On July 12, 2013, the Commodity Futures Trading Commission (the “CFTC”) adopted interpretive guidance (the “Guidance”) that details the CFTC’s interpretation of the application of the Commodity Exchange Act (the “CEA”) and the CFTC’s regulations to swaps that are entered into or performed outside the United States or involve at least one counterparty that is not organized under U.S. law. The Guidance covers multiple topics, including (i) the definition of “U.S. person,” (ii) registration requirements for swap dealers (“SDs”) and major swap participants (“MSPs”), (iii) the definition of and regulatory requirements applicable to a “foreign branch” of a U.S. bank, (iv) the application of “Entry-Level Requirements” and “Transaction-Level Requirements” for SDs, MSPs and non-registrants, and (v) substituted compliance with U.S. regulations through compliance with comparable local law.
On July 21, 2010, Title VII of the Dodd-Frank Act (“Dodd-Frank”) amended the CEA to provide for comprehensive regulation of swaps. Dodd-Frank states, however, that its swaps provisions shall not apply to activities outside the United States unless those activities have a “direct and significant connection with activities in, or effect on, commerce of the United States.” This authority was intended to address the perceived transfer of risk “across multinational affiliated entities” that would “make it difficult for market participants and regulators to fully assess those risks.”
The Guidance followed two CFTC proposals. On July 12, 2012, the CFTC published its initial proposed interpretation of Section 2(i). On December 21, 2012, in response to considerable public comment, including from international regulators and swap market participants, the CFTC issued additional guidance to solicit further public comment on the definition of “U.S. person” and certain other issues. At the same time, the CFTC issued an exemptive order delaying the application of certain Dodd-Frank regulations to non-U.S. persons registering as SDs and MSPs and foreign branches of U.S. SDs and MSPs.
The CFTC does not deem its Guidance to be a rule or regulation that would “state with precision when particular requirements do and do not apply to particular situations.” Rather, the Guidance is “intended to provide an efficient and flexible vehicle to communicate the [CFTC’s] current views on how the Dodd-Frank swap requirements would apply on a cross-border basis.” The CFTC notes that it “will periodically review [the] Guidance in light of future developments” and may adopt rules codifying the Guidance in the future.
Definition of U.S. Person
The Guidance sets forth the following non-exclusive list of definitions for “U.S. person”:
(i) any natural person who is a resident of the United States;
(ii) an estate of a decedent who was a resident of the United States at the time of death;
(iii) any corporation, partnership, limited liability company, business or other trust association, joint-stock company, fund or any form of enterprise similar to any of the foregoing (other than an entity described in prongs (iv) or (v), below) (a “legal entity”), in each case that is organized or incorporated under the laws of a state or other jurisdiction in the United States or having its principal place of business in the United States;
(iv) a pension plan for the employees, officers, or principals of such a legal entity, unless the plan is primarily for the benefit of foreign employees of such entity;
(v) any trust governed by the laws of a state or other jurisdiction in the United States, if a court within the United States is able to exercise primary jurisdiction over the administration of the trust;
(vi) any commodity pool, pooled account, investment fund, or other collective investment vehicle that is not described in prong (iii) and that is majority-owned by one or more persons described in prongs (i) – (v), except any commodity pool, pooled account, investment fund, or other collective investment vehicle that is publicly offered only to non-U.S. persons and not offered to U.S. persons;
(vii) any legal entity (other than a limited liability company, limited liability partnership or similar entity where all of the owners of the entity have limited liability) that is directly or indirectly majority-owned by one or more U.S. persons described in prongs (i) – (v) and in which such person(s) bears unlimited responsibility for the obligations and liabilities of the legal entity; and
(viii) any individual account or joint account (discretionary or not) where the beneficial owner (or one of the owners in the case of a joint account) is a U.S. person described in prongs (i) – (vii).
Examples of Principal Place of Business of Collective Investment Vehicle
The Guidance contains several examples illustrating the manner in which the CFTC would apply the term “U.S. person” under prong (iii) above to collective investment vehicles.
