The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk has issued a time-limited, no-action letter stating that it will not recommend that the CFTC take enforcement action against Shanghai Clearing House for failing to register as a derivatives clearing organisation, as laid out in the Commodity Exchange Act.
The relief is intended as an interim measure.
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The no-action relief applies to swaps accepted for clearing by Shanghai Clearing House and subject by the People’s Bank of China to mandatory clearing in the People’s Republic of China, including certain interest rate swaps denominated in renminbi.
In requesting the relief, Shanghai Clearing House maintained that it complies with the Principles for Financial Market Infrastructures and has committed to petitioning the CFTC for a permanent exemption from the registration requirement.
CFTC Chairman Timothy Massad commented: “I am pleased that CFTC has granted important no-action relief to Shanghai Clearing House. As of today, Shanghai Clearing House will be allowed to temporarily clear certain swaps that are subject to mandatory clearing in China. This relief is intended as an interim measure, as Shanghai Clearing House intends to seek a permanent order exempting it from registration with respect to such swap clearing.”
Today’s announcement marks an important step towards strengthening the CFTC’s relationship with Chinese regulators.