Extension of No-Action Relief for Shanghai Clearing House Regarding DCO Registration

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 17-26
No-Action
May 16, 2017
Division of Clearing and Risk
Mr. Karl Chen
Chief Financial Officer
Shanghai Clearing House
No. 2 East Beijing Road
Huangpu District
Shanghai, People’s Republic of China
Re: Extension of No-Action Relief with Regard to Section 5b(a) of the Commodity Exchange Act and Commission Regulations Thereunder Dear Mr. Chen:
This is in regard to CFTC Letter No. 16-56,
1 which expires on May 31, 2017. In the letter, the Division of Clearing and Risk (“Division”) of the Commodity Futures Trading Commission (“Commission”) stated that it will not recommend that the Commission take enforcement action against Shanghai Clearing House (“SHCH”) for failure to register as a derivatives clearing organization (“DCO”) pursuant to the requirements of Section 5b(a) of the Commodity Exchange Act (the “CEA”) and Commission regulations thereunder, subject to certain conditions described in the letter. Under the terms of the letter, SHCH is permitted 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. Since the issuance of the letter, SHCH has submitted a petition 2 to the Commission requesting an order of exemption from registration as a DCO pursuant to Section 5b(h) of the CEA. The Division is reviewing SHCH’s petition and has not yet made a recommendation to the Commission as to whether or not SHCH should be granted an exemption. If the Commission were to issue an order of exemption, the order would require SHCH to, among other things, comply with certain reporting requirements. The Division is still seeking assurances that the existing regulatory and oversight regime in the PRC permits SHCH to provide to the Commission the full scope of information required under an exemption order. 1 CFTC Letter No. 16-56 (May 31, 2016). 2 Petition received November 22, 2016.