CFTC Staff Letter 20-45: No-action relief extending section 2(h)(8) exemption for inter-affiliate swaps

CFTC LETTER NO. 20-45 NO-ACTION DECEMBER 17, 2020

Division of
Market Oversight

Dorothy DeWitt
Director
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 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”) extend the relief provided under CFTC Letter No. 17-67 until the Commission makes a decision with respect to the applicability of the trade execution requirement to inter-affiliate trades. The no-action relief provided under CFTC Letter No. 17-67 extended relief provided by CFTC Letter Nos. 14-136, 14-26, 15-62, and 16-80 and will expire on 11:59 p.m. (Eastern Time) December 31, 2020. On December 7, 2020, the Commission adopted a final rule (the “Rule”) establishing two exemptions from the trade execution requirement. The first such trade execution exemption applies to a swap that qualifies for, and meets the associated requirements of, any exception or exemption under part 50 of the Commission’s regulations. The second codifies relief provided under CFTC Letter No. 17-67, and prior staff letters, and applies to a swap that is entered into by eligible affiliate counterparties and cleared, regardless of the affiliates’ ability to claim the Inter￾Affiliate Clearing Exemption (as defined below) under Commission regulation 50.52. The Rule will become effective 30 days after its publication in the Federal Register. As the effective date of the Rule is after the expiration of CFTC Letter No. 17-67, the Division of Market Oversight (“Division” or “DMO”), pursuant to Commission regulation 140.99, will extend the no-action relief provided under CFTC Letter No. 17-67 until the effective date of the Rule.