CFTC Grants No-Action Relief for UBS-CS Legacy Swaps Transferred Under UK Law
The CFTC Market Participants Division and the Division of Clearing and Risk (the "Divisions") issued no-action relief from swaps margin rule and mandatory clearing requirements related to legacy swaps affected by the merger of UBS Group AG ("UBS") and Credit Suisse Group AG ("CS") and the winding down of Credit Suisse International.
The Divisions stated that the relief reflects the "unique circumstances" of the UBS-CS merger—a transaction that was supported by Swiss authorities to preserve financial stability following Credit Suisse's distress in March 2023. According to the letter, without such relief as to the swaps, the transfer could inadvertently strip the swaps of their "legacy" status, triggering costly compliance requirements and operational disruptions.
In No-Action Letter 25-12, the Divisions said the relief applies to swaps transferred pursuant to a statutory transfer under Part VII of the UK Financial Services and Markets Act of 2000 ("Part VII Transfer").
The Divisions stated that this relief is limited to swaps that:
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were entered into prior to applicable compliance dates under the CFTC's margin and clearing rules;
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are not otherwise materially amended; and
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are transferred solely due to the winddown of CSI following UBS' acquisition of CS.
Further, the Divisions explained that for margin legacy swaps, the transfers would not, by itself, trigger margin requirements under CFTC Rules 23.150–23.161 ("Scope"), provided that the swap remains otherwise unamended and the transfer is court-approved. For clearing legacy swaps, the Divisions confirmed that the transfer alone would not trigger mandatory clearing obligations under CFTC Rules 50.2 ("Treatment of swaps subject to a clearing requirement") and Rule 50.4 (Classes of swaps required to be cleared"), so long as the swaps are not otherwise altered beyond the transfer from CSI to UBS.
The no-action relief is conditioned upon: (i) the transfer occurring pursuant to the UK court-approved Part VII Transfer; (ii) no material amendments to the swaps beyond those necessary for effecting the transfer; and (iii) the effective date of transfer being no earlier than April 15, 2025.