college of supervisors is 

established that comprises members of 

the NCA, ESMA, other EU national 

authorities that may supervise entities 

on which the operations of that CCP 

might have an impact (i.e., selected 

clearing members, trading venues, 

interoperable CCPs and central 

securities depositories), as well as 

members of the European System of 

Central Banks (ESCB), as relevant.17 The 

NCAs regularly, and at least annually, 

inform the college of the results of the 

review and evaluation of the CCP, 

including any remedial action taken or 

penalty imposed.18 The CCP college is 

responsible for reaching an opinion on 

(1) the authorization of a CCP; (2) 

extensions of authorization; and (3) any 

changes to a CCP’s risk model. 

While NCAs remain in charge of 

supervising CCPs, ESMA, as an 

independent European supervisory 

authority, validates changes to the risk 

models of authorized CCPs and is 

responsible for harmonizing and 

coordinating the implementation of 

EMIR across the EU member states. 

ESMA is managed by a Board of 

Supervisors, which is composed of the 

heads of 28 national authorities (where 

there is more than one national 

authority in a Member State those 

authorities agree which of their heads 

will represent them), with observers 

from Norway, Iceland, and 

Liechtenstein. The Board makes 

decisions on the compliance by NCAs 

with community legislation, 

interpretation of community legislation, 

decisions in crisis situations, the 

approval of draft technical standards, 

guidelines, peer reviews, and any 

reports that are developed.19

IV. Comparable and Comprehensive 

Standard 

Consistent with CEA Section 2(i) and 

principles of international comity, in 

the case of foreign-based DCOs, the 

Commission will make a comparability 

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


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Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices 15263 

20The Commission has taken analogous action 

with respect to foreign-based swap dealers and 

major swap participants. Cf 78 FR 78864 (Dec. 27, 

2013) (Australia); 78 FR 78852 (Dec. 27, 2013) 

(Hong Kong); 78 FR 78910 (Dec. 27, 2013) (Japan— 

Entity Level Requirements); 78 FR 78890 (Dec. 27, 

2013) (Japan—Transaction Level Requirements);78 

FR 78899 (Dec. 27, 2013) (Switzerland); 78 FR 

78839 (Dec. 27, 2013) (Canada); 78 FR 78923 (Dec. 

27, 2013) (EU—Entity Level Requirements); 78 FR 

78878 (Dec. 27, 2013) (EU—Transaction Level 

Requirements); see also 78 FR 45292 (July 26, 

2013). 

21The Commission additionally provided the EC 

and ESMA the opportunity to consult regarding the 

relevant provisions of the EMIR Framework 

described in this Notice; however, in reaching its 

conclusions the Commission ultimately relied upon 

the English-language published text of the 

provisions of the EMIR Framework. 

22 17 CFR 39.11(a)(1). 

23 17 CFR 39.11(b)(1). 

24 17 CFR 39.11(c)(1). 

25 17 CFR 39.11(b)(3). 

26 17 CFR 39.11(d)(2). 

27 17 CFR 39.11(e)(1)(i). 

28 Id. 

29 17 CFR 39.11(e)(1)(ii). 

basis of the foreign regime as a whole.20

In making its comparability 

determinations, the Commission may 

include conditions that address, among 

other things, timing and other issues 

related to coordinating the 

implementation of reform efforts across 

jurisdictions. 

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 

the requirement(s); the scope and 

objectives of the relevant 

requirement(s); the comprehensiveness 

of the foreign regulator’s supervisory 

compliance program; and the foreign 

jurisdiction’s authority to support and 

enforce its oversight of the registrant. 

In making this comparability 

determination, the Commission is 

relying on the provisions of the EMIR 

Framework. The Commission assumes 

that the provisions of the EMIR 

Framework discussed herein are in full 

force and effect and that the description 

of the EMIR Framework that is 

contained within this Notice is accurate 

and complete.21 The Commission also 

assumes that the provisions of the EMIR 

Framework discussed herein have been 

implemented in accordance with their 

terms and there are no Member State or 

EU laws, regulations, or actions of the 

NCAs or any other authorities that are 

contrary to the provisions of the EMIR 

Framework. Further, the Commission’s 

determination is based on the EMIR 

Framework as it exists at this time; any 

changes to the EMIR Framework 

(including, but not limited to, changes 

in the relevant supervisory or regulatory 

regime) could, depending on the nature 

of the change, invalidate the 

Commission’s comparability 

determination. 

V. Comparability Determination 

The following section presents the 

requirements imposed by specific 

sections of the CEA and Commission 

regulations applicable to DCOs that are 

the subject of this comparability 

determination. Following the discussion 

of each Commission requirement, the 

Commission provides the corresponding 

provision of the EMIR Framework. 

The Commission’s determinations in 

this regard are intended to inform the 

public of the Commission’s views 

regarding whether the specific 

provisions of the EMIR Framework may 

be comparable to, and as comprehensive 

as, specific requirements in the CEA and 

CFTC regulations and, therefore, may 

form the basis for substituted 

compliance. The descriptions provided 

herein of CEA and CFTC requirements, 

as well as the provisions of the EMIR 

Framework, are summaries of the actual 

provisions and are qualified by 

reference to them. Statements of 

regulatory objectives are general in 

nature and provided only for the 

purpose of this Notice. Likewise, the 

Commission’s summary of what is 

comparable as between specific CEA 

and CFTC requirements on the one hand 

and corresponding provisions of the 

EMIR Framework on the other is only a 

summary. In particular, there may be 

aspects that are not cited, including 

particular features that may not be 

comparable, but that do not affect the 

overall determination with respect to 

that provision or set of provisions. 

A. Financial Resources (Regulation 

39.11) 

CEA Section 7a–1(c)(2)(B) (‘‘Core 

Principle B’’) establishes general 

requirements for DCOs to have adequate 

financial resources. To implement Core 

Principle B the Commission adopted 

regulation 39.11, which requires a DCO 

to maintain financial resources 

sufficient to cover its exposures with a 

high degree of confidence and to enable 

it to perform its functions in compliance 

with the core principles set out in 

Section 5b of the CEA. 

Commission Requirement: Regulation 

39.11 sets forth requirements by which 

a DCO must identify and adequately 

manage its general business risks and 

hold sufficient liquid resources to cover 

potential losses that are not related to 

clearing members’ defaults so that the 

DCO can continue to provide services as 

a going concern. 

Regulation 39.11 provides that a 

DCO’s financial resources will be 

considered sufficient if their value, at a 

minimum, exceeds the total amount that 

would enable the DCO to meet its 

financial obligations to its clearing 

members notwithstanding a default by 

the clearing member creating the largest 

financial exposure for the DCO in 

extreme but plausible market conditions 

(‘‘Cover 1’’).22 A DCO may use the 

following types of financial resources to 

satisfy this requirement, including: the 

DCO’s own capital; guaranty fund 

deposits; default insurance; potential 

assessments for additional guaranty 

fund contributions, if permitted by the 

DCO’s rules; and any other financial 

resource deemed acceptable.23

On a monthly basis, a DCO must 

perform stress testing that will allow it 

to make a reasonable calculation of the 

financial resources needed to meet its 

Cover 1 requirement. A DCO has 

reasonable discretion to determine the 

methodology it uses to compute its 

Cover 1 requirement; however, the 

Commission may review the 

methodology and require changes as 

appropriate.24 A DCO may allocate a 

financial resource to satisfy its Cover 1 

credit risk or its operating costs, but it 

may not allocate a financial resource to 

satisfy both its Cover 1 credit risk and 

its operating costs.25

If a DCO’s rules provide for 

assessments for additional guaranty 

fund contributions, then the DCO must: 

Have rules requiring that its clearing 

members have the ability to meet an 

assessment within the time frame of a 

normal end-of-day variation settlement 

cycle; monitor the financial and 

operational capacity of its clearing 

members to meet potential 

assessment(s); apply a 30% haircut to 

the value of potential assessments; and 

only count the value of assessments 

after the haircut, to meet up to 20% of 

those obligations.26

In addition, CFTC regulation 39.11 

provides that a DCO must effectively 

measure, monitor, and manage its 

liquidity risks, maintaining sufficient 

liquid resources such that it can, at a 

minimum, fulfill its cash obligations 

when due.27 A DCO also must hold its 

assets in a manner that minimizes the 

risk of loss or delay in accessing them.28

The financial resources the DCO 

allocates to meet this liquidity 

requirement must be sufficiently liquid 

to enable the DCO to fulfill its 

obligations as a CCP during a one-day 

settlement cycle.29 A DCO must 


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30 17 CFR 39.11(e)(1)(ii). 31 17 CFR 39.11(e)(3)(i). 32 17 CFR 39.11(e)(3)(iii). 33 17 CFR 39.11(e)(3)(ii). 

maintain cash, U.S. Treasury 

obligations, or high quality, liquid, 

general obligations of a sovereign 

nation, in an amount equal or greater 

than an amount calculated as follows: 

• Calculate the average daily 

settlement pay for each clearing member 

over the last fiscal quarter; 

• Calculate the sum of those average 

daily settlement pays; and 

• Using that sum, calculate the 

average of its clearing members’ average 

pays.30

A DCO may take into account a 

committed line of credit or similar 

facility for the purposes of meeting the 

remainder of this liquidity requirement. 