(a) An asset management firm located in the United States establishes a collective investment vehicle (“Fund A”) outside of the United States and is named Fund A’s investment manager. The firm’s personnel managed Fund A’s formation and appointed its service providers. Personnel of the firm, who are located in the United States, will be responsible for implementing Fund A’s investment and trading strategy and its risk management. The CFTC would view the principal place of business of the fund to be in the United States, and each of the legal entities that comprise Fund A would be classified as a U.S. person.
(b) An asset management firm located outside the United States establishes a collective investment vehicle (“Fund B”) located outside the United States. Firm personnel located outside the United States will be responsible for implementing Fund B’s investment and trading strategy and its risk management. Firm personnel in the United States and outside the United States will manage Fund B’s investment portfolio. The U.S. personnel will be under the direction of and report to the non-U.S. office with regard to Fund B’s investment objectives, and the U.S. personnel have subordinate positions to the non-U.S. located personnel in the firm’s organizational structure. The CFTC would view the principal place of business of Fund B as being outside the United States, and, assuming Fund B is not majority-owned by U.S. persons, Fund B would not be deemed to be a U.S. person.
(c) A financial firm located in the United States establishes a collective investment vehicle (“Fund C”) outside of the United States. Fund C is divided into separate classes and uses a different subadviser, who may be located in or outside of the United States, for each class. At least one class is subadvised by an affiliate of the firm. The firm delegates overall control of the classes to the subadvisers, but retains the right to reallocate assets among the classes. The CFTC would view the principal place of business of Fund C (including each class that comprises Fund C) as within the United States, making it a U.S. person.
As previously noted, the above factors and guidance regarding the term “U.S. person” are not exclusive. Rather, the CFTC expects that situations may arise where the various prongs of the U.S. person definition do not resolve a person’s status. In such a case, the CFTC foresees utilizing a facts-and-circumstances test to determine whether a person is a U.S. person, taking into consideration (i) the strength of the connections between the person’s swap-related activities and U.S. commerce, (ii) the extent to which such activities are conducted in the United States, (iii) the importance to the United States of regulating such activities relative to other jurisdictions where the person’s swap activities may take place, (iv) the likelihood that classifying the person as a “U.S. person” could create regulatory conflicts with another jurisdiction, and (v) considerations of international comity. The CFTC also makes clear that the U.S. person definition in the Guidance only applies to swap regulation under Title VII of Dodd-Frank, and not to other CEA provisions or regulations thereunder.
Swap Dealer and Major Swap Participant Registration Requirements
An entity whose swap dealing activity exceeds the de minimis threshold, in the case of an SD, or the MSP calculation, in the case of an MSP, must register as an SD or MSP, respectively, under the CEA. SDs and MSPs are subject to “Entity-Level Requirements” (as discussed below), and SDs and MSPs that are U.S. persons or that transact with U.S. persons in certain circumstances are subject to “Transaction-Level Requirements” (as discussed below). SDs and MSPs that are non-U.S. persons may be able to satisfy certain of these requirements through substituted compliance with their home country regulations, as described below.
Swap Dealer De Minimis Threshold
A U.S. person must count against the SD de miminis threshold all swaps for which it is the dealer, as well as the swaps where the dealer is (1) a U.S. affiliate under common control or (2) a non-U.S. affiliate that is guaranteed by the U.S. person or a “conduit” affiliate of the U.S. person.
A non-U.S. person that is not guaranteed by a U.S. person must count against the de minimis threshold all swap dealing activity with certain types of counterparties. These counterparties are: (1) any U.S. person (excluding foreign branches of U.S. SDs, as defined below) or (2) any guaranteed affiliate of a U.S. person, unless that affiliate (i) is an SD, (ii) is affiliated with an SD and engages in only a de minimis amount of swap dealing, or (iii) is guaranteed by a non-financial entity. In addition, a non-U.S. person that is not guaranteed by a U.S. person may exclude from the amount of swaps counted against its de minimis threshold any swap that it enters into anonymously on a designated contract market, swap execution facility or foreign board of trade and that is cleared.
