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Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations
comprehensive. In addition, the final rule may contribute to the financial integrity of the broader financial system by spreading the potential risk of particular swaps among a greater number of registered and exempt DCOs, thus reducing concentration risk.
c. Price Discovery Price discovery is the process of determining the price level for an asset through the interaction of buyers and sellers and based on supply and demand conditions. The Commission has not identified any impact of the final rule on price discovery. This is because price discovery occurs before a transaction is submitted for clearing through the interaction of bids and offers on a trading system or platform, or in the over-the-counter market. The final rule does not impact requirements under the CEA or Commission regulations regarding price discovery.
d. Sound Risk Management Practices The exempt DCO framework encourages sound risk management practices because exempt DCOs are subject to the risk management standards set forth in the PFMIs, which are comparable to standards imposed on registered DCOs.

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e. Other Public Interest Considerations The Commission notes the public interest in access to clearing organizations outside of the United States in light of the international nature of many swap transactions. The final rule codifies the exemption process for non-U.S. clearing organizations that will permit them to clear swap transactions for U.S. persons on a proprietary basis when such clearing organizations meet the eligibility requirements and conditions included therein, thus promoting transparency and consistency. Furthermore, the final rule might encourage international comity by deferring, under certain conditions, to regulators in other jurisdictions in the oversight of non-U.S. clearing organizations. The Commission expects that such regulators will defer to the Commission in the supervision and regulation of registered DCOs organized in the United States, thereby reducing the regulatory and compliance burdens to which such DCOs are subject.
4. Consideration of Alternatives The final rule does not permit U.S.
customers to clear through exempt DCOs. As the Commission noted in the 2018 Proposal, there is uncertainty as to how swaps customer funds would be treated under the U.S. Bankruptcy Code if the customers swaps are cleared at an
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exempt DCO.60 However, the Commission did request comment as to whether the Commission should consider permitting an exempt DCO to clear swaps for U.S. customers.61
In response, three commenters expressed support. ISDA stated that it strongly believes that the Commission should permit exempt DCOs to clear swaps for customers. ASX argued that it would be beneficial to allow U.S.
customers to access the broadest possible range of clearing organizations, which would provide them with flexibility and choice in accessing the best commercial solutions for the products that they use. JSCC
recommended that the Commission consider allowing U.S. customers to access exempt DCOs through non-U.S.
clearing members that are not required to register as an FCM, as long as those non-U.S. clearing members can demonstrate that they are properly supervised, regulated, and licensed to provide customer clearing services in their home countries, and if the home regulatory authority maintains appropriate cooperative arrangements with the Commission.
Similarly, in response to the 2019
Proposal, several commenters, including ASX, FIA, SIFMA, JSCC, and CCP12, proposed a regime for swaps similar to that for futures, including a clearing structure in which a U.S. customer clears through an FCM that maintains the U.S. customers positions and margin in a customer omnibus account held by a non-U.S. clearing member that is not registered as an FCM. The commenters argued that such a regime could potentially provide new business opportunities to FCMs while allowing customers to save money and improve efficiency by using the same FCMs to clear at both registered and exempt DCOs. This would permit customers to avoid the time and expense of executing documentation with multiple intermediaries, for example, and to realize operational efficiencies such as netting and offsetting within a single intermediary, receiving fewer position statements, and managing fewer cash transfers. The commenters noted that customers would also benefit from the various customer protections required of FCMs, such as those pertaining to disclosure, net capital, and reporting.
The Commission notes that, based on data submitted pursuant to 39.19c, as of October 2020, approximately 70
percent of initial margin at registered DCOs was in customer accounts, with the remainder in house proprietary 60 2018
61 2018

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Proposal, 83 FR at 39926.
Proposal, 83 FR at 39930.

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accounts. It is likely that the majority of initial margin at exempt DCOs or clearing organizations that may seek an exemption is also in customer accounts.
Thus, limiting clearing by U.S. persons at exempt DCOs to proprietary swaps will likely significantly reduce the number of U.S. persons who can benefit from clearing at exempt DCOs and may reduce the incentive for eligible clearing organizations to seek exemption.62
However, there is uncertainty as to the extent to which U.S. customers would be protected under the Bankruptcy Code in the event of an FCM bankruptcy proceeding. The Commission is not adopting these alternatives at this time, but continues to weigh these risks against the potential benefits to U.S.
customers and FCMs.
D. Antitrust Considerations Section 15b of the CEA requires the Commission to take into consideration the public interest to be protected by the antitrust laws and endeavor to take the least anticompetitive means of achieving the purposes of the CEA, in issuing any order or adopting any Commission rule or regulation.63
The Commission believes that the public interest to be protected by the antitrust laws is the promotion of competition. The Commission requested, but did not receive, any comments on whether the proposed rulemaking implicated any other specific public interest to be protected by the antitrust laws. The Commission has considered the proposed rulemaking to determine whether it is anticompetitive. The Commission believes that the final rule may promote greater competition in swap clearing because it might encourage more nonU.S. clearing organizations to seek an exemption from registration to clear the same types of swaps for U.S. persons that are currently cleared by registered DCOs.
The Commission has not identified any less anticompetitive means of achieving the purposes of the CEA. The Commission requested, but did not receive, any comments on whether there are less anticompetitive means of achieving the relevant purposes of the CEA that would otherwise be served by adopting the final rule.
62 Clearing organizations could be incentivized to seek DCO registration instead, either under the Commissions original framework or the recently adopted Alternative Compliance framework.
63 7 U.S.C. 19b.

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