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Federal Register / Vol. 86, No. 4 / Thursday, January 7, 2021 / Rules and Regulations Appendices to Exemption From Derivatives Clearing Organization RegistrationCommission Voting Summary, Chairmans Statement, and Commissioners Statements Appendix 1Commission Voting Summary On this matter, Chairman Tarbert and Commissioners Quintenz, Behnam, Stump, and Berkovitz voted in the affirmative. No Commissioner voted in the negative.

Appendix 2Statement of Support of Chairman Heath P. Tarbert
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We are voting to approve a rule proposed in 2018 that codifies existing staff guidance by which the CFTC exempts derivatives clearing organizations DCOs from registration for the clearing of swaps.1
Pursuant to that guidance, we have exempted four clearinghouses that we determined are subject to comparable, comprehensive supervision and regulation by the clearing organizations home country regulator.2
Codifying this framework through a noticeand-comment rulemaking is, frankly, good government. And doing so is in keeping with my recent directive on the use of staff letters and guidance, in which I noted that staff guidance and letters should supplement rulemakings, rather than themselves function as rules.3 This approach has many benefits, including providing increased transparency.
It also furthers our strategic objective of enhancing the regulatory experience for market participants at home and abroad.
This rulemaking is a modest first step. As is the case in the existing staff guidance, the 1 See Exemption From Derivatives Clearing Organization Registration, 83 FR 39923 Aug. 13, 2018. The Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111203, 124
Stat. 1376, amended the Commodity Exchange Act CEA to permit the Commission to exempt conditionally or unconditionally a DCO from registration for the clearing of swaps if the Commission determines that the clearing organization is subject to comparable, comprehensive supervision and regulation by appropriate government authorities in the clearing organizations home country. See Section 5ba of the CEA, 7 U.S.C. 7a1a.
2 See Amended Order of Exemption from Registration Jan. 28, 2016 ASX Clear Futures Pty Limited, available at: https www.cftc.gov/sites/
default/files/idc/groups/public/@otherif/
documents/ifdocs/
asxclearamdorderdcoexemption.pdf; Amended Order of Exemption from DCO Registration May 15, 2017 Japan Securities Clearing Corporation, available at: https www.cftc.gov/sites/default/files/
idc/groups/public/@otherif/documents/ifdocs/
jsccdcoexemptamdorder5-15-17.pdf; Order of Exemption from DCO Registration Oct. 26, 2015
Korea Exchange, Inc., available at: https
www.cftc.gov/sites/default/files/idc/groups/public/
@otherif/documents/ifdocs/krxdcoexemptorder1026-15.pdf; and Order of Exemption from DCO
Registration Dec. 21, 2015 OTC Clearing Hong Kong Limited, available at: https www.cftc.gov/
sites/default/files/idc/groups/public/@otherif/
documents/ifdocs/otccleardcoexemptorder12-2115.pdf.
3 See Directive of Chairman Heath P. Tarbert on the Use of Staff Letters and Guidance Oct. 27, 2020, available at: https www.cftc.gov/
PressRoom/SpeechesTestimony/
tarbetstatement102720.

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rule does not permit exempt DCOs to clear for U.S. customers, but rather only for proprietary swap transactions for U.S.
clearing members and futures commission merchants FCMs. It reflects the CFTCs continued efforts to foster cross-border cooperation and show deference to home country regulation that is deemed comparable to our own regulations.
In 2019, the Commission issued a supplemental proposal that would have gone further and permitted exempt DCOs to clear swaps for U.S. eligible contract participants ECPs through foreign intermediaries.4 I
would have supported finalizing that proposal for two reasons. First, the proposal would have provided greater flexibility and choice to our most sophisticated U.S.
customersECPsto access swaps cleared at non-U.S. clearinghouses. This would have given these sophisticated counterparties access to foreign-currency denominated instruments traded overseas that would enable them to hedge their various risks on a global basis. Second, exempting clearinghouses that do not pose a substantial risk to the U.S. financial system is consistent with principles of international comity.
Because we have not worked through all the issues raised by the 2019 supplemental proposal to the satisfaction of our Commission, today we are adopting only the 2018 proposal. Nonetheless, I support continued discussion on whether to permit Exempt DCOs additionally to clear certain non-U.S.-dollar denominated swaps for U.S.
customers who are ECPs, either directly through foreign intermediaries or through U.S. FCMs. Although registration as a DCO
under either our traditional or recentlyestablished alternative framework 5should be the preferred route for most non-U.S.
clearinghouses, there are likely circumstances where U.S. customers would benefit from access to additional riskmitigating instruments offered overseas.