CFTC regulation 39.11 further 

provides that the assets a DCO holds in 

a guaranty fund must have minimal 

credit, market, and liquidity risks and 

must be readily accessible on a sameday basis.31 Additionally, letters of 

credit are not permissible assets for a 

guaranty fund.32

Finally, CFTC regulation 39.11 

provides that a DCO’s cash balances 

must be invested or placed in 

safekeeping in a manner that bears little 

or no principal risk.33

Regulatory Objective: Core Principle B 

and the Commission’s implementing 

regulations are designed to establish 

uniform standards that further the goals 

of avoiding market disruptions and 

financial losses to market participants 

and the general public, and avoiding 

systemic problems that could arise from 

a DCO’s failure to maintain adequate 

resources. The regulations promote 

financial strength and stability, thereby 

fostering efficiency and a greater ability 

to compete in the broader financial 

market. 

As highlighted by the events of 2007– 

2008 in global financial markets, 

maintaining sufficient financial 

resources is a critical aspect of any 

financial entity’s risk management 

system, and ultimately contributes to 

the goal of stability in the broader 

financial markets. By setting specific 

standards with respect to how DCOs 

must access and monitor the adequacy 

of their financial resources, Core 

Principle B and the Commission’s 

implementing regulations contribute to 

a DCO’s maintenance of sound risk 

management practices and further the 

goal of minimizing systemic risk. 

Comparable EU Law and Regulations: 

The following provisions of the EMIR 

Framework address financial resources. 

EMIR, Art. 43: At all times, a CCP 

shall maintain sufficient prefunded 

available financial resources to enable 

the CCP to withstand the default of at 

least the two clearing members to which 

it has the largest exposure under 

extreme but plausible market 

conditions. Such prefunded financial 

resources shall include dedicated 

resources of the CCP, shall be freely 

available to the CCP, and shall not be 

used to meet the CCP’s capital 

requirements. 

RTS–CCP, Art. 51(2) and 53(1): On a 

regular basis, a CCP shall conduct stress 

tests designed to ensure that its 

combination of margin, default fund 

contributions, and other financial 

resources are sufficient to cover the 

default of at least the two clearing 

members to which the CCP has the 

largest exposures under extreme but 

plausible market conditions. As part of 

its stress testing, the CCP also shall 

examine potential losses resulting from 

the default of entities in the same 

corporate group as the two clearing 

members to which it has the largest 

exposure under extreme but plausible 

market conditions. 

RTS–CCP, Art. 30(2) and 59(5): A CCP 

shall develop a framework for defining 

the types of extreme but plausible 

market conditions based on a range of 

(1) historical scenarios that could 

expose it to the greatest risk; and (2) 

potential future scenarios founded on 

consistent assumptions regarding 

market volatility and price correlation 

across markets and financial 

instruments, drawing on both 

quantitative and qualitative assessments 

of potential market conditions. If a CCP 

decides that recurrence of a historical 

instance of large price movements is not 

plausible, the CCP shall justify to the 

competent authority its omission from 

the framework. A CCP shall analyze and 

monitor its financial resources coverage 

in the event of defaults by conducting 

at least daily stress testing using 

standard and predetermined parameters 

and assumptions. 

EMIR, Art. 44 and 47(3)–(5): At all 

times, a CCP shall have access to 

adequate liquidity to perform its 

services and activities and, on a daily 

basis, shall measure its potential 

liquidity needs. Financial instruments 

posted as margin or as default fund 

contributions shall be deposited in a 

manner that ensures the full protection 

of those financial instruments. Cash 

deposits of a CCP, other than with a 

central bank, shall be executed through 

highly secure arrangements with 

authorized financial institutions. Where 

a CCP deposits assets with a third party, 

it shall ensure that the assets are 

identifiable separately by means of 

differently titled accounts. 

RTS–CCP, Chapter VIII (Art. 32–34): A 

CCP shall establish a robust liquidity 

risk management framework, which 

shall include, among other things, 

effective operational and analytical tools 

to identify, measure, and monitor its 

settlement and funding flows on an 

ongoing and timely basis and assess its 

potential future liquidity needs under a 

wide range of potential stress scenarios. 

A CCP shall maintain, in each relevant 

currency, liquid resources 

commensurate with its liquidity 

requirements. These liquid resources 

shall be limited to the following: cash 

deposited at a central bank of issue; 

cash deposited at authorized credit 

institutions; committed lines of credit; 

committed repurchase agreements; and/ 

or highly marketable financial 

instruments that are readily available 

and convertible into cash on a same-day 

basis using prearranged and highly 

reliable funding arrangements. 

EMIR, Art. 46 and 47: A CCP shall 

accept highly liquid collateral with 

minimal credit and market risk to cover 

its initial and ongoing exposure to its 

clearing members and it shall invest its 

financial resources only in cash or 

highly liquid financial instruments with 

minimal market and credit risk. 

EMIR, Art. 16 and 47(2): A CCP’s 

capital, including retained earnings and 

reserves, shall be proportionate to the 

risk stemming from the activities of the 

CCP. Capital not invested in cash or 

highly liquid financial instruments with 

minimal credit risk, however, shall not 

count for purposes of calculating a 

CCP’s regulatory capital. 

RTS–CR, Art. 2(2): A CCP shall 

calculate and retain the amount of 

capital it requires to wind down or 

restructure. This estimated time span 

shall be sufficient to ensure an orderly 

winding down or restructuring of its 

activities, reorganizing its operations, 

liquidating its clearing portfolio, or 

transferring its clearing activities to 

another CCP, including in stressed 

market conditions. For the purposes of 

this RTS, the prescribed time span for 

purposes of determining sufficient 

capital to wind down or restructure a 

CCP’s activities is subject to a minimum 

of six months. 

RTS–CCP, Art. 43–46 and Annex II: A 

debt instrument can be considered 

highly liquid, bearing minimal credit 

and market risk if it is issued by or 

explicitly guaranteed by a government, 

central bank, multilateral development 

bank, or the European Financial 

Stability Facility or the European 

Stability Mechanism; the CCP can 

demonstrate that the debt instrument 

has low credit and market risk based 

upon an internal assessment; the 


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34 17 CFR 39.13(b). 

35 17 CFR 39.13(c). 

36 76 FR 69363. 

average time-to-maturity of the CCP’s 

portfolio does not exceed two years; the 

debt instrument is denominated in a 

currency the risks of which the CCP can 

demonstrate it is able to manage or in 

a currency in which the CCP clears 

transactions; the debt instrument is 

freely transferrable and without any 

regulatory constraint or third party 

claims that impair liquidation; the debt 

instrument has an active outright sale or 

repurchase market with a diverse group 

of buyers and sellers, including during 

stress conditions; and reliable price data 

on the debt instrument is published on 

a regular basis. 

Commission Determination: The 

Commission finds that the provisions of 

the EMIR Framework with respect to 

financial resources are generally similar 

to the applicable provisions of CFTC 

Regulation 39.11, and set specific and 

uniform standards with respect to how 

CCPs should access and monitor the 

adequacy of their financial resources. 

These standards seek to ensure that 

CCPs can meet their financial 

obligations to market participants, thus 

contributing to the financial integrity of 

the derivatives market as a whole. Both 

regimes require prefunding of financial 

resources sufficient to at least cover a 

default caused by a clearing member 

creating the largest financial exposure 

for the EU-based CCP that is dually 

registered with the CFTC as a DCO 

(‘‘DCO/CCP’’) in extreme but plausible 

market conditions. Both regimes also 

require that a DCO/CCP’s financial 

resources include dedicated resources 

(e.g., prefunded mutualized resources) 

and require frequent and regular stress 

testing of financial resources. Likewise, 

both regimes require that assets in the 

default fund have minimal credit, 

market, and liquidity risks, and be 

readily accessible on a same-day basis. 

