CFTC Grants No-Action Relief to SDs and MSPs Regarding Relationship Documentation and Business Conduct

CFTC Grants No-Action Relief to SDs and MSPs Regarding Relationship Documentation and Business Conduct

The Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission issued no-action letters relating to certain trading relationship documentation obligations and external business conduct standards by swap dealers (SDs) and major swap participants (MSPs).

In CFTC Letter No. 13-38, DSIO granted time-limited no-action relief to SDs and MSPs from certain trading relationship documentation obligations prescribed in CFTC Regulation 23.504.  Pursuant to the temporary no-action relief, if an SD’s or MSP’s transactions with a counterparty are limited to foreign exchange (FX)-related swaps or FX-related products exempted by the Secretary of the US Treasury, then such SD or MSP is not required to comply with the documentation requirements in CFTC Regulation 23.504 with respect to transactions with such counterparty.  To obtain such relief, the SD or MSP must maintain written policies and procedures required under CFTC Regulation 23.504(a)(2), and the SD or MSP must not already have an ISDA Master Agreement in place with such counterparty that covers either of the FX transactions referenced above.

The no-action relief is available to SDs and MSPs until September 1, 2013 for transactions with counterparties that are active funds, or until December 31, 2013 for transactions with any other counterparties.

CFTC Letter No. 13-38 is available here.

In CFTC Letter No. 13-39, DSIO granted no-action relief to SDs from certain external business conduct standards in CFTC Regulation 23.400 through 23.451 for FX-related swaps or FX-related products exempted by the Secretary of the US Treasury.  To obtain no-action relief, an SD must execute such FX transactions pursuant to an intermediated prime brokerage arrangement, and the FX intermediary must be either an introducing broker or futures commission merchant.  Under such circumstances, the SD may allocate certain external business conduct standards to the FX intermediary, subject to certain conditions.

CFTC Letter No. 13-39 is available here.

In CFTC Letter No. 13-33, DSIO granted no-action relief to SDs and MSPs from trading relationship documentation obligations under CFTC Regulation 23.504 with respect to swaps not executed on a swap execution facility or designated contract market, but are intended to be cleared.  In addition, DSIO granted no-action relief to SDs and MSPs from certain external business conduct standards for such swaps in cases in which the SD or MSP does not know the identity of the counterparty prior to the execution of the swap.

Such no-action relief is conditioned on the SD or MSP satisfying certain requirements, including the requirement that the SD or MSP and the counterparty enter in to a fallback agreement in the event the swap fails to be accepted for clearing by a clearing member or the relevant derivatives clearing organization.

CFTC Letter No. 13-33 is available here.