Major Swap Participant Calculation
For purposes of determining whether it falls under the “major swap participant” definition, a non-U.S. person must count toward the MSP calculation any swap position where its counterparty is a U.S. person or is a non-U.S. person that is guaranteed by a U.S. person (unless the potential MSP has its obligations guaranteed by a U.S. person, in which case the swaps are attributed to the guarantor). In addition, a non-U.S. person that guarantees the obligations of a third party on a swap with a U.S. person (or with a non-U.S. person that is guaranteed by a U.S. person) must count toward the MSP calculation the swap position it has guaranteed.
Foreign Branch and Transactions with a Foreign Branch
A “foreign branch” of a U.S. person is considered to be a part of the U.S. person. Thus, if the U.S. person is an SD or MSP, the foreign branch must comply with all Transaction-Level Requirements (as discussed below). Acknowledging that certain foreign entities may cease doing business with foreign branches of U.S. persons to avoid application of the CEA, the Guidance permits foreign branches of U.S. SDs that are banks to comply with their obligations under Dodd-Frank through substituted compliance with local law (discussed below) with regard to Category A Transaction-Level Requirements for swap trades between the foreign branch and a non-U.S. person.
Definition of Foreign Branch of a U.S. Bank
To utilize substituted compliance, the non-U.S. operation of a U.S. bank SD must be a “foreign branch.” To be classified as a “foreign branch,” the non-U.S. office must (i) be subject to Regulation K, the Federal Deposit Insurance Corporation International Banking Regulation, or designated as a “foreign branch” by the U.S. bank’s primary regulator, (ii) maintain accounts independently of the home office and other foreign branches with profit or loss accrued at each branch determined as a separate item for each branch, and (iii) be subject to substantive regulation in banking or financing in the jurisdiction where the foreign branch is located. The CFTC may also consider other relevant facts and circumstances in determining whether a foreign office of a U.S. bank is a “foreign branch” for purposes of the Guidance.
Transactions with a Foreign Branch
Substituted compliance will be permitted only for required transactions between the foreign branch and a non-U.S. person. Generally, the CFTC would consider a swap to be with the foreign branch, and not the U.S. bank, when all of the following factors are present: (i) the employees negotiating the terms of the swap (or managing the swap if electronically executed), other than employees with functions that are solely clerical or ministerial, are located in the foreign branch or in another foreign branch of the U.S. bank; (ii) the foreign branch or another foreign branch is the office through which the U.S. bank makes and receives payments and deliveries under the swap on behalf of the foreign branch pursuant to a master netting or similar trading agreement, and the documentation of the swap certifies that the office for the U.S. bank is such foreign branch; (iii) the swap is entered into by the foreign branch in its normal course of business; (iv) the swap is treated as a swap of the foreign branch for tax purposes; and (v) the swap is reflected in the local accounts of the foreign branch.
Entity-Level Requirements and Transaction-Level Requirements
The Guidance divides the CEA’s swap provisions for SDs and MSPs, and CFTC regulations promulgated thereunder, into “Entity-Level Requirements” and “Transaction-Level Requirements.” Each group is further divided into two categories. The manner in which these categories are applied to different entities depends upon the type of entity, as discussed below.
The Entity-Level Requirements apply to the entity as a whole because each requirement is intended to provide that SDs and MSPs “maintain a comprehensive and robust system of internal controls to ensure. . . the protection of the financial system.” The Entity-Level Requirements include those related to (i) capital adequacy, (ii) chief compliance officer, (iii) risk management, (iv) swap data recordkeeping, (v) SDR reporting, and (vi) physical commodity large swaps trader reporting. The Entity-Level Requirements are divided into the “First Category,” consisting of items (i) - (iv) and the “Second Category,” consisting of items (v) - (vi).
Transaction Level Requirements
The Transaction-Level Requirements apply on a transaction-by-transaction basis and include the following: (i) required clearing and swap processing; (ii) margining and segregation for uncleared swaps; (iii) trade execution; (iv) swap trading relationship documentation; (v) portfolio reconciliation and compression; (vi) real-time public reporting; (vii) trade confirmation; (viii) daily trading records; and (ix) external business conduct standards.
