On June 4, 2013, the Division of Clearing and Risk (the “Division”) of the US Commodity Futures Trading Commission (the “CFTC”) granted limited no-action relief from the mandatory clearing requirement for swaps entered into by certain treasury affiliates within non-financial corporate groups (the “No-Action Relief”). The relief will permit eligible treasury affiliates that are not otherwise eligible for the end-user exception to continue to enter into non-cleared hedging transactions for the benefit of their non-financial affiliates, but is subject to certain conditions and limitations.

Background: CFTC Mandatory Clearing Requirement and the End-User Exception -

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) provides for the mandatory clearing of OTC derivatives contracts designated by the CFTC. Nonetheless, in recognition of the significant cost and operational challenge that clearing could represent for end-users, Dodd-Frank contains an exception from the clearing requirement available to non-financial (i.e., commercial) end-users that use swaps to hedge or mitigate commercial risk and that elect not to clear such swaps and satisfy certain reporting requirements (the “End-User Exception”).

Also, the CFTC has exempted from the mandatory clearing requirement by rule swaps between certain affiliated entities within a corporate group as an alternative to the End-User Exception.

Please see full memo below for more information.

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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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