CFTC Staff Letter 14-87: No-Action Relief for Korea Exchange Regarding Section 5b(a)

U.S. COMMODITY FUTURES TRADING COMMISSION
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Facsimile: (202) 418-5547 aradhakrishnan@cftc.gov a Ananda Radhakrishnan Director Division of Clearing and Risk CFTC Letter No. 14-87 No-Action Division of Clearing and Risk Chairman & CEO Korea Exchange Re: No-Action Relief with Regard to Section 5b(a) of the Commodity Exchange Act and Commission Regulations Thereunder Dear Mr. Choi:
This letter responds to your letter dated May 29, 2014 (“Letter”) to the Division of Clearing and Risk (“Division”) of the Commodity Futures Trading Commission (“Commission”). In the Letter, you request that the Division confirm that it will not recommend that the Commission take enforcement action against Korea Exchange, Inc. (“KRX”) for failure to register as a derivatives clearing organization (“DCO”) pursuant to Section 5b(a) of the Commodity Exchange Act (“CEA”) 1 should KRX engage in certain clearing activities specified in the Letter. Specifically, KRX seeks to clear Korean Won-denominated interest rate swaps (“KRW IRS”), as well as any other swaps later covered by the clearing requirements of the Republic of Korea’s (“Korea”) Financial Investment Services and Capital Markets Act (the “FSCMA”), for the proprietary trades of KRX’s clearing members that are U.S. persons. KRX requests that this relief expire on the earlier of May 31, 2015, or any date on which the Commission exempts KRX from the DCO registration requirement under Section 5b(h) of the CEA. 2 KRX represents that it intends to apply for an exemption from registration as a DCO once the Commission addresses the process or specific criteria and conditions necessary to obtain exemptive relief. 3