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Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations
application is complete. The application must include: i A cover letter providing general information identifying the applicant, its regulatory licenses or registrations, and relevant contact information; ii a description of the applicants business plan, including swap asset classes that it would clear and whether the swaps are subject to a clearing requirement issued by the Commission or the applicants home country regulator; iii documents that demonstrate that the applicant is held to requirements consistent with the PFMIs;
iv a written representation from the applicants home country regulator that the applicant is in good regulatory standing; v copies of the applicants most recent disclosures necessary to observe the PFMIs, including the financial market infrastructure disclosure template set forth in Annex A to the Disclosure Framework and Assessment Methodology for the PFMIs; 40 vi a representation that the applicant will comply with each of the requirements and conditions of its exemption; vii a draft of the applicants rules showing compliance with various requirements for an exemption; and viii the applicants consent to jurisdiction in the United States, with contact information for the applicants designated U.S. agent.
Proposed 39.6e3 provides that, at any time during the Commissions review of an application for exemption, the Commission may request that the applicant submit supplemental information in order for the Commission to process the application, and require an applicant to file such supplemental information in the format and manner specified by the Commission.
Regulation 39.3a4, which applies to applications for DCO registration, contains a similar provision.
Proposed 39.6e4 requires an applicant to promptly amend its application if it discovers a material omission or error, or if there is a material change in the information provided to the Commission in the application or other information provided in connection with the application. This provision is similar to 39.3a5, which addresses amendments to applications for DCO
registration.
Proposed 39.6e5 identifies those sections of an application for exemption from registration that would be made public, including the cover letter required in proposed 39.6e2i;
40 See CPSSIOSCO, Principles for financial market infrastructures: Disclosure framework and Assessment methodology Dec. 2012, at 82 et seq., available at http www.iosco.org/library/pubdocs/
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6. Regulation 39.6f, g, and hModification or Termination of Exemption; Notice to Clearing Members of Termination of Exemption The Commission initially proposed to provide in 39.6f that the Commission may modify the terms and conditions of an order of exemption, either at the request of the exempt DCO or on the Commissions own initiative, based on changes to or omissions in material facts or circumstances pursuant to which the order of exemption was issued, or for any reason in the Commissions discretion. This is a further expression of the Commissions discretionary authority under section 5bh of the CEA
to exempt a clearing organization from registration conditionally or unconditionally, and it reflects the Commissions authority to act with flexibility in responding to changed circumstances affecting an exempt DCO.
In the 2019 Proposal, the Commission proposed to also provide for the termination of an exemption upon the Commissions initiative, and to set forth the process by which the Commission would issue a modification or termination.
Under proposed 39.6f1, the Commission may modify or terminate an exemption from DCO registration, in its discretion and upon its own initiative, if the Commission determines that there are changes to or omissions in material facts or circumstances pursuant to which the order of exemption was issued. The Commission may also
modify or terminate an exemption from DCO registration if any of the terms and conditions of the order of exemption are not met, including: i The exempt DCO
observing the PFMIs in all material respects; and ii the exempt DCO being subject to comparable, comprehensive supervision and regulation by its home country regulator.42
The Commission proposed 39.6f2, f3, and f4 to set forth the process for modification or termination of an exemption upon the Commissions initiative. Under proposed 39.6f2, the Commission must first provide written notification to an exempt DCO that the Commission is considering whether to modify or terminate the DCOs exemption and the basis for that consideration.
Under proposed 39.6f3, an exempt DCO may respond to the notification in writing no later than 30
business days following receipt of the Commissions notification, or at such later time as the Commission may permit in writing. The Commission believes that a minimum 30-business day timeframe would allow the Commission to take timely action to protect its regulatory interests while providing the exempt DCO with sufficient time to develop its response.
The Commission proposed 39.6f4
to provide that, following receipt of a response from the exempt DCO, or after expiration of the time permitted for a response, the Commission may either:
i Issue an order terminating the exemption as of a date specified in the order; ii issue an amended order of exemption that modifies the terms and conditions of the exemption; or iii provide written notification to the exempt DCO that the Commission has determined to neither modify nor terminate the exemption.
ASX, JSCC, and ISDA believe that an automatic termination of exemptions could result in market disruption and legal uncertainty, particularly for U.S.
persons clearing through the exempt DCO. However, the commenters recognized that the Commission must ensure that exempt DCOs continue to operate safe and efficient clearing operations under a regime that is consistent with the PFMIs. Therefore, the commenters suggested that the Commission should first commit to working with the exempt DCO and its home country regulators to resolve any issues with compliance with the terms and conditions of the order of exemption. If these efforts are not
41 The Disclosure Framework contemplates that CCPs will make public disclosures pursuant to the Disclosure Framework. See id. at 1.

42 In the 2019 Proposal, proposed 39.6f1
included a subparagraph iii that is not being adopted at this time.

documents demonstrating that the applicant is organized in a jurisdiction in which its home country regulator applies to the applicant statutes, rules, regulations, and/or policies that are consistent with the PFMIs as proposed in 39.6e2iii; disclosures necessary to observe the PFMIs as proposed in 39.6e2v; 41 draft rules that meet the requirements of proposed 39.6b1 U.S. persons clearing requirements, 39.6b2 open access requirements; and 39.6d swap data reporting requirements, as applicable;
and any other part of the application not covered by a request for confidential treatment, subject to 145.9. This provision is similar to 39.3a6, which identifies those portions of an application for registration as a DCO
that are made public.
The Commission did not receive comments on this aspect of the proposal. The Commission is adopting 39.6e as proposed.

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