Over the vehement dissent of Commissioner Sharon Bowen, the Commodity Futures Trading Commission determined that the margin requirements for uncleared swaps applicable to swap dealers and major swap participants under Japanese rules are mostly comparable to those under CFTC rules. As a result, such covered swap entities (CSE) may comply with Japanese law for most margin requirements when transacting with a non-US counterparty where the transaction is subject to both US and Japanese margin rules. The only material difference, said the CFTC, are requirements related to the posting of margin for inter-affiliate transactions. Whereas a CSE entering into an uncleared swaps transaction with a consolidated affiliate under CFTC rules is required to exchange variation margin, and in certain circumstances collect initial margin, this is not the case under Japanese requirements. Accordingly, a CSE transacting an uncleared swap with a non-US person that would otherwise be subject to both US and Japanese margin rules will have to comply with the US margin rules related to inter-affiliate transactions. Similarly, under CFTC rules, all initial margin posted by or collected by a CSE must be held by an independent third-party custodian. Although this is not a requirement under Japanese rules, under Japanese requirements all initial margin must be held in a trust structure. The Commission said the Japanese structure is comparable because “property deposited to such a trust account … is legally recognized as segregated from the property of the trustor, the property of the trust bank, and other trust property in the trust account.” Commissioner Bowen dissented from this and other comparability determinations claiming that “[i]n my experience with bankruptcies, I have learned that access to customer funds largely depends on the location of those funds. Third-party custodianship is an important safeguard.” Commissioner Bowen also objected that, while under US law, variation margin for dealer-to-dealer swaps must be met in cash, less liquid instruments are permitted under Japanese law. “That means,” said Ms. Bowen, “that in a crisis, American companies in Japan could be exchanging instruments that are virtually worthless since they cannot be readily converted to cash, thereby putting them in jeopardy.”