The Commodity Futures Trading Commission has issued separate orders of exemption allowing the Japan Securities Clearing Corporation (JSCC) and Korea Exchange, Inc. (KRX) to clear interest rate swaps without registering as derivatives clearing organizations (DCO). The CFTC granted these exemptions after determining that both entities are subject to a comprehensive supervisory and regulatory framework in their home countries.
The exemptions issued to JSCC and KRX are subject to the following conditions. Among other requirements, each clearing organization must: (1) maintain rules that permit clearing members to clear only for US persons who would be a “proprietary account” of the clearing member as defined in CFTC Rule 1.3(y); (2) allow open access to swaps where one or more of the counterparties is a US person; (3) confirm that it is in good regulatory standing in its home country; (4) submit certain reports to the CFTC; (5) certify annually that it complies with CPMI-IOSCO Principles for Financial Market Infrastructures; and (6) consent to US jurisdiction and agree to make available all books and records for inspection upon request.
The order of exemption from registration for the JSCC is available here.
The order of exemption from registration for the KRX is available here.