I support today’s final rule providing legal certainty to swap counterparties electing the inter-affiliate exemption from the Commission’s requirement that certain interest rate swaps and credit default swaps be cleared.  At issue is an important condition of the exemption that reduces the likelihood that uncollateralized exposures can build up at a U.S. swap participant.[1]  I support the policy, made permanent by today’s rule, that permits variation margin to be exchanged by affiliated counterparties in lieu of clearing swaps with foreign counterparties.  This provision appropriately balances an anti-evasionary measure with providing flexibility to market participants.  The provision has functioned well since 2013, and it is appropriate to make the provision permanent after several extensions of the no-action relief.[2]

I would like to highlight that today’s final rule acknowledges that five additional jurisdictions have enacted swap clearing requirements since the first version of this rule was issued in 2013.[3]   Today’s rule therefore serves as another example of the Commission appropriately deferring to foreign regulatory regimes in order to reduce compliance burdens and promote market liquidity internationally.  

Not only do I support today’s final rule because it makes a sound policy permanent, but also because it codifies no-action relief that has proven workable for market participants.  Codifying no-action relief makes the Commission’s regulatory framework more transparent and simplifies compliance.  I would support continuing to codify other no-action relief, for example with respect to providing relief from the trade execution requirement for a swap exempted from the clearing requirement.[4]

Finally, I would like to thank the staff of DCR for their diligence in completing this rulemaking.