Derivatives Reform: Comparison of Title VII of the 

Dodd-Frank Act to International Legislation

Prepared by CFTC Staff for the 

Global Markets Advisory Committee 

October 5, 2010
2

Derivatives Reform: Comparison of Title VII of the Dodd-Frank Act to International Legislation

Topic European Commission Title VII of U.S. Dodd-Frank Act 

Japan Financial Instrument 

and Exchange Act1

Instruments covered

Generally applies to OTC derivatives that are not 

traded on an exchange, including: physicallysettled and cash-settled options, swaps, and 

other derivative contracts on securities, 

currencies, interest rates or yields, or other 

derivatives instruments, financial indices, or 

financial measures; credit derivatives; and cashsettled options, swaps, and other derivatives

contracts on commodities.

Generally applies to swaps, options (other than 

options on futures), and security-based swaps; the 

Secretary of the Treasury may determine to exclude 

foreign exchange swaps and forwards.

Generally applies to all 

financial derivatives.

Entities covered

Financial counterparties (investment firms, credit 

institutions, insurers, reinsurers and assurers, 

institutions for occupational retirement 

provision, undertakings from collective 

investments in transferable securities (UCITS) 

and fund managers) are subject to all provisions. 

Non-financial counterparties (any entity 

established in the EU that does not meet the 

above definition of a financial counterparty) may 

be subject to some or all of the provisions if their 

net non-hedged positions exceed certain 

thresholds.

Creates 2 new registration categories: 

Swap dealer -- a person who: i) holds itself out as a 

dealer in swaps; ii) makes a market in swaps; 

iii) regularly enters into swaps with counterparties 

as an ordinary course of business for its own 

account; or iv) engages in any activity causing the 

person to be commonly known in the trade as a 

dealer or market maker in swaps; 

Major swap participant -- a non-dealer: i) who 

maintains a substantial position in any major swap 

category, excluding positions held by pension plans 

or for hedging or mitigating commercial risk; or 

ii) whose outstanding swaps create substantial 

counterparty exposure that could have serious 

adverse effects on the financial stability of the U.S. 

banking system or financial markets; or iii) who is a 

financial entity that is highly leveraged relative to 

the amount of capital it holds and that is not subject 

to capital requirements established by a Federal 

banking agency, and maintains a substantial 

position in any major swap category. 

 

1 The information in this column is based on publicly available summaries of the legislation that are prepared in English.
3

Exemptions for 

central banks

Central banks and multilateral development 

banks, including the World Bank, are exempted.

General extra-territoriality provision: The DoddFrank Act swap provisions do not apply to activities 

outside the U.S. unless those activities: i) have a 

direct and significant connection with activities in or 

effect on U.S. commerce; or ii) contravene CFTC 

rules prescribed to prevent evasion of the new law.

No similar exemption.

Effective date

20 days after publication in the Official Journal of 

the EU. Technical standards must be completed 

by ESMA by June 30, 2012.

Generally, the later of: 360 days after enactment 

(July 16, 2011); or, if a provision requires a 

rulemaking, 60 days after publication of the final 

rule to implement the provision. The deadline for 

most rulemakings is July 2011.

Regime for foreign CCPs and 

strengthening infrastructure 

of CCPs must be enforced 

within 1 year after 

promulgation of the law. 

Regime for mandatory 

clearing and reporting of 

trade data must be enforced 

within 2.5 years after 

promulgation of the law.

Clearing 

requirement

Financial counterparties, and any non-financial 

counterparties whose net non-hedged positions 

exceed a clearing threshold, must clear all 

eligible derivatives contracts concluded with 

another financial counterparty or with such a 

non-financial counterparty.

Financial entities (generally swap dealers, major 

swap participants, commodity pools, hedge funds, 

pension plans, and banks) generally must clear all 

swaps that are subject to the mandatory clearing 

requirement. Non-financial entities that use swaps 

to hedge or mitigate commercial risk and notify 

CFTC how they meet their financial obligations 

associated with non-cleared swaps are not subject 

to the mandatory clearing and exchange-trading 

requirements.
4

Clearing eligibility

i) A CCP requests authorization from its national 

regulator to clear a class of derivatives; if the 

regulator approves, the regulator will inform 

ESMA of its decision; ESMA will decide within 6 

months, after conducting a public consultation, if 

clearing should be made mandatory for that class 

of derivatives; ESMA will publish any discussion 

on the class and authorized CCPs for that class in 

a public register; ii) On its own initiative, and in 

consultation with the ESRB, ESMA must identify 

and notify the EC of classes of derivatives for 

which the clearing obligation should apply, but 

for which no CCP is authorized.

