The Commodity Futures Trading Commission’s Division of Market Oversight (DMO) has issued CFTC Letter No. 14-15, which provides temporary no-action relief for (i) multilateral trading facilities (MTFs) overseen by regulators in the European Union from the requirement to register with the CFTC as a swap execution facility (SEF) and (ii) parties executing swaps on MTFs from the trade execution requirement set forth in Section 2(h)(8) of the Commodity Exchange Act (CEA). This temporary relief is available until the earlier of the date when DMO issues a letter granting an MTF’s request pursuant to CFTC Letter No. 14-16 (as described below) or March 24, 2014. CFTC Letter No. 14-15 is available here.

Simultaneously, DMO and the CFTC’s Division of Swap Dealer and Intermediary Oversight jointly issued CFTC Letter No. 14-16, which establishes relief for an MTF seeking an exemption from SEF registration requirements under the CEA and CFTC regulations. To obtain relief, an MTF must submit a request that certifies the following: 

  • The MTF complies with pre-trade price transparency requirements established by its home country regulator which are comparable to SEF requirements relating to order book and request for quote functionality.   
  • The MTF complies with impartial access and oversight requirements established by its home country regulator. The impartial access and oversight requirements must be comparable to SEF requirements relating to non-discriminatory access by market participants, rule enforcement, monitoring, emergency authority and system safeguards. 
  • The MTF complies with the block size requirements set forth in CFTC regulations and reports swap data in accordance with Parts 43 and 45 of CFTC regulations as if the MTF were a SEF. 
  • The MTF routes transactions that are required to be cleared pursuant to CEA and CFTC requirements to a derivatives clearing organization that is registered as such with the CFTC, is exempt from such registration or has received no-action relief with respect to such registration.  
  • The MTF does not allow trading on its platform by US persons who are not eligible contract participants.

 DMO must issue a letter granting relief to the MTF for such relief to become effective. As noted in CFTC Letter No. 14-15, an MTF seeking relief should submit its request no later than March 10, 2014, to allow DMO sufficient time to make its determination before the March 24 deadline noted above.  

CFTC Letter No. 14-16 also provides relief for parties executing swaps on qualifying MTFs from the trade execution and swap data reporting requirements in Section 2(h)(8) of the CEA and Parts 43 and 45 of CFTC regulations, respectively. The joint letter additionally provides relief to swap dealers and major swap participants executing swaps on qualifying MTFs from (i) certain external business conduct requirements under subpart H of Part 23 of CFTC regulations, (ii) the confirmation requirement under CFTC Regulation 23.501 and (iii) the swap trading relationship documentation requirement under CFTC Regulation 23.504.   

CFTC Letter No. 14-16 is available here. 

A more detailed analysis of the these no-action letters is available in the forthcoming Katten Client Advisory “CFTC Issues Relief for Cross-Border Trading of Swaps on Qualifying Multilateral Trading Facilities in the European Union.”