Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

Commodity Futures Trading Commission

Office of Public Affairs

Three Lafayette Centre

1155 21st Street, NW

Washington, DC 20581

www.cftc.gov

September 8, 2016

Fact Sheet - Comparability Determination for Japan Uncleared Swap Margin Rules 

for Substituted Compliance Purposes 

In response to an application submitted by the Japan Financial Services Agency (JFSA), the Commodity Futures

Trading Commission (CFTC) is approving a comparability determination that would permit substituted compliance 

with certain of Japan’s margin requirements for uncleared swaps as compared to the uncleared swap margin

provisions of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act and CFTC

regulations. 

Margin For Uncleared Swaps and the Cross-Border Margin Rule

On January 6, 2016, pursuant to section 4s(e) of the Commodity Exchange Act (CEA), the CFTC adopted rules to address 

margin requirements for uncleared swaps entered into by swap dealers (SDs) or major swap participants (MSPs) (Covered 

Swap Entities) with financial institutions. On May 31, 2016, the CFTC then adopted rules regarding how these margin 

requirements apply to cross-border uncleared swaps (Cross-Border Margin Rule). The Cross-Border Margin Rule was 

generally designed to address the risks to an SD or MSP that is subject to the margin requirements associated with its 

uncleared swaps, consistent with section 2(i) of the Commodity Exchange Act and the statutory objectives of the margin 

requirements. 

As part of the Cross-Border Margin Rule, the CFTC established a framework which permits certain non-U.S. CSEs to rely on 

substituted compliance to the extent that the Commission determines the relevant foreign jurisdiction’s margin requirements 

are comparable to the CFTC’s. Specifically, the Cross-Border Margin Rule outlines a framework for the CFTC’s comparability 

determinations, including eligibility and submission requirements for requesters and the CFTC’s standard of review for making 

comparability determinations. 

Standard of Review for Comparability Determinations

Consistent with the key factors that the Commission indicated it will consider in making a comparability determination under 

the Cross-Border Margin Rule, in making the comparability determination for Japan, the Commission considered the scope 

and objectives of Japan’s margin requirements; whether Japan’s margin requirements achieve comparable outcomes to the 

Commission’s corresponding margin requirements; and the ability of the JFSA to supervise and enforce compliance with 

Japan’s margin requirements. This process reflects an outcome-based approach to assessing the comparability of a foreign 

jurisdiction’s margin requirements with focus on whether the foreign jurisdiction’s margin requirements are comparable to the 

Commission’s in purpose and effect, not whether they are comparable in every aspect or contain identical elements.

Summary of Comparability Determination for Japan

On June 17, 2016, the JFSA submitted a request pursuant to the Cross-Border Margin Rule that the CFTC determine that laws 

and regulations applicable in Japan provide a sufficient basis for an affirmative finding of comparability with respect to margin 

requirements for uncleared swaps applicable to certain SDs and MSPs registered with the CFTC. As listed in the chart below, 

with one exception, the Commission has found the margin requirements for uncleared swaps under the laws and regulations 

of Japan comparable to those under the CEA and CFTC regulations.
Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

CFTC Rule Japan Uncleared Swap Margin Requirements

Treatment of Inter-Affiliate Swaps

Regulation § 23.159

Not comparable

(Note 1)

Methodologies for Calculating Initial and Variation Margin 

Amounts 

Regulations §§ 23.154, 23.155

Comparable 

Process and Standards for Approving Models for 

Calculating Initial Margin

Regulation § 23.154(b)

Comparable 

Timing and Manner of Collection and Payment of Margin

Regulations §§ 23.152, 23.153 Comparable 

Threshold Levels or Amounts 

§ 23.154(a)(3) Comparable 

Risk Management Controls for Calculation of Initial and 

Variation Margin

Regulation § 23.154(b)(5)

Comparable 

Eligible Collateral

Regulation § 23.156 Comparable 

Custodial Arrangements, Segregation, and 

Rehypothecation 

Regulation § 23.157

Comparable 

Margin Documentation

Regulation § 23.158 Comparable 

Cross-Border Application/Reciprocity

Regulation § 23.160 Comparable 

Note 1: Japan does not require collection or posting of initial or variation margin between consolidated affiliates. 

The Commission’s rules require collection and posting of variation margin and, in some cases, collection of initial 

margin between consolidated affiliates.