Hedge funds have won a regulatory victory after the Commodity Futures Trading Commission (CFTC) agreed to allow Japan Securities Clearing Corp (JSCC) to clear yen-denominated interest rate swaps for US customers, according to a report by Bloomberg.
The decision follows persistent lobbying from trade groups, which argued that access to JSCC would provide better liquidity and competitive pricing for US investors. Concerns had lingered over JSCC’s handling of customer collateral and bankruptcy protections.
On Friday, the CFTC issued a no-action letter stating it would not take enforcement action against JSCC for clearing swaps for US clients despite the firm not being fully registered with the regulator. The clearinghouse must inform clients that US bankruptcy protections do not apply to their trades.
Previously, JSCC was only permitted to clear yen swaps for US futures commission merchants trading for their own accounts. The move opens the door for broader participation by hedge funds and other institutional investors seeking to hedge yen volatility. JSCC handled roughly 55% of yen interest rate swap volumes in 2024, according to the CFTC.
“This action levels the playing field for US investors and strengthens their global competitiveness,” said Jennifer Han, chief legal officer at the Managed Funds Association.
