CFTC's DSIO Issues Time-Limited No-Action Relief Surrounding FX Transactions of Up to 7 Business Days (CFTC Letter 13-13)

The CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") issued a time-limited no-action letter that provides swap dealers and major swap participants with relief from compliance with External Business Conduct Standards (the "Standards") in connection with certain foreign exchange forwards and swaps that (i) are entered into with an eligible contract participant, (ii) have a settlement cycle of no more than seven local business days and (iii) are entered into prior to September 1, 2013.

The letter provides that the reason for the delay in compliance to the External Business Conduct Standards is to allow market participants more time to distinguish between forward transactions that will become subject to the Standards after September 1 and spot transactions that will not be. As a general matter, transactions that have longer than a two-day settlement period are treated as forwards under the CFTC's rules; however, if the relevant FX transaction is entered into in connection with the settlement of a transaction in foreign securities, it is considered to be a spot trade and thus not subject to the Standards. The delay will allow market participants to build systems that can demonstrate that their FX transactions that extend over a period longer than two days are being entered into in connection with securities trades and thus are not subject to the Standards.

See: CFTC Letter 13-13 (links externally to CFTC website).