A derivatives clearing organization (DCO) shall 

submit to CFTC its intention to clear a swap or class 

of swaps, and the CFTC will decide whether clearing 

should be required. Separately, the CFTC is 

required to review other classes of swaps to 

determine if clearing should be mandatory for that 

class of swaps, even if no DCO currently clears it or 

has submitted it to CFTC.

Certain derivatives

transactions, as designated 

by the cabinet office 

ordinance, will be required to 

be cleared on domestic CCPs. 

Other derivatives

transactions, as designated 

by the cabinet office 

ordinance, must be cleared 

but may be cleared on 

foreign CCPs.

Clearing obligation 

factors

ESMA must base its decision on:

- The reduction of systemic risk in the financial 

system;

- The liquidity of contracts;

- The availability of pricing information;

- The ability of the CCP to handle the volume of 

contracts; and 

- The level of client protection provided by the 

CCP.

CFTC must take account of the following factors in 

making a determination:

- The existence of significant outstanding notional 

exposures, trading liquidity and adequate pricing 

data;

- The availability of rule framework, capacity, 

operational expertise and resources, and credit 

support infrastructure to clear the contract;

- The effect on the mitigation of systemic risk, taking 

into account the size of the market and resources of 

the DCOs available to clear the contract;

- The effect on competition, including fees and 

charges applied to clearing; and

- The existence of reasonable legal certainty in the 

event of the insolvency of the DCO or its members.

The cabinet office ordinance 

will determine the scope. 

Consistency with bankruptcy 

provisions is one factor that 

will be used.

CCP access

A CCP authorized to clear a class of derivatives 

must accept such contracts on a nondiscriminatory basis, regardless of the venue of 

execution.

DCOs must clear swaps on a non-discriminatory

basis, regardless of the venue of execution.
5

Reporting 

requirement

Any financial counterparty, and a non-financial 

counterparty whose net non-hedged positions 

exceed an information threshold, must report to 

a registered trade repository the details of any 

derivatives contract that it has entered into, and 

any modification or termination, not later than 

the working day following the execution, 

clearing, or modification of the contract. If a 

trade repository is not able to record the details 

of a contract, financial counterparties must 

report the details of their positions in those 

contracts to the national regulator.

All swaps must be reported to a registered swap 

data repository or, if there is no repository that 

would accept the swap, to CFTC. Real-time public 

reporting required for: i) swaps required to be 

cleared (even if not cleared due to end-user 

exception); ii) swaps voluntarily cleared; and 

iii) swaps not cleared that are reported to a swap 

data repository or CFTC. Real-time reporting means 

to report data relating to a swap, including price 

and volume, as soon as technologically practicable 

after the time at which the swap has been 

executed.

Derivatives transactions, 

which are not required to be 

submitted to CCPs will be 

required to be submitted to 

domestic or designated 

foreign trade repositories. It 

is unclear if some non-cleared 

transactions will be 

exempted from submission to 

a trade repository.

Reporting fields

Reports shall contain at least the names of the 

counterparties and, if different, the beneficiary 

of the rights and obligations arising from the 

contract, and main characteristics of the 

contract, including type, underlying, maturity 

and notional value.

For swap data repositories, CFTC shall specify the

data elements to be collected and maintained. 

Not listed.
6

Risk mitigation for 

bilateral trades

Financial counterparties and non-financial 

counterparties that exceed clearing threshold 

must ensure that arrangements are in place to 

measure, monitor and mitigate operational and 

credit risk, by at least, where possible, using 

electronic confirmation of the contract terms 

and having in place robust, resilient and 

auditable processes for portfolio reconciliation, 

to manage the risk and to identify disputes 

between parties early, and to monitor the value 

of outstanding contracts. Value determinations 

must be based on daily mark-to-market, and risk 

management procedures must require the 

timely, accurate and appropriately segregated 

exchange of collateral or the appropriate and 

proportionate holding of capital.

