CFTC Approves Limited-Purpose Swap Dealer Designation for State Street (with Lofchie Comment)

The CFTC granted a limited-purpose swap dealer ("SD") designation to State Street Bank and Trust Company ("SSBT") with respect to its activities in foreign exchange products that are swaps ("FX Products").The CFTC explained that "limited-purpose designations" designates a person as an SD for one type, class, or category of swap or activities without the person being considered an SD for other types, classes, categories or activities. In the present case, SSBT is given relief with respect to its activities in interest rate swaps.

This is the second time the CFTC granted this designation (see link to Cargill designation below).

Lofchie Comment: State Street informed the CFTC that it enters into approximately 20 interest rate swaps a year, all of which will be with CFTC-registered swap dealers (and thus one might guess that a good portion of them would be subject to central clearing). By coincidence, the CFTC's order is subject to 20 conditions (A-T, beginning on approximately page 7 of the order). It seems like administrative overkill to regulate non-dealing interest rate swaps between a bank and registered swap dealers. What is the CFTC trying to guard against and why does it require 20 conditions to do it?

See: CFTC Order of Approval; Press Release.See also: Limited Purpose Designation for Cargill.