On January 8, 2016, the Division of Clearing and Risk (“Division”) of the Commodity Futures Trading Commission (“CFTC”) issued no-action letters providing relief from the mandatory clearing requirement for swaps under Section 2(h)(1)(A) of the Commodity Exchange Act (“CEA”) to small bank holding companies (“BHCs”), small savings and loan holding companies (“SLHCs”), and community development financial institutions (“CDFIs”).
BACKGROUND -
The CFTC has designated for mandatory clearing four types of interest rate swaps and two types of index credit default swaps, which means that, absent an exemption, these types of swaps must be cleared through a derivatives clearing organization registered with the CFTC. Prior to the issuance of this relief by the Division, only four types of financial institutions with no more than $10 billion in assets could qualify for an exemption (under certain conditions) from the clearing requirement for swaps that the CFTC has determined are required to be cleared (the “Original Institutions”). The Original Institutions were as follows...
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