CFTC Staff Letter 20-10: No-Action Position Excluding Certain Commodity Swaps from MSP Registration Threshold for Insured Depository Institutions

CFTC Letter No. 20-10 No-Action March 20, 2020

Division of Swap Dealer and
Intermediary Oversight
Joshua B. Sterling
Director
Re: No-Action Position for Excluding Certain Commodity Swaps from Major Swap Participant Registration Threshold Calculation of an Insured Depository Institution Ladies and Gentlemen:
This letter is issued by the Division of Swap Dealer and Intermediary Oversight (“DSIO”) of the Commodity Futures Trading Commission (“Commission” or “CFTC”) in response to a request from an insured depository institution (“IDI”), “X”. 1 “X” requests conditional, time-limited no-action relief from the requirement to include certain swaps when calculating whether it exceeds a certain threshold specified by Commission regulations and thereby triggering a requirement to register with the Commission as a major swap participant (“MSP”).
I. Regulatory Background
Pursuant to the requirements of section 1a(33) of the Commodity Exchange Act (“CEA”), Commission regulation 1.3 further defines certain terms, including the term “major swap participant” (the “MSP Definition”). Paragraph (1) of the MSP Definition requires registration as an MSP of any person that is not a swap dealer and meets or exceeds one or more thresholds of swap activity set forth in the rule. One such threshold in paragraph (1)(ii)(A) states in relevant part that any person will be an MSP if such person “maintains a substantial position in swaps for any of the major swap categories, excluding … positions held for hedging or mitigating commercial risk.”2 The “major swap categories” for purposes of the MSP Definition are defined in Commission regulation 1.3 as rate swaps, credit swaps, equity swaps, and other commodity swaps.3 As relevant for this letter, a “substantial position” in “other