CFTC Issues a Time-Limited No-Action Letter Regarding CDS Clearing Swaps (CFTC Letter 13-86) (with Lofchie Comment)

The CFTC's Division of Market Oversight ("DMO") issued a no-action letter relating to certain occasional off-facility cleared credit default swaps ("CDSs") that are entered into pursuant to DCO's rules on the price submission process for determining end-of-day settlement prices for cleared CDSs. The letter provided no-action relief to a DCO for failure to register as a SEF pursuant to CFTC Rule 37.3 ("Requirements and Procedures for Registration"), or any DCO clearing member for entering into a swap through the DCO's CDS Settlement Price Process and not on a SEF or a DCM for CDS Clearing-Related Swaps, even if such swap is subject to trade execution requirement pursuant CEA Section 2(h)(8) ("Jurisdiction of Commission; Liability of Principal for Act of Agent; Commodity Futures Trading Commission; Transaction in Interstate Commerce").

Additionally, the letter extended relief granted in no-action letters 12-59 and 13-36 regarding the reporting requirements in CFTC Part 45 ("Swap Data Recordkeeping and Reporting Requirements"). The letter stated that the relief will expire on September 30, 2014.

Lofchie Comment: There is no policy issue at stake for this letter to be time-limited. There is no reason for the trades to be entered into on an exchange - since they result from the rules of a clearing corporation and not from ordinary supply and demand - and there is nothing scheduled to happen on September 30, 2014 to make the no-action letter moot. This time limitation is arbitrary.

See: CFTC Letter 13-86; Press Release.Related news: CFTC Issues Time-Limited No-Action Relief for SDs and MSPs from the Reporting Provisions of CFTC Rules Part 45 for CDS Clearing-Related Swaps (December 19, 2012); CFTC Issues Extension of Time-Limited No-Action Relief for SDs and MSPs from the Reporting Requirements of Part 45 for CDS Clearing-Related Swaps (Letter 13-36) (June 28, 2013).