CFTC Staff Letter 15-62: Extension of No-Action Relief for Inter-Affiliate Swaps

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5000
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Div ision of
Market Oversight
CFTC Letter 15-62
No-Action
November 17, 2015
Division of Market Oversight
Re: Extension of Time-Limited No-Action Relief from Commodity Exchange Act Section 2(h)(8) for Swaps Executed Between Certain Affiliated Entities that Are Not Exempt from Clearing Under Commission Regulation 50.52 Dear Mr. Kennedy:
This letter responds to a request received from the International Swaps and Derivatives Association, Inc. (“ISDA”), on behalf of its members and other market participants that engage in inter-affiliate swaps, that the Commodity Futures Trading Commission (the “Commission” or “CFTC”) exercise its authority pursuant to section 4(c) and other applicable provisions of the Commodity Exchange Act (“CEA”) to establish a permanent exemption for inter-affiliates swaps from the trade execution requirement under CEA section 2(h)(8), irrespective of whether such swaps are cleared or maintained bilaterally in reliance on Commission Regulation 50.52 or another exemption or exception from clearing. In addition, ISDA requests that the relief provided under CFTC Letter No. 14-26 be extended by further no-action in order to allow time for Commission action and to forestall market uncertainty. The no-action relief provided under CFTC Letter No. 14-26 was extended by CFTC Letter No. 14-136 and will expire on 11:59 p.m. (Eastern Time) December 31, 2015. The Division of Market Oversight (“Division”) continues to assess the situation involving inter￾affiliate swap trading and the trade execution requirement, including establishing a permanent solution, and will thus extend the no-action relief provided under CFTC Letter No.14-26 until 11:59 pm (Eastern Time) to December 16, 2016. Background CEA section 2(h)(8) requires that transactions involving swaps subject to the CEA section 2(h)(1) clearing requirement be executed on or pursuant to the rules of 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”). Swaps subject to the trade execution requirement must be 7 U.S.C. § 2(h)(8).