On June 6, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission issued no action letter 19-13 to permit swap dealers and their counterparties to make certain changes to current swaps without subjecting the swaps to the CFTC swap margin rule. The need for the relief stems from the anti-avoidance position taken by the CFTC when the swap margin rule was enacted that any change made after the margin rule compliance date applicable to swap dealer and its counterparty to an uncleared swap (a Legacy Swap) in existence on the compliance date will cause the Legacy Swap to be brought into scope for margin.

The letter, which was issued in response to a request from the International Swaps and Derivatives Association, clarifies that the margin rule will not apply to:

(1) A Legacy Swap that is amended in a way that does not change any material terms;

(2) A swap resulting from the exercise of a swaption that is a Legacy Swap;

(3) A Legacy Swap that is partially terminated;

(4) A Legacy Swap that is partially novated; and

(5) Any new swaps resulting from a multilateral compression exercise consisting solely of Legacy Swaps.

The CFTC letter is available here