The Division of Market Oversight (DMO) of the Commodity Futures Trading Commission has issued an extension of no-action relief for swap execution facilities (SEFs), designated contract markets (DCMs) and swap counterparties from the trade execution requirement for certain “package transactions.” As described in DMO’s no-action letter, a “package transaction” is a transaction (1) between two or more counterparties involving two or more instruments, (2) that is priced or quoted as one economic transaction with simultaneous or near simultaneous execution of all components, (3) where the execution of each component is contingent upon the execution of all other components, and (4) that has at least one component that is a swap that has been made available to trade (MAT) and therefore subject to the trade execution requirement in Section 2(h)(8) of the Commodity Exchange Act (CEA). 

As set forth below, the no-action letter grants relief for the following categories of package transactions: 

• MAT/Agency MBS. In this category, each swap component is subject to the trade execution requirement and all other components are agency mortgage-backed securities. For MAT/Agency MBS transactions, DMO has granted temporary relief (1) to counterparties from the trade execution requirement in CEA Section 2(h)(8), which would otherwise require counterparties to execute the swap components on a DCM or SEF, and (2) to DCMs and SEFs from the method of execution requirements in CFTC Regulation 37.9 and CEA Section 5(d)(9), which would otherwise restrict the execution methods that SEFs and DCMs may offer for the swap components. This relief expires May 15, 2015, for all affected parties. 

• MAT/New Issuance Bond. In this category, at least one swap component is subject to the trade execution requirement and at least one component is a bond issued and sold in the primary market. For MAT/New Issuance Bond transactions, DMO has granted temporary relief (1) to counterparties from the trade execution requirement in CEA Section 2(h)(8), (2) to SEFs and DCMs from the method of execution requirements in CFTC Regulation 37.9 and CEA Section 5(d)(9), and (3) to SEFs from the minimum trading functionality requirement in CFTC Regulation 37.3(a)(2), which would otherwise require SEFs to list the swap components on an order book. This relief expires February 12, 2016, for all affected parties. 

• MAT/Futures. In this category, at least one swap component is subject to the trade execution requirement and all other components are futures contracts. For MAT/Futures transactions, DMO has granted temporary relief (1) to counterparties from the trade execution requirement in CEA Section 2(h)(8), (2) to SEFs and DCMs from the method of execution requirements in CFTC Regulation 37.9 and CEA Section 5(d)(9), and (3) to SEFs from the minimum trading functionality requirement in CFTC Regulation 37.3(a)(2). This relief expires November 14, 2015, for all affected parties. 

• MAT/Non-MAT (Uncleared), MAT/Non-Swap Instrument and MAT/Non-CFTC Swap. In a MAT/Non-MAT (Uncleared) transaction, at least one swap component is subject to the trade execution requirement and at least one component is a swap that is subject to the CFTC’s exclusive jurisdiction but is not required to be cleared. In a MAT/Non-Swap Instrument transaction, at least one swap component is subject to the trade execution requirement and at least one component is not a swap. In a MAT/Non-CFTC Swap transaction, at least one swap component is subject to the trade execution requirement and at least one component is a swap over which the CFTC does not have exclusive jurisdiction. For all three categories, DMO has granted temporary relief (1) to counterparties from the trade execution requirement in CEA Section 2(h)(8), (2) to SEFs and DCMs from the method of execution requirements in CFTC Regulation 37.9 and CEA Section 5(d)(9), and (3) to SEFs from the minimum trading functionality requirement in CFTC Regulation 37.3(a)(2). This relief expires (1) February 15, 2015, for counterparties and (2) February 12, 2016, for SEFs and DCMs. 

In addition to the categories listed above, DMO additionally noted that no-action relief has already expired for the following categories of package transactions: 

• MAT/MAT. In this category, each component is a swap subject to the trade execution requirement. 

• MAT/Non-MAT (Cleared). In this category, at least one swap component is subject to the trade execution requirement and each of the other components is subject to the clearing requirement. 

• US Dollar Swap Spreads. In this category, each swap component is subject to the trade execution requirement and all other components are US Treasury securities. 

CFTC Letter No. 14-137 is available here.