CFTC Extends No-Action Relief for "Package Transactions" (CFTC Letter 14-137)
The CFTC Division of Market Oversight announced further implementation of the trade execution requirement for certain interest rate and credit default swaps.
In Letter 14-62, the CFTC provided no-action relief previously for certain swaps required to be traded on a swap execution facility ("SEF") or designated contract market ("DCM") to the extent that those swaps were part of a package transaction.
The CFTC determined that additional relief is necessary to provide market participants with adequate time to comply fully with the trade execution requirement with respect to swap components of certain categories of package transactions, pursuant to CEA Sections 2(h)(8) and 5(d)(9) and CFTC Rule 37.9. The extended relief is arranged by category and with varying terms of extension, as set out below:
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Package Transaction Category |
Relief Expiration |
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1. MAT/MAT: Each of the components is a swap that is subject to the trade execution requirement. |
Relief expired May 15, 2014 with the expiration of CFTC Letter 14-12. |
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2. MAT/Non-MAT (Cleared): At least one of the components is subject to the trade execution requirement, and each of the other components is subject to the clearing requirement. |
Relief expired June 1, 2014, pursuant to Package Transaction NAL 14-62. |
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3. U.S. Dollar Swap Spreads: Each of the swap components is subject to the trade execution requirement, and all other components are U.S. Treasury securities. |
Relief expired June 15, 2014, pursuant to Package Transaction NAL 14-62. |
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4. MAT/Agency MBS: Each of the swap components is subject to the trade execution requirement, and all other components are agency mortgage-backed securities. |
Relief from CEA section 2(h)(8) until May 15, 2015. Under this relief, swap components that are subject to the trade execution requirement are not required to be executed on an SEF or DCM. Relief from Commission Regulation § 37.9 and CEA section 5(d)(9) until May 15, 2015, which permits an SEF or DCM to offer any method of execution for the swap components that are subject to the trade execution requirement. |
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5. MAT/Non-MAT (Uncleared): At least one of the swap components is subject to the trade execution requirement, and at least one of the components is a CFTC swap that is not subject to the clearing requirement. This category may include:
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Relief from CEA section 2(h)(8) until February 15, 2015. Under this relief, the swap components that are subject to the trade execution requirement are not required to be executed on an SEF or DCM. Relief from Commission Regulation § 37.9 and CEA section 5(d)(9) until February 12, 2016 which permits an SEF or DCM to offer any method of execution for the swap components. Relief from Commission Regulation § 37.3(a)(2) until February 12, 2016, which permits SEFs not to offer an Order Book as minimum trading functionality for the swap components. |
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6. MAT/Non-Swap Instruments: At least one of the swap components is subject to the trade execution requirement, and at least one of the components is not a swap. This category excludes U.S. Dollar Swap Spreads, MAT/Futures, MAT/Agency MBS and MAT/New Issuance Bonds. This category may include:
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Relief from CEA section 2(h)(8) until February 15, 2015. Under this relief, the swap components that are subject to the trade execution requirement are not required to be executed on an SEF or DCM. Relief from Commission Regulation § 37.9 and CEA section 5(d)(9) until February 12, 2016, which permits an SEF or DCM to offer any method of execution for the swap components. Relief from Commission Regulation § 37.3(a)(2) until February 12, 2016, which permits SEFs not to offer an Order Book as a minimum trading functionality for the swap components. |
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7. MAT/Non-CFTC Swap: At least one of the swap components is subject to the trade execution requirement, and at least one of the components is a swap over which the CFTC does not have exclusive jurisdiction (e.g., a mixed swap). |
Relief from CEA section 2(h)(8) until February 15, 2015. Under this relief, the swap components that are subject to the trade execution requirement are not required to be executed on an SEF or DCM. Relief from Commission Regulation § 37.9 and CEA section 5(d)(9) until February 12, 2016, which permits an SEF or DCM to offer any method of execution for the swap components. Relief from Commission Regulation § 37.3(a)(2) until February 12, 2016, which permits SEFs not to offer an Order Book as a minimum trading functionality for the swap components. |
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8. MAT/New Issuance Bond: At least one individual swap component is subject to the trade execution requirement, and at least one individual component is a bond issued and sold in the primary market. |
Relief from CEA section 2(h)(8) until February 12, 2016. Under this relief, the swap components that are subject to the trade execution requirement are not required to be executed on an SEF or DCM. Relief from Commission Regulation § 37.9 and CEA section 5(d)(9) until February 12, 2016, which permits an SEF or DCM to offer any method of execution for the swap components. Relief from Commission Regulation § 37.3(a)(2) until February 12, 2016, which permits SEFs not to offer an Order Book as a minimum trading functionality for the swap components. |
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9. MAT/Futures: At least one individual swap component is subject to the trade execution requirement, and all other components are contracts for the purchase or sale of a commodity for future delivery (i.e., futures contracts). This category may include:
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Relief from CEA section 2(h)(8) until November 14, 2015. Under this relief, the swap components that are subject to the trade execution requirement are not required to be executed on an SEF or DCM. Relief from Commission Regulation § 37.9 and CEA section 5(d)(9) until November 14, 2015, which permits an SEF or DCM to offer any method of execution for the swap components. Relief from Commission Regulation § 37.3(a)(2) until November 14, 2015, which permits SEFs not to offer an Order Book as a minimum trading functionality for the swap components. |
See: CFTC Letter: 14-137.Related news: CFTC Provides No-Action Relief for "Package Transactions" (CFTC Letter 14-62) (with Patel Comment) (May 1, 2014) SIFMA AMG Submits Comments to CFTC Requesting Extended Relief Regarding the Execution of Package Transactions (October 22, 2014); MFA Submits Request to CFTC for No-Action Relief from Trade Execution Requirement for Package Transactions (October 15, 2014); 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).