UNITED STATES OF AMERICA 


Before the 


COMMODITY FUTURES TRADING COMMISSION 


In the Matter of the Petition of 

OTC Clearing Hong Kong Limited 

For Exemption from Registration 

as a Derivatives Clearing Organization 

ORDER OF EXEMPTION FROM REGISTRATION 

OTC Clearing Hong Kong Limited ("OTC Clear"), has submitted to the Commodity 

Futures Trading Commission ("Commission"), pursuant to Section 5b(h) of the Commodity 

Exchange Act ("Act"), 7 U.S. C. § 7a-1 (h), a petition for exemption from registration as a 

derivatives clearing organization ("DCO"). Section 5b(h) ofthe Act permits the Commission to 

exempt, conditionally or unconditionally, a DCO from registration for the clearing of swaps if 

the Commission determines that the DCO is subject to comparable, comprehensive supervision 

and regulation by the appropriate government authority in the home country ofthe DCO ("Home 

Country Regulator"). 

The Commission has reviewed the petition and finds that OTC Clear has demonstrated 

compliance with those requirements ofthe Act with which it must comply to be eligible for an 

exemption from registration as a DCO. 

In light ofthe foregoing, IT IS ORDERED, pursuant to Section 5b(h) ofthe Act, 7 

U.S.C. § 7a-l(h), that OTC Clear is granted an exemption from registration as a DCO subject to 

the terms and conditions specified herein: 

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(1) Cleared Products. OTC Clear is permitted to clear, pursuant to this Order, swaps 

including, but not limited to, interest rate swaps denominated in Chinese renminbi, euros, Hong 

Kong dollars, and U.S. dollars, as well as non-deliverable forwards denominated in renminbi, 

Indian rupees, Korean won, and Taiwan dollars. 

(2) U.S. Clearing Services Restricted to Proprietary Swap Positions for U.S. Persons. 

For purposes of this Order, "U.S. person" is defined as set forth in the Commission's Interpretive 

Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations, 78 Fed. 

Reg. 45,292, 45,316-17 (July 26, 2013), as such definition may be amended or superseded by a 

definition ofthe term "U.S. person" that is adopted by the Commission with a scope 

encompassing this Order. OTC Clear must maintain rules that limit swap clearing services for 

U.S. persons and futures commission merchants ("FCMs") to the following circumstances: 

(a) A U.S. person that is a clearing member of OTC Clear may clear swaps for itself 

and those persons identified in the Commission's definition of "proprietary account" set foiih in 

Regulation l.3(y); 

(b) A non-U.S. person that is a clearing member of OTC Clear may clear swaps for 

any affiliated U.S. person identified in the definition of "proprietary account" set forth in 

Regulation l .3(y); and 

(c) An entity that is registered with the Commission as an FCM may be a clearing 

member of OTC Clear, 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 l .3(y). 

(3) Open Access. OTC Clear must maintain rules with respect to swaps to which one 

or more ofthe counterparties is a U.S. person. Such rules must: 

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(a) Provide that all swaps with the same terms and conditions, as defined by product 

specifications established under OTC Clear's rules, submitted to OTC Clear for clearing are 

economically equivalent within OTC Clear and may be offset with each other within OTC Clear, 

to the extent offsetting is permitted by OTC Clear's rules; and 

(b) Provide that there must be non-discriminatory clearing of a swap executed 

bilaterally or on or subject to the rules of an unaffiliated electronic matching platform or trade 

execution facility. 

(4) Consent to Jurisdiction; Designation of Agent for Service of Process. OTC Clear 

must consent to jurisdiction in the United States, and must designate, authorize, and identify to 

the Commission, an agent in the United States who must accept any notice or service of process, 

pleadings, or other documents, including any summons, complaint, order, subpoena, request for 

information, or any other written or electronic documentation or correspondence issued by or on 

behalf of the Commission or the United States Department of Justice to OTC Clear, in 

connection with any actions or proceedings brought against, or investigations relating to, OTC 

Clear or any U.S. person or FCM that is a clearing member, or that clears swaps through an 

affiliated clearing member, of OTC Clear. OTC Clear must promptly inform the Commission of 

any change in its designated and authorized agent. 

(5) Compliance. OTC Clear must comply, and must demonstrate compliance as 

requested by the Commission, with the requirements of this Order. 

(6) Inspection of Books and Records. OTC Clear must make all documents, books, 

records, reports, and other information related to its operation pursuant to this Order ("Books and 

Records") open to inspection and copying by any representative ofthe Commission; and in 

response to a request by any representative of the Commission, OTC Clear must, promptly and 

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in the form specified, make the requested Books and Records available and provide them directly 

to Commission representatives. 

(7) Observance of the CPMI-IOSCO Principles for Financial Market Infrastructures 

("PFMis"). On an annual basis, within 60 days following the end of its fiscal year, OTC Clear 

must provide to the Commission a certification that it continues to observe the PFMis in all 

material respects. 