Appendix 3Supporting Statement of Commissioner Brian D. Quintenz I support todays final rule to codify the CFTCs existing practice of exempting nonU.S. derivatives clearing organizations DCOs from registration, pursuant to a provision of the Commodity Exchange Act that allows for U.S. swap market participants to access comparably regulated foreign DCOs.1 That provision authorizes the Commission to defer to its counterparts abroad, which I believe properly conserves the Commissions resources and enables firms to avoid duplicative regulation, while providing U.S. market participants with greater choice. I am proud that todays final rule provides yet another example of the CFTC deferring to foreign regulators that provide comparable regulation and supervision. During my tenure as a Commissioner, the CFTC has properly 4 See Exemption From Derivatives Clearing Organization Registration, 84 FR 35456 July 23, 2019.
5 See Registration With Alternative Compliance for Non-U.S. Derivatives Clearing Organizations, 85
FR 67160 Oct. 21, 2020.
1 Sec. 5bh of the Commodity Exchange Act.

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provided such deference in many areas, including swap dealer SD registration,2
uncleared swap margin requirements,3 swap execution facilities SEFs,4 registered DCOs,5 and foreign futures.6 Like these other actions, todays final rule holds exempt DCO
to a high regulatory standard. Under the final rule, a DCO is only eligible for an exemption if its home country regulator ensures the clearinghouse complies with rules consistent with the internationally accepted Principles for Financial Market Infrastructures PFMIs issued by CPMIIOSCO.7 Moreover, the exempt DCO must regularly provide the CFTC with margin information concerning U.S. clearing members, among other key information.8
I note that under the final rule, an exempt DCO will only be authorized to clear the proprietary positions of its U.S. clearing members. I had supported and still support the Commissions 2019 proposal that would have expanded the exempt DCO framework to allow for U.S. customers, like asset managers and insurance companies, to clear at exempt DCOs directly to better manage and hedge their risk.9 I continue to believe that all participants meeting the Commodity Exchange Acts definition of eligible contract participant 10 have the resources, sophistication, and incentives to adequately assess how customer protections provided by an exempt DCO may differ from protections established by CFTC regulations for registered DCOs. The CFTC should provide these market participants with the choice befitting their status, not only as sophisticated market participants, but as complex international organizations who 2 Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to SDs and Major Swap Participants MSPs, 85 FR
56924 Sept. 14, 2020.
3 Comparability Determination for Australia:
Margin Requirements for Uncleared Swaps for SDs and MSPs, 84 FR 12908 Apr. 3, 2019; Amendment to Comparability Determination for Japan: Margin Requirements for Uncleared Swaps for SDs and MSPs, 84 FR 12074 Apr. 1, 2019.
4 Amendment to Order of Exemption from SEF
registration for Recognized Market Operators authorized in Singapore, Nov. 2, 2020, available at:
https www.cftc.gov/PressRoom/PressReleases/
8301-20; Amendment to Order of Exemption from SEF registration for E.U. multilateral trading facilities and organized trading facilities, July 23, 2020, available at: https www.cftc.gov/PressRoom/
PressReleases/8211-20; Order of Exemption from SEF registration for Japanese derivatives trading facilities, July 11, 2019, available at: https
www.cftc.gov/PressRoom/PressReleases/7968-19.
5 Registration with Alternative Compliance for Non-U.S. DCOs, 85 FR 67160 Oct. 21, 2020.
6 Regulation 30.10 orders issued to the Bombay Stock Exchange, National Stock Exchange Intl Financial Service Centre Ltd. India, Montreal Exchange, NZX Ltd. New Zealand, and UBS AG
Switzerland, Nov. 2, 2020, available at: https
www.cftc.gov/PressRoom/PressReleases/8300-20.
7 Reg. 39.6a1i.
8 Reg. 39.6c.
9 Exemption from DCO Registration, 84 FR 35456
July 23, 2019; Opening Statement of Commissioner Brian Quintenz before the Open Commission Meeting on July 11, 2019, available at:
https www.cftc.gov/PressRoom/
SpeechesTestimony/quintenzstatement071119.
10 Sec. 1a18 of the Commodity Exchange Act.

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