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Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations
the Commission and the clearing organizations home country regulator, pursuant to which, among other things, the home country regulator agrees to provide to the Commission any information that the Commission deems necessary to evaluate the clearing organizations initial and continued eligibility for exemption or to review compliance with any conditions of such exemption.
ISDA commented that the Commission should identify the types of information that it expects to require under the MOU. ISDA argued that it is important for the Commission to provide additional clarity regarding the specific information it will require to evaluate the exempt DCOs initial and continued eligibility for exemption to ensure that providing such information would not violate any local laws. ISDA
believes that doing so would allow the Commission to access necessary information while, at the same time, taking into account any prohibitions on providing certain types of information under local laws.
In response to ISDAs comment, the Commission notes that 39.6e2 sets forth the information that an applicant for exemption from DCO registration must provide to the Commission. That information would not be specified in an MOU because it must be provided by the applicant, not the applicants home country regulator. However, an MOU
between the Commission and the home country regulator would allow the Commission to seek the home country regulators assistance in analyzing and interpreting the information as necessary to determine the applicants eligibility for an exemption. If the applicant is granted an exemption, the MOU would allow the Commission to gather additional information from the home country regulator as necessary to determine the exempt DCOs continued eligibility. For example, if an exempt DCO provides notice to the Commission of a change in its home country regulatory regime pursuant to 39.6c2iii, the Commission may wish to discuss the change with the home country regulator to understand what impact, if any, the change may have on the exempt DCOs ability to comply with the conditions of its exemption.
The Commission notes that it already has several MOUs with other regulators in place, and those specific to the oversight of clearing organizations are generally similar in content and scope.27
27 CFTC Memoranda of Understanding:
Cooperation for Supervisory, Prudential, and Risk Assessment Purposes, https www.cftc.gov/

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To the extent that local laws limit a regulators ability to share information with the Commission, the Commission works closely with the regulator to resolve any issues.
The Commission is adopting 39.6a2 as proposed.
2. Regulation 39.6bConditions of Exemption The Commission proposed 39.6b to set forth the conditions to which an exempt DCO would be subject. These are the same conditions the Commission has imposed on exempt DCOs through the orders of exemption that it has issued to date.
a. Clearing by or for U.S. Persons and Futures Commission Merchants The Commission proposed 39.6b1 to prohibit the clearing of U.S. customer positions at an exempt DCO. An FCM would be permitted to be a clearing member of an exempt DCO, or maintain an account with an affiliated broker that is a clearing member, for the purpose of clearing swaps only for the FCM itself and those persons identified in the definition of proprietary account in 1.3 of the Commissions regulations.
The Commission requested comment in the 2018 Proposal as to whether the Commission should consider permitting an exempt DCO to clear swaps for U.S.
customers. The Commission received four comments in response to that request. As noted above, the Commission responded to these comments by issuing the 2019 Proposal, which proposed to permit U.S.
customers to clear at an exempt DCO, but only through foreign intermediaries, not FCMs. However, at this time, the Commission is adopting 39.6b1
largely as proposed in the 2018
Proposal, to permit an exempt DCO to clear only proprietary positions of U.S.
persons and FCMs, and not customer positions. Specifically, 39.6b1
provides that an exempt DCO must have rules that limit swaps clearing services for U.S. persons and FCMs as follows:
i A U.S. person that is a clearing member of the exempt DCO may clear swaps for itself and those persons identified in the definition of proprietary account set forth in 1.3; 28 ii a non-U.S. person that is a International/MemorandaofUnderstanding/
mouInfo_Sharing_for_Supervisor.html.
28 The reference to those persons identified in the definition of proprietary account set forth in 1.3, refers to those persons associated with the U.S. person that is a clearing member in the manner provided in the definition of proprietary account as if the U.S. person is the individual, a partnership, corporation or other type of
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clearing member of the exempt DCO
may clear swaps for any affiliated U.S.
person identified in the definition of proprietary account set forth in 1.3
of this chapter; 29 and iii an FCM may be a clearing member of the exempt DCO, or otherwise maintain an account with an affiliated broker that is a clearing member, for the purpose of clearing only proprietary swaps positions for itself and those persons identified in the definition of proprietary account set forth in 1.3.30
b. Open Access The Commission proposed 39.6b2 to codify the open access requirements of section 2h1B of the CEA, which applies to both registered and exempt DCOs, with respect to swaps cleared by an exempt DCO to which one or more of the counterparties is a U.S. person.31 Paragraph b2i would require an exempt DCO to maintain rules providing that all such swaps with the same terms and conditions as defined by product specifications established under the exempt DCOs rules submitted to the exempt DCO for clearing are economically equivalent and may be offset with each other, to the extent that offsetting is permitted by the exempt DCOs rules. Paragraph b2ii would require an exempt DCO to maintain rules providing for non-discriminatory clearing of such a swap executed either bilaterally or on or subject to the rules of an unaffiliated electronic matching platform or trade execution facility, e.g., a swap execution facility. The Commission did not receive any comments on this provision. The Commission is adopting 39.6b2 as proposed.
association that carries the proprietary account on its books and records, and not simply to such types of persons identified in the definition generally.
29 This provision is intended to permit what would be considered clearing of proprietary positions under the Commissions regulations, even if the positions would qualify as customer positions under the laws and regulations of an exempt DCOs home country. This provision clarifies that an exempt DCO may clear positions for FCMs if the positions are not customer positions under the Commissions regulations.
30 The reference to those persons identified in the definition of proprietary account set forth in 1.3, is intended to refer to those persons associated with the FCM in the manner provided in the definition of proprietary account as if the FCM is the individual, a partnership, corporation or other type of association that carries the proprietary account on its books and records, and not simply to such types of persons identified in the definition generally.
31 7 U.S.C. 2h1B.

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