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July 4, 2014

Davis Polk Explain the Regulatory Uncertainties for Non-US CCPs

An article at Risk, now public, explains the deep uncertainty around the outcome of the CFTC exemption consideratons for non-US CCPs

In a recent guest commentary in Risk Magazine (subscription required), Annette Nazareth and Jeff Dinwoodie of Davis Polk's Financial Institutions Group discuss several key questions concerning the CFTC’s plans for non-U.S. swaps clearinghouses. Davis Polk have now circulated a PDF version of their article (attached below) which begins to set out the risks for CCPs involved in:

  • Equivalence judgements between CFTC rules and EMIR
  • The use of Exemption letters for some non-US CCPs, and how long those will continue to be effective
  • The need for CCPS to meet the Principles For Market Infrastructures (PFMIs) from IOSCO / CPSS
  • Treatment of ASX, KRX and Hong Kong Clearing

Questions answered include:

  • Evaluating Satisfaction of the PFMIs. How prescriptive will the CFTC be in evaluating satisfaction of the PFMIs?
  • Flexibility for Jurisdictions Still Implementing the PFMIs. Will the CFTC offer any flexibility to clearinghouses organized in jurisdictions that have not yet fully implemented the PFMIs?
  • Other Conditions. Would other conditions that the CFTC may attach to an exemption be problematic?
  • New Chairman and Commissioners. What role will the confirmations of Timothy Massad, Christopher Giancarlo and Sharon Bowen have on the potential rulemaking?

Have a look at the PDF – it makes the situation for non-US CCPs seems quite complex and unpredictable.


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