CFTC Staff Letter 14-26: Time-Limited No-Action Relief from Trade Execution Requirements for Eligible Affiliate Counterparties

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5000
Facsimile: (202) 418-5521 www.cftc.gov
Division of
Market Oversight
CFTC Letter No 14-26
No-Action
March 6, 2014
Division of Market Oversight
Time-Limited No-Action Relief from the Commodity Exchange Act Section 2(h)(8) for Swaps Executed Between Certain Affiliated Entities Not Electing Commission Regulation § 50.52 Dear Mr. Pickel:
This letter responds to a request received from the International Swaps and Derivatives Association (“ISDA”), dated February 19, 2014, to the Division of Market Oversight (the “Division”) of the Commodity Futures Trading Commission (the “Commission”). Among other requests, 1 ISDA seeks no-action relief from the trade execution requirement in Commodity Exchange Act (“CEA”) section 2(h)(8) on behalf of members and other market participants that engage in “inter-affiliate”2 swaps. Background Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) 3 amended the CEA to establish a comprehensive new regulatory framework for swaps. Among other things, CEA section 2(h)(8) requires that transactions involving swaps subject to the CEA section 2(h)(1) clearing requirement be executed on a designated contract market (“DCM”) or swap execution facility (“SEF”), unless no DCM or SEF makes such swaps available to trade or such swaps qualify for the clearing exception under CEA section 2(h)(7) (the “trade execution requirement”). 4