Similar to the Entity-Level Requirements, the Transaction-Level Requirements are divided into two categories. The Guidance refers to items (i) - (viii) as “Category A” requirements while item (ix), external business conduct standards, constitutes “Category B” requirements.
If a U.S. person is a party to a swap, generally the Dodd-Frank requirements will apply without the availability of substituted compliance. The application of certain categories of Entity-Level Requirements and Transaction-Level Requirements in the context of substituted compliance for cross-border swaps is discussed below.
The Guidance articulates a “substituted compliance” regime whereby the CFTC will allow certain non-U.S. SDs and MSPs to satisfy their Dodd-Frank obligations by complying with the swap regulations of their home country if the provisions of an applicable foreign regulatory regime contain regulations “comparable with and as comprehensive” as, although not necessarily identical to, the Entity-Level and Transaction-Level Requirements. The CFTC has identified the following jurisdictions as having regulations that may qualify for substituted compliance: Australia, Canada, the EU, Hong Kong, Japan, and Switzerland. Those jurisdictions are the home jurisdictions of the SDs that are not domiciled in the U.S. and have been provisionally registered in the U.S. under the CEA. The CFTC’s determination of the availability of substituted compliance will be based on its evaluation of the comprehensiveness and scope of the foreign regulator’s requirements, as well as the comprehensiveness of the foreign regulator’s supervisory compliance program and authority to enforce its requirements. Comparability determinations will be made on a requirement-by-requirement basis. Consequently, an entity may be able to rely on substituted compliance for one requirement while still remaining subject to Dodd-Frank requirements in other areas.
Once the CFTC concludes the review of a jurisdiction’s regulatory framework, it will issue a comparability determination that applies to all entities or transactions in that jurisdiction. The substituted compliance regime is generally scheduled to take effect on December 21, 2013, or 30 days following the issuance of a substituted compliance determination, whichever comes earlier, so the CFTC envisions reviewing the submissions over the next few months. The Guidance also notes that the CFTC anticipates that additional time may be required to implement the substituted compliance regime, and that it intends to address the need for any further transitional relief when it makes substituted compliance determinations.
The CFTC intends to review substituted compliance determinations within four years. The application of substituted compliance does not, however, deprive the CFTC of its examination and enforcement authority over registered SDs and MSPs from other jurisdictions.
Application of Substituted Compliance to Entry-Level Requirements and Transaction-Level Requirements
Whether an SD or MSP must comply with certain CEA provisions and related CFTC regulations depends, in part, on the SD’s or MSP’s status as a U.S. or non-U.S. person, the swap counterparty, and whether the requirement is an Entity-Level or a Transaction-Level Requirement.
SD and MSP Entity-Level Requirements
Substituted compliance is typically available to non-U.S. SDs and MSPs for all First Category Entity-Level Requirements, regardless of the counterparty. However, for Second Category Entity-Level Requirements, substituted compliance will generally be permitted only where the counterparty of such swap is also a non-U.S. person. Before it will permit substituted compliance with respect to a particular jurisdiction, however, the CFTC must be able to obtain direct access to all of the reported swap data stored at the foreign data repository.
SD and MSP Transaction-Level Requirements
SDs and MSPs that are U.S. persons must generally comply with all Category A Transaction-Level Requirements. However, where such U.S. person is a foreign branch of a U.S. bank that is a registered SD or MSP, substituted compliance is available where the swap counterparty is also a foreign branch of a U.S. bank that is a registered SD or MSP or a non-U.S. person.
SDs and MSPs that are non-U.S. persons generally must comply with all Category A Transaction-Level Requirements for swaps where the counterparty is (i) a U.S. person, (ii) a foreign branch of a U.S. bank that is an SD or MSP, or (iii) a non-U.S. person that is guaranteed by or a conduit affiliate of a U.S. person. However, substituted compliance generally will be available to a non-U.S. SD or MSP if its counterparty is a foreign branch of a U.S. bank SD or MSP, or a non-U.S. person guaranteed by or a conduit affiliate of a U.S. person. Substituted compliance is not necessary if the non-U.S. SD or MSP engages in a swap with a non-U.S. person that is not a guaranteed or conduit affiliate of a U.S. person, because Category A does not apply.