Additionally, both regimes prohibit a 

DCO/CCP from allocating the same 

financial resources to different 

categories of financial exposure and 

both regimes require that cash balances 

must be either invested or appropriately 

safeguarded in a manner which bears 

little to no principal risk. 

Accordingly, the Commission finds 

that the provisions of the EMIR 

Framework with respect to financial 

resources discussed above and 

identified below in Table 1(a) are 

comparable to and as comprehensive as 

the financial resource requirements of 

CFTC regulation 39.11, with the 

exception of 39.11(f), which requires 

DCOs to submit to the Commission 

quarterly financial resource reports that 

include a quarterly financial statement. 

The Commission recognizes that 

European CCPs would not have 

financial statements prepared in 

accordance with U.S. Generally 

Accepted Accounting Principles 

(‘‘GAAP’’) absent Commission 

registration. Thus, the Commission will 

permit CCPs to submit financial 

statements prepared in accordance with 

International Financial Reporting 

Standards (‘‘IFRS’’), with periodic 

reconciliation to assist staff in reviewing 

the financial statements. 

TABLE 1(A)—FINANCIAL RESOURCES

Subject area CFTC regulations EMIR framework 

Default financial resources (Credit risk: Cover 

1).

17 CFR 39.11(a)(1), 17 CFR 39.11(b)(1), 17 

CFR 39.11(d)(2).

EMIR, Art 43; RTS–CCP, Art 53(1) 

Monthly stress-testing of default financial resources.17 CFR 39.11(c)(1) .......................................... RTS–CCP, Art. 51(2) and 53(1); RTS–CCP, 

Art 30(2) and 59(5) 

Liquidity of default financial resources ............... 17 CFR 39.11(e)(1) .......................................... EMIR, Art 44 and 47(3)–(5); RTS–CCP, 

Chapter VIII (Art 32–34) 

Default fund collateral ........................................ 17 CFR 39.11(e)(3)(i), 17 CFR 39.11(e)(3)(iii) EMIR, Art 46 and 47 

General business risks, (Allocation of financial 

resources).

17 CFR 39.11(b)(3) .......................................... EMIR Art 16 and 47(2); RTS-Capital Requirements for CCP, Art 2(2) 

Cash management ............................................. 17 CFR 39.11(e)(3)(ii) ...................................... EMIR, Art 47; RTS–CCP, Art 43–46 and 

Annex II 

B. Risk Management (Regulation 39.13) 

CEA Section 7a–1(c)(2)(D) (‘‘Core 

Principle D’’) establishes general 

requirements for DCOs to have the 

ability to manage the risks associated 

with discharging the responsibilities of 

the DCO through the appropriate tools 

and procedures. To implement Core 

Principle D, the Commission adopted 

regulation 39.13, which requires a DCO 

to maintain appropriate tools and 

procedures to manage the risks 

associated with discharging the 

responsibilities of a DCO in compliance 

with the core principles set out in 

Section 5b of the CEA. 

Commission Requirement: CFTC 

regulation 39.13 generally requires a 

DCO to measure its credit exposure to 

each clearing member not less than once 

during each business day and to 

monitor such exposure periodically 

during the business day. CFTC 

regulation 39.13 also requires a DCO to 

limit its exposure to potential losses 

from defaults by clearing members, 

through margin requirements and other 

risk control mechanisms, to ensure that 

its operations would not be disrupted 

and that non-defaulting clearing 

members would not be exposed to 

losses that non-defaulting clearing 

members cannot anticipate or control. 

Finally, CFTC regulation 39.13 also 

requires that a DCO collect margin from 

each clearing member sufficient to cover 

potential exposures in normal market 

conditions and that each model and 

parameter used in setting such margin 

requirements be risk-based and 

reviewed on a regular basis. 

CFTC regulation 39.13 requires a DCO 

to establish, maintain, and regularly 

update a written risk management 

framework (approved by its board of 

directors) that, at a minimum, clearly 

identifies and documents the range of 

risks to which the DCO is exposed, 

addresses monitoring and managing 

those risks, and provides a mechanism 

for internal audit.34

CFTC regulation 39.13 also requires a 

DCO to appoint a chief risk officer 

(‘‘CRO’’), who must be responsible for 

implementing the DCO’s written risk 

management framework and for making 

appropriate recommendations to the 

DCO’s risk management committee or 

board of directors.35 Given the 

importance of the risk management 

function and the comprehensive nature 

of the responsibilities of a DCO’s chief 

compliance officer (‘‘CCO’’), the 

Commission previously has stated that 

it expects that a DCO’s CRO and CCO 

would be two different individuals.36

Pursuant to CFTC regulation 39.13, 

through margin requirements and other 

risk control mechanisms, a DCO must 


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37 17 CFR 39.13(f). 

38 17 CFR 39.13(g)(2)(i). 

39 17 CFR 39.13(g)(1). 

40 17 CFR 39.13(g)(6). 

41 17 CFR 39.13(g)(2)(iii). 

42 17 CFR 39.13(g)(2)(iv). 

43 17 CFR 39.13(g)(3). 

44 17 CFR 39.13(g)(4). 

45 17 CFR 39.13(g)(7). 

46 17 CFR 39.13(g)(11). 

47 17 CFR 39.13(g)(12). 

limit its exposure to potential losses 

from defaults by its clearing members to 

ensure that its operations would not be 

disrupted and non-defaulting clearing 

members would not be exposed to 

losses that they cannot anticipate or 

control.37

CFTC regulation 39.13 also provides 

that a DCO must establish initial margin 

requirements that are commensurate 

with the risk of each product and 

portfolio, including any unusual 

characteristics of, or risks associated 

with, particular products or portfolios, 

including but not limited to jump-todefault risk or other similar risk.38 Each 

model and parameter used in setting 

initial margin requirements must be 

risk-based and reviewed on a regular 

basis.39 On a daily basis, a DCO must 

determine the adequacy of its initial 

margin requirements.40

The actual coverage of a DCO’s initial 

margin requirements must meet an 

established confidence level of at least 

99%, based on data from an appropriate 

historical time period, for each product 

for which the DCO uses a product-based 

margin methodology; for each spread 

within or between products for which 

there is a defined spread margin rate; for 

each account held by a clearing member 

at the DCO, by house origin and by each 

customer origin; and for each swap 

portfolio, including any portfolio 

containing futures and/or options and 

held in a commingled account pursuant 

to CFTC regulation 39.15(b)(2), by 

beneficial owner.41 A DCO must 

determine the appropriate historic time 

period based on the characteristics, 

including volatility patterns, of each 

product, spread, account, or portfolio.42

In addition, CFTC regulation 39.13 

provides that on a regular basis, a 

qualified and independent party must 

review and validate a DCO’s systems for 

generating initial margin requirements, 

including its theoretical models, and 

that this party must not be the person 

responsible for development or 

operation of the systems and models 

being tested.43

A DCO may reduce initial margin 

requirements for related positions if the 

price risks with respect to such 

positions are significantly and reliably 

correlated—i.e., there is a theoretical 

basis for the correlation in addition to 

an exhibited statistical correlation.44

Additionally, CFTC regulation 39.13 

provides that a DCO must back test its 

initial margin requirements by 

comparing its initial margin 

requirements with historical price 

changes to determine the extent of 

actual margin coverage using an 

appropriate time period but not less 

than the previous 30 days, as follows: 

On a daily basis, the DCO must back test 

products or swaps portfolios that are 

experiencing significant market 

volatility; and on at least a monthly 

basis, the DCO must back test the 

adequacy of all of its initial margin 

requirements.45

On a daily basis, a DCO must use 

prudent valuation practices to value 

assets posted as initial margin.46 In 

particular, a DCO must appropriately 

reduce its valuation of the assets that it 

accepts in satisfaction of its initial 

margin requirements, to reflect credit, 

market, and liquidity risks, taking into 

account stressed market conditions, and 

must evaluate the appropriateness of 

such haircuts on at least a quarterly 

basis.47

Regulatory Objective: Core Principle D 

and the Commission’s implementing 

regulations are designed to ensure that 

each DCO possesses the ability and 

necessary tools to manage the risks 

associated with discharging the 

responsibilities of being a DCO. The 

Commission’s regulation requiring a 

DCO to maintain and update a written 

risk management framework seeks to 

ensure that a DCO carefully has 

considered its risk management 

framework, and it will provide guidance 

to DCO management, staff, and market 

participants. By requiring a 99% 

confidence level for initial margin, the 

Commission’s regulations seek to 

prevent DCOs from competing with 

respect to how much risk they are 

willing to take on or from misjudging 

the amount of risk they would take on 

if they operated under lower standards. 

