UNITED STATES OF AMERICA 


Before the 


COMMODITY FUTURES TRADING COMMISSION 


In the Matter of the Petition of 

Korea Exchange, Inc. 

For Exemption from Registration 

as a Derivatives Clearing Organization 

ORDER OF EXEMPTION FROM REGISTRATION 

Korea Exchange, Inc. ("KRX"), 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-l(h), a petition for exemption from registration as a derivatives clearing 

organization ("DCO"). Section 5b(h) of the 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 horne country of the DCO ("Horne 

Country Regulator"). 

The Commission has reviewed the petition and finds that KRX has demonstrated 

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

exemption from registration as a DCO. 

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

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

terms and conditions specified herein: 

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

including, but not limited to, interest rate swaps denominated in Korean Won. 

(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Reg. 45,292, 45,316-17 (July 26, 2013), as such definition may be amended or superseded by a 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 of the term "U.S. person" that is adopted by the Commission with a scope 

encompassing this Order. KRX must maintain rules that limit swap clearing services for U.S. 

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

(a) AU. S. person that is a clearing member of KRX may clear swaps for itself and 

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

Regulation 1.3(y); 

(b) A non-U.S. person that is a clearing member ofKRX may clear swaps for any 

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

1.3(y); and 

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

member of KRX, 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 fmih in Regulation 1.3(y). 

(3) Open Access. KRX must maintain rules with respect to swaps to which one or 

more of the counterparties is a U.S. person. Such rules must: 

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

specifications established under KRX's rules, submitted to KRX for clearing are economically 

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equivalent within KRX and may be offset with each other within KRX, to the extent offsetting is 

permitted by KRX'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. KRX 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 KRX, in connection with 

any actions or proceedings brought against, or investigations relating to, KRX or any U.S. person 

or FCM that is a clearing member, or that clears swaps through an affiliated clearing member, of 

KRX. KRX must promptly inform the Commission of any change in its designated and 

authorized agent. 

(5) Compliance. KRX must comply, and must demonstrate compliance as requested 

by the Commission, with the requirements of this Order. 

(6) Inspection of Books and Records. KRX 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 of the Commission; and in 

response to a request by any representative of the Commission, KRX must, promptly and in the 

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

Commission representatives. 

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(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, KRX 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 KRX's request, a written representation that KRX 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 KRX. 

(9) General Reporting Requirements. KRX 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 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, KRX must report initial margin requirements and initial margin on 

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

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(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 ~nd the positions of its affiliates, and either the 

clearing member or any of its affiliates is a U.S. person, KRX must separately list the mark-tomarket 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 quarter of KRX and submitted 

to the Commission no later than 17 business days after the end of KRX' s fiscal qumier, 

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. If a 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 quarter, with respect to 

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

of the clearing member and all affiliates. If a clearing member is not aU. 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; 

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

material to KRX's continuing observance ofthe PFMis or with any of the requirements set forth 

in this Order; 

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(d) As available to KRX, any assessment ofKRX's or the Home Country Regulator's 

observance of the PFMis, 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 KRX, any examination report, 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 KRX'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 FCM clearing swaps, with such event 

of default determined in accordance with KRX's rules, immediate notice of the default including 

the name ofthe U.S. person or FCM, a list of the positions held by the U.S. person or FCM, and 

the amount of the U.S. person's or FCM's financial obligation; and 

(h) Notice of action taken against a U.S. person or FCM by KRX, no later than two 

business days after KRX takes such action against a U.S. person or FCM. 

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

limited to, information for the purpose of the Commission evaluating KRX's continued 

eligibility for exemption from registration, reviewing KRX' s compliance with any conditions of 

the exemption, or conducting oversight of U.S. persons and their affiliates, and the swaps that are 

cleared by such persons through KRX. 

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

clears through KRX a swap that has been reported to a Commission-registered swap data 

repository ("SDR") pursuant to Pmi 45 of the Commission's regulations, then KRX must report 

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

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the original swap that had been submitted to KRX for clearing. KRX must also report the 

termination of the swap accepted for clearing by KRX, to the SDR to which the swap was 

originally reported. In order to avoid duplicative repmiing for such transactions, KRX shall have 

rules that prohibit the Part 45 reporting 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 KRX. 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 26111 day of October, 2015. 

By the Commission 

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