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Final CFTC Rules on Clearing Exemption for Swaps between Certain Affiliated Entities
4 April 2013
The CFTC has adopted final rules to exempt swaps between certain affiliated entities, with certain modifications to and clarifications from the proposed rules.
The final rules permit "eligible affiliate counterparties" to elect not to clear a swap if: both counterparties elect not to clear the swap, the terms of the swap are documented, the swap is subject to a centralized risk management program and the counterparties comply with certain reporting requirements and certain additional requirements when entering into swaps with an unaffiliated counterparty.
In order to elect the exemption, when entering into a swap with an unaffiliated counterparty, each eligible affiliate counterparty must either (1) comply with the U.S. clearing requirements or an exception or exemption therefrom, (2) comply with a foreign jurisdiction's clearing mandate or an exception or exemption therefrom (subject to certain determinations by the CFTC), (3) clear the swap through a clearing organization subject to supervision in its home country, or (4) comply with certain temporary alternative compliance frameworks.
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