Through requiring independent 

validation of the DCO’s margin models, 

the Commission’s regulations seek to 

prevent bias in validating the DCO’s 

models. By requiring daily review and 

back testing, the regulations seek to 

ensure that DCOs monitor the adequacy 

of their initial margin requirements. 

Comparable EU Law and Regulations: 

The following provisions of the EMIR 

Framework address risk management. 

RTS–CCP Art. 4: A CCP shall have a 

sound, written framework for the 

comprehensive management of all 

material risks to which it is or may be 

exposed. In developing its risk 

management framework, a CCP shall 

take an integrated and comprehensive 

view of all relevant risks. 

RTS–CCP, Art. 3(3) and 4(6): A CCP 

shall have a CRO, who shall implement 

the risk management framework. The 

CCP shall ensure that the functions of 

the CRO, CCO, and chief technology 

officer are carried out by different 

individuals, who shall be employees of 

the CCP entrusted with the exclusive 

responsibility of performing these 

functions. 

EMIR, Art. 48(2): A CCP shall take 

prompt action to contain losses and 

liquidity pressures resulting from 

defaults and shall ensure that the 

closing out of any clearing member’s 

positions does not disrupt its operations 

or expose non-defaulting clearing 

members to losses that they cannot 

anticipate or control. 

EMIR, Art. 41(2), 49(1): A CCP shall 

adopt models and parameters for setting 

margin requirements that capture the 

risk characteristics of the products and 

swaps cleared and take into account the 

interval between margin collections, 

market liquidity, and the possibility of 

changes over the duration of the 

transaction. The models shall be 

validated by the competent authority. A 

CCP regularly shall review its models 

and parameters for setting margin 

requirements and shall subject the 

models to rigorous and frequent stress 

tests. A CCP also shall obtain 

independent validations of its models 

and parameters. 

RTS–CCP, Art. 24(2)(b): In 

determining the adequate confidence 

interval for each class of product that it 

clears, a CCP shall consider, among 

other factors, the risk characteristics of 

the class of product, which can include, 

but are not limited to, volatility, 

duration, liquidity, non-linear price 

characteristics, jump-to-default risk and 

wrong-way risk. 

RTS–CCP, Art. 24(1): A CCP shall 

calculate the initial margins to cover the 

exposures arising from market 

movements for each financial 

instrument that is collateralized on a 

product basis, over an appropriate time 

horizon for the liquidation of the 

position, with a confidence level of 

99.5% for over-the-counter derivatives 

and 99% for all other products. 

RTS–CCP, Art. CCP 25: A CCP shall 

ensure that its model methodology and 

its validation process for determining 

initial margin covers at least the latest 

12 months and captures a full range of 

market conditions, including periods of 

stress. 

RTS–CCP, Art 47 and 59(1): At least 

annually, a CCP shall conduct a 


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comprehensive and well-documented 

validation of its models, their 

methodologies, and the liquidity risk 

management framework used to 

quantify, aggregate, and manage the 

CCP’s risks. 

RTS–CCP, Art. 27 and 59(9): A CCP 

may allow offsets or reductions in the 

required margin across the products and 

swaps that it clears if the price risk of 

one financial instrument or a set of 

products or swaps is significantly and 

reliably correlated, or based on an 

equivalent statistical parameter of 

dependence, with the price risk of other 

products or swaps. The CCP shall 

demonstrate the existence of an 

economic rationale for the price 

correlation. At least annually, a CCP 

shall test offsets among products and 

swaps and how correlations perform 

during periods of actual and 

hypothetical severe market conditions. 

RTS–CCP, Art. 49 and 60(2): On a 

daily basis, a CCP shall assess its margin 

coverage by back testing its margin 

coverage against expected outcomes 

derived from the use of margin models 

to evaluate whether there are any testing 

exceptions to margin coverage. In 

conducting such back testing, the CCP 

shall evaluate its current positions and 

clearing members, and take into account 

possible effects from portfolio margining 

and, where appropriate, interoperable 

CCPs. The historical time horizons used 

for back tests shall include data from at 

minimum the most recent year or as 

long as a CCP has been clearing the 

relevant product or swap if that is less 

than a year. 

RTS–CCP, Art. 40(2): A CCP shall 

mark-to-market its collateral on a near to 

real-time basis, and where not possible, 

a CCP shall be able to demonstrate to 

the competent authorities that it is able 

to manage the risks. 

EMIR, Art. 46(1); RTS–CCP, Art. 41(2) 

and 59(10): A CCP shall accept highly 

liquid collateral with minimal credit 

and market risk to cover its initial and 

ongoing exposure to its clearing 

members. It shall apply adequate 

haircuts to collateral asset values that 

take into account the liquidity risk 

following the default of a market 

participant and concentration risk, and 

that reflect the potential for the value of 

such assets to decline over the interval 

between their last reevaluation and the 

time by which they reasonably can be 

assumed to be liquidated. Such haircuts 

shall consider, for each among other 

factors, the type of asset and the credit 

risk associated with the financial 

instrument, the maturity of the asset; the 

historical and hypothetical future price 

volatility of the asset in stressed market 

conditions; the liquidity of the 

underlying market, including bid/ask 

spread; the foreign exchange risks; and 

any wrong-way risk. The CCP shall test 

its haircuts at least monthly. 

Commission Determination: The 

Commission finds that the provisions of 

the EMIR Framework with respect to 

risk management are generally similar to 

Core Principle D and CFTC regulation 

39.13, and prescribe how CCPs should 

monitor, evaluate, and manage the risks 

to which they are exposed. These 

standards seek to ensure that CCPs can 

meet their financial obligations to 

market participants, thus contributing to 

the financial integrity of the derivatives 

market as a whole. 

Both regimes include a broad, general 

requirement for a DCO/CCP to manage 

the risk to which it is exposed and both 

regimes require the appointment of a 

CRO to perform similar functions. Both 

regimes require a DCO/CCP to use risk 

control mechanisms, such as margin 

requirements, to limit exposure to 

potential clearing member defaults. 

Similarly, both regimes require that 

margin models and parameters be riskbased and regularly reviewed and both 

regimes require that the calculation of 

initial margin include factoring the risk 

characteristics of each cleared product. 

Both regimes require at least a 99% 

confidence level in determining the 

adequacy of initial margin and both 

regimes have similar proscriptions for 

back testing initial margin models. 

Finally, both regimes require that cash 

balances must be either invested or 

appropriately safeguarded in a manner 

that bears little or no principal risk. 

Accordingly, the Commission finds 

that the provisions of the EMIR 

Framework with respect to risk 

management standards discussed above 

and identified below in Table 1(b) are 

comparable to and as comprehensive as 

the risk management requirements of 

CFTC regulation 39.13, with the 

exception of 39.13(g)(8)(i) and (ii), 

which respectively require FCMs to 

calculate initial margin for cleared 

customer accounts on a gross (as 

opposed to net) basis and require DCOs 

to collect additional initial margin for 

non-hedge positions of FCM customers. 

Despite the importance of gross 

margining of customer accounts and the 

collection of this additional initial 

margin, in an effort to promote comity, 

the Commission would not require 

DCO/CCPs to apply either of these 

regulations to non-FCM clearing 

member intermediaries or to the 

customers of non-FCM clearing member 

intermediaries. Additionally, the 

Commission makes this finding 

notwithstanding that the EMIR 

Framework’s treatment of affiliates does 

not shield customers from potential 

losses by affiliates of the clearing 

member in the same manner as the 

CFTC’s approach and in fact potentially 

exposes customers to proprietary 

trading losses. 

TABLE 1(B)—RISK MANAGEMENT

Subject area CFTC regulations EMIR framework 

General/documentation requirement .................. 17 CFR 39.13(a)–(b) ........................................ RTS–CCP, Art 4 

Chief risk officer ................................................. 17 CFR 39.13(c) .............................................. RTS–CCP, Art 3(3) and 4(6) 

Limitation of exposure to potential losses from 

defaults.

