MFA, ICI, SIFMA and IA Assoc. Joint Comment Letter to CFTC on the Netting of Uncleared Swaps for Purposes of Commodity Pool Calculation

A number of trade associations jointly submitted a letter to the CFTC's Director of the Division of Swap Dealer and Intermediary Oversight requesting that the Division grant relief to permit sponsors of registered investment companies and privately offered investment funds to net certain uncleared swaps held by a fund when applying the net notional test in amended CFTC Rules 4.5 or 4.13(a)(3). Specifically, the associations request that a fund be permitted to net uncleared swaps for purposes of the net notional test, provided that:

(1) the termination dates of offsetting swaps are the same; and
(2) the reference asset or rate for the offsetting swaps is the same.

The letter would not require that the notional amounts of the swap be identical; where the amounts did not match, the fund would include the excess of the larger over the smaller swap in its calculations for purposes of determining whether it must register. That is, if a fund were "long" 100 notional on asset X with dealer A and "short" 50 notional on asset X with dealer B, the fund would treat itself as having 50 notional of exposure for purposes of calculating whether it is required to register as a commodity pool.

Click hereto view letter in full (links externally to MFA website).
See generally: Lofchie's Guide to CPO/CTA Regulation:Who Must Register as a Commodity Pool.