Financial Crime World

CFTC Extends No-Action Letter for Taiwan Futures Exchange (TAIFEX) on Derivatives Clearing Organization Registration

Release Number: 8776-23 Date: September 13, 2023

The Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk has announced that it will not recommend enforcement action against Taiwan Futures Exchange (TAIFEX) for not registering as a derivatives clearing organization (DCO) as mandated under Section 5b(a) of the Commodity Exchange Act (CEA). The no-action letter, which extends the previous one issued in 2022, remains effective until the earlier of March 15, 2024 or the date of TAIFEX’s potential exemption from DCO registration under Section 5b(h) of the CEA.

Scope of No-Action Letter

The recent no-action letter is limited to TAIFEX’s clearing of proprietary trades executed by United States clearing members and their affiliates. This arrangement allows the exchange to continue functioning without registration as a CFTC-regulated DCO for the time being.

Key Takeaways

  • The no-action letter does not change TAIFEX’s requirement to eventually register as a DCO or seek explicit exemption from the CEA.
  • The letter offers crucial breathing room, ensuring no disruptions to the trading of derivatives by United States clearing members and their affiliates through TAIFEX.
  • The arrangement is limited to clearing proprietary trades executed by U.S. clearing members and their affiliates.

CFTC Statement

“The Division of Clearing and Risk is providing no-action relief to the Taiwan Futures Exchange, in connection with the clearing of proprietary trades of U.S. clearing members and their affiliates, pending the CFTC’s determination of whether to grant an exemption under Section 5b(h) of the CEA.”

Maintaining Market Stability

By permitting this continued operation, the CFTC intends to maintain market stability and the smooth functioning of the relevant derivatives markets.

Conclusion

The no-action letter provides relief to TAIFEX, allowing it to continue clearing proprietary trades executed by U.S. clearing members and their affiliates without registering as a DCO. The CFTC’s decision aims to ensure market stability and maintain the smooth functioning of derivatives markets, while also providing breathing room for TAIFEX to address its registration requirements in the future.