17 CFR 39.13(f) ............................................... EMIR, Art 48(2) 

Margin models/parameters ................................. 17 CFR 39.13(g)(1) .......................................... EMIR, Art 41(2), 49(1) 

Risk factors for margin ....................................... 17 CFR 39.13(g)(2)(i) ...................................... RTS–CCP, Art 24(2)(b) 

Minimum confidence level .................................. 17 CFR 39.13(g)(2)(iii) ..................................... RTS–CCP, Art 24(1) 

Lookback period ................................................. 17 CFR 39.13(g)(2)(iv) ..................................... RTS–CCP, Art 25 

Regular independent validation .......................... 17 CFR 39.13(g)(3) .......................................... RTS–CCP, Art 47 and 59(1) 

Portfolio margining ............................................. 17 CFR 39.13(g)(4) .......................................... RTS–CCP, Art 27; RTS–CCP, Art 59(9) 

Margin Back tests ............................................... 17 CFR 39.13(g)(7) .......................................... RTS–CCP, Art 49 and 60(2) 

Daily valuation of collateral posted as initial 

margin.

17 CFR 39.13(g)(11) ........................................ RTS–CCP, Art 40(2) 

Haircuts .............................................................. 17 CFR 39.13(g)(12) ........................................ EMIR, Art 46(1); RTS–CCP, Art 41(2) and 

59(10) 

Daily determination of initial margin adequacy .. 17 CFR 39.13(g)(6) .......................................... EMIR, Art 49(1) 


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48 17 CFR 39.14(b). 49 17 CFR 39.14(c)(1). 

50 17 CFR 39.14(c)(2). 

51 17 CFR 39.14(c)(3). 

52 17 CFR 39.14(e). 

53 17 CFR 39.14(f). 

54 17 CFR 39.14(g). 

C. Settlement Procedures (Regulation 

39.14) 

CEA Section 7a–1(c)(2)(E) (‘‘Core 

Principle E’’) establishes general 

requirements for DCOs to have 

sufficient settlement procedures. To 

implement Core Principle E the 

Commission adopted regulation 39.14, 

which requires a DCO to complete 

money settlements on a timely basis, but 

not less frequently than once each 

business day; employ money settlement 

arrangements to eliminate or strictly 

limit exposure to settlement bank risks; 

maintain an accurate record of the flow 

of funds associated with money 

settlements; possess the ability to 

comply with the terms and conditions 

of any permitted netting or offset 

arrangement with another DCO; 

establish rules that clearly state the 

obligation of a DCO with respect to 

physical deliveries; and ensure that a 

DCO identifies and manages each risk 

arising from any of its obligation with 

respect to physical deliveries. 

Commission Requirement: Regulation 

39.14 requires that a DCO collect margin 

from its clearing members on a daily 

basis. Specifically, a DCO must effect 

settlement with each clearing member at 

least once each business day, and must 

have the authority and operational 

capacity to effect a settlement with each 

clearing member on an intraday basis, 

either routinely, when thresholds 

specified by the DCO are breached, or in 

times of extreme market volatility.48

CFTC regulation 39.14 provides that a 

DCO must employ settlement 

arrangements that eliminate or strictly 

limit its exposure to settlement bank 

risk, by among other things, having 

documented criteria with respect to 

those banks that are acceptable 

settlement banks for the DCO and its 

clearing members, including criteria 

addressing the capitalization, 

creditworthiness, access to liquidity, 

operational reliability, and regulation or 

supervision of such banks.49 A DCO 

further must monitor each approved 

settlement bank on an ongoing basis to 

ensure that such bank continues to meet 

the DCO’s established criteria.50

A DCO must monitor the full range of 

and concentration of its exposure to its 

own and its clearing members’ 

settlement bank(s) and assess its own 

and its clearing members’ potential 

losses and liquidity in the event that the 

settlement bank with the largest share of 

settlement activity were to fail. A DCO 

must take any one or more of the 

following actions, as needed, to 

eliminate or strictly limit such 

exposures: maintain accounts at one or 

more additional settlement banks; 

approve one or more additional 

settlement banks that its clearing 

members could choose to use; impose 

concentration limits with respect to one 

or more of its own or its clearing 

members’ settlement banks; and/or take 

any other appropriate actions.51

A DCO must maintain an accurate 

record of the flow of funds associated 

with each settlement.52

A DCO must possess the ability to 

comply with each term and condition of 

any permitted netting or offset 

arrangement with any other clearing 

organization.53

For products that are settled by 

physical transfer of the underlying 

instruments or commodities, a DCO 

must establish rules that clearly state 

each obligation that the DCO has 

assumed with respect to such physical 

deliveries, including whether it has an 

obligation to make or receive delivery of 

a physical instrument or commodity, or 

whether it indemnifies clearing 

members for losses incurred in the 

delivery process, and ensure that the 

risks of each such obligation are 

identified and properly managed.54

Regulatory Objective: On a daily basis, 

DCOs are exposed to significant inflows 

and outflows of cash and other liquid 

financial instruments. Core Principle E 

and the Commission’s implementing 

regulations are designed to ensure that 

a DCO has the authority and operational 

capacity to effect settlement with each 

clearing member, on an intraday basis 

and to also monitor, eliminate, or 

strictly limit the settlement risks to 

which a DCO is exposed. 

Comparable EU Law and Regulations: 

The following provisions of the EMIR 

Framework address settlement 

procedures. 

EMIR, Art. 41(1) and (3): A CCP shall 

impose, call, and collect margins to 

limit its exposures from its clearing 

members, and where relevant, from 

CCPs with which it has interoperability 

arrangements. Such margins shall be 

sufficient to cover potential exposures 

that the CCP estimates will occur until 

the liquidation of the relevant positions. 

Such margins also shall be sufficient to 

cover losses that result from at least 

99% of the exposures’ movements over 

an appropriate time horizon and they 

shall ensure that a CCP fully 

collateralizes its exposures with all its 

clearing members, and, where relevant, 

with CCPs with which it has 

interoperability arrangements, at least 

on a daily basis. A CCP shall regularly 

monitor and, if necessary, revise its 

margins to reflect current market 

conditions, taking into account any 

potential procyclical effects of such 

revisions. A CCP shall call and collect 

margins on an intraday basis, at a 

minimum when predefined thresholds 

are exceeded. 

EMIR, Art. 50(1): Where practical and 

available, a CCP shall use central bank 

money to settle its transactions. Where 

a CCP cannot use central bank money, 

it shall take steps to strictly limit cash 

settlement risk. 

RTS–CCP, Art. 4(2), 32(4)(a), and 

51(3): A CCP shall take an integrated 

and comprehensive view of all relevant 

risk, including the risks it bears from 

and poses to, among other things, 

settlement banks. A CCP also shall 

assess the liquidity risk it faces, 

including situations in which the CCP 

or its clearing members cannot settle 

their payment obligations when due as 

part of the clearing or settlement 

process. Such assessment shall address 

the liquidity needs arising from the 

CCP’s relationship with, among others, 

settlement banks. As part of its stress 

testing procedures, a CCP should 

consider stress testing scenarios 

involving the technical or financial 

failure of, among others, its settlement 

banks. 

RTS–CCP, Art. 13 and Art. 14(3): A 

CCP shall maintain records of all 

transactions in all contracts it clears and 

shall ensure that its records include all 

information necessary to conduct a 

comprehensive and accurate 

reconstruction of the clearing process. A 

CCP shall make, and keep updated, a 

record of the amounts of margin, default 

fund contributions, and other financial 

resources, with respect to each single 

clearing member and client account, if 

known to the CCP. 

EMIR, Art. 50(2)–(3): A CCP shall 

clearly state its obligations with respect 

to deliveries of financial instruments, 

including whether it has any obligation 

to make or receive delivery of a 

financial instrument or whether it 

indemnifies participants for losses 

incurred in the delivery process. Where 

a CCP has an obligation to make or 

receive deliveries of financial 

instruments, it shall eliminate principal 

risk by using delivery-versus-payment 

mechanisms, to the extent possible. 

Commission Determination: The 

Commission finds that the provisions of 

the EMIR Framework with respect to 

settlement procedures are generally 

similar to Core Principle E and CFTC 

regulation 39.14, and eliminate or 


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55 17 CFR 39.16(a). 

56 17 CFR 39.16(c)(1). 

57 17 CFR 39.16(c)(2)(i)–(v). 

58 17 CFR 39.16(c)(3). 

strictly limit a CCP’s exposure to 

settlement risk. Both regimes require the 

daily collection of margin and both 

require a DCO/CCP to employ 

settlement arrangements that limit 

exposure to various risks, including 

exposure to settlement banks, 

concentration risk, and physical 

delivery of instruments. Both regimes 

have similar recordkeeping 

requirements. Finally, both regimes 

require a DCO/CCP to have rules with 

respect to the physical delivery of an 

instrument or commodity, and to 

identify and manage the risks associated 

with the physical delivery of such 

instruments. 

