CFTC Grants No-Action Relief to SGX-DC and Its Clearing Members (CFTC Letter 13-74) (with Lofchie Comment)

The CFTC Division of Clearing and Risk ("DCR") issued time-limited no-action relief to the Singapore Exchange Derivatives Clearing Limited ("SGX-DC"), stating that it will not recommend enforcement action against SGX-DC's clearing members for failing to comply with CEA Section 4d(f)(1) ("Dealing by Unregistered Futures Commission Merchants or Introducing Brokers Prohibited; Duties in Handling Customer Receipts; Rules to Avoid Duplicative Regulations") in light of the fact that no CFTC-registered FCMs are members of the relevant clearing corporations. The relief is subject to specified conditions, and expires on the earlier of (i) March 31, 2014, or (ii) the date upon which all U.S. customer positions in the relevant commodity swaps have been either closed or, subject to SGX-DC becoming registered by the CFTC as a derivatives clearing organization (DCO), transferred to a clearing member that is an FCM.

Lofchie Comment: The need for extended relief in this case demonstrates Asian markets access problems for U.S. investors. Even if a U.S. FCM will join a relevant market, it appears that U.S. investors will have very limited choices as to with whom they can clear their trades (the regulations potentially give a monopoly position to a single CFTC-registered FCM).

See: No-Action Letter 13-74; Press Release.