On May 16, the Commodity Futures Trading Commission’s Division of Clearing and Risk (DCR) issued No-Action Letter 17-26, which extends relief previously granted to the Shanghai Clearing House under CFTC No-Action Letter 16-56. CFTC No-Action Letter 16-56 is effective until (and excluding) May 31.
In its earlier letter, DCR stated that it would not recommend the CFTC take enforcement actions against the Shanghai Clearing House (SHCH) for failure to register as a derivatives clearing organization (DCO) in light of SHCH’s pending petition for an exemption from registration as a DCO. Pursuant to the relief, SHCH is permitted to clear certain swaps subject to mandatory clearing in the People’s Republic of China (PCR) for the proprietary trades of SHCH clearing members that are US persons or affiliates of US persons.
DCR granted the extension because it is not ready to make a recommendation to the CFTC regarding SHCH’s petition for exemption. In this regard, DCR noted that it has not yet received assurances that the existing regulatory and oversight regime in the PRC permits SHCH to provide to the CFTC the full scope of information that would be required under an exemption order. DCR also needs to understand the scope of the PRC’s Cybersecurity Law, which takes effect on June 1. That law may also prevent SHCH from fully complying with some or all of the reporting requirements that would be included in an order of exemption.
The extension will last until the earlier of November 30 or the date on which the CFTC exempts SHCH from registration as a DCO.
CFTC Letter No. 17-26 is available here.
CFTC Letter No. 16-56 is available here.