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CFTC Extends Reporting Relief for Non-U.S. Swap Dealers and Participants

nihal.patel@cwt.com's picture
Commentary by Nihal Patel

The CFTC Division of Market oversight ("DMO") extended previously granted no-action relief to certain non-U.S. swap dealers ("SDs") and major swap participants ("MSPs") from certain swap dealer recordkeeping and reporting rules under CFTC Rules Part 45 and 46 (the "SDR Reporting Rules"). The relief was originally granted by CFTC Letter 13-75 and most recently extended by CFTC Letter 16-79.

The letter provides relief to non-U.S. SDs and non-U.S. MSPs that are (i) established in Australia, Canada, the European Union, Japan or Switzerland, and (ii) not part of an affiliated group in which the ultimate parent entity is U.S.-based. The letter provides relief from the SDR Reporting Rules with respect to swaps that are entered into with non-U.S. counterparties. In the letter, the DMO noted that it has yet to issue comparability determinations for the SDR Reporting Rules, and that outstanding issues have thus far prevented foreign regulators from reaching an arrangement regarding swap data sharing.

The relief was previously scheduled to expire on December 1, 2017. It was extended until the earlier of (i) December 1, 2020, and (ii) 30 days after the issuance of a comparability determination regarding the SDR Reporting Rules for the relevant SD's jurisdiction. The DMO added that it does not "currently intend" to extend the no-action relief beyond December 1, 2020 even if regulators from the relevant jurisdictions have not provided the CFTC with access to foreign trade repository data or provided a substituted compliance determination.

Commentary

This letter continues a recent trend in CFTC staff no-action letters of providing relief through 2020 or until relevant regulatory action is taken by the Commission. This is in contrast to the previous approach, in which letters were frequently extended for one year at a time. The relief in this letter, for example, was first issued in December 2013, and extended once in each subsequent year (generally with only a month or so until the prior relief was to expire).

Notwithstanding that the additional time is helpful to market participants for planning purposes, it's curious here that the staff felt the need to say, three years in advance, that they do not intend to give further relief. A lot can happen in three years.

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