CFTC Issues No-Action Relief Relating to Certain CDS Clearing-Related Swaps Executed Pursuant to a CDS Settlement Price Process (CFTC Letter 14-119)

The CFTC Division of Market Oversight ("DMO") issued an extension to No-Action Letter 13-86. CFTC Letter 13-86 provides time-limited relief relating to certain occasional, off-facility, cleared credit default swaps ("CDS") that are entered into pursuant to the rules of a derivative clearing organization ("DCO") related to its price submission process for determining end-of-day settlement prices for cleared CDS.

Letter 14-119 provides, subject to certain specified conditions, the following relief:

• the DMO will not recommend enforcement against a DCO for failure to register as an SEF pursuant to CFTC Rule 37.3 ("Requirements and Procedures for Registration");
• the DMO will not recommend enforcement against any DCO clearing member for entering into a swap through the DCO's CDS Settlement Price Process and not on an SEF or a designated contract market ("DCM"), even if such swap is subject to CEA Section 2(h)(8)'s trade execution requirement; and
• the DMO will not recommend enforcement against a reporting counterparty for failure to comply with its obligations to report swap data as required by CFTC Rules Part 45 ("Swap Data Recordkeeping and Reporting Requirements") for CDS Clearing-Related Swaps.

The CFTC stated that the extension is intended to "provide a reasonable amount of time for DCOs relying on the relief to obtain additional experience using the CDS Settlement Price Process, to collect additional price data, and to consider possible viable alternatives . . . which can assist the Commission in considering a permanent approach to this issue."

All relief provided by the letter will expire on September 30, 2015, or on the effective date of any CFTC action to facilitate a longer-term approach to establishing settlement prices for CDS.

See: CFTC Letter 14-119; CFTC Press Release.