CFTC Staff Letter 17-27: No-Action Relief for SEFs and DCMs Regarding Clerical or Operational Errors

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

CFTC Letter 17-27
No-Action
May 30, 2017
Division of Market Oversight
Division of Clearing and Risk
Re: No-Action Relief for Swap Execution Facilities and Designated Contract Markets in Connection with Swaps with Operational or Clerical Errors Executed on a Swap Execution Facility or Designated Contract Market Ladies and Gentlemen:
This letter responds to a request received from the Wholesale Markets Brokers’ Association, Americas (“WMBAA”)1 that the Division of Market Oversight and the Division of Clearing and Risk (together, the “Divisions”) of the Commodity Futures Trading Commission (“CFTC” or “Commission”) extend the relief provided under CFTC Letter No.16-58, which will expire on 11:59 p.m. (Eastern Time) June 15, 2017. In its request, the WMBAA contends that despite swap execution facility (“SEF”) efforts to continue to work on solutions to reduce operational and clerical errors, 2 market participants continue to encounter circumstances in which a trade is rejected from clearing due to a readily correctible clerical or operational error, resulting in void ab initio treatment, or an error is discovered after a trade has been cleared. The WMBAA does not believe it is likely that market participants will be able to entirely eliminate operational and clerical errors. The WMBAA encourages the Commission to adopt, via a rulemaking, a permanent, practicable process for addressing these types of errors. The WMBAA further requests that, until such permanent solution is achieved, the existing no-action relief be extended. The Divisions continue to consider a permanent solution to clerical and operational errors and, until such permanent solution is achieved, the Divisions will extend the no-action relief provided under CFTC Letter No. 16-58 to SEFs and designated contract markets (“DCMs”)3 until the effective date of revised Commission regulations that establish a permanent, practicable solution for swaps with operational or clerical errors executed on a SEF or DCM.