CFTC Expands Existing Clearing Relief for Treasury Affiliates

by Eversheds Sutherland (US) LLP

On November 24, the Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk (DCR) issued a no-action letter to expand previously issued relief, that is available to “treasury affiliates,” from the mandatory clearing requirement. “Treasury affiliate” refers to those entities within a corporate group that (1) undertake hedging activities on behalf of their affiliates, or (2) act in a wider capacity as treasury centers that provide financial services for all or most of their affiliates, including daily cash management, debt administration, and risk hedging and mitigation.

Many non-financial companies employ treasury affiliates for the purpose of concentrating expertise and reducing redundancy within their corporate groups. Often, a treasury affiliate will serve as the primary external market-facing entity for its entire corporate group. Treasury affiliates allow for (1) aggregation of risks within a corporate group, which can be offset with one single swap transaction rather than multiple swap transactions between each affiliate and third-party swap dealers, and (2) netting of affiliate exposures prior to entry into third-party swap dealer transactions.

Treasury affiliates are predominantly engaged in activities that are financial in nature and, therefore, many are considered “financial entities” for purposes of the Commodity Exchange Act (CEA), as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).1 Generally, financial entities are ineligible for an exception from mandatory clearing that is available to end-users.2 The rationale for affording relief to treasury affiliates from the clearing requirement (although they are financial entities) is that treasury affiliates act on behalf of affiliates that themselves would be eligible for the end-user exception from mandatory clearing. Thus, the relief from clearing afforded by the DCR is predicated on a treasury affiliate meeting certain conditions that are designed to ensure that a treasury affiliate engages in swaps to hedge or mitigate the commercial risk of its non-financial affiliates.3

CFTC Letter 14-144 expands and supersedes the previously issued no-action relief, CFTC Letter 13-22, so that treasury affiliates that were previously unable to avail themselves of the relief from clearing may now do so. The CFTC deemed it appropriate to expand the relief afforded in CFTC Letter 13-22 after receiving input from affected market participants. The attached table summarizes the criteria for the previously issued relief and how such relief has been expanded by CFTC Letter 14-144. One of the most notable changes to the prior relief made by CFTC Letter 14-144 is the removal of the condition that a treasury affiliate’s swap obligations be guaranteed by the treasury affiliate’s parent; the DCR makes clear that this removal recognizes the fact that the financial support afforded to treasury affiliates by their ultimate parents can take various forms.

1 See Section 2(h)(7)(C)(i) of the CEA, 7 U.S.C. § 2(h)(7)(C)(i). Certain types of treasury affiliates are carved out of the financial entity definition based on the types of activities they engage in.
2 See Section 2(h)(7)(A) of the CEA and CFTC regulation 50.50, 17 C.F.R. § 50.50 (2014).
3 The clearing requirement currently only applies to certain classes of interest rate swaps and credit default swaps. See CFTC regulation 50.4, 17 C.F.R. § 50.4 (2014). Thus, the expanded relief from clearing that is summarized in this Legal Alert is currently only relevant to those treasury affiliates that engage in these types of swaps.


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.

© Eversheds Sutherland (US) LLP | Attorney Advertising

Written by:

Eversheds Sutherland (US) LLP

Eversheds Sutherland (US) LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.