CFTC Approves Certain Final Rules Amending Margin Requirements for Certain Uncleared Swaps and Exemptions From Registration for Certain Foreign Intermediaries

On October 15, at the same open meeting in which it approved the final rule on position limits, the Commodity Futures Trading Commission unanimously approved two other unrelated final rules.

The first final rule extends the compliance date one year, from September 1, 2021 to September 1, 2022, for margin requirements for uncleared swaps for swap dealers and major swap participants for which there is no banking regulator. This rule will be effective 30 days after publication in the Federal Register.

The second final rule amends the registration exemptions available under CFTC Regulation 3.10(c) (collectively, 3.10 Exemption) for certain foreign-located persons, in connection with their US commodity transactions on behalf of persons located outside the United States. Among other things, these amendments: (1) clarify that non-US commodity pool operators (CPOs), whether CFTC registered or not, acting for non-US pools may claim 3.10 Exemption status for those pools on a pool-specific basis, even if such CPOs operate pools pursuant to other available registration exemptions; (2) provide a safe harbor under which non-US CPOs operating offshore pools can rely upon 3.10 Exemption status for such pools, provided they meet certain operating and offering-related conditions; and (3) allow US affiliates of non-US CPOs to contribute initial capital to offshore pools without affecting the ability of those pools to claim 3.10 Exemption status. This rule will be effective 60 days after publication in the Federal Register.

The CFTC press release from the October 15 meeting, which includes links to the voting drafts for both of the above final rules, is available here.

CFTC Staff Provides Reporting Relief for Swaps Related to Certain Upcoming DCO Auctions

On October 13, the Division of Market Oversight (DMO) of the Commodity Futures Trading Commission issued two no-action letters that provide limited relief from swap transaction and pricing data reporting requirements for specific derivatives clearing organizations (DCOs) and market participants that take part in upcoming DCO auctions intended to assist in transitioning certain cleared swaps away from discounting using the Effective Federal Funds Rate and instead using the Secured Overnight Financing Rate (such auctions, Transition Auctions). This transition in discounting methods is an important step in the broader initiative to transition swaps that reference interbank offered rates, like the London Interbank Offered Rate (LIBOR), to swaps that reference alternative benchmark rates. In effect, the relief delays reporting requirements, until November 19, for swap transaction and pricing data under CFTC Regulation 43.3 with respect to swaps executed as part of either (1) LCH Limited’s Transition Auction on October 16; or (2) CME Inc.’s Transition Auction on October 19.

The CFTC press release, which includes links to both no-action letters, is available here.