CFTC Staff Letter 16-80: Extension of No-Action Relief for Inter-Affiliate Swap Trade Execution

U.S. COMMODITY FUTURES TRADING COMMISSION
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Division of
Market Oversight
CFTC Letter 16-80

No-Action

November 28, 2016

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 Ms. Rozenberg:
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 (“Commission” or “CFTC”) exercise its authority pursuant to section 4(c) and other applicable provisions of the Commodity Exchange Act (the “Act”) to establish a permanent exemption for inter-affiliate swaps from the trade execution requirement under section 2(h)(8) of the Act, 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. 15-62 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. 15-62 extended relief provided by CFTC Letter Nos. 14-136 and 14-26 and will expire on 11:59 p.m. (Eastern Time) December 16, 2016. 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.15- 62 until 11:59 pm (Eastern Time) on December 31, 2017. Background
Section 2(h)(8) of the Act requires that transactions involving swaps subject to the
clearing requirement set forth under 2(h)(1) of the Act 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
section 2(h)(7) of the Act (the “trade execution requirement”).
1 Swaps subject to the trade
7 U.S.C. § 2(h)(8). 1