PwC's Managing upstream risk: Regulatory reform review - An asian perspective November 2013 | Page 21

• he person does not control the trading
T
of the owned entity (based on criteria in
the bullet points above), with the person
showing that it and the owned entity have
procedures in place that are reasonably
effective to prevent coordinated trading in
spite of the majority ownership5;
• ach representative of the person (if any) on
E
the owned entity’s board of directors attests
that he or she does not control trading of the
owned entity; and
• he person certifies that either (a) all of
T
the owned entity’s positions qualify as bona
fide hedging transactions or (b) the owned
entity’s positions that do not so qualify
do not exceed 20% of any position limit
currently in effect, and the person agrees in
either case that:
o If this certification becomes untrue
for the owned entity, the person will
aggregate the owned entity for three
complete calendar months and if all of
the owned entity’s positions qualify as
bona fide hedging transactions during
that time the person would have the
opportunity to make the certification
again and stop aggregating;
o Upon any call by the CFTC, the owned
entity(ies) will make a filing responsive
to the call, reflecting the owned entity’s
positions and transactions only, at any
time (such as when the CFTC believes
the owned entities in the aggregate may
exceed a visibility level); and

granted, and relief would be available only
if and when the CFTC acted on a particular
request for relief.

Finally, the Proposed Rules would provide that
if an owned entity has filed a notice claiming an
exemption from aggregation, any person with
a 10 per cent or greater ownership interest in
the owned entity need not file a separate notice
for the same positions and accounts, so long as
such person does not otherwise control trading
of the accounts or positions and such person
complies with the conditions applicable to the
exemption (other than filing the notice).

The rules also proposed modifications to
independent account controller exemption,
exemption for ownership pool participants,
exemption based on prohibitions on sharing
information, exemptions based on underwriting
activities, broker-dealer activities and accounts
held by futures commission merchants.

o The person will provide additional
information to the CFTC if any owned
entity engages in coordinated activity,
short of common control (understanding
that if there were common control, the
positions of the owned entity(ies) would
be aggregated).

Moreover, if a person with greater than 50
per cent ownership of an owned entity did not
meet the above conditions, the person could
apply for special relief. In any event, however,
the Proposed Rules would not impose any time
limits on the CFTC’s process for making the
determination of whether relief is appropriately
Banking

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