Prudential Regulators for banks (in consultation 

with CFTC and SEC) shall jointly adopt, and CFTC for 

non-banks shall adopt, “rules for swap dealers and 

major swap participants, with respect to their 

activities as a swap dealer or major swap 

participant,” imposing capital requirements and 

both initial and variation margin requirements on all 

non-cleared swaps.

Capital and margin requirements shall help ensure 

the safety and soundness of the swap dealer or 

major swap participant, and be appropriate for the 

risk associated with the non-cleared swaps held as a 

swap dealer or major swap participant. With 

respect to segregation of margin collateral posted 

for non-cleared swaps, the segregation requirement 

for initial margin is imposed on a swap dealer at the 

request of a counterparty. The margin account 

must be carried by an independent third-party 

custodian. If a swap dealer does not segregate, it 

must report quarterly to the counterparty that its 

procedures with respect to margin collateral comply 

with the parties’ agreement.

CCP authorization

To be authorized, a CCP must have access to 

adequate liquidity from a central bank or 

creditworthy commercial bank. Authorization 

must specify the services the CCP may offer. If a 

CCP wishes to extend to additional services, such 

as clearing in a different currency or instrument 

that significantly differs in risk characteristics, it 

must submit an extension request to its 

regulator.

To be registered and maintain registration, a DCO 

must comply with 18 core principles (CPs) in the 

Commodity Exchange Act (CEA), as well as CFTC 

regulations. CP (B) requires that a DCO have 

adequate financial, operational, and managerial 

resources, as determined by CFTC, to discharge its 

responsibilities. CP (D) requires that a DCO ensure 

that it possesses the ability to manage the risks 

associated with discharging the responsibilities of 

the DCO. CP (E) requires a DCO to complete money 

settlements on a timely basis (at least once each 

business day), employ money settlement 

arrangements to eliminate or strictly limit the DCO’s 

exposure to settlement bank risks, and ensure that 

money settlements are final when effected.
7

CCP grandfathering

Existent CCPs at the time of adoption will have 

two years from the effective date to seek 

authorization.

Depository institutions and SEC-registered clearing 

agencies that cleared swaps prior to enactment of 

the Dodd-Frank Act are deemed registered. The 

effective date of any new DCO responsibilities 

under the Dodd-Frank Act will be determined 

according to the rulemaking schedule.

Foreign CCP 

recognition

A CCP established outside of the EU may only 

provide clearing to entities established in the EU 

if the CCP is recognized by ESMA. ESMA must 

recognize the CCP if the EC has adopted a 

decision that the legal/supervisory arrangements 

in the foreign country ensure that the CCP 

complies with legal requirements that are 

equivalent to the EU's requirements, and the CCP 

is subject to effective supervision and 

enforcement; the CCP is authorized in, and 

subject to, effective supervision in its home 

jurisdiction; and cooperative arrangements have 

been established between ESMA and the 

relevant national regulators of the foreign 

jurisdiction.

CFTC may exempt, conditionally or unconditionally, 

a DCO from registration for the clearing of swaps if 

CFTC determines that the DCO is subject to 

comparable, comprehensive supervision and 

regulation by the appropriate government 

authorities in the DCO's home country.

An existing foreign CCP may 

either set up in Japan or

obtain a license as a Foreign 

Financial Instrument Clearing 

Organization. The foreign 

CCP also could enter into an 

alliance with a domestic 

Financial Instrument Clearing 

Organization if it has 

established a system to 

ensure secure clearing of 

unsettled obligations. 

CCP capital 

requirements

For authorization, at least 5 million Euros in 

permanent, available and separate initial capital. 

Capital, along with retained earnings and 

reserves, must always be sufficient for an orderly 

winding-down or restricting of activities over an 

appropriate time span.

CP (B) requires that a DCO have adequate financial, 

operational, and managerial resources, as 

determined by CFTC, to discharge its 

responsibilities. Those financial resources shall, at a 

minimum, exceed the total amount that would 

enable the DCO to meet its obligations despite a 

default by a member creating the largest financial 

exposure in extreme, but plausible, market 

conditions and enable the DCO to cover its 

operating costs for a 1-year period.

