CFTC Staff Letter 17-34: No-Action Relief for Swap Dealers from Margin Rules for Uncleared Swaps with the European Stability Mechanism

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre

1155 21st Street NW, Washington, DC 20581

Telephone: (202) 418-5000

Division of Swap Dealer and
Intermediary Oversight
Eileen T. Flaherty
Director
CFTC Letter No. 17-34

No-Action

July 24, 2017

Division of Swap Dealer and Intermediary Oversight Re: Commission Regulations 23.150-159, 161: No-Action Position with Re￾spect to Uncleared Swaps with the European Stability Mechanism Ladies and Gentlemen:
This letter is in response to a request for a no-action position received by the Division of Swap Dealer and Intermediary Oversight (“DSIO”) of the Commodity Futures Trading Commission (“Commission”) from the European Stability Mechanism (the “ESM”), which enters into swaps with swap dealers (“SDs”) that are registered with the Commis￾sion and subject to the Commission’s rules regarding margin requirements for un￾cleared swaps.1 Specifically, the ESM asked that DSIO provide relief for SDs from the Final Margin Rule (as defined below) when entering into uncleared swaps with the ESM.
I. Regulatory Background
Pursuant to section 4s(e) of the Commodity Exchange Act (“CEA”),2 the Commission is required to promulgate margin requirements for uncleared swaps applicable to each SD for which there is no Prudential Regulator.3 The Commission published the Final Mar￾1 The Commission’s margin requirements for uncleared swaps apply only to SDs and major swap partici￾pants for which there is not a prudential regulator. See 7 U.S.C. 6s(e)(1)(B). SDs and major swap partici￾pants for which there is a prudential regulator must meet the margin requirements for uncleared swaps established by the applicable prudential regulator. 7 U.S.C. 6s(e)(1)(A). See also 7 U.S.C. 1a(39) (defining the term “Prudential Regulator” to include the Board of Governors of the Federal Reserve System; the Of￾fice of the Comptroller of the Currency; the Federal Deposit Insurance Corporation; the Farm Credit Ad￾ministration; and the Federal Housing Finance Agency). The Prudential Regulators published final mar￾gin requirements in November 2015. See Margin and Capital Requirements for Covered Swap Entities, 80 FR 74840 (Nov. 30, 2015). 2 7 U.S.C. § 1 et. seq. 3 See 7 U.S.C. 6s(e)(1)(B).