CFTC Issues No-Action Letter Delaying Temporarily the Registration of an Australian Clearing Organization (CFTC Letter 14-07) (with Lofchie Comment)

The CFTC Division of Clearing and Risk ("DCR") issued a no-action letter stating that it will not take enforcement action against the Australian-based clearing organization ASX Clear Pty Limited ("ASXCLF") for failing to register as a derivatives clearing organization ("DCO") pursuant to CEA Section 5b(a) ("Derivatives Clearing Organizations").

According to the letter, ASXCLF will be permitted to clear Australian and New Zealand dollar-denominated interest rate swaps for the proprietary trades of qualified U.S. clearing participants and their parent entities and affiliates. Previously, ASXCLF limited its swap clearing services to clearing participants that are not U.S. persons.The relief is effective until December 31, 2014, or until the date upon which the CFTC either registers ASXCLF as a DCO pursuant to CEA Section 5b(a) or exempts ASXCLF from registration.

Lofchie Comment: The grant of this exemption seems to be another quiet step by the CFTC toward reconsidering its policy on cross-border regulation of swaps. The prior policy, in which any non-U.S. entity that interacted with a U.S. person became subject to the full body of U.S. regulation, resulted in the isolation of U.S. markets, as many non-U.S. entities decided that doing business with U.S. persons was not worth the cost of becoming fully subject to U.S. regulation. The new policy, if in fact there is a trend here, seems directed toward maintaining the U.S. markets as part of an interconnected global financial system.

See: No-Action Letter 14-07; Press Release.