Minimum capital 

requirement is not listed but 

will be determined by a 

cabinet order.
8

CCP authorization 

procedure

A regulator may only grant authorization to a 

CCP if it is fully satisfied that the CCP complies 

with all requirements and has received a joint 

positive opinion from the CCP’s college of 

supervisors and ESMA. A decision must be made

by the regulator on whether or not to grant 

authorization within six months of the 

submission of a completed application. The 

regulator must at least annually review the 

arrangements, strategies, processes and 

mechanisms implemented by the CCP, having 

regard to the size, systemic importance, nature, 

scale and complexities of the CCP’s activities.

To be registered and maintain registration, a DCO 

must comply with 18 core principles and CFTC 

regulations, and is subject to ongoing oversight by 

CFTC.

General 

requirements for 

CCPs

No ownership cap. A CCP must have robust 

governance arrangements, including a clear 

organizational structure to identify, manage, 

monitor and report the risks to which it is or 

might be exposed. The CCP must maintain a 

separation between the reporting lines for risk 

management and all other operations of the 

CCP, must make its governance arrangements 

available to the public, and must be subject to 

frequent and independent audits.

CFTC shall adopt rules to mitigate conflicts of 

interest, which may include numerical limits on the 

control of, or voting rights with respect to, DCOs 

that clear swaps, by large banks, financial 

companies, swap dealers, and major swap 

participants. CP (O) contains governance fitness 

standards that must be transparent. CP (P) provides 

that DCOs must have rules to minimize conflicts of 

interest in the decision-making process of the DCO. 

A holder of more than 5% of 

the voting rights of a clearing 

organization must notify the 

Prime Minister's office, and a 

person who intends to hold 

or acquire 20% or more of 

the voting rights must obtain 

the authorization of the 

Prime Minister's office,

before completing such a 

transaction.

CCP board 

composition and risk 

committee

Among other requirements, board members 

must be of sufficiently good repute and 

experience and have sufficient expertise in 

financial services, risk management and clearing 

services. At least 1/3 of the board (no less than 

two members) must be independent. The 

compensation of the independent and other 

non-executive members of the board cannot be 

linked to the performance of the CCP. The CCP 

must have a risk committee, composed of 

representatives of its clearing members and 

independent members of the board.

The governance fitness standards of CP (O) require 

DCOs to establish fitness standards for, among 

others, directors, members of the DCO, and 

members of any disciplinary committee. CP (Q)

requires that members of the governing board of a 

DCO include market participants. CP (D) requires 

that a DCO possess the ability to manage the risks 

associated with a DCO, including measurement of 

credit exposure, limitation of exposure to potential 

losses from defaults, and margin requirements.
9

CCP recordkeeping

A CCP must maintain all records for at least 10 

years on the services it provides to enable 

regulators to monitor for regulatory compliance. 

A CCP also must maintain all information on all 

contracts it has processed for at least 10 years 

following the termination of a contract. The CCP 

must make all records and information required 

to be kept and all information on the positions of 

cleared contracts, irrespective of where they 

were executed, available to the regulator and 

ESMA.

CP (J) requires a DCO to provide CFTC all 

information CFTC determines to be necessary to 

conduct oversight of the DCO. CP (K) requires a 

DCO to maintain records of all activities related to 

the business of the DCO in a form and manner 

acceptable to CFTC for a period of at least 5 years. 

Also, CEA Section 5b(k) requires DCOs to provide to 

CFTC all other information that CFTC determines is 

necessary for CFTC to perform its responsibilities.

CCP ownership

Among other requirements, the CCP must 

identify its shareholders to its regulator, and the 

regulator is required to refuse authorization of 

the CCP if it is not satisfied as to the suitability of 

the shareholdings with qualifying holdings. If 

there are close links between the CCP and other 

persons, and if such linked persons prejudicially 

influence the management of the CCP, the 

regulator “shall take appropriate measures to 

terminate that situation.” The regulator may 

remove a board member if it finds that the 

conduct of the member is likely to be prejudicial 

to the sound and prudent management of the 

CCP. If an entity’s holdings would exceed (or be 

reduced below) 10%, 20%, 30% or 50% or if the 

CCP would become a subsidiary of that entity, 

the entity must first notify the regulator of the 

CCP in writing, indicating the size of the intended 

holding and other relevant information. A 

regulator may oppose a proposed acquisition 

only if there are reasonable grounds for doing so.

