On August 16, 2012, the Commodity Futures Trading Commission (CFTC) issued a proposed rule to exempt swaps between certain affiliates within a corporate group from the clearing requirement under new Section 2(h) of the Commodity Exchange Act. To qualify for the proposed exemption, the following key requirements must be met:

Consolidated Financials Requirement: the exemption is applicable only to swaps between majority-owned affiliates whose financial statements are included in the same consolidated financial statements. Under the proposed rule, the CFTC queries whether a higher ownership threshold should be required, i.e. 100% or 80% (based on Section 1504 of the Internal Revenue Code)...

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