The Category B Transaction-Level Requirements generally apply to all swap transactions where a U.S. SD or MSP is a counterparty to the swap and substituted compliance is not permitted. However, Category B Transaction-Level Requirements do not apply if the U.S. SD or MSP solicits and negotiates the swap through a foreign subsidiary or affiliate with a non-U.S. person or if the foreign branch of a U.S. bank SD or MSP is the counterparty. Further, the Category B Transaction-Level Requirements will not apply to swaps between two non-U.S. persons or between a non-U.S. person and either (i) a foreign branch of a U.S. bank that is a registered SD or MSP, or (ii) a non-U.S. SD or MSP. If neither counterparty is a U.S. person, substituted compliance is not necessary because Category B does not apply.
Several of the CEA’s swap provisions and CFTC regulations apply to persons who are not registered SDs or MSPs (“non-registrants”). Generally, a non-registrant is required to abide by the Second Category, but not the First Category, Entity-Level Requirements. Similarly, a non-registrant is typically required to adhere to certain Category A Transaction-Level Requirements regarding clearing, execution, and real-time public reporting, but not Category B. Unlike application of the Entity-Level and Transaction Level Requirements for SDs and MSPs, the applicable requirements for non-registrants (the “Non-Registrant Requirements”) are typically applied together or not at all. Persons that are not financial entities, such as commercial end-users, may satisfy the clearing and exchange execution requirements by claiming the clearing exception for hedging or risk mitigating transactions.
In a swap where one or both of the non-registrant counterparties is a U.S. person, the counterparties are required to comply with the Non-Registrant Requirements; substituted compliance is not permitted. If a swap is between two non-registrants that are guaranteed or conduit affiliates, certain Entity-Level and Transaction-Level Requirements would apply. However, the parties to the swap are eligible for substituted compliance (except with regard to large trader reporting), and provided that SDR Reporting would be eligible for substituted compliance only if the CFTC has direct access to all of the reported swap data elements that are stored at a foreign trade repository.
Where both non-registrants are non-U.S. persons and not guaranteed by a U.S. person, most Non-Registrant Requirements would generally not apply, with the exception of the physical commodity large swaps trader reporting requirements.
Additional No-Action Relief
Concurrently with the Guidance, CFTC staff issued two no-action letters providing additional relief. No-Action Letter No. 13-45, issued by the CFTC Division of Swap Dealer and Intermediary Oversight (“DSIO”) on July 11, 2013, determined that the risk mitigation rules under the European Market Infrastructure Regulation (“EMIR”) relating to confirmation, portfolio reconciliation, portfolio compression, and trading relationship documentation are “essentially identical” to the CFTC’s regulations. Accordingly, if a U.S. person or a non-U.S. person that is a guaranteed or conduit affiliate of a U.S. person enters into a swap with a counterparty subject to EMIR (such as a European SD or the European branch of a U.S. SD), compliance with the EMIR rules in the areas identified above will be sufficient to comply with Dodd-Frank regulations, except with respect to end-user clearing exception documentation and certain swap valuation disputes noted below. Absent the availability of the end-user exemption, a clearing requirement may still apply to these transactions unless the end-user specifically claims the exemption and has complied with any CFTC prerequisites for claiming it.
The letter applies specifically only to counterparties in the EU that are subject to EMIR. However, DSIO’s letter states that it may consider similar relief with respect to other jurisdictions. Importantly, two areas to which the no-action relief does not apply are (1) reporting to the CFTC of any swap valuation dispute in excess of $20 million or its equivalent in another currency, and (2) the end-user clearing exception documentation.
Under the terms of the existing direct access no-action relief letters issued by the CFTC’s Division of Market Oversight, a foreign board of trade (“FBOT”) may permit identified members or other participants located in the U.S. to enter trades directly into the trade matching system of the FBOT only with respect to futures and option contracts. CFTC No-Action Letter 13-46, also issued on July 11, 2013, by the Division of Market Oversight now will permit those FBOTs that have been operating pursuant to CFTC no-action relief to begin listing swaps if the FBOTs satisfy the conditions set forth in the no-action letter, which relate to clearing and reporting requirements and submitting a written request to list the swap.
