CFTC Further Extends Relief from Advisory on Transaction-level Requirements for Non-US Swap Dealers | Practical Law

CFTC Further Extends Relief from Advisory on Transaction-level Requirements for Non-US Swap Dealers | Practical Law

The CFTC further extended to September 30, 2015 relief previously granted to non-US swap dealers (SDs) from certain Dodd-Frank swap transaction-level requirements applicable to swaps entered into by SDs with non-US persons that are not guaranteed affiliates or conduit affiliates of a US person when the swap is negotiated, arranged or executed in the US. The rule was the subject of a controversial 2013 staff advisory which was upheld in federal court earlier this year.

CFTC Further Extends Relief from Advisory on Transaction-level Requirements for Non-US Swap Dealers

by Practical Law Finance
Published on 20 Nov 2014 • USA (National/Federal)
The CFTC further extended to September 30, 2015 relief previously granted to non-US swap dealers (SDs) from certain Dodd-Frank swap transaction-level requirements applicable to swaps entered into by SDs with non-US persons that are not guaranteed affiliates or conduit affiliates of a US person when the swap is negotiated, arranged or executed in the US. The rule was the subject of a controversial 2013 staff advisory which was upheld in federal court earlier this year.
On November 14, 2014, the CFTC released No-action Letter 14-140 (No-action 14-140), further extending to September 30, 2015 relief previously granted to non-US swap dealers (SDs) from certain Dodd-Frank swap transaction-level requirements applicable to swaps entered into by SDs with non-US persons that are not guaranteed affiliates or conduit affiliates of a US person when the swap is negotiated, arranged or executed in the US. The rule was the subject of a controversial 2013 staff advisory which was upheld in federal court earlier this year (see Legal Update, CFTC Cross-border Swaps Rules Upheld in Court).
This relief was originally issued by the CFTC in response to market outcry over the 2013 staff advisory (see Legal Update, CFTC Closes Cross-border Swaps Compliance Loophole). No-action 14-140 extends the relief granted in No-action Letters 14-74, 14-01 and 13-71 (see Legal Updates, CFTC Extends Relief for Non-US Swap Dealers from Dodd-Frank Transaction-level Requirements and CFTC Issues Relief from Recent Cross-border Swaps Advisory and Requests Public Comments).
Transaction-level requirements include swap clearing and real-time data reporting requirements (see Practice Note, The Dodd-Frank Act: Cross-border Application of Swaps Rules: Transaction-level Requirements).
No-action 14-140 recommends that the CFTC take no action against a non-US SD for failure to comply with:
  • All transaction-level requirements, if the swap is entered into with a non-US SD that is not registered with the CFTC.
  • All transaction-level requirements except for the following, if the swap is entered into with a non-US SD that is registered with the CFTC:
    • multilateral portfolio compression requirements under 17 CFR 23.503; and
    • swap trading relationship requirements under 17 CFR 23.504.
For details on these requirements, see Practice Note, The Dodd-Frank Act: Final Internal Business Conduct (IBC) Rules on Documentation, Confirmation, Reconciliation and Compression for Swap Dealers and MSPs.
In No-action Letter 13-71, the CFTC issued relief for these swaps from transaction-level requirements until January 14, 2014. In No-action Letter 14-01, that no-action relief was extended until September 15, 2014. The relief was further extended under No-action Letter 14-74 until December 31, 2014.
No-action 14-140 again extends the relief granted by No-action 14-74, this time to the earlier of:
  • September 30, 2015; or
  • the effective date of further CFTC action with respect to these issues.