CFTC shall adopt rules to mitigate conflicts of 

interest, which may include numerical limits on the 

control of, or voting rights with respect to, DCOs 

that clear swaps, by large banks, financial 

companies, swap dealers, and major swap 

participants. CFTC also shall adopt rules mitigating 

conflicts of interest in connection with the conduct 

of business by a swap dealer or major swap 

participant with a DCO in which the swap dealer or 

major swap participant has a material debt or 

material equity interest. 
10

CCP conflicts

A CCP must maintain and operate effective 

written organizational and administrative 

arrangements to identify and manage potential 

conflicts between itself, its clearing members or 

their clients, or between them.

CFTC shall adopt rules to mitigate conflicts of 

interest, which may include numerical limits on the 

control of, or voting rights with respect to, DCOs 

that clear swaps, by large banks, financial 

companies, swap dealers, and major swap 

participants. Also, CP (P) provides that DCOs must 

have rules to minimize conflicts of interest in the 

decision-making process of the DCO. 

CCP business 

continuity

A CCP must establish, implement and maintain 

an adequate business continuity policy and 

disaster recovery plan that, at a minimum, allows 

for the recovery of all transactions at the time of 

disruption to allow the CCP to continue to 

operate with certainty and complete settlements 

on time.

CP (I) requires DCOs to establish system safeguards 

to minimize operational risk and establish 

emergency procedures, backup facilities, and a plan 

for disaster recovery that allows for, among other 

things, the timely recovery and resumption of 

operations of the DCO.

CCP outsourcing

Where it outsources operational functions, 

services, or activities, the CCP will remain fully 

responsible for discharging all of its regulatory 

obligations, and must ensure, among other 

things, that outsourcing does not result in the 

delegation of responsibility, and that the service 

provider cooperates with the CCP’s regulator and 

protects sensitive and confidential information.

The CEA does not address outsourcing by DCOs, but 

pursuant to CEA Section 5c(b), a registered entity 

that delegates a function remains responsible for 

carrying out the function.

CCP business 

conduct rules

When providing services, a CCP must act fairly 

and professionally in accordance with the best 

interests of the clearing members and clients and 

sound risk management. The CCP must establish 

the categories of admissible clearing members 

and admission criteria, which must be nondiscriminatory, transparent and objective.

CP (C) requires a DCO to establish appropriate 

admission and continuing eligibility standards for 

members of, and participants in, the DCO. The 

participation and membership requirements must 

be objective, publicly disclosed, and permit fair and 

open access.

CCP price 

transparency

A CCP must publicly disclose the prices and fees 

associated with the services it provides and the 

price information used to calculate its end of day 

exposures with clearing members and volumes 

of the cleared transactions for each class of 

instruments. The CCP must inform members and 

clients of the risks associated with its services.

Among other things, CP (L) requires DCOs to provide 

market participants with sufficient information to 

identify and evaluate the risks and costs of using a 

DCO. A DCO must disclose publicly its clearing and 

other fees and daily settlement prices, volume, and 

open interest for each contract settled or cleared by 

the DCO.
11

Segregation and 

portability

A CCP must keep records and accounts to enable 

it at anytime and without delay to identify and 

segregate assets and positions of one clearing 

member from the assets and positions of any 

other clearing member and from its own assets. 

Each clearing member must distinguish and 

segregate in accounts with the CCP the assets 

and positions of that member from those of its 

clients.

CEA Section 4d requires that all customer futures, 

options on futures, and cleared swap positions, and 

funds and property deposited to margin such 

positions, be held in segregated accounts. This 

requirement is imposed on futures commission 

merchants and DCOs. In addition, CP (F) requires 

DCOs to hold member and participant funds in a 

manner so as to minimize the risk of loss or delay in 

the access by the DCO to the assets and funds. CP 

(G) requires DCOs to have procedures for the 

efficient, fair, and safe management of events in 

which members or participants become insolvent or 

otherwise default. 

