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CFTC Again Delays Package Swaps Exchange Trading Under Dodd-Frank
Practical Law Legal Update w-000-6817 (Approx. 4 pages)
CFTC Again Delays Package Swaps Exchange Trading Under Dodd-Frank
by Practical Law Finance
| Published on 14 Oct 2015 • USA (National/Federal) |
The CFTC issued a further revised timeline for the phase-in of mandatory exchange trading of certain packaged transactions that include a swap component which is subject to the trade execution requirement under Title VII of the Dodd-Frank Act.
On October 14, 2015, the CFTC issued No-Action Letter 15-55 (No-action 15-55), providing a further revised timeline for the phase-in of mandatory exchange trading of certain packaged transactions that include a swap component which is subject to the trade execution requirement under Title VII of the Dodd-Frank Act (see Practice Note, The Dodd-Frank Act: Swap Clearing and Exchange Trading under Title VII).
The relief extends relief granted by the CFTC last year under No-Action Letter 14-137. Many believe the further extension is the result of logistical issues with respect to the exchange trading of package transactions. Some market participants say these logistical issues may never be able to be resolved.
The CFTC's revised timeline for implementation of the Title VII trade execution requirement for package transactions is as follows (note that "MAT" means "made available to trade" and refers to the Title VII trade execution requirement):
Package Transaction Category | Relief Expiration |
MAT/MAT: Each of the components is a swap subject to the trade execution requirement. | Relief expired May 15, 2014 pursuant to CFTC No-Action Letter 14-12. |
MAT/Non-MAT (Cleared): At least one of the components is subject to the trade execution requirement and each of the other components is subject to the clearing requirement. | Relief expired June 1, 2014 pursuant to CFTC No-Action Letter 14-62. |
US Dollar Swap Spreads: Each of the swap components is subject to the trade execution requirement and all other components are US Treasury securities. | Relief expired June 15, 2014 pursuant to CFTC No-Action Letter 14-62. |
MAT/Agency MBS: Each of the swap components is subject to the trade execution requirement and all other components are agency mortgage-backed securities. | Relief expired May 15, 2015 pursuant to CFTC No-action Letter 14-137. |
MAT/New Issuance Bond: At least one individual swap component is subject to the trade execution requirement and at least one individual component is a bond issued and sold in the primary market. | Relief extended under No-action 15-55 from CEA section 2(h)(8) until November 15, 2016. Until that date, the swap components subject to the trade execution requirement are not required to be executed on a SEF or DCM. Relief extended under No-action 15-55 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2016, which permits a SEF or DCM to offer any method of execution for the swap components of the transaction. Relief extended under No-action 15-55 from CFTC Regulation § 37.3(a)(2) until November 15, 2016, which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components of the transaction. |
MAT/Futures: At least one individual swap component is subject to the trade execution requirement and all other components are contracts for the purchase or sale of a commodity for future delivery (futures contracts). This category may include:
| Relief extended under No-action 15-55 from CEA section 2(h)(8) until November 15, 2016. Until that date, the swap components subject to the trade execution requirement are not required to be executed on a SEF or DCM. Relief extended under No-action 15-55 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2016, which permits a SEF or DCM to offer any method of execution for the swap components of the transaction. Relief extended under No-action 15-55 from CFTC Regulation § 37.3(a)(2) until November 15, 2016, which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components of the transaction. |
MAT/Non-MAT (Uncleared): At least one of the swap components is subject to the trade execution requirement and at least one of the components is a CFTC swap that is not subject to the clearing requirement. This category may include:
| Relief extended under No-action 15-55 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2016, which permits a SEF or DCM to offer any method of execution for the swap components of the transaction. Relief extended under No-action 15-55 from CFTC Regulation § 37.3(a)(2) until November 15, 2016, which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components of the transaction. |
MAT/Non-Swap Instruments: At least one of the swap components is subject to the trade execution requirement and at least one of the components is not a swap. This category excludes US Dollar Swap Spreads, MAT/Futures, MAT/Agency MBS, and MAT/New Issuance Bond. This category may include:
| Reliefextended under No-action 15-55 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2016, which permits a SEF or DCM to offer any method of execution for the swap components. Relief extended under No-action 15-55 from CFTC Regulation § 37.3(a)(2) until November 15, 2016, which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components. |
MAT/Non-CFTC Swap: At least one of the swap components is subject to the trade execution requirement and at least one of the components is a swap over which the CFTC does not have exclusive jurisdiction (e.g., a mixed swap and security-based swap (SBS)). | Relief extended under No-action 15-55 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2016, which permits a SEF or DCM to offer any method of execution for the swap components. Relief extended under No-action 15-55 from CFTC Regulation § 37.3(a)(2) until November 15, 2016, which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components. |