CFTC Staff Letter 16-10: Time-Limited No-Action Relief for End Users from Form TO Filing Requirement

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5260
Facsimile: (202) 418-5527
Division of
Market Oversight
CFTC Letter 16-10
No-Action
February 18, 2016
Division of Market Oversight
Time-Limited No-Action Relief for End Users from the Form TO Filing Requirement under § 32.3(b)(2) of the Commission’s Regulations Commission regulation § 32.3 provides that commodity options that qualify as trade options are generally exempt from the swap requirements of the CEA and the Commission’s regulations, subject to certain specified conditions. To qualify for the trade option exemption, a commodity option transaction must meet the following requirements: (1) the offeror is either an eligible contract participant (“ECP”)1 or a producer, processor, commercial user of, or merchant handling the commodity that is the subject of the commodity option transaction, or the products or byproducts thereof (a “commercial party”) that offers or enters into the commodity option transaction solely for purposes related to its business as such; (2) the offeree is, and the offeror reasonably believes the offeree to be, a commercial party that is offered or enters into the transaction solely for purposes related to its business as such; and (3) the option is intended to be physically settled so that, if exercised, the option would result in the sale of an exempt or agricultural commodity2 for immediate or deferred shipment or delivery.3 Pursuant to Commission regulation § 32.3(b)(1), the determination as to whether a trade option must be reported pursuant to the swaps reporting requirements of part 45 of the Commission’s regulations is based on the status of the parties to the trade option and whether or not they have previously reported swaps to an appropriate swap data repository (“SDR”) pursuant to part 45. If a trade option involves at least one counterparty (whether as buyer or seller) that has (1) become obligated to comply with the reporting requirements of part 45, (2) as a reporting party, (3) during the twelve month period preceding the date on which the trade option is entered into, (4) in connection with any non-trade option swap trading activity, then such trade option must also be reported pursuant to the reporting requirements of part 45. If only one counterparty to a trade option has previously complied with the part 45 reporting provisions, as described above, then that counterparty shall be the part 45 reporting counterparty for the