Margin 

requirements

A CCP must impose margins on clearing 

members and CCPs with which it has 

interoperable arrangements, sufficient to cover 

potential exposures that the CCP estimates will 

occur, until liquidation of relevant provisions. 

The margins must be sufficient to cover losses 

that result from at least 99% of exposures 

movements over an appropriate time horizon. A 

CCP must develop models and parameters in 

setting margins, and must call and collect 

margins on an intraday basis, at least when predefined thresholds are breached.

CP (D) requires that a DCO possess the ability to 

manage the risks associated with operating a DCO. 

A DCO, through margin requirements and other risk 

control mechanisms, shall limit the DCO's exposure 

to potential losses from defaults by members and 

participants to ensure that operations of the DCO 

would not be disrupted and non-defaulting 

members would not be exposed to unexpected 

losses. The margin requirements shall be sufficient 

to cover potential exposures in normal market 

conditions. Models and parameters used in setting 

margin requirements must be risk-based and 

reviewed on a regular basis. 
12

Default fund, 

additional risk 

controls, and default 

waterfall

A CCP must maintain at least one default fund to 

cover losses arising from the default, including 

opening of an insolvency proceeding, of one or 

more clearing members. In addition, a CCP must 

maintain sufficient available financial resources 

to cover potential losses exceeding margin 

requirements and the default fund. The CCP 

must develop scenarios of extreme but plausible 

market conditions, and develop default fund 

requirements and other financial resources that 

enable the CCP to at all times withstand the 

default of the two clearing members to which it 

has the largest exposures, and must enable the 

CCP to withstand sudden sales of financial 

resources and rapid reductions in market 

liquidity. A CCP must use margins posted by a 

defaulting member prior to using other financial 

resources to cover losses. If insufficient, the CCP 

must next use the defaulting member's default 

fund contribution. If also insufficient, a CCP may 

then use default fund contributions and other 

contributions of non-defaulting members, but 

may not use margins posted by non-defaulting 

clearing members to cover losses from the 

default of another clearing member.

CP (B) requires that a DCO shall have adequate 

financial, operational, and managerial resources, as 

determined by CFTC, to discharge its 

responsibilities. Those financial resources shall, at a 

minimum, exceed the total amount that would 

enable the DCO to meet its obligations despite a 

default by a member creating the largest financial 

exposure in extreme, but plausible, market 

conditions and enable the DCO to cover its 

operating costs for a 1-year period. CP (G) requires 

DCOs to have procedures for the efficient, fair and 

safe management of events in which members or 

participants become insolvent or otherwise default.

Collateral 

requirements

A CCP must only accept highly liquid collateral 

with minimal credit and market risk to cover its 

exposures to clearing members, applying 

adequate haircuts that reflect the potential for 

values to decline over time. A CCP may accept, 

where appropriate and prudent, the underlying 

of the derivatives contract as collateral to cover 

margin requirements.

CP (D) requires that a DCO possess the ability to 

manage the risks associated with operating a DCO. 

A DCO, through margin requirements and other risk 

control mechanisms, should ensure that operations 

of the DCO would not be disrupted and nondefaulting members would not be exposed to 

unexpected losses. The margin requirements shall 

be sufficient to cover potential exposures in normal 

market conditions.
13

CCP investment

A CCP may only invest its financial resources in 

highly liquid financial instruments with minimal 

market and credit risk, and shall not invest its 

capital in its own securities or those of its parent 

or subsidiaries.

CP (F) requires that funds and assets invested by a 

DCO be held in instruments with minimal credit, 

market, and liquidity risks.

Default procedures

A CCP must have procedures in place for when a 

clearing member does not comply with 

participation requirements and must outline 

procedures in the event the insolvency of a 

clearing member is not established by the CCP. 

The CCP must take reasonable steps to ensure 

that its procedures are enforceable, must take 

prompt action to contain losses, and must 

promptly inform its regulator.

CP (C) requires DCOs to establish and implement 

procedures to verify, on an ongoing basis, the 

compliance of each participation and membership 

requirement of the DCO. CP (G) requires DCOs to 

have procedures for the efficient, fair, and safe 

management of events in which members or 

participants become insolvent or otherwise default. 

Models/testing

A CCP must regularly review the models and 

parameters adopted to calculate margin 

requirements, default fund contributions, 

collateral requirements and other risk controls. 

