CFTC Grants Relief on Cross-Border "U.S. Person" Definition for Swap Dealers

The CFTC Market Participants Division, Division of Clearing and Risk, and Division of Market Oversight ("Divisions") issued no-action relief allowing swap dealers and other market participants to use the 2020 Cross-Border Rule definitions of "U.S. person" and "guarantee" across all swap regulations.

The Institute of International Bankers, ISDA and SIFMA requested the relief, arguing that the Commission's multiple overlapping definitions — including differing definitions in the 2013 Cross-Border Guidance and the Cross-Border Uncleared Margin Rule — created undue compliance burdens, required repeated counterparty representations, and disadvantaged U.S. market participants competitively. The Associations said that swap dealers must collect representations conforming to three different CFTC rulesets, plus SEC and prudential regulator rules, causing confusion among non-U.S. counterparties.

According to the letter, the Divisions agreed that the multiplicity of interpretations imposes undue burdens and that harmonization with the SEC is desirable. The no-action positions permit market participants to: (1) classify counterparties using the 2020 Cross-Border Rule definitions in 17 CFR 23.23 ("Cross-border application") for purposes of the Unaddressed Requirements (clearing, trade execution, real-time reporting, swap data reporting) and CFTC uncleared margin requirements; (2) continue relying on counterparty representations made under the Cross-Border Uncleared Margin Rule or 2013 Guidance prior to the 2020 Cross-Border Rule's effective date for Group B and Group C requirements; and (3) decline to treat non-U.S. counterparties as "conduit affiliates" for Unaddressed Requirements. The relief eliminates the December 31, 2027, expiration date for reliance on prior counterparty representations and permits market participants to disregard the "conduit affiliate" category from the 2013 Guidance.

The relief supersedes prior inconsistent staff letters, including CFTC Staff Letters 20-18, 20-21, 21-09, and 25-16. The positions remain in effect until the Commission promulgates rules addressing the disparate cross-border definitions.

The CFTC said the no-action positions are limited to the issuing Divisions, do not bind the full Commission, and may be modified or withdrawn. The relief is conditioned on the facts and representations presented to staff.