The CFTC has construed CEA Section 2(i) to embrace highly complex and complicated principles for applying Dodd-Frank to swap transactions outside the United States or with entities organized outside the United States. However, the Guidance and concurrent no-action relief, as well as the CFTC’s announcement of a “path forward” with the European Commission, indicate that the CFTC recognizes the need for some level of international cooperation in regulating swaps. Nevertheless, through comparability reviews and determinations regarding whether the regulations of other jurisdictions are “essentially identical” to those in the United States, the CFTC is retaining a dominant role in setting the standards for swap regulation around the world.
 The Guidance was published at 78 Fed. Reg. 45291 (July 26, 2013). Although nominally effective as of that date, most provisions are being phased in, with the U.S. person definition effective on October 9, 2013 and certain other provisions effective later this year.
 Public Law 111-203, 124 Stat. 1376 (2010).
 7 U.S.C. 2(i). The CFTC asserts that Section 2(i)’s terms require that the CFTC find that swaps in the aggregate, and not individually, have a “direct and significant” effect on commerce, citing Gonzales v. Raich, 545 U.S. 1 (2005), and Wickard v. Filburn, 317 U.S. 111 (1942). In interpreting this provision, the CFTC analyzes the CEA via comparison to similar terms in the Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”), which provides the cross-border standard for the Sherman Antitrust Act. See 15 U.S.C. 6a. Similar to the “direct and significant” language of the CEA, FTAIA contains exclusionary language that limits FTAIA’s application to conduct that has a “direct, substantial, and reasonably foreseeable effect” on U.S. commerce. 15 U.S.C. 6a(1). The CFTC’s Guidance interprets the term “direct” to mean “a reasonably proximate nexus” (relying on Minn-Chen, Inc. v. Agrium, Inc., 683 F.3d 845, 857 (7th Cir. 2012)) and rejects an interpretation that the word “direct” requires an effect to be foreseeable.
 See generally Proposed Guidance, 77 Fed. Reg. 41213 (July 12, 2012).
 See generally Further Proposed Guidance, 78 Fed. Reg. 909 (January 7, 2013).
 78 Fed. Reg. 858 (January 7, 2013). The Securities and Exchange Commission (“SEC”) has separately proposed regulations that would govern cross-border activities involving security-based swaps. See Cross-Border Security-Based Swap Activities; Re-Proposal of Regulation SBSR and Certain Rules and Forms Relating to the Registration of Security-Based Swap Dealers and Major Security-Based Swap Participants, 78 Fed. Reg. 30968 (May 23, 2013). The SEC proposal is generally perceived as being less expansive than the Guidance. This may stem from the fact that the SEC’s cross-border jurisdiction regarding security-based swaps is limited to preventing evasion of Dodd-Frank and regulations promulgated thereunder, while the CFTC mandate under CEA Section 2(i) not only covers anti-evasion, but also applies to cross-border transactions that have a “direct and significant connection with activities in, or effect on, commerce of the United States.” See footnote 3, above.
 Guidance, at 45297. On July 11, 2013, the day before the CFTC adopted the Guidance, the agency announced that it had reached an understanding or “path forward” with the European Commission (“EC”) regarding the cross-border regulation of derivatives. The CFTC press release stated that the CFTC, the EC, and the European Securities and Markets Authority have agreed to implement their respective rules and regulations regarding derivatives in a manner designed to address conflicts, inconsistencies, and legal uncertainty “to the greatest extent possible and consistent with international legal principles.” The CFTC also noted that, at least between the CFTC and the European Union (“EU”), the approach to swap reporting is very similar and they will continue to work together to resolve remaining issues related to privacy, blocking, and secrecy laws. It is unclear, however, whether this will eliminate the need to report certain transactions to both a U.S. and a non-US. swap data repository (“SDR”).
 The term “United States” means the United States, its states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and any other territories or possessions of the United States government, its agencies or instrumentalities. Proposed Guidance, at 41218 & n.29.