A CCP must inform its regulator of the results of 

the tests, obtain validation before making 

changes to its models, and publicly disclose key 

information on its risk management model and 

its underlying assumptions.

CP (D) requires that each model and parameter 

used by a DCO in setting margin requirements be 

risk-based and reviewed on a regular basis.

Settlement

A CCP must use central bank money to settle its 

transactions, where available, and if not 

available, steps must be taken to strictly limit 

credit and liquidity risks.

CP (E) requires DCOs to complete money 

settlements on a timely basis (not less frequently 

than once each business day) and employ money 

settlement arrangements to eliminate or strictly 

limit exposure of the DCO to settlement bank risks 

(including credit and liquidity risks).
14

Interoperability

ESMA must report to the EC on the extension of 

the scope of the rules on interoperability 

arrangements, beyond equities, to derivatives by 

September 30, 2014. The EC must draft an 

annual report to the European Parliament and 

Council of the EU, assessing possible systemic 

risk and cost implications of interoperability 

arrangements, including any relevant proposals. 

The European System of Central Banks (ESCB) 

must provide the EC with an assessment of 

possible systemic risk and cost implications of 

interoperability arrangements.

No comparable provision.

Trade repository 

registration

For purposes of the reporting requirement, a 

trade repository must register with ESMA and be 

established in the EU. Registration with ESMA is 

effective for the entire EU. A trade repository 

that wishes to register must submit an 

application to ESMA, and ESMA must make a 

decision within 40 working days once it has given 

notice to the applicant that the application is 

complete. 

To be registered and maintain registration, a swap 

data repository (SDR) must comply with core 

principles and various additional duties. 

Certain derivatives

transactions shall be stored 

and reported to the Prime 

Minister through trade 

repositories or designated 

foreign trade repositories. A 

system for trade repositories 

will be established in 

rulemaking.
15

Foreign trade 

repository 

recognition

The EC must submit proposals to the Council of 

the EU for the negotiation of international 

agreements with foreign jurisdictions regarding 

mutual access to, and exchange of information 

on, derivatives contracts held in trade 

repositories established in foreign jurisdictions, 

where the information is relevant to the exercise 

of an EU regulator’s duties.

A trade repository established outside of the EU 

may only provide services to entities established 

in the EU if the repository is recognized by ESMA. 

ESMA must recognize a repository from a foreign 

jurisdiction if:

o The repository is authorized in and subject to 

effective surveillance in that foreign jurisdiction;

o The EC has adopted a decision determining 

that the legal and supervisory arrangements of 

the foreign jurisdiction ensure that trade 

repositories authorized in that jurisdiction 

comply with legally binding requirements that

are equivalent to the requirements in the EU, 

and that the repository is subject to effective 

supervision and enforcement in that foreign 

jurisdiction;

o The EU has entered into an international 

agreement with the foreign jurisdiction; and

o Cooperation arrangements have been 

established to ensure that EU authorities have 

immediate and continuous access to all the 

necessary information. 

On a confidential basis pursuant to CEA Section 8, 

upon request and after notifying CFTC, an SDR shall 

make all data, including individual counterparty 

trade and position data, available to various 

regulatory authorities. CEA Section 8 permits CFTC 

to also share information with foreign regulators 

acting within the scope of their jurisdiction. 

Title VII of the Dodd-Frank Act shall not apply to 

activities outside the U.S. unless those activities 

have a direct and significant connection with 

activities in, or effect on, commerce of the U.S. or 

contravene CFTC anti-evasion rules.

The legislation discusses the 

ability for foreign trade 

repositories to be recognized 

as Designated Foreign Trade 

Repositories. These 

repositories are not required 

to report to Japanese 

authorities, but a system will 

be established to exchange 

information internationally 

with the supervisory agencies 

of each trade repository.
16

Fines/penalties

At the request of ESMA, the EC may impose a 

fine on a trade repository if the repository 

intentionally or recklessly infringes one of its 

duties under the regulations. The fine cannot 

exceed 20% of the annual income or turnover of 

the repository from the preceding business year. 