Accordingly, the Commission finds 

that the provisions of the EMIR 

Framework with respect to settlement 

procedures discussed above and 

identified below in Table 1(c) are 

comparable to and as comprehensive as 

the default rules and procedures of 

CFTC regulation 39.14. 

For the avoidance of doubt, the 

Commission notes that the foregoing 

comparability determination only 

applies with regard to certain provisions 

of regulation 39.14 (i.e., § 39.14(b), 

§ 39.14(c), § 39.14(e), § 39.14(f), and 

§ 39.14(g)). No comparability finding is 

made regarding § 39.14(d), which 

requires a DCO to ensure that 

settlements are final when effected by 

ensuring that it has entered into legal 

agreements that state that settlement 

fund transfers are irrevocable and 

unconditional no later than when the 

DCO’s accounts are debited or credited. 

TABLE 1(C)—SETTLEMENT PROCEDURES

Subject area CFTC regulations EMIR framework 

Settlement procedures ....................................... 17 CFR 39.14(b), (c), (e)–(g) ........................... EMIR, Art. 41(1) and (3); EMIR, Art 50(1); 

RTS–CCP, Art 4(2), 32(4)(a) and 51(3); 

RTS–CCP, Art 13 and 14(3); EMIR, Art 

50(2)-(3). 

D. Default Rules and Procedures 

(Regulation 39.16) 

CEA Section 7a-1(c)(2)(G) (‘‘Core 

Principle G’’) establishes general 

requirements for DCOs to have adequate 

default rules and procedures. To 

implement Core Principle G the 

Commission adopted regulation 39.16, 

which requires a DCO to have rules and 

procedures designed to allow for the 

efficient, fair, and safe management of 

events during which members or 

participants become insolvent or 

otherwise default on the obligations of 

the members or participants to the DCO. 

Commission Requirement: CFTC 

regulation 39.16 provides requirements 

by which a DCO must adopt rules and 

procedures designed to allow DCOs to 

effectively manage events during which 

clearing members become insolvent or 

default on the obligations of such 

clearing members to the DCO.55

Pursuant to CFTC regulation 39.16, a 

DCO must adopt procedures that would 

permit the DCO to timely take action to 

contain losses and liquidity pressures 

and to continue meeting its obligations 

in the event of a default on the 

obligations of a clearing member to the 

DCO.56 Further, a DCO must adopt rules 

setting forth its default procedures; 

including the DCO’s definition of 

default, the actions that the DCO may 

take upon default, which must include 

the prompt transfer, liquidation, or 

hedging of the customer or house 

positions of the defaulting clearing 

member, as applicable, and which may 

include, in the DCO’s discretion, the 

auctioning or allocation of positions to 

other clearing members; any obligations 

that the DCO imposes on its clearing 

members to participate in auctions or to 

accept allocations, of the customer or 

house positions of a defaulting clearing 

member, subject to certain limitations; 

the default waterfall—i.e., the sequence 

in which the funds and assets of the 

defaulting clearing member and its 

customers and the financial resources 

maintained by the DCO would be 

applied in the event of a default; and a 

provision that the funds and assets of a 

defaulting clearing member must be 

applied to cover losses with respect to 

a customer default, if the relevant 

customer funds and assets are 

insufficient to cover the shortfall.57 The 

DCO must make its default rules 

publicly available.58

Regulatory Objective: Core Principle G 

and the Commission’s implementing 

regulations are designed to ensure that 

each DCO clearly states its default 

procedures, makes its default rules 

publicly available, and has rules and 

procedures that allow it to take timely 

action to contain losses and liquidity 

pressures and to continue meeting its 

obligations. 

Comparable EU Law and Regulations: 

The following provisions of the EMIR 

Framework address default rules and 

procedures. 

EMIR, Art. 48: A CCP shall have 

written procedures to be followed in the 

event of the default of a clearing 

member. The CCP shall take prompt 

action to contain losses and liquidity 

pressures resulting from defaults and 

shall ensure that the closing out of any 

clearing member’s positions does not 

disrupt its operations or expose the nondefaulting clearing members to losses 

that they cannot anticipate or control. 

EMIR, Art. 37(6): A CCP may impose 

specific additional obligations on 

clearing members, including the 

participation in auctions of a defaulting 

member’s positions. Such obligations 

shall be proportional to the risk brought 

by the clearing member and shall not 

restrict participation to certain 

categories of clearing members. 

EMIR, Art. 45: A CCP shall use a 

defaulting clearing member’s margins 

before using other financial resources to 

cover losses. Where the margins posted 

by the defaulting clearing member are 

insufficient to cover the losses covered 

by the CCP, the CCP shall use the 

default fund contribution of the 

defaulting member to cover the loss. A 

CCP shall use contributions to the 

default fund of the non-defaulting 

clearing members and any other 

financial resources only after having 

exhausted the defaulting clearing 

member’s contributions. A CCP further 

shall use its own dedicated financial 

resources before using the default fund 

contributions of non-defaulting clearing 

members. A CCP shall not use the 

margins posted by non-defaulting 

clearing members to cover losses 

resulting from the default of another 

clearing member. 

RTS–CCP, Art. 58 and 59(12): At least 

on a quarterly basis, a CCP shall test and 

review its default procedures to ensure 

they are both practical and effective. At 

least annually, a CCP shall perform 

simulation exercises as part of the 

testing of its default procedures. It also 

shall perform simulation exercises 


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59Questions and Answers: Implementation of the 

Regulation (EU) No 648/2012 on OTC derivatives, 

central counterparties and trade repositories (EMIR) 

https://www.esma.europa.eu/system/files_force/

library/2016–293_qa_xvi_on_emir_

implementation.pdf?download=1. 

following any material change to its 

default procedures. 

ESMA Q&A CCP Question 8(f)(1): A 

CCP shall use the margins posted by a 

defaulting clearing member prior to 

other financial resources when covering 

losses and may have rules which allow 

it to use surplus margin on a defaulted 

clearing member’s house account to 

meet any obligation of the clearing 

member with respect to losses on a 

client account of that clearing member. 

For the avoidance of doubt, surplus 

margin on a client account of a default 

clearing member cannot be used to meet 

any losses on the defaulted clearing 

member’s house account(s).59

RTS–CCP, Art. 61(2): A CCP shall 

make publicly available key aspects of 

its default procedures, including the 

circumstances in which action may be 

taken, who may take action, the scope 

of the actions that may be taken 

(including the treatment of both 

proprietary and client positions, funds 

and assets), and the mechanisms for 

addressing a CCP’s obligations to nondefaulting clearing members. 

Commission Determination: The 

Commission finds that the provisions of 

the EMIR Framework with respect to 

default rules and procedures are 

generally similar to CFTC regulation 

39.16, and prescribe how CCPs should 

clearly state their default procedures. 

Both regimes require a DCO/CCP to 

have detailed procedures to follow in 

the event of a default, including 

requirements for the orderly transfer 

and/or liquidation of customer or 

proprietary positions, participation in 

auctions, the sequence of the default 

waterfall, and public disclosure of the 

default procedures. These standards 

seek to ensure that CCPs may take 

timely action to contain losses and 

liquidity pressures and to continue 

meeting their obligations. 

Accordingly, the Commission finds 

that the EMIR Framework with respect 

to default rules and procedures 

discussed above and identified below in 

Table 1(d) are comparable to and as 

comprehensive as the default rules and 

procedures of CFTC regulation 39.16. 

For the avoidance of doubt, the 

Commission notes that the foregoing 

comparability determination only 

applies with regard to the above 

mentioned provisions of CFTC 

regulation 39.16 (i.e., § 39.16(a), 

§ 39.16(c)(1), § 39.16(c)(2)(i)-(v), and 

§ 39.16(c)(3)). No comparability finding 

is made regarding the other provisions 

of § 39.16, namely § 39.16(b), which 

requires a DCO to maintain a written 

default management plan, and 

§ 39.16(d), which requires a DCO to 

have certain rules in place regarding the 

insolvency of clearing members. 

TABLE 1(D)—DEFAULT RULES AND PROCEDURES

Subject area CFTC regulations EMIR framework 

Default rules & procedures ................................ 17 CFR 39.16(a), .............................................

17 CFR 39.16(c)(1), 17 CFR 39.16(c)(2)(i)– 

(v), 17 CFR 39.16(c)(3).

