On December 21, 2015, the CFTC issued CFTC Letter 15-67 (Letter 15-67), which provides that trades executed on a swap execution facility (SEF) or designated contract market (DCM) must be routed to and received by a clearinghouse (registered derivatives clearing organization (DCO)) no more than ten minutes after execution of the trade, effective August 1, 2016.

Swaps must be cleared “as quickly as technologically practicable” (AQATP) under CFTC regulations. Trades may be promptly submitted directly to a DCO through either:

The AQATP standard may now be met, as specified in Letter 15-67, under the new ten-minute time frame.

Letter 15-67 was issued in response to a July 27, 2015 letter from ISDA regarding the use of fully automated systems for straight-through processing and affirmations of SEF cleared swaps. Letter 15-67 supplements a previous 2013 Staff Guidance on Swaps Straight-Through Processing, amending the timing of receipt of the trade for clearing.

While trades that are submitted directly to a DCO by a SEF or DCM are typically cleared within seconds of execution, some trades that are routed through third-party hubs undergo a manual post-execution affirmation process. The CFTC believes that the AQATP standard must take into account the need to minimize errors in order to facilitate prompt and efficient transaction processing. This post-execution affirmation process is helpful to identify errors before a trade is submitted for clearing. Currently, the time for this process ranges from minutes to overnight.

However, ISDA and other industry participants indicated to the CFTC that the industry should be able to review all swaps within 10 minutes after execution by no later than August 1, 2016.

The CFTC notes that not all trades will need the entire ten minutes for routing and where possible, trades should be affirmed fully immediately after execution. Additionally, the CFTC notes in the letter that further modification of this time frame may be necessary as the industry continues to reduce the necessary time for transaction processing.

This time frame does not affect the reporting obligations of SEFs and DCMs included in CFTC Regulations Parts 43 and 45 (real-time public reporting and SDR regulatory reporting, respectively (see Practice Note, US Derivatives Regulation: CFTC Swap Data Reporting and Recordkeeping Rules).

For more information on the AQATP standard, see the CFTC's final rule on Customer Clearing Documentation, Timing of Acceptance for Clearing, and Clearing Member Risk Management .

Letter 15-67 relates to the following CFTC regulations:

For more information on the timing of SEF and DCO swaps for clearing, see Legal Updates: