CFTC Issues Relief for Brexit-Related Transfer of Legacy Swaps

The CFTC's Market Participants Division and Division of Clearing and Risk jointly issued no-action relief to permit the transfer of certain swaps in connection with Brexit.

The CFTC staff stated that relief is "appropriate to maintain the status quo" for legacy swaps (i.e., swaps entered into prior to an applicable compliance date) made solely to transfer ownership in response to the expiration of the Brexit transition period. The no-action relief covers uncleared swap margin requirements and swap clearing requirements.

As set out in CFTC Letter 20-42, the relief will apply to legacy swaps that meet conditions that include the following: (i) the transfer is solely in connection with planning for or in response to the Brexit transition period, (ii) the transfer is to a "margin affiliate" or a branch or other authorized form of establishment of the transferor, (iii) the parties make no other transfers of the swap, (iv) the amendment does not modify the payment amount calculation methods, the maturity date or the notional amount, (v) the amendment takes effect no earlier than on the date of the letter and (vi) the amendment takes effect no later than one year after the "Brexit Transition Period Expiration Date."

The relief applies to transfers that take effect no earlier than December 4, 2020 (the date of CFTC Letter 20-42) and no later than one year after the Brexit Transition Period Expiration Date (currently December 31, 2020).