EMIR, Art 48, 37(6) and 45; RTS–CCP, Art 

58, 59(12) and 61(2); ESMA Q&A CCP 

Question 8(f)1. 

VI. DCO/CCP Registration 

Section 5b(a) of the CEA and 

Commission Regulations 39.1 and 39.3 

require a DCO to register with the 

Commission in the format and manner 

specified by the Commission. In 

particular, Regulation 39.3 specifies that 

a DCO seeking registration from the 

Commission must file a Form DCO and 

various supporting exhibits. 

In the interest of comity, the 

Commission generally will tailor its 

registration process both in terms of 

administration and substantive review 

to reflect the availability of substituted 

compliance for EU CCPs. Accordingly, 

consistent with Regulation 39.3, EU 

CCPs seeking registration must complete 

Form DCO. However, with respect to 

questions and information requirements 

in areas where compliance with the 

EMIR Framework is substituted for 

compliance with part 39, the EU CCP 

may evidence its compliance with the 

EMIR Framework in lieu of its 

compliance with part 39. DCO/CCPs 

that are already dually registered need 

not take any further action to take 

advantage of the substituted compliance 

determinations made under this Notice. 

These determinations will be applied 

automatically to all current DCO/CCPs 

registrants. 

Moreover, to streamline the 

registration process, an EU CCP 

applicant may, instead of submitting the 

exhibits required under the CFTC Form 

DCO regulation, use existing materials 

that it has submitted to its NCA for its 

EMIR authorization or other relevant 

documents produced by its NCA that 

demonstrate compliance with EMIR 

provisions for which substituted 

compliance is available (e.g., 

supervisory examination reports or 

reports from its NCA). The positive 

opinion of the CCP supervisory college 

should also be submitted to the 

Commission by way of supporting 

evidence. The Commission will not 

require an EU CCP to obtain 

certification from its NCA, certifying 

that it has complied with the EMIR 

Framework. 

In addition, for the Form DCO 

documents listed below, the 

Commission will accept a copy of the 

original document filed by the EU CCP 

with its NCA with an attestation by that 

authority that they are acceptable to that 

authority: 

• Exhibit A–8: articles of 

incorporation or similar corporate 

documents; 

• Exhibit A–10: outside service 

provider agreements; 

• Exhibit E–1(4): settlement bank 

agreements; 

• Exhibit F(a)(2): depository 

agreements; and 

• Exhibit M(a): information-sharing 

agreements. 

If these documents are not in English, 

and an English translation is available, 

the EU CCP applying for registration 

should provide the English translation. 

If an English translation is not available, 

the EU CCP applying for registration 

should inform the Commission in 

writing but need not provide a 

translated version unless requested by 

the CFTC. 

The Commission will review the 

documentation received to determine if 

it is complete and comprehensive. In 

the case that information evidencing 

compliance with the EMIR Framework 

is incomplete, the Commission will seek 

to obtain further evidence from the 

relevant NCA evidencing its assessment 

of compliance. If the documentation is 

still not sufficient for the Commission to 

review compliance with the terms of the 


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60The Commission also requires an MOU with 

respect to exempt DCOs. 

EMIR Framework, the Commission will 

request additional evidence from the 

CCP and notify the NCA of the request 

made. 

The Commission will seek to obtain 

any other missing information from the 

relevant EU CCP. The Commission also 

will provide the relevant NCA with the 

opportunity to be consulted with 

respect to any questions if so requested 

at the outset by that authority. 

VII. Limited Application of Certain 

CFTC Regulations 

As a general matter, the Commission 

acknowledges that CCPs registered in 

foreign jurisdictions operate under 

different regulatory regimes, and that 

the differences between these various 

regimes may lead to regulatory arbitrage. 

The Commission also understands that 

the CFTC staff intends to provide 

limited no-action relief for DCO/CCPs 

from the application of Commission 

regulations to discrete aspects of a DCO/ 

CCP’s non-U.S. clearing activities as set 

forth below when this Notice becomes 

effective. 

(1) CFTC Regulation 39.12(b)(6)’s 

requirement that, upon a DCO’s 

acceptance of a swap for clearing, the 

original swap is extinguished and it is 

replaced by an equal and opposite swap 

between the DCO and each clearing 

member acting as a principal for a house 

trade or an agent for a customer trade 

will not apply where neither party is a 

U.S. clearing member or an FCM 

clearing member; 

(2) Part 22 of CFTC Regulations and 

its ‘‘legally segregated but operationally 

commingled’’ (‘‘LSOC’’) account model 

for cleared swaps customer accounts 

will not apply to clearing members that 

are not FCMs; 

(3) CFTC Regulation 39.13(g)(8)(i)’s 

requirement that initial margin for 

customer accounts cleared by an FCM 

be calculated and collected on a gross 

basis would not apply to non-FCM 

clearing member intermediaries; 

(4) CFTC Regulation 39.13(g)(8)(ii)’s 

requirement that a DCO collect initial 

margin at a level that is greater than 

100% of the DCO’s initial margin 

requirements for the non-hedge 

positions of FCM customers will not 

apply to non-FCM clearing member 

intermediaries; 

(5) CFTC Regulation 39.12(a)(2)(iii)’s 

prohibition that a DCO not set a 

minimum capital requirement of more 

than $50 million for any person that 

seeks to become a clearing member to 

clear swaps will not apply to non-U.S. 

clearing members or non-FCM clearing 

members; 

(6) CFTC Regulation 39.12(b)(7)’s 

requirement that DCOs utilize ‘‘straightthrough-processing’’ of swaps submitted 

for clearing will not apply to trades that 

are not executed on or subject to the 

rules of a DCM or a swap execution 

facility and for which neither clearing 

member is an FCM, a swap dealer, or a 

major swap participant; 

(7) Regulation 39.13(h)(5)’s 

requirement that DCOs must require 

their clearing members to maintain 

written risk management policies and 

procedures and that DCOs must have 

the authority to obtain information and 

documents from clearing members 

regarding their risk will still apply; 

however, DCO/CCPs may implement 

different oversight programs for U.S./

FCM clearing members and non-U.S. 

clearing members; and 

(8) Regulation 39.11(f)’s and 

Regulation 39.19(c)(3)(ii)’s implicit 

requirements that DCOs submit to the 

CFTC quarterly financial resource 

reports and an audited year-end 

financial statement that are prepared in 

accordance with GAAP will not apply; 

rather, the DCO/CCPs may submit 

financial statements prepared in 

accordance with IFRS, with periodic 

reconciliation to assist staff in reviewing 

the financial statements. 

VIII. Supervisory Arrangement 

As noted above, with respect to 

dually-registered DCO/CCPs, the 

Commission retains its examination 

authority with respect to DCO/CCPs and 

requires that home country regulator(s) 

enter into an MOU that addresses how 

the regulator(s) will cooperate and share 

information with respect to supervision 

of the DCO/CCP. Thus, the Commission 

has entered into a supervisory MOU 

with the home country regulator(s) of a 

DCO/CCP.60 For dual registrants in the 

future, the Commission similarly 

expects that an MOU will establish 

procedures for ongoing cooperation, 

address direct access to information, 

provide for notification upon the 

occurrence of specified events, 

memorialize understandings related to 

on-site visits, and include protections 

related to the use and confidentiality of 

non-public information shared pursuant 

to the MOU. 

While certain principles of 

supervision are universal, based on its 

experience supervising DCO/CCPs, the 

Commission recognizes the benefits of 

tailoring a joint supervisory regime to 

(1) the unique legal and regulatory 

framework in which each regulator 

operates and (2) the unique financial, 

operational, and organizational 

characteristics of each DCO/CCP. With 

respect to CFTC regulations for which 

there would be substituted compliance, 

the Commission generally believes that 

there should be joint examinations. By 

way of example, Commission staff 

already has participated in joint 

examinations with the Bank of England, 

and the Commission believes that joint 

examinations can be an efficient means 

for effective, in-depth review of a DCO/ 

CCP’s regulatory compliance. 

However, depending on the 

individual circumstances, it may be 

appropriate for the home country 

regulator(s) to assume greater 

responsibility for conducting the 

examinations. The Commission expects 

that its staff would be flexible in 

determining their approach to a given 

examination based on the nature and 

scope of the examination. Therefore, 

with the overall goal of applying 

uniform principles in a consistent yet 

flexible way, the Commission intends to 

address supervisory matters, including 

examinations, on a case-by-case basis 

for each individual DCO/CCP in close 

consultation with the relevant home 

country regulator(s). 

