Voglio sapere a riguardo di…

Federal Register / Vol. 86, No. 145 / Monday, August 2, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES3

cleared derivatives does not exceed a certain threshold on a group basis.330
In some cases these differences may result in a Covered Entity not being adequately collateralized to cover its current or future exposure to these counterparties with respect to its OTC
derivatives transactions. In addition, differences in the counterparty exceptions could potentially incentivize market participants to engage in noncleared security-based swap transactions outside of the United States.331 Consequently, it is appropriate to impose additional margin conditions to produce comparable regulatory outcomes in terms of counterparty exceptions between Exchange Act rule 18a3 and the French and EU requirements.
The first additional condition addresses differences in the counterparty exceptions with respect to variation margin. It requires a Covered Entity to collect variation margin, as defined in the EMIR Margin RTS, from a counterparty with respect to a transaction in non-cleared securitybased swaps, unless the counterparty would qualify for an exception under Exchange Act rule 18a3 from the requirement to deliver variation margin to the Covered Entity.332 This condition defines variation margin by referencing EMIR Margin RTS to facilitate implementation of the condition by Covered Entities. Under this condition, for example, Covered Entities would be required to collect variation margin from their affiliates, but would be permitted to comply with all other French and EU margin requirements, including calculation, collateral, documentation, and timing of collection requirements. The first additional condition will close the gap between the counterparty exceptions of Exchange Act rule 18a3 and the French and EU
330 French Authorities Application at 7. These thresholds are being phased-in with the last initial margin threshold set at EUR 8 billion.
331 The Commission recognizes there are also cases where the French and EU margin rules are more restrictive than Exchange Act rule 18a3.
French and EU margin rules require Covered Entities to post initial margin to covered counterparties, while the Exchange Act rule 18a3
would permit posting but not require it. In addition, French and EU margin rules also require a Covered Entity to collect and post initial margin to financial and non-financial counterparties if their notional exposure to non-centrally cleared derivatives exceeds a certain threshold on a group basis. In contrast, Exchange Act rule 18a3 does not require but permits a nonbank security-based swap dealer to collect initial margin from counterparties that are financial market intermediaries. 17 CFR 240.18a3c1iiiB. The comparability analysis, however, focuses on determining whether the French and EU margin rules are comparable to Exchange Act rule 18a3.
332 See para. c2ii of the order.

VerDate Sep<11>2014

18:23 Jul 30, 2021

Jkt 253001

margin rules with respect to variation margin.
The second additional condition addresses differences in the counterparty exceptions with respect to initial margin. It requires a Covered Entity to collect initial margin, as defined in the EMIR Margin RTS, from a counterparty with respect to transactions in non-cleared securitybased swaps, unless the counterparty would qualify for an exception under Exchange Act rule 18a3 from the requirement to deliver initial margin to Covered Entity.333 The condition defines initial margin by referencing EMIR Margin RTS to facilitate implementation of the condition by Covered Entities. Under this condition, for example, Covered Entities would be required to collect initial margin from their certain counterparties, but would be permitted to comply with all other French and EU margin requirements, including calculation, collateral, documentation, and timing of collection requirements. The second additional condition will close the gap between the counterparty exceptions of Exchange Act rule 18a3 and the French and EU
margin rules with respect to initial margin.
Finally, for the reasons discussed above in part III.B.2.e of this release, the third additional condition is that the Covered Entity applies substituted compliance with respect to Exchange Act rules 18a5a12 a record making requirement.334 This record making requirement is directly linked to the margin requirements of Exchange Act rule 18a3. The UK Proposed Order conditioned substituted compliance with respect to this record making requirement on the Covered Entity applying substituted compliance with respect to Exchange Act rule 18a3.335
This additional condition is designed to provide clarity as to the Covered Entitys obligations under this record making requirement when applying substituted compliance with respect to Exchange Act rule 18a3 pursuant this Order.
VI. Substituted Compliance for Internal Supervision and Compliance Requirements A. Proposed Approach The French Authorities Application further requested substituted para. c2iii of the order.
para. c2iv of the Order.
335 See UK Substituted Compliance Notice and Proposed Order, 86 FR at 1839698, 18416. The Commission sought comment in the Reopening Release on whether this approach should be taken in the final Order. See Reopening Release, 86 FR at 18348.

PO 00000

333 See 334 See
Frm 00029

Fmt 4701

Sfmt 4703

41639

compliance in connection with requirements relating to:
Internal supervisionDiligent internal supervision and conflict of interest provisions that generally require SBS Entities to establish, maintain and enforce supervisory policies and procedures that reasonably are designed to prevent violations of applicable law, and implement certain systems and procedures related to conflicts of interest.
Chief compliance officersChief compliance officer provisions that generally require SBS Entities to designate individuals with the responsibility and authority to establish, administer and review compliance policies and procedures, to resolve conflicts of interest, and to prepare and certify annual compliance reports to the Commission.
Additional Exchange Act section 15Fj requirementsCertain additional requirements related to informationgathering and antitrust prohibitions.336
Taken as a whole, these requirements generally help to advance SBS Entities use of structures, processes and responsible personnel reasonably designed to promote compliance with applicable law, identify and cure instances of noncompliance, and manage conflicts of interest.
In proposing to provide conditional substituted compliance in connection with this part of the French Authorities Application, the Commission preliminarily concluded that the relevant French and EU requirements in general would produce comparable regulatory outcomes by providing that French SBS Entities have structures and processes that reasonably are designed to promote compliance with applicable law and to identify and cure instances of non-compliance and manage conflicts of interest. Substituted compliance under the proposed Order was to be conditioned in part on SBS Entities being subject to and complying with specified French and EU provisions that in the aggregate produce regulatory outcomes that are comparable to those associated with those internal supervision, compliance and related requirements under the Exchange Act.337
Under the proposed Order, substituted compliance was to be subject to certain additional conditions to help ensure the comparability of regulatory outcomes. First, substituted compliance in connection with the internal supervision requirements 336 See French Substituted Compliance Notice and Proposed Order, 85 FR at 8572627.
337 See id. at 85727 n.55.

E:FRFM02AUN3.SGM

02AUN3