Singapore To Clear U.S. Derivatives01.01.2014
Singapore Exchange (SGX Derivatives Clearing) has become the first Asian clearing house authorized as a Derivatives Clearing Organization (DCO) by a U.S. derivatives regulator, the Commodity Futures Trading Commission (CFTC).
The CFTC issued an order granting SGX-DC registration as a DCO pursuant to Section 5b of the Commodity Exchange Act.
SGX-DC, a subsidiary of Singapore Exchange Limited, is organized under the laws of Singapore and is regulated in Singapore by the Monetary Authority of Singapore. Subject to the terms and conditions of the Order, SGX-DC is authorized to provide clearing services for swaps that SGX-DC currently clears and such other swaps that the CFTC determines SGX-DC is eligible to clear.
New and existing U.S. customers will be able to clear their derivatives contracts through SGX’s derivatives clearing house in compliance with the latest U.S. laws and regulations, including the Dodd-Frank Act, the Commodity Exchange Act and CFTC’s regulations.
To allow for an orderly transition, SGX clearing members which are not registered with the CFTC as futures commission merchants (FCMs) can continue clearing swap contracts for US persons via SGX Derivatives Clearing following an extension of the “no action relief” from CFTC to March 31, 2014.
“SGX is delighted to be recognized as Asia’s first Derivatives Clearing Organization.This reaffirms our commitment to serve our US customers with the necessary regulatory authorization. It also underscores our position as a leading exchange with the highest international standards and practices which clients can rely on for their business and risk management needs,” said Muthukrishnan Ramaswami, president of SGX.
SGX Derivatives Clearing and SGX’s securities clearing house, The Central Depository (CDP), have also applied to the European Securities and Market Authority for recognition as third country central counterparties under the European Market Infrastructure Regulation in order to continue providing clearing services to European Union customers.
In November, SGX Derivatives Clearing and the CDP were endorsed by the International Monetary Fund’s Financial Sector Assessment Programme for satisfying high levels of compliance with the Principles for Financial Market Infrastructures (PFMI). The PFMI embody the international standards for payment, clearing and settlement.
Separately, the CFTC’s Division of Swap Dealer and Intermediary Oversight (DSIO) has issued two no-action letters that provide certain futures commission merchants, swap dealers, and major swap participants with limited relief surrounding the requirement that chief compliance officers of such firms prepare and submit an Annual Report, pursuant to Commission Regulation 3.3.
In one of the no-action letters, DSIO provided relief for swap dealers tha are not required, prior to December 31, 2013, to register with the CFTC as swap dealers; and have a fiscal year-end of December 31, 2013. In that no-action letter, DSIO stated that it will not recommend that the CFTC take an enforcement action against any such firm, or a chief compliance officer of any such firm, for failing to prepare an Annual Report and furnish such Report to the CFTC for the fiscal year that ends on December 31, 2013.
In a separate letter, DSIO provided relief to all futures commission merchants, swap dealers, and major swap participants concerning the deadline for furnishing a copy of the Annual Report to the CFTC. The no-action relief provided in that letter is limited to the Annual Report required to be furnished by such firms during calendar year 2014.
Image via : Flickr/Christian Schnettelker cc
ISDA survey shows variety of views on whether increased clearing would improve resilience and efficiency.
Crypto derivatives need central clearing to become a major asset class.
Clients can agree collateral on a real-time basis and increase efficiencies.
Margin and collateral are a new use case for bond ETFs.
Additional volatility due to unforeseen macro events, particularly the conflict in Ukraine, were contribers.