CFTC Further Delays Package Swaps Exchange Trading Under Dodd-Frank | Practical Law

CFTC Further Delays Package Swaps Exchange Trading Under Dodd-Frank | Practical Law

The CFTC issued a further revised timeline for the phase-in of mandatory exchange trading of certain packaged transactions that include a swap component subject to the trade execution requirement under Title VII of the Dodd-Frank Act.

CFTC Further Delays Package Swaps Exchange Trading Under Dodd-Frank

Practical Law Legal Update w-004-3736 (Approx. 4 pages)

CFTC Further Delays Package Swaps Exchange Trading Under Dodd-Frank

by Practical Law Finance
Published on 03 Nov 2016 • 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 subject to the trade execution requirement under Title VII of the Dodd-Frank Act.
On November 1, 2016, the CFTC issued No-Action Letter 16-76 (No-Action 16-76), extending existing no-action relief set out in No-Action Letter 15-55, discussed below. No-Action 16-76 grants relief to entities or counterparties executing the swap component of package transaction categories outlined below until 11:59 p.m. EST on November 15, 2017. For more information on No-Action Letter 15-55, see Legal Update, CFTC Again Delays Package Swaps Exchange Trading Under Dodd-Frank.
The CFTC has decided to extend the relief because regulators still face challenges balancing the utility of package transactions with the policy goals of the trade execution requirement under Title VII of the Dodd-Frank Act.
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 swaps subject to the Title VII trade execution requirement):
Package Transaction Category
Relief Expiration
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 16-76 from CEA section 2(h)(8) until November 15, 2017. 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 16-76 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2017, which permits a SEF or DCM to offer any method of execution for the swap components of the transaction.
Relief extended under No-action 16-76 from CFTC Regulation § 37.3(a)(2) until November 15, 2017, 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:
  • MAT swap v. Treasury futures
  • MAT swap v. Eurodollar futures
Relief extended under No-action 16-76 from CEA section 2(h)(8) until November 15, 2017. 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 16-76 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2017, which permits a SEF or DCM to offer any method of execution for the swap components of the transaction.
Relief extended under No-action 16-76 from CFTC Regulation § 37.3(a)(2) until November 15, 2017, 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 16-76 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2017, which permits a SEF or DCM to offer any method of execution for the swap components of the transaction.
Relief extended under No-action 16-76 from CFTC Regulation § 37.3(a)(2) until November 15, 2017, 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 Bonds. This category may include:
  • MAT swap v. single-name CDS
  • MAT swap v. bond (secondary market transaction)
Relief extended under No-action 16-76 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2017, which permits a SEF or DCM to offer any method of execution for the swap components.
Relief extended under No-action 16-76 from CFTC Regulation § 37.3(a)(2) until November 15, 2017, 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 16-76 from CFTC Regulation § 37.9 and CEA section 5(d)(9) until November 15, 2017, which permits a SEF or DCM to offer any method of execution for the swap components.
Relief extended under No-action 16-76 from CFTC Regulation § 37.3(a)(2) until November 15, 2017, which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components.