Clearing

Trading and Clearing

Dodd-Frank Act - Mandatory Platform Trading and Central Clearing Requirements

Dodd-Frank amended the Commodity Exchange Act (CEA) and Security Exchange Act (SEA), for certain derivatives, to require mandatory platform trading on a Designated Contract Market (DCM) or Swap/Security Based Swap Execution Facility (SEF/SBSEF) and mandatory clearing through an authorised / recognised Central Counterparty (CCP) for certain products.

A derivative class will be subject to ‘mandatory’:

  • Trading, if the CFTC or SEC certify a made available to trade (MAT) determination from a DCM or SEF/SBSEF.
  • Clearing, if a clearinghouse offers the product for clearing and the CFTC or SEC have issued a clearing determination that includes such a derivative.

CFTC Regime

Under the CFTC Regime, the mandatory platform trading and central clearing requirements have been phased-in since September of 2013.

For a summary of swap classes that are subject to mandatory platform trading (or “Made Available to Trade”) as at 18th February 2014 please see: Swaps Made Available To Trade Charts (cftc.gov)

For a full list of swap classes made available to trade, please see: CFTC

All counterparties who do not qualify for an exemption, exception or other relief from the clearing requirement must clear swaps subject to the CFTC’s clearing determination.

The swap classes that are currently required to be cleared can be found here: Swaps required to be cleared

SEC Regime

Although currently there are no products mandated to trade on SBSEF or be centrally cleared, the SEC regime in this space is expected to evolve in due course.

Please refer to the External Business Conduct Required Disclosures page for SEC SBS clearing related disclosures.

The names of the clearing agencies that accept Security-Based Swaps for clearing and which HSBC Bank plc or HSBC Bank USA, N.A. are permissioned are as follows:

Clearing Agency HSBC Bank plc HSBC Bank USA, NA
LCH CDSClear Yes -
ICE Clear Europe Yes -
ICE Clear Credit Yes Yes

 

For Security Based Swap classes not subject to the SEC clearing requirement, counterparties may elect to require clearing, through the above listed clearing agencies.

For a list of the clearinghouses that clear Securities Based Swaps please visit the ISDA website.

 

Last updated: 7 October 2021