CFTC Roundup: Japan Securities Clearing Corp. Gets Relief Despite Not Registering as a Derivatives Clearing Organization & the Final Oral Communications Records Rule is Approved, as is Interim Final Rules for Major Swap Participants and Swap Dealers

No Enforcement Action Against Japan Securities Clearing Corp. Despite Failure to Register as a Derivatives Clearing Organization
The Commodity Futures Trading Commission Division of Clearing and Risk has decided not to recommend that an enforcement action be taken against Japan Securities Clearing Corp. for not registering as a derivatives clearing organization. Enforcement action also won’t be recommended against the corporation’s clearing participants for not clearing yen-dominated interested rate swaps through a registered DCO.

The Commission had recently finalized its clearing requirement determination, which mandates that market participants clear certain CDS classes based on European and North American corporate entities and certain interest rate swaps classes. Under the relief, JSCC will be able to clear credit default swaps (“iTraxx Japan index and yen-denominated interest rate swaps that reference the Tokyo Interbank Offered Rate or LIBOR”, said the CFTC), as long as it doesn’t accept (and none of its qualified clearing participants offer) swaps for clearing for a US customer.

CFTC Approves Oral Communications Records Rule

Per a newly Commission-approved final rule, certain market participants will have to record oral communications that result in a commodity interest transaction. The rule amends existing rules so that they meet Dodd-Frank Wall Street Reform and Consumer Protection Act requirements.

The revised regulations mandate that futures commission merchants, some introducing brokers, certain swap execution facilities and designed contract market members, and retail foreign exchange dealers must abide by this rule, which, according to the Commission, will record “critical evidence” should there be an enforcement investigation later. (The CFTC had originally wanted all oral communications related to both cash commodity and commodity interest transaction recorded. However, following comments about how recording communications related to cash commodity transactions might affect the agricultural community, the latter was removed from consideration.)

CFTC Approves Interim Final Rules for Major Swap Participants and Swap Dealers
The Commodity Futures Trading Commission has approved interim final rules for swap dealers and major swap participants that will allow them to not have to comply with specific requirements dealing with documentation and business conduct. The rule changes will give both groups more time to fulfill regulations 23.502, 23.504, 23.201(b)(3)(ii); 23.402; 23.410(c); 23.430; 23.431(a)-(c); 23.432; 23.434(a)(2), (b), (c); 23.440; 23.450; and 23.505.

The final interim rules go into effect once they are published in the Federal Register. Comments are invited within 30 days of their publication.

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Commodities Futures Trading Commission

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