 The CFTC considers the principal place of business to be in the United States if the “senior personnel responsible for either (1) the formation and promotion of the collective investment vehicle, or (2) the implementation of the vehicle’s investment strategy are located in the United States, depending on the facts and circumstances that are relevant to determining the center of direction, control and coordination of the vehicle.” Guidance, at 45310.
 The Guidance specifically states that the CFTC “does not intend that prong (vii) would cover legal entities organized or domiciled in a foreign jurisdiction but whose swaps obligations are guaranteed by a U.S. person.” The Guidance distinguishes a guarantor from a person who bears “unlimited responsibility” for the obligations of another on the basis that, because a guarantee is treated as a contract, the guarantor may be protected by legal defenses to enforcement that an owner of an unlimited liability company would not have. Guidance, at 45312 & n.217.
 The Guidance also states that the term “U.S. person” generally includes a foreign branch of a U.S. person, because such branches are considered “an extension” of the U.S. person. However, a non-U.S. person may exclude from its SD de minimis threshold or MSP calculation (i) transactions with a foreign branch of an SD registered under the CEA (as discussed below), and (ii) transactions with certain non-U.S. persons.
 This scenario exemplifies the CFTC’s position that mere formation outside the United States does not exempt an investment vehicle from U.S. regulation. Here, the decision-making authority and management of Fund A resides in the United States. Consequently, the CFTC would deem Fund A’s principal place of business to be within the United States.
 In this scenario, Fund B was established outside of the United States. Coupled with the location of Fund B’s senior management outside the United States, the center of control and decision-making is not located within the United States.
 In this scenario, the financial firm’s formation of Fund C and control over its capital allocation infers that the financial firm retained control over the operation of Fund C.
 This registration requirement applies to U.S. persons and non-U.S. persons. The CFTC utilizes the de minimis exemption and MSP calculation to distinguish between those entities with and without a sufficient nexus to the “direct and significant” language of CEA Section 2(i). See 17 C.F.R. §1.3(ggg) (definition of SD); 17 C.F.R. §1.3(hhh) (definition of MSP). The Guidance in this respect differs from CFTC treatment under Part 30 of its regulations of foreign intermediaries for futures and option transactions made on behalf of U.S. customers on or subject to the rules of a foreign board of trade, which are not required to register under the CEA if registered with a foreign regulator. 17 C.F.R. §30.10.
 The Guidance interprets a “guarantee” to include not only traditional guarantees of payment or performance, but also other formal arrangements that support the ability to pay or perform swap obligations, specifically referring to keepwells, liquidity puts, indemnity agreements, master trust agreements, and liability or loss transfer or sharing agreements. Guidance at 45320 & n.267.
 A “conduit” affiliate is a non-U.S. affiliate through which an enterprise centralizes its market-facing swap business, with the conduit affiliate either trading on behalf of U.S. affiliates or trading in its own name and then entering into back-to-back swaps with U.S. affiliates to transfer the financial risk to them. The CFTC has identified several non-exclusive factors to determine whether a non-U.S. affiliate is a conduit affiliate. These include: (i) whether the non-U.S. affiliate is a majority-owned affiliate of a U.S. person; (ii) whether the non-U.S. affiliate is controlling (i.e., parent), controlled by (i.e., subsidiary) or under common control with (i.e., sister company) the U.S. person; (iii) whether the financial results of the non-U.S. affiliate are included in the consolidated financial statements of the U.S. person; and (iv) whether the non-U.S. affiliate, in the regular course of business, engages in swaps with non-U.S. third-parties for the purpose of hedging or mitigating risks faced by, or to take positions on behalf of, its U.S. affiliates, and enters into offsetting swaps or other arrangements with its U.S. affiliates to transfer the risks and benefits of such swaps with third-parties to its U.S. affiliates. Guidance at 45319-20 & nn.258 and 268, and at 45323 & n.308.
 The Guidance refers in certain places to a branch of a U.S. person and in other places the reference is only to a branch of a U.S. bank. The CFTC Office of General Counsel has clarified to one of the authors that only the foreign branch of a U.S. bank SD would be able to take advantage of substituted compliance.
