Eversheds Sutherland (US) LLP

On November 21, 2025, the Market Participants Division of the Commodity Futures Trading Commission (CFTC) issued a no-action letter granting relief to financial institutions engaging in certain credit risk transfer (CRT) transactions from commodity pool operator (CPO) registration (No-Action Letter).1 The Structured Finance Association requested the no-action relief on behalf of its prudentially regulated member financial institutions, such as national banks, bank holding companies, and savings and loan holding companies (collectively, SFA Banks) that use CRT transactions to manage risks associated with assets they hold and obtain capital relief under US banking regulations.

The CRT transactions covered by the No-Action Letter generally follow a specific structure. First, the SFA Bank designates a pool of assets on its own balance sheet subject to the risk transfer, such as loans, mortgages, and leases. Then, the SFA Bank, or another entity involved in the set-up or operation process, establishes a special purpose vehicle (SPV) to issue credit-linked notes to a limited group of sophisticated institutional investors in a private placement or offshore offering. The SPV and the SFA Bank, in turn, enter into a credit default swap under which the SPV assumes credit losses on the SFA Bank’s reference pool in exchange for the SFA Bank making periodic payments. Investor proceeds provide the collateral supporting the SPV’s obligations, and the SPV is structured as a bankruptcy-remote, limited-purpose entity that does not engage in any active trading. Instead, the SPV’s returns reflect the performance of the underlying assets rather than market movements in the credit default swap. The purpose of the CRT transactions is to lower the SFA Bank’s minimum capital requirements and manage balance sheet risks. However, the use of a credit default swap brings the SPV within the definition of a “commodity pool,”2 triggering a requirement for the SFA Bank to register with the CFTC as a CPO.

The No-Action Letter grants relief from CPO registration for SFA Banks that use the CRT transaction structure described above. Specifically, it provides that SFA Banks may rely on the de minimis exemption from CPO registration under CFTC Regulation 4.13(a)(3).3 To qualify for the de minimis exemption, a person must meet the following four requirements:

  1. interests in the pool must be exempt from registration under the Securities Act of 1933, and the interests must be marketed and advertised to the public in the United States solely, if at all, in compliance with the Securities and Exchange Commission’s Regulation D or Rule 144A4
  2. at all times, the pool meets one or the other of the following de minimis tests with respect to its commodity interest positions: (a) the aggregate initial margin, premiums and required minimum security deposit (for retail forex transactions) at the time the most recent position was established does not exceed 5% of the liquidation value of the pool’s portfolio, after giving effect to unrealized profits or losses; or (b) the aggregate net notional value of the pool’s commodity interest positions (i.e., futures, options and swaps), determined at the time the most recent position was established, does not exceed 100 percent of the liquidation value of the pool’s portfolio, after/taking into account unrealized profits and unrealized losses
  3. the person reasonably believes, at the time of investment, that each person who participates in the pool is one of several categories of sophisticated investor, e.g., accredited investors or qualified eligible persons
  4. participations in the pool are not marketed as or in a vehicle for trading in commodity interests5

SFA Banks easily satisfy the first three prongs of the requirement. The key issue addressed in the Structured Finance Association’s request for relief and the No-Action Letter is the fourth prong of the exemption, which prohibits marketing a pool as a vehicle for trading in commodity interests. The reason this is the case is that CRT transactions offering documents must include a detailed desciption of the credit default swap and its mechanics; however, such disclosures could be viewed as marketing commodity interest trading, raising uncertainty as to whether the SFA Banks could rely on the CFTC Regulation 4.13(a)(3) exemption. The No-Action Letter clarifies that the required credit default swap disclosures do not, by themselves, disqualify SFA Banks from relying on the 4.13(a)(3) exemption.

Pursuant to the No-Action Letter, SFA Banks using CRT transactions may rely on the de minimis exemption from CPO registration under CFTC Regulation 4.13(a)(3) provided that the following criteria are met:

  1. the CRT transaction exists solely to hedge the SFA Bank’s own credit risk and to qualify for regulatory capital relief. It may not be used for speculative or trading purposes
  2. the SFA Bank continuously satisfies prongs (i)-(iii) of CFTC Regulation 4.13(a)(3), namely, (i) the offering must be a private offering; (ii) the de minimis commodity interest exposure test must be satisfied; and (iii) participation in the CRT must be limited to sophisticated investors. If these conditions cannot be maintained, the SFA Bank must notify the CFTC and may neither issue more notes nor engage in additional risk transfer arrangements
  3. the SFA Bank files a notice of eligibility for the exemption with the National Futures Association and meets all other terms of CFTC Regulation 4.13 with respect to each SPV used in CRT transactions
  4. the SPV holds only the credit default swaps necessary for the CRT transaction. It may not enter into additional swaps or commodity interests
  5. the assets purchased with the proceeds from the sale of the SPV’s notes can only be invested in cash or cash-equivalent high-quality liquid assets with maturities aligned to the credit default swap. The No-Action Letter cross-references CFTC Regulation 1.25 for the purpose of defining “highly liquid”6
  6. the SPV cannot engage in any business or activity other than for the SFA Bank’s CRT transaction, nor can it incur any additional debt or enter into any credit default swaps beyond those necessary for the CRT transaction. In addition, the SPV must maintain corporate separateness from the SFA Bank and be governed by an independent board of directors. The SPV must also be “bankruptcy remote” and the SFA Bank must waive any right to file an involuntary bankruptcy petition or initiate an insolvency, liquidation, or dissolution on the SPV’s behalf

In addition to providing regulatory certainty for SFA Banks that rely on CRT transaction structures with SPVs for capital management, the No-Action Letter provides transparency and stability for investors by standardizing requirements and protections across CRT programs. The No-Action Letter requires that offering materials clearly disclose that the SFA Bank is not registered with the CFTC and is relying on the relief, so that investors understand the regulatory framework governing the SPV and the basis for using the exemption.

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1 See CFTC Release No. 9141-25, CFTC Staff Issues CPO No-Action Letter (Nov. 21, 2025), available at https://www.cftc.gov/PressRoom/PressReleases/9141-25.

2 A “commodity pool” is defined as an investment trust, syndicate, or similar form of enterprise operated for the purpose of trading in commodity interests, including futures contracts or options on futures, retail off-exchange forex contracts, or swaps. See 7 U.S.C. § 1a(10).

3 The No-Action Letter is consistent with relief previously afforded by CFTC staff that permits entities offering similarly structured transactions to rely on the de minimis exemption from CPO registration. See CFTC Letter No. 14-111 (Aug. 25, 2014) (granting no-action relief from CPO registration for Fannie Mae and Freddie Mac with respect to mortgage credit risk transfer structures, in reliance on the de minimis exemption); and CFTC Letter No. 14-152 (Dec. 18, 2014) (granting no-action relief from CPO registration to operators of vehicles offering insurance-linked notes, in reliance on the de minimis exemption).

4 Regulation D provides a registration exemption for the initial sale of securities sold in private placements to sophisticated investors, and Rule 144A provides a registration exemption for resales of restricted securities to sophisticated investors. See SEC Regulation D, 17 C.F.R. § 230.506(c); SEC Rule 144A, 17 C.F.R. § 230.144A.

5 See CFTC Regulation 4.13, 17 C.F.R. § 4.13(a)(3).

6 See CFTC Regulation 1.25, 17 C.F.R. § 1.25.

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