CFTC Staff Letter 12-06: Temporary No-Action Relief for Trade Option Exemption Compliance

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5260
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Division of Market Oversight
CFTC Letter No. 12-06
No-Action
August 14, 2012
Division of Market Oversight
Staff No-Action Relief: Temporary Relief for Persons Eligible for the Trade Option Exemption from the Requirements of §§ 32.3(b) and 32.3(c)(1), (3), (4) and (5) of the Commission’s Regulations On April 27, 2012, the Commission published final commodity option rules and interim final rules incorporating a trade option exemption (“TOE IFR”), subject to conditions, from most provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd￾Frank”), 1 the Commodity Exchange Act (“CEA”) 2 and the Commission’s regulations. 3 In that April 27 th release, the Commission reiterated that commodity options are “statutorily defined as swaps” and thus “subject to the same rules applicable to any other swap.”4 However, the Commission added that “if the offeror, the offeree, and the characteristics of the option transaction meet the requirements of the trade option exemption, such option transactions will be exempt from the general Dodd-Frank regime, subject to specified ongoing conditions and compliance requirements discussed below, as applicable.”5 The Commission also advised interested parties that [t]he final rule and interpretations that result from the Product Definitions NPRM will address the determination of whether a commodity option or a transaction with optionality is subject to the swap definition in the first instance. If a commodity option or a transaction with optionality is excluded from the scope of the swap definition, as further defined by the Commission and the SEC, the final rule and/or interim final rule adopted herein are not applicable. 6 On July 10, 2012, the Commission approved joint (with the Securities and Exchange Commission (“SEC”)) final rules and interpretations further defining, among other terms, the