No-action Relief on SEF Transaction Confirmations Issued by CFTC | Practical Law

No-action Relief on SEF Transaction Confirmations Issued by CFTC | Practical Law

The CFTC issued no-action relief to SEFs from certain requirements relating to uncleared swap transaction confirmations under CFTC Regulation 37.6(b).

No-action Relief on SEF Transaction Confirmations Issued by CFTC

Practical Law Legal Update 4-578-9505 (Approx. 3 pages)

No-action Relief on SEF Transaction Confirmations Issued by CFTC

by Practical Law Finance
Published on 25 Aug 2014 • USA (National/Federal)
The CFTC issued no-action relief to SEFs from certain requirements relating to uncleared swap transaction confirmations under CFTC Regulation 37.6(b).
On August 19, 2014, the CFTC's Division of Market Oversight (DMO) issued No-action Letter 14-108 (No-action 14-108), which provides relief to SEFs from certain data reporting and recordkeeping requirements relating to transaction confirmations required for uncleared swaps executed on or pursuant to the rules of a SEF under CFTC regulations 37.6(b). CFTC Regulation 37.6(b) requires SEFs to provide each counterparty to a transaction with a written record of all the terms of the transaction, which legally supersedes any previous agreement and serves as a confirmation of the transaction. The relief expires at midnight on September 30, 2015 (EST).
The SEFs requested relief since not all SEFs are prepared to issue confirmations that include all terms of a swap transaction since:
  • Some SEFs do not have access to the relevant non-economic terms of a transaction.
  • It is not clear how SEFs will access the ISDA Master Agreements that contain terms that need to be included in the confirmation.
SEFs also requested clarification as to which individual terms must be included in the confirmation and requested time to standardize terms.
No-action 14-108 grants relief to SEFs from the requirements that:
  • Underlying, previously negotiated agreements, such as ISDA Master Agreements, that are incorporated by reference into the transaction confirmation must be submitted to the SEF by the parties to the transaction prior to the execution of the relevant swap transaction.
  • SEFs must obtain copies of the incorporated underlying agreements as required under the recordkeeping provisions of CFTC Regulations 37.1000, 37.1001 and 45.2 by the time of execution.
As a condition to the relief, the underlying agreements must be available to CFTC staff upon request within a reasonable amount of time.