CFTC Approves Final Regulations Governing Clearing Exemption for Swaps Between Certain Affiliated Entities and Provides No-Action Relief From Certain Reporting Requirements for Certain Inter-Affiliate Swaps

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On April 1, 2013, the Commodity Futures Trading Commission (“CFTC”) approved a final rule (Regulation 50.52) exempting swaps between certain affiliated entities from the clearing requirements of the Commodity Exchange Act (“CEA”) and CFTC regulations. This rule will become effective on June 10, 2013.1 Additionally, on April 5, 2013, the CFTC issued a no-action relief letter, having immediate effect, exempting parties from certain reporting requirements in connection with intra-group swaps, subject to certain conditions discussed below.

Clearing Requirement -

Section 723(a)(3) of the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the CEA making it unlawful for any person to engage in a swap unless that person submits the swap to a derivatives clearing organization (“DCO”) that is either registered or exempt from registration under the CEA, if the swap is required to be cleared. A swap is required to be cleared if it is accepted for clearing by a DCO and the CFTC has determined that the swap must be cleared. End-users currently have a clearing exception, if they satisfy certain requirements; however, most other market participants remain subject to the mandatory clearing requirement. This new rule approved by the CFTC offers a new clearing exemption. Specifically, this final rule exempts swaps between certain affiliated entities within a corporate group (“inter-affiliates”) from the clearing requirement.

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Topics:  CEA, CFTC, Derivatives Clearing Organizations, Dodd-Frank, GAAP, IFRS, Mandatory Clearing Requirements, No-Action Letters, Reporting Requirements, Swaps

Published In: Finance & Banking Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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