CFTC Staff Letter 17-67: Extension of No-Action Relief from Section 2(h)(8) for Inter-Affiliate Swap Transactions

U.S. COMMODITY FUTURES TRADING COMMISSION
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Div ision of
Market Oversight
CFTC Letter No. 17-67
No-Action
December 14, 2017
Division of Market Oversight
Re: Extension of 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. Miller, Mr. Kennedy and Ms. Brandon:
This letter responds to a request received from the Institute of International Bankers, International Swaps and Derivatives Association, Inc. (“ISDA”), and Securities Industry and Financial Markets Association (together the “Associations”) on behalf of their members and other market participants that engage in inter-affiliate swaps, that the Commodity Futures Trading Commission (“Commission” or “CFTC”) 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, the Associations request that the relief provided under CFTC Letter No. 16-80 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. 16-80 extended relief provided by CFTC Letter Nos. 14-136, 14-26 and 15-62 and will expire on 11:59 p.m. (Eastern Time) December 31, 2017. The Division of Market Oversight (“Division”) continues to assess the situation involving inter-affiliate swap trading and the trade execution requirement, and will thus extend the no￾action relief provided under CFTC Letter No. 16-80 until the earlier of (1) December 31, 2020 at 11:59 pm (Eastern Time) or (2) the effective date of Commission action providing a permanent solution for the execution of inter-affiliate swaps. 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