The Commodity Futures Trading Commission issued two proposals related to non-US-based derivatives clearing organizations. Under one proposal, non-US-based central counterparty clearinghouses that are not systemically important and are subject to “comparable, comprehensive supervision and regulation” by competent regulators in their home country may qualify as an exempt DCO. In such capacity, foreign CCPs may facilitate clearing services for swaps entered into by eligible US contract participants through non-US clearing members that are not registered as futures commission merchants. Additionally, the CFTC proposed that non-US-based CCPs could register as DCOs with the CFTC and satisfy their registration requirements mostly through adherence to their local home country regulatory obligations. The CFTC would continue to require adherence to US customer funds protection requirements.
Although he supported the CFTC’s proposal to mostly defer to foreign regulators’ oversight of non-systemically important non-US-registered DCOs, Commissioner Dan Berkovitz, along with Commissioner Rostin Behnam, dissented from the CFTC’s proposal to allow certain non-US CCPs to be exempted from DCO registration. According to Mr. Berkovitz, “[t]he proposal would jeopardize U.S. customers, create systemic risks to the U.S. financial system, promote the use of foreign intermediaries at the expense of U.S. firms, and exceed this agency’s limited exemptive authority.” Mr. Berkovitz most objected to the proposal’s prohibition against US-registered FCMs from serving as FCMs for US customers at exempt DCOs. Although she voted in favor of the proposal to exempt certain foreign CCPs from registering as DCOs, Commissioner Dawn Stump also expressed concerns about the inability of registered FCMs to provide services to US persons and requested public comment on this aspect.