CFTC Provides No-Action Relief (Letter 13-10) from Swap Data Reporting Requirements to Swap Counterparties that Are Not SDs or MSPs (with Lofchie Comment)

The CFTC Division of Market Oversight ("DMO") announced the issuance of a no-action letter providing swap counterparties that are not swap dealers or major swap participants ("non-SD/MSP counterparties") with certain relief from the reporting requirements of the CFTC's swap data reporting rules. The DMO's no-action letter provides non-SD/MSP counterparties that are not "financial entities," as defined in Section 2(h)(7)(C) of the Commodity Exchange Act ("non-financial swap counterparties"), with reporting relief under Part 43 (Real Time Public Reporting) and Part 45 (Swap Data Recordkeeping and Reporting) (i) for interest rate and credit swaps, until July 1, 2013, and (ii) for equity, foreign exchange and other commodity swaps, until August 19, 2013. In addition, the no-action letter provides non-financial swap counterparties with reporting relief under Part 46 (Recordkeeping and Reporting for Historical Swaps) for all swap asset classes until October 31, 2013.

Lofchie Comment: The truly difficult question for a practicing in-house lawyer making real-world compliance decisions is not what this requirement means, but how much money and time must be spent developing compliance systems to meet rule requirements that are impractical as adopted, subject to unworkable schedules, and pushed back at the last minute. This decision as to how much in the way of real dollars should be spent to comply with potentially illusory deadlines is particularly acute as to the Part 46 Rules. Query: what possible regulatory benefit is there in forcing firms to provide information as to swaps that happened to be in existence as of April 25, 2011, and that may have been entered into years before that. Write your Congressperson and ask the CFTC to explain the purpose of this rule and whether it can be cost-justified. (In particular, if end users were to send the CFTC the required information, would the CFTC even have the facilities to store and collate the information, never mind make use of it?)

See: CFTC Letter No. 13-10.