At the request of ESMA, the EC may impose 

periodic penalty payments on any persons 

employed by or for a trade repository. The 

periodic penalties cannot exceed 5% of the 

average daily turnover in the preceding business 

year. Prior to making its decision, the EC must 

give the concerned parties an opportunity to be 

heard and the parties must have full access to 

the EC’s files, subject to business secrecy. In 

addition, the European Court of Justice (ECJ) has 

unlimited jurisdiction to review decisions by the 

EC on fines and penalties.

Failure to comply with the SDR provisions of the 

CEA would be subject to the enforcement 

procedures and penalties provisions of CEA Sections 

6 and 9.

Trade repository 

surveillance

ESMA must monitor trade repositories for 

compliance with their regulatory duties. ESMA 

must be empowered to access any document in 

any form and to receive or take a copy, to 

demand information from any person and, if 

necessary, to summon and question a person to 

obtain information, carry out on-site inspections 

with or without announcement, and require 

records of telephone and data traffic.

An SDR shall be subject to inspection and 

examination by any representative of CFTC. An SDR 

must provide direct electronic access to CFTC.
17

General 

requirements for 

trade repositories

A trade repository must have robust governance 

arrangements, including a clear organizational 

structure with transparent and consistent lines 

of responsibility and adequate internal control 

mechanisms, including sound administrative and 

accounting procedures to prevent the disclosure 

of confidential information. The repository must 

have objective, non-discriminatory and publicly 

disclosed requirements for access and 

participation. Access may only be restricted to 

control the risk to the data maintained by the 

repository.

CP (2) requires SDRs to establish governance 

arrangements that are transparent to fulfill public 

interest requirements and to support the objectives 

of the government, owners, and participants. An 

SDR must maintain the privacy of swap transaction 

information that it receives. Also, an SDR must 

designate a chief compliance officer, whose duties 

include reviewing compliance with the core 

principles and preparing an annual report regarding 

compliance with the CEA and CFTC regulations.

Trade repositories are 

required to store information 

with respect to certain 

derivatives transactions that 

are not subject to clearing in 

CCPs. The trade repositories 

must demonstrate robust 

governance arrangements as 

well as procedures to prevent 

the disclosure of confidential 

information.

Trade repository fee 

transparency

The repository must publicly disclose prices and 

fees associated with services, including prices 

and fees of single services and functions 

provided separately, including discounts and 

rebates. Prices and fees must be cost-related.

No comparable provision.

Trade repository 

operational 

reliability

A repository must identify sources of operational 

risk and minimize them through appropriate 

systems, controls and procedures, and establish, 

implement and maintain adequate business 

continuity policies and disaster recovery plans to 

ensure the preservation of its functions, timely 

recovery of operations and fulfillment of its 

obligations. This should at least provide for the 

establishment of backup facilities.

An SDR shall establish emergency procedures, 

backup facilities, and a plan for disaster recovery 

that allows for the timely recovery and resumption 

of operations and the fulfillment of the 

responsibilities and obligations of the SDR.

Public-reporting

A repository must publish aggregate positions by 

class of derivatives for all contracts for which it 

receives data. All necessary information must be 

made available to ESMA, relevant regulators and 

relevant European central banks. ESMA must 

share necessary information for the exercise of 

duties with other relevant authorities.

An SDR must provide information in such form and 

frequency as CFTC may require in order to comply 

with the real-time public reporting requirement. On 

a confidential basis pursuant to CEA Section 8, upon 

request and after notifying CFTC, an SDR shall make 

all data, including individual counterparty trade and 

position data, available to various regulatory 

authorities. CEA Section 8 permits CFTC to also 

share information with foreign regulators acting 

within the scope of their jurisdiction.
18

Trade repository 

safeguarding/

recording data

A repository must ensure the confidentiality, 

integrity and protection of information it 

receives, and must promptly record information 

and maintain it for at least 10 years following the 

termination of the relevant contracts.

A repository must calculate positions by class of 

derivatives and by reporting entity based on 

details of contracts reported.

A repository must allow parties to access and 

correct information on the contract at all times.

A repository must take all reasonable steps to 

prevent misuse of information maintained in its 

systems and prevent the use of the information 

held for other business activities. 

An SDR must maintain the privacy of information it 

receives and maintain the data in such form, in such 

manner, and for such period as CFTC may require.