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CFTC Grants Substitute Compliance

The Commodity Futures Trading Commission has issued a raft of announcements that approve a series of broad comparability determinations that would permit substituted compliance with non-US regulatory regimes as compared to certain swaps provisions of Title VII of the Dodd-Frank Act and the Commission’s regulations.

CFTC has given the nod to the regulatory regimes of Australia, Canada, European Union, Hong Kong, Japan and Switzerland.

Substituted compliance describes the circumstances where the Commission’s general policy would be to permit non-US swap dealers or non-US major swap participants whose swaps activities might bring them within the scope of certain CFTC regulations, to use compliance with regulations in their home jurisdiction as a substitute for compliance with the relevant CFTC regulations.

CFTC says that as jurisdictions outside the US continue to strengthen their regulatory regimes, the Commission may determine that additional foreign regulatory requirements are comparable to and as comprehensive as certain requirements under the CEA and the Commission’s regulations.

Alongside the substitute compliance announcement, the CFTC issued a raft of No Action Letters for organisations from those jurisdictons, allowing them extra time to comply with aspects of the Dodd Frank legislation.

In a separate move, the Singapore Exchange Derivatives Clearing has been granted registration as a derivatives clearing organisation pursuant to Section 5b of the Commodity Exchange Act. The grant means SGX-DC is authorised to provide clearing services for swaps that it currently clears and such other swaps that the CFTC determines SGX-DC is eligible to clear.

SGX’s clearance came as CFTC and the Monetary Authority of Singapore (MAS) signed a Memorandum of Understanding (MOU) regarding cooperation and the exchange of information in the supervision and oversight of regulated entities that operate on a cross-border basis in the US and Singapore.

Through the MOU, the Commission and MAS express their willingness to cooperate with each other in the interest of fulfilling their respective regulatory mandates regarding derivatives markets. The scope of the MOU includes markets and organised trading platforms, central counterparties, trade repositories, and intermediaries, dealers, and other market participants.

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