(8) Representation of Good Regulatory Standing. On an annual basis, within 60 days 

following the end of its fiscal year, the Commission must receive from the Home Country 

Regulator, at OTC Clear' s request, a written representation that OTC Clear is in good regulatory 

standing. For purposes of this paragraph 8, "good regulatory standing" means that either (a) there 

has been no finding by the Home Country Regulator of material non-observance of the PFMis or 

other relevant home country legal requirements, or (b) there has been a finding by the Home 

Country Regulator of material non-observance of the PFMis or other relevant home country 

legal requirements but any such finding has been or is being resolved to the satisfaction of the 

Home Country Regulator by means of corrective action taken by OTC Clear. 

(9) General Reporting Requirements. OTC Clear shall submit to the Commission the 

following information, as specified: 

(a) A report compiled as of the end of each trading day and submitted to the 

Commission by 10:00 a.m. U.S. Central time on the following business day, containing: 

(i) Initial margin requirements and initial margin on deposit for each U.S. person, 

with respect to swaps; provided, however, if a clearing member margins on a p01ifolio basis its 

own positions and the positions of its affiliates, and either the clearing member or any of its 

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affiliates is a U.S. person, OTC Clear must report initial margin requirements and initial margin 

on deposit for all such positions on a combined basis for each such clearing member; and 

(ii) Daily variation margin, separately listing the mark-to-market amount collected 

from or paid to each U.S. person, with respect to swaps; provided, however, if a clearing member 

margins on a portfolio basis its own positions and the positions of its affiliates, and either the 

clearing member or any of its affiliates is a U.S. person, OTC Clear must separately list the 

mark-to-market amount collected from or paid to each such clearing member, on a combined 

basis; 

(b) A report compiled as of the last day of each fiscal quaiier of OTC Clear and 

submitted to the Commission no later than 17 business days after the end of OTC Clear's fiscal 

quarter, containing the following information: 

(i) The aggregate clearing volume of U.S. persons during the fiscal quarter, with 

respect to swaps. If a clearing member is a U.S. person, the volume figure shall include the 

transactions of the clearing member and all affiliates. Ifa clearing member is not a U.S. person, 

the volume figure shall include only transactions of affiliates that are U.S. persons. 

(ii) The average open interest of U.S. persons during the fiscal quaiier, with respect to 

swaps. If a clearing member is a U.S. person, the open interest figure shall include the positions 

of the clearing member and all affiliates. If a clearing member is not a U.S. person, the open 

interest figure shall include only positions of affiliates that are U.S. persons. 

(iii) A list of U.S. persons and FCMs that are either clearing members or affiliates of 

any clearing member, with respect to the clearing of swaps, as of the last day of the fiscal 

quarter; 

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(c) Prompt notice regarding any change in the home country regulatory regime that is 

material to OTC Clear's continuing observance of the PPMis or with any ofthe requirements set 

f01ih in this Order; 

(d) As available to OTC Clear, any assessment of OTC Clear' s or the Home Country 

Regulator's observance of the PPMis, or any portion thereof, by a Home Country Regulator or 

other national authority, or an international financial institution or international organization; 

(e) As available to OTC Clear, any examination repmi, examination findings, or 

notification of the commencement of any enforcement or disciplinary action by a Home Country 

Regulator; 

(f) Immediate notice of any change with respect to OTC Clear's licensure, 

registration, or other authorization to act as a clearing organization in its home country; 

(g) In the event of a default by a U.S. person or PCM clearing swaps, with such event 

of default determined in accordance with OTC Clear's rules, immediate notice ofthe default 

including the name of the U.S. person or PCM, a list of the positions held by the U.S. person or 

PCM, and the amount ofthe U.S. person's or PCM's financial obligation; and 

(h) Notice of action taken against a U.S. person or PCM by OTC Clear, no later than 

two business days after OTC Clear takes such action against a U.S. person or PCM. 

(i) Any other information that the Commission deems necessary, including, but not 

limited to, information for the purpose ofthe Commission evaluating OTC Clear's continued 

eligibility for exemption from registration, reviewing OTC Clear's compliance with any 

conditions ofthe exemption, or conducting oversight of U.S. persons and their affiliates, and the 

swaps that are cleared by such persons through OTC Clear. 

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(10) Swap Data Recordkeeping and Reporting Requirements. If a clearing member 

clears through OTC Clear a swap that has been repmied to a Commission-registered swap data 

repository ("SDR") pursuant to Part 45 of the Commission's regulations, then OTC Clear must 

repmi to an SDR, pursuant to this Order, data regarding the two swaps resulting from the 

novation of the original swap that had been submitted to OTC Clear for clearing. OTC Clear 

must also report the termination of the swap accepted for clearing by OTC Clear, to the SDR to 

which the swap was originally reported. In order to avoid duplicative reporting for such 

transactions, OTC Clear shall have rules that prohibit the Pmi 45 repmiing of the two new swaps 

by the original counterparties to the original swap. 

(11) Reservation of Rights. This Order is based upon the representations made and 

supporting material provided to the Commission by OTC Clear. In the event of any changes to 

or omissions in the material facts or circumstances pursuant to which this Order is issued, or for 

any reason in its own discretion, the Commission may condition, modify, suspend, terminate, or 

otherwise restrict the terms of this Order, as appropriate and as permitted by law, on its own 

motion. 

Issued in Washington, D.C. this 21st day of December, 2015. 

By the Commission 

Robe1i N. Sidman 

Deputy Secretary of the Commission 

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