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Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations
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4. Home Country Regulator The Commission proposed to define home country regulator to mean, with respect to a non-U.S. clearing organization, an appropriate government authority which licenses, regulates, supervises, or oversees the clearing organizations clearing activities in the home country. The Commission did not receive any comments on this proposed definition and is adopting it as proposed.
5. Principles for Financial Market Infrastructures The Commission proposed to define Principles for Financial Market Infrastructures to mean the PFMIs published by the Committee on Payment and Settlement Systems CPSS and the Technical Committee of the International Organization of Securities Commissions IOSCO in April 2012, as updated, revised, or otherwise amended. The Commission proposed the as updated, revised, or otherwise amended language in the 2018 Proposal to recognize that CPMI
IOSCO 17 could offer further interpretation of or guidance on the PFMIs.18 As proposed in the 2019
Proposal,19 the Commission is striking as updated, revised, or otherwise amended from the definition to clarify that while a home country regulator may voluntarily adopt or amend its statutes, rules, regulations, policies or combination thereof to incorporate subsequent interpretations and guidance, the home country regulator is not required to do so to maintain a regulatory regime that is comparable to and as comprehensive as the PFMIs.
The Commission believes that striking that portion of the proposed definition would provide exempt DCOs with greater regulatory certainty, as a DCOs eligibility to remain exempt from registration would not be contingent on whether a home country regulator has adopted CPMIIOSCOs latest interpretations or guidance. The Commission also does not believe it is appropriate to allow any future change to the PFMIs themselves to be incorporated into the definition without the Commission and other regulators first having the opportunity to consider the change. However, the Commission reserves the ability to incorporate future amendments to the PFMIs within the definition if the Commission determines that such amendments are appropriate.
17 The name of CPSS was changed to the Committee on Payment and Market Infrastructures CPMI in 2014.
18 2018 Proposal, 83 FR at 39925 n.14.
19 2019 Proposal, 84 FR at 35459.

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The Commission did not receive any comments on this proposed definition and is adopting it as proposed.
C. Regulation 39.6Exemption From DCO Registration The Commission proposed new 39.6
to establish a regulatory framework for the granting of exemptions from DCO
registration consistent with the policies and procedures that the Commission has been following with respect to granting exemptions from DCO
registration. The specific provisions of 39.6 are discussed in greater detail below.
1. Regulation 39.6aEligibility for Exemption The Commission proposed 39.6a to provide that the Commission may exempt a non-U.S. clearing organization from registration as a DCO for the clearing of swaps for U.S. persons 20 and thereby exempt such clearing organization from compliance with the provisions of the CEA and Commission regulations applicable to registered DCOs, if the Commission determines that all of the eligibility requirements listed in 39.6a are met, and that the clearing organization satisfies the conditions set forth in 39.6b.21
a. Subject to Comparable, Comprehensive Supervision and Regulation The Commission proposed to codify in 39.6a1 the statutory authority in section 5bh of the CEA that the Commission may exempt a clearing organization from DCO registration for the clearing of swaps provided that the Commission determines that the clearing organization is subject to comparable, comprehensive supervision and regulation by a home country regulator. To satisfy this condition, the clearing organization would need to demonstrate that: i It is organized in a jurisdiction in which a home country regulator applies to the clearing organization, on an ongoing basis, 20 The Commission proposed to use the interpretation of U.S. person as set forth in the Cross-Border Guidance, as such definition may be amended or superseded by a definition of the term U.S. person that is adopted by the Commission and applicable to this final rule. See Cross-Border Guidance, 78 FR 45292, 4531645317.
21 The eligibility requirements listed in 39.6a and the conditions set forth in 39.6b are preconditions to the Commissions issuance of any order exempting a clearing organization from the DCO registration requirement of the CEA and Commission regulations. Additional conditions that are unique to the facts and circumstances specific to a particular clearing organization could be imposed upon that clearing organization in the Commissions order of exemption, as permitted by section 5bh of the CEA.

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statutes, rules, regulations, policies, or a combination thereof that, taken together, are consistent with the PFMIs; ii it observes the PFMIs in all material respects; iii and it is in good regulatory standing in its home country.
In determining that adherence to the PFMIs 22 satisfies the comparable, comprehensive supervision and regulation standard set forth in CEA
section 5bh, the Commission takes a holistic, outcomes-based approach. That is, the Commission has assessed whether, taken together in their entirety, the PFMIs provide a comprehensive framework for DCO supervision and regulation that is comparable to the statutory and regulatory requirements that comprise the DCO regulatory frameworkfocusing, in particular, on the core principles applicable to registered DCOs set forth in CEA section 5b DCO Core Principles.23 The use of the PFMIs as the benchmark in this context builds upon the global effort to develop an effective and consistent set of regulatory and supervisory standards for CCPs. More specifically, the PFMIs address major elements critical to the safe and efficient operation of CCPs, such as risk management, adequacy of financial resources, default management, margin, settlement, and participation requirements.24
The Commission recognizes that the requirements of the PFMI-compliant jurisdiction will not be identical to the Commissions regulations in every aspect. Nevertheless, a foreign jurisdictions observance of the PFMIs provides assurance that its supervision and regulation are sufficiently similar in purpose and effect while avoiding a 22 In addition to the principles applicable to central counterparties CCPs and other financial market infrastructures, the PFMIs provide that central banks, market regulators, and other relevant authorities should observe five responsibilities.
Consistent with this, the Commission expects that, in order to meet the standard of being subject to comparable, comprehensive supervision and regulation, a clearing organizations home country regulator will observe these responsibilities. In particular, Responsibility D, Explanatory Note 4.4.1
provides that the home country regulator should adopt the PFMIs, and, while the precise means through which the principles are applied may vary from jurisdiction to jurisdiction, all CPSS and IOSCO members are expected to apply the principles to the relevant financial market infrastructures in their jurisdictions to the fullest extent allowed by the legal framework in their jurisdiction. PFMIs, 4.4.1. Therefore, the Commission would not find a home country regulators statement that it requires a clearing organization to observe the PFMIs to be sufficient to meet the above standard for exemption, if the home country regulator has not itself adopted a regulatory framework that is consistent with the PFMIs.
23 7 U.S.C. 7a1c2.
24 See, e.g., Derivatives Clearing Organizations and International Standards, 78 FR 72476 Dec. 2, 2013 adopting final rules.

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