CFTC Staff Letter 16-56: Time-limited no-action relief for Shanghai Clearing House regarding Section 5b(a) of the Commodity Exchange Act

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5430
Facsimile: (202) 418-5547
Division of Clearing and Risk
CFTC Letter No. 16-56
No-Action
Division of Clearing and Risk
Chief Financial Officer
Shanghai Clearing House
No. 2 East Beijing Road
Huangpu District
Shanghai, People’s Republic of China
Re: No-Action Relief with Regard to Section 5b(a) of the Commodity Exchange Act and Commission Regulations Thereunder Dear Mr. Chen:
This is in response to your letter dated April 15, 2016 (“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 Shanghai Clearing House (“SHCH”) for failing to register as a derivatives clearing organization (“DCO”) pursuant to Section 5b(a) of the Commodity Exchange Act (“CEA”)1 and Commission regulations thereunder. Under the requested relief, SHCH would be permitted temporarily to clear certain swaps subject to mandatory clearing in the People’s Republic of China (“PRC”) for the proprietary trades of SHCH clearing members that are U.S. persons or affiliates of U.S. persons. You request that such relief be effective for one year. You represent in the Letter that SHCH intends to petition the Commission for an exemption from the DCO registration requirement by a date no later than six months following the effective date of the no-action relief. You also represent that SHCH meets the requirements of the Principles for Financial Market Infrastructures (“PFMIs”) developed by the Committee on Payment and Settlement Systems of the Bank for International Settlements and the Technical Committee of the International Organization of Securities Commissions.