New Year Brings Changes To End User Reporting Requirements For Trade Options And Swaps

The first half of 2014 will bring changes to the end user reporting requirements for trade options and swaps—namely, (1) the commencement of the annual Form TO reporting requirement for unreported trade options and (2) a reduced time period for reporting swaps to a swap data repository if an end user (non-swap dealer/major swap participant) is the reporting counterparty.

Trade options are commodity options in which:  (1) the offeror and offeree are both producers, processors or commercial users of, or merchants handling, the subject commodity and are entering into the transaction solely for purposes related to their business (alternatively, this prong can be satisfied with respect to the offeror if the offeror qualifies as an “eligible contract participant”); and (2) the parties intend to physically settle the transaction if the option is exercised.  Under the new reporting requirement, trade options that were entered into after April 10, 2013, and were not reported to a swap data repository must be reported to the CFTC on Form TO by March 1, 2014.  Filers of Form TO report the aggregate amount of unreported trade options exercised during the previous calendar year by swap category (energy, metals, agriculture and other) and amount ($0, $0 to $10 million, $10 million to $100 million and over $100 million).

Beginning April 10, 2014, end user reporting counterparties’ deadlines for reporting swaps to a swap data repository will be reduced from within 48 business hours of execution/confirmation to within 36 business hours of execution/confirmation.

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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