CFTC Provides No-Action Relief for "Package Transactions" (CFTC Letter 14-62)

The CFTC Divisions of Market Oversight and of Clearing and Risk announced further implementation of the trade execution requirement for certain interest rate and credit default swaps. Beginning on May 16, 2014, market participants executing swaps subject to the trade execution requirement that are part of a "package transaction" must be executed on a swap execution facility ("SEF") or designated contract market ("DCM") pursuant to a phased compliance timeline provided in CFTC Letter 14-62.

The phased compliance timeline in Letter 14-62 provides that:

• for package transactions in which all components are swaps that have been made available to trade and are subject to the trade execution requirement, relief will be available until May 15, 2014;
• for package transactions in which the components include at least one swap component that has been made available to trade and is subject to the trade execution requirement, and in which all other components are swaps subject to the clearing requirement under CEA Section 2(h)(1)(A) and CFTC Rule 50.4, relief will be provided until June 1, 2014;
• for package transactions in which the swap components have been made available to trade and are subject to the trade execution requirement and all other components are U.S. Treasury securities ("U.S. Dollar Swap Spreads"), relief will be provided until June 15, 2014;
• for package transactions (excluding U.S. Dollar Swap Spreads) in which the components include at least one swap component that has been made available to trade and is subject to the trade execution requirement, and at least one component that is not a swap, relief will be provided until November 15, 2014;
• for package transactions in which the components include at least one swap component that has been made available to trade and is subject to the trade execution requirement, and at least one swap component that is under the CFTC's jurisdiction and not subject to the clearing requirement under CEA Section 2(h)(1)(A) and CFTC Rule 50.4, relief will be provided until November 15, 2014;
• for package transactions in which the components include at least one swap component that has been made available to trade and is subject to the trade execution requirement, and at least one swap component that is a swap over which the CFTC does not have exclusive jurisdiction, relief will be provided until November 15, 2014.

Additionally, further time-limited relief is provided for the clearing of package transactions as follows:

• If an SEF or DCM permits a new trade with terms and conditions that match those of the original trade to be submitted for clearing (other than the time of execution), SEFs and DCMs will have relief from CFTC Rule 37.9(a)(2), regarding methods of execution for required or permitted transactions, and CFTC Rules 37.203(a) and 38.152, which prohibit prearranged trading. This relief would be provided from May 16, 2014 until September 30, 2014.

See: CFTC Letter 14-62; CFTC Press Release.
Related news: CFTC Hosts Public Roundtable on Trade Execution Requirement and Package Transactions (with Delta Strategy Group Summary) (February 13, 2014) CFTC Publishes Guidance, No-Action Letter and Interim Final Rule to Promote Trading on SEFs and Support an Orderly Transition to Mandatory Trading (CFTC Letter 14-12) (February 10, 2014) MFA Submits Letter to CFTC Requesting Relief for Package Transactions (January 27, 2014); MFA Submits Suggestions to CFTC on MAT Submissions (with Lofchie Comment) (November 25, 2013); SIFMA and ISDA Criticize SEFs' Made-Available-to-Trade Submissions (with Lofchie Comment) (November 21, 2013).