CFTC Extends Relief on the Applicability of Transaction-Level Requirements in Certain Cross-Border Swaps (with Lofchie Comment)
The CFTC Divisions of Swap Dealer and Intermediary Oversight ("DSIO"), Clearing and Risk, and Market Oversight issued a time-limited no-action letter (CFTC Letter No. 14-140) that extends relief to CFTC-registered swap dealers ("SDs") that are established under the laws of jurisdictions other than the United States ("Non-U.S. SDs") from certain transaction-level requirements under the CEA. The time-limited relief initially was provided in CFTC Letter No. 14-74.
On November 14, 2013, DSIO issued an Advisory ("DSIO Advisory") in response to inquiries from swap market participants regarding the applicability of the CFTC's transaction-level requirements in certain situations. Subsequent to the issuance of the DSIO Advisory, certain Non-U.S. SDs raised concerns regarding compliance with the transaction-level requirements, stating that in order to avoid market disruption for their non-U.S. counterparties, additional time would be necessary to come into compliance.
That relief previously had been extended until December 31, 2014. This letter extends the date of the time-limited no-action relief provided in CFTC Letter No. 14-74 until the earlier of September 30, 2015, or the effective date of any CFTC action with respect to the subjects addressed by the DSIO Advisory.
Lofchie Comment: Had the CFTC not extended the relief, it would have taken many months for firms to comply with the relevant requirements. The withdrawal of market-wide relief is the effective equivalent of the adoption of a rule. Accordingly, it would be better practice for the CFTC to announce its intent with respect to expiring no-action relief substantially in advance of a relevant expiration date. Given how many requirements now need to be cleaned up, giving fair notice of rules' "effective dates" to market participants – including those that are made effective by the expiration of a no-action letter – should be a very high priority.
See: CFTC Letter No. 14-140.