On February 23, the Commodity Futures Trading Commission’s Division of Clearing and Risk (DCR) issued No-Action Letter 18-04, which extends relief previously granted to the Shanghai Clearing House (SHCH) under CFTC No-Action Letter 16-56 (as reported in the June 3, 2016, edition of Corporate and Financial Weekly Digest), and renewed in CFTC No-Action Letters 17-26 and 17-62. CFTC No Action Letter 17-62 expired on February 28.
In CFTC No-Action Letter 18-04, DCR stated it would not recommend the CFTC take enforcement action against SHCH for failure to register as a derivatives clearing organization (DCO) in light of its pending petition for an exemption from registration as a DCO. Under the terms of the letter, SHCH is permitted to clear certain swaps subject to mandatory clearing in the People’s Republic of China for the proprietary trades of SHCH clearing members that are US persons or affiliates of US persons.
Before the CFTC can grant SHCH an exemption, it must first execute a Memorandum of Understanding (MOU) with the clearing organization’s home country regulator. DCR granted the extension because it needs more time to make a decision regarding the petition, as well as to complete the MOU process.
The extension will last until the earlier of February 28, 2019, and the date on which the CFTC exempts SHCH from registration as a DCO.
CFTC Letter No. 16-56 is available here.
CFTC Letter No. 18-04 is available here.