 Guidance at 45329. The CFTC will generally not include in the definition of “foreign branch” an affiliate of a U.S. bank that is organized as a separate legal entity.
 Certain aspects of swap data recordkeeping relating to complaints and sales materials are classified as Second Category requirements, even though most swap data recordkeeping requirements are classified as First Category requirements. Entity-Level Requirements (iv) - (vi) also apply to counterparties to swaps that are not registered as SDs or MSPs, such as commodity pools, pension plans, private funds, or commercial end users. Application of such provisions to non-registrants is discussed further under “Non-Registrants.”
 Transaction-Level Requirements (i), (iii), and (vi) also apply to entities not registered as SDs or MSPs. Application of such provisions to non-registrants is discussed further under “Non-Registrants.” Entities not registered as SDs or MSPs may also be subject to the requirement to post margin on uncleared swaps.
 However, as discussed below, the CFTC staff has also recognized that certain Transaction-Level Requirements under foreign law that are deemed to be “essentially identical” to U.S. law may be followed in lieu of the U.S. requirements.
 Substituted compliance will not permit waiver of the SD/MSP registration requirement under the CEA. At least thus far, the Guidance provides no relief from registration under the CEA, even if a foreign jurisdiction has a substantially similar registration regime. As noted in endnote 17 above, this aspect of the Guidance differs from the CFTC’s treatment of foreign intermediaries for futures and option transactions under Part 30 of the CFTC’s regulations.
 Foreign regulators, an individual non-U.S. entity, a group of non-U.S. entities, a U.S. bank that is a SD or MSP with foreign branches, or a trade association, or other group, on behalf of similarly situated entities may request the CFTC conduct a comparability determination.
 The CFTC currently does not appear prepared to permit substituted compliance with respect to entities in jurisdictions that do not have any SD registrants. However, the Guidance offers the following relief for the jurisdictions that do not qualify for substituted compliance. Subject to two conditions, the CFTC will permit swaps between the foreign branch of a U.S. SD that is not a guaranteed affiliate or a conduit affiliate of a U.S. person to comply with the transaction-level requirements applicable to entities domiciled or doing business in the foreign jurisdiction where the foreign branch is located. The first condition is that the aggregate notional value (expressed in U.S. dollars and measured on a quarterly basis) of the swaps of all of that U.S. SD’s foreign branches in foreign jurisdictions other than Australia, Canada, the EU, Hong Kong, Japan, or Switzerland cannot exceed 5% of the aggregate notional value of all of the swaps of that U.S. SD. Second, the U.S. SD must maintain records with supporting information to verify that the first condition is satisfied, as well as to identify, define, and address any significant risk that may arise from the non-application of the CFTC transaction level requirements.
[30 Upon determining that a foreign jurisdiction’s regulatory regime is comparable to that of the CEA and CFTC regulations, a person based in that jurisdiction may comply with the applicable regulations of the jurisdiction in lieu of the comparable CEA and CFTC requirements.
 See “Exemptive Order Regarding Compliance With Certain Swap Regulations,” 78 Fed. Reg. 43785 (July 22, 2013).
 Guidance at 45344 & n.468.
 SDs and MSPs that are U.S. persons cannot claim substituted compliance for the Entity Level Requirements.
 The CFTC reasons that foreign regulators have an interest in regulating foreign branch swap transactions within their jurisdiction, and the necessity of U.S. regulation over the same transaction is lessened by the CFTC’s oversight of the U.S. home office.
 One exception to this statement occurs when two non-registrants, at least one of whom is a U.S. person, anonymously execute a swap on a designated contract market or swap execution facility and such swap is cleared by a derivatives clearing organization, or executed and cleared through a foreign board of trade. The non-registrants need comply only with the swap data recordkeeping, SDR reporting, and physical commodity large swaps trader reporting requirements.
 The Guidance notes that any “non-U.S. clearing member that holds positions in [certain specified U.S.-listed physical commodity] swaps” large enough to trigger reporting obligations should report “all reportable” positions to the CFTC. Guidance at 45364.