January 23, 2018

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CFTC Grants Temporary No-Action Relief from Clearing Requirement for Swaps Between Affiliated Counterparties

The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission issued temporary no-action relief from the swaps clearing requirement for swaps that are entered into between affiliated counterparties.

Earlier this year, the CFTC released a proposed rule that would exempt from the clearing requirement swaps entered into by two affiliates (Inter-affiliate Exemption). As a result of the CFTC’s first clearing requirement determination  (see “CFTC Issues Required Clearing Determination for Certain Credit Default and Interest Rate Swaps” in CFTC above) and the fact that the Inter-affiliate Exemption has not yet been finalized, the CFTC granted this temporary relief to remove any uncertainty pending adoption of a final rule. For this relief to apply: (i) the parties must be affiliates, (ii) the parties must issue consolidated financial statements and (iii) both parties must agree not to clear the swap.

The CFTC’s temporary no-action letter is available here

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About this Author

Kevin M. Foley, Finance Lawyer, Katten Muchin law Firm

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.