CFTC spares Singapore Exchange’s clearing division an enforcement – but for how long?

The global drive among national regulators to work together toward standardizing trade clearing methodology continues, as the CFTC defers enforcement action against SGX-DC

The US Commodity Futures Trading Commission’s Division of Clearing and Risk (DCR) issued a time-limited no-action letter to the Singapore Exchange Derivatives Clearing Limited (SGX-DC) on Friday last week, as Singapore readies itself for alignment with Western regulatory authorities on post-trade clearing.

SGX-DC is a registered derivatives clearing organization, which operates in Singapore, Asia’s most populous institutional FX jurisdiction. Following the full implementation of market reform procedures by which institutional electronic trading entities must comply across North America last year, Europe was hot on the heels of the United States in beginning to set forth the rulings in MiFID II which in many respects emulate those of the US in terms of trade reporting and greater transparency post execution of OTC derivatives trades, Singapore is likely to follow suit shortly afterwards.

In this particular no-action letter, DCR states that it will not recommend that the Commission take enforcement action against SGX-DC’s clearing members for failing to comply with the Commodity Exchange Act (CEA) Section 4d(f)(1) futures commission merchant (FCM) registration requirements in carrying existing positions and accepting for clearing offsetting positions in certain commodity swaps for U.S. customers or customers of FCMs that clear through an FCM omnibus customer account; or SGX-DC for engaging in activities related to its clearing members carrying and accepting for clearing such customer positions. The relief is subject to specified conditions, including expiration on April 30, 2014.

This no-action relief is an extension of relief that was granted by DCR to SGX-DC and its clearing members in December 2013, modified to explicitly include relief with respect to clearing for customers of FCMs that clear through an FCM omnibus customer account. Under the 2013 no-action letter (CFTC No-Action Letter 13-74), similar relief was granted until the earlier of March 31, 2014, or the date upon which the positions of U.S. customers were to be held only by clearing members that are registered FCMs.

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CFTC spares Singapore Exchange's clearing division an enforcement - but for how long?


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