IX. Conclusion 

As noted above, the Commission finds 

that each provision of the EMIR 

Framework discussed above, is 

comparable to and comprehensive as 

the Commission requirements identified 

above and thus a CCP’s compliance with 

the identified provisions of the EMIR 

Framework will satisfy compliance with 

the corresponding Commission 

requirements. 

Issued in Washington, DC, on March 16, 

2016, by the Commission. 

Christopher J. Kirkpatrick, 

Secretary of the Commission. 

Appendices to Comparability 

Determination for the European Union: 

Dually-Registered Derivatives Clearing 

Organizations and Central 

Counterparties—Commission Voting 

Summary, Chairman’s Statement, and 

Commissioner’s Statement 

Appendix 1—Commission Voting 

Summary 

On this matter, Chairman Massad and 

Commissioners Bowen and Giancarlo voted 

in the affirmative. No Commissioner voted in 

the negative. 

Appendix 2—Statement of Chairman 

Timothy G. Massad 

Today, the CFTC has taken action to 

implement our agreement with the European 

Commission regarding requirements for 

central clearing counterparties (CCPs). Our 

unanimous action today means that 

European CCPs registered with the CFTC can 

comply with many of our rules by meeting 


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1See, e.g., IOSCO Task Force on Cross-Border 

Regulation, Final Report (Sept. 2015) (advocating 

for an outcomes-based approach as opposed to a 

line-by-line comparison of rules). 

the corresponding European Market 

Infrastructure Regulation (EMIR) 

requirements. 

The equivalence agreement announced by 

European Commissioner Jonathan Hill and 

myself is an important step in achieving 

cross-border harmonization of derivatives 

regulation. It provides a foundation for 

cooperation among regulators in the 

oversight of the global clearinghouses that are 

so important in our financial system today. 

It resolves the issues that were standing in 

the way of Europe recognizing U.S. CCPs. 

And it helps make sure that the U.S. and 

European derivatives markets can continue to 

be dynamic, with robust competition and 

liquidity across borders. 

The action we have taken today is an 

important component of that agreement. The 

notice identifies the rules for which the 

CFTC will grant substituted compliance. 

These include rules related to CCP financial 

resources, risk management, settlement 

procedures, and default management. We 

have also streamlined the process for 

registration, which will further harmonize 

our regimes. 

Finally, CFTC staff today are also 

providing no-action relief from the 

application of Commission regulations to 

discrete aspects of a clearinghouse’s non-U.S. 

clearing activities. 

The Commission is working with U.S. 

clearinghouses seeking recognition by the 

European Securities and Market Authority 

(ESMA) to ensure ESMA has all necessary 

information to review their applications in a 

timely manner. I look forward to ESMA 

completing the recognition process in a 

manner that ensures the global derivatives 

markets can continue to function efficiently 

and without disruption. 

Appendix 3—Statement of 

Commissioner J. Christopher Giancarlo 

I support the comparability determinations 

issued by the Commodity Futures Trading 

Commission (‘‘CFTC’’). 

Today’s action furthers the commitment to 

a common approach for transatlantic central 

clearing counterparties (CCPs) announced on 

February 10, 2016 by my colleague, CFTC 

Chairman Timothy Massad, and 

Commissioner Jonathan Hill of the European 

Commission (EC). Under the comparability 

determinations, CCPs that are authorized in 

the European Union (EU) under the European 

Market Infrastructure Regulation (EMIR) and 

registered with the CFTC may comply with 

certain CFTC requirements for financial 

resources, risk management, settlement 

procedures, and default rules and procedures 

by complying with corresponding 

requirements under the EMIR framework. 

Today’s notice also provides for a 

streamlined approach for EU CCPs that may 

wish to register with the CFTC in the future. 

As I said when it was announced, the 

agreement reached between the EC and the 

CFTC avoids unacceptable changes to four 

decades of U.S. clearinghouse margin policy 

and higher costs of hedging risk for 

America’s farmers, ranchers, financial 

institutions, energy firms and manufacturers. 

Yet, as I have observed, the protracted 

process for reaching this compromise was 

made needlessly complex because both the 

EC and the CFTC insisted on a line-by-line 

rule analysis contrary to the flexible, 

outcomes-based approach advocated by the 

OTC Derivatives Regulators Group. While the 

end result is a good one, the approach taken 

to get here was needlessly circuitous and 

uncertain. 

The CFTC and its global counterparts must 

now recommit themselves to work together to 

implement an equivalence and substituted 

compliance process, particularly for swaps 

execution and the cross-border activities of 

swap dealers and major swaps participants, 

based on common principles in order to 

increase regulatory harmonization and 

reduce market balkanization.1 The future of 

the global swaps marketplace depends on it. 

[FR Doc. 2016–06261 Filed 3–21–16; 8:45 am] 

BILLING CODE 6351–01–P 

DEPARTMENT OF DEFENSE 

Office of the Secretary 

[Docket ID: DOD–2015–OS–0099] 

Manual for Courts-Martial; Proposed 

Amendments 

AGENCY: Joint Service Committee on 

Military Justice (JSC), Department of 

Defense. 

ACTION: Notice of response to public 

comments on proposed amendments to 

the Manual for Courts-Martial, United 

States (2012 ed.) (MCM). 

SUMMARY: The JSC is publishing final 

proposed amendments to the MCM. The 

proposed changes concern the Rules for 

Courts-Martial, the Military Rules of 

Evidence, and the punitive articles 

applicable in trials by courts-martial. 

These proposed changes have not been 

coordinated within the Department of 

Defense under DoD Directive 5500.1, 

‘‘Preparation, Processing and 

Coordinating Legislation, Executive 

Orders, Proclamations, Views Letters 

and Testimony,’’ June 15, 2007, and do 

not constitute the official position of the 

Department of Defense, the Military 

Departments, or any other Government 

agency. 

FOR FURTHER INFORMATION CONTACT: 

Major Harlye Carlton, USMC, JSC 

Executive Secretary, at harlye.carlton@

usmc.mil. The JSC public Web site is 

located at http://jsc.defense.gov. 

SUPPLEMENTARY INFORMATION: 

Public Comments: Comments and 

materials received from the public are 

available under Docket ID Number 

DOD–2015–OS–0099, Federal Register 

Number 2015–26485, and at the 

following link: http://www.regulations.

gov/#!docketDetail;D=DOD-2015-OS0099. 

Background 

On October 19, 2015 (80 FR 63204– 

63212), the JSC published a Notice of 

Proposed Amendments concerning the 

rules of procedure and evidence and the 

punitive articles applicable in trials by 

courts-martial and a Notice of Public 

Meeting to receive comments on these 

proposals. The public meeting was held 

on November 5, 2015. No comments 

were received at the public meeting. 

The 60-day public comment period for 

the notice closed on December 18, 2015. 

One public comment was received. 

The JSC considered the public 

comments and after conducting 

deliberations, made no modifications to 

the proposed amendments to the MCM 

as a result of the public comments. The 

JSC conducted additional internal 

deliberations and made some 

modifications to the proposed 

amendments to the MCM accordingly. 

Comments that were submitted that are 

outside the scope of the originallyproposed changes will be considered as 

part of the JSC 2016 annual review of 

the MCM. 

Proposed Amendments After Period for 

Public Comment 

The proposed recommended 

amendments to the MCM that have been 

forwarded through the DoD for action by 

Executive Order of the President of the 

United States are as follows: 

Section 1. Part II of the Manual for 

Courts-Martial, United States, is 

amended as follows: 

(a) The title of R.C.M. 104(b)(1) is 

amended to read as follows: 

‘‘(1) Evaluation of member, defense 

counsel, or special victims’ counsel.’’ 

(b) R.C.M. 104(b)(1)(B) is amended to 

read as follows: 

‘‘(B) Give a less favorable rating or 

evaluation of any defense counsel or 

special victims’ counsel because of the 

zeal with which such counsel 

represented any client. As used in this 

rule, ‘‘special victims’ counsel’’ are 

judge advocates who, in accordance 

with 10 U.S.C. 1044e, are designated as 

Special Victims’ Counsel by the Judge 

Advocate General of the armed force in 

which the judge advocates are members, 

and within the Marine Corps, by the 

Staff Judge Advocate to the 

Commandant of the Marine Corps.’’ 

(c) R.C.M. 305(h)(2)(B)(iii)(a) is 

amended to read as follows: 

‘‘(a) The prisoner will not appear at 

trial, pretrial hearing, preliminary 

hearing, or investigation, or’’ 


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