March 27, 2019

CFTC Approves Comparability Determination for Australia Uncleared Swap Margin Rules for Substituted Compliance Purposes

Australia is deemed comparable with all aspects of Margin for Uncleared Swaps

Washington, DC –The Commodity Futures Trading Commission (CFTC) today unanimously approved a comparability determination finding the margin requirements for uncleared swaps under the laws of Australia and the regulations of the Australian Prudential Regulation Authority (APRA) comparable in outcome to those under the Commodity Exchange Act (CEA) and CFTC regulations.

“In making this substituted compliance determination, Commission staff has conducted a principles-based, holistic analysis that focuses on regulatory outcomes rather than on a strict rule-by-rule comparison,” said CFTC Chairman J. Christopher Giancarlo. “This means that market participants can rely on one set of rules – in their totality – without fear that another jurisdiction will seek to selectively impose an additional layer of regulatory obligations. This comparability determination is another example of how the Commission is committed to showing deference to foreign jurisdictions that have comparable regulatory and supervisory regimes. Such an approach is essential to ensuring strong and stable derivatives markets that support economic growth both within the United States and around the globe.”

Substituted compliance describes the circumstances where the CFTC would permit swap dealers or major swap participants subject to the rules of a foreign jurisdiction but whose swaps activities bring them within the scope of certain CFTC regulations, to use compliance with regulations in the foreign jurisdiction as a substitute for compliance with the relevant CFTC regulations. This approach builds on the CFTC’s long-standing policy of recognizing comparable regulatory regimes based on international coordination and comity principles with respect to cross-border activities involving futures and options.

In accordance with the CFTC’s policy framework described in its Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants – Cross-Border Application announced May 24, 2016 (See CFTC Press Release 7370-16), the comparability determination is part of substituted compliance with respect to CFTC regulations applicable to swaps activities outside the U.S.

The CFTC’s approval also reflects a collaborative effort with APRA and market participants from Australia. Working with APRA, the CFTC can provide a comparability determination for all uncleared swap margin requirements (see chart below). 

Uncleared Swap Margin Requirements:
Summary of Comparability Determination for the
Australian Prudential Regulatory Authority

The following table presents, in summary form, the determinations of the U.S. Commodity Futures Trading Commission (CFTC) with respect to the comparability in outcome of the margin requirements for uncleared swaps under the laws of Australia and the regulatory requirements of APRA as compared to margin requirements for uncleared swaps under the Commodity Exchange Act and CFTC regulations.