U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

Division of Swap Dealer and

Intermediary Oversight

Division of 

Clearing and Risk

Division of 

Market Oversight

Gary Barnett

Director

Ananda Radhakrishnan

Director

Vincent A. McGonagle

Director

CFTC Letter No. 14-01

No-Action

January 3, 2014

Division of Swap Dealer and Intermediary Oversight

Division of Clearing and Risk

Division of Market Oversight

Re: Extension of No-Action Relief: Transaction-Level Requirements for Non-U.S. Swap 

Dealers

Ladies and Gentlemen:

This letter extends the no-action relief provided by CFTC Staff Letter 13-71, which 

responded to requests received by the Division of Swap Dealer and Intermediary Oversight 

(“DSIO”), the Division of Clearing and Risk, and the Division of Market Oversight (collectively, 

the “Divisions”) of the Commodity Futures Trading Commission (“Commission”) from swap 

dealers (“SDs”) registered with the Commission that are established under the laws of 

jurisdictions other than the United States (“Non-U.S. SDs”),1seeking time-limited relief from 

certain transaction-level requirements (as described below) under the Commodity Exchange Act 

(“CEA”) and the Commission’s regulations promulgated thereunder. The Non-U.S. SDs sought

relief from such requirements when entering into swaps with a counterparty that is not a U.S. 

person.

2

I. Background

A. Transaction-Level Requirements

 

1 Although the relief contained herein was requested by certain Non-U.S. SDs, such relief is available to all NonU.S. SDs.

2 As used in this letter, the term “U.S. person” has the same meaning as in the Interpretive Guidance and Policy 

Statement Regarding Compliance with Certain Swap Regulations (the “Guidance”), 78 FR 45292 at 44316-17 (July 

26, 2013). 
Extension: Non-U.S. Swap Dealer Transaction-Level Requirements

Page 2

When entering into a swap, an SD is required to comply with certain “Transaction-Level 

Requirements”3 with respect to the transaction. The Transaction-Level Requirements cover a 

range of requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act4

and Commission regulations promulgated thereunder: some of the requirements more directly 

address financial protection of SDs and their counterparties; others address more directly market 

efficiency and/or price discovery. The Commission believes that the Transaction-Level 

Requirements may be applied on a transaction-by-transaction basis.5

B. The DSIO Advisory

On November 14, 2013, DSIO issued an advisory6in response to inquiries from swap 

market participants regarding the applicability of the Commission’s Transaction-Level 

Requirements with respect to swaps between a Non-U.S. SD (whether an affiliate or not of a 

U.S. person) and a non-U.S. person if the swap is arranged, negotiated, or executed by personnel 

or agents of the Non-U.S. SD located in the United States.

In the advisory, DSIO stated its belief that persons regularly arranging, negotiating, or 

executing swaps for or on behalf of an SD are performing core, front-office activities of that 

SD’s dealing business, and thus, “a non-U.S. SD (whether an affiliate or not of a U.S. person) 

regularly using personnel or agents located in the U.S. to arrange, negotiate, or execute a swap 

with a non-U.S. person generally would be required to comply with the Transaction-Level 

Requirements.” 

II. Relief Requested

Subsequent to issuance of the DSIO advisory, the Divisions received multiple requests 

from Non-U.S. SDs for time-limited relief from compliance with the Transaction-Level 

Requirements when entering into swaps with non-U.S. persons that are not guaranteed affiliates7

 

3

For purposes of this letter, the term ‘‘Transaction-Level Requirements’’ refers to the requirements set forth in 

Commission regulations 23.202, 23.205, 23.400 to 23.451, 23.501, 23.502, 23.503, 23.504, 23.505, 23.506, 23.610 

and parts 43 and 50. The Divisions note that (1) the Commission has not yet finalized regulations regarding margin 

for uncleared swaps, (2) compliance with its regulations regarding segregation for uncleared swaps is not yet 

required, and (3) it has not yet determined that any swap is ‘‘available to trade’’ such that a trade execution 

requirement applies to the swap. See Exemptive Order Regarding Compliance with Certain Swap Regulations (the 

“Exemptive Order”), 78 FR 43785 at 43794 (July 22, 2013).

4

See Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (July 21, 

2010).

5

See the Guidance, 78 FR at 45366.

6 The DSIO Advisory is available on the Commission’s website:

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-69.pdf.

7

For purposes of this letter, the terms “guarantee” and ‘‘guaranteed affiliate’’ have the same meaning as in the 

Exemptive Order. See 78 FR at 43794.
Extension: Non-U.S. Swap Dealer Transaction-Level Requirements

Page 3

or conduit affiliates8of a U.S. person using personnel or agents located in the United States to 

arrange, negotiate, or execute such swaps (such swaps, the “Covered Transactions”). The NonU.S. SDs represented that, in order to avoid market disruption for their non-U.S. counterparties, 

such time-limited relief was necessary to allow them to organize their internal policies and 

procedures to come into compliance with the Transaction-Level Requirements when entering 

into Covered Transactions.

III. Staff Position

As was the case in CFTC Staff Letter 13-71, the Divisions note that, as of the date of this 

letter, the Divisions have not recommended that the Commission take an enforcement action 

against a Non-U.S. SD (whether or not an affiliate of a U.S. person) for failure to comply with 

any applicable Transaction-Level Requirement when entering into any Covered Transaction.

Subsequent to the issuance of CFTC Letter 13-71, the Commission has requested public 

comment regarding compliance issues implicated by Covered Transactions. In view of the 

foregoing, the Divisions are hereby extending the date of the time-limited staff no-action relief 

provided in CFTC Letter No. 13-71.

Accordingly, until September 15, 2014, the Divisions will not recommend that the 

Commission take an enforcement action against a Non-U.S. SD (whether or not an affiliate of a 

U.S. person) for failure to comply with:

(a) Any applicable Transaction-Level Requirement with respect to a Covered Transaction if 

the Covered Transaction is not with a Non-U.S. SD; and

(b) If the Covered Transaction is with a Non-U.S. SD, any Transaction-Level Requirement 

other than (i) the multilateral portfolio compression requirements under Commission 

regulation 23.503; and (ii) the swap trading relationship requirements under Commission 

regulation 23.504.

This letter, and the positions taken herein, represent the views of the Division of Swap 

Dealer and Intermediary Oversight, the Division of Clearing and Risk, and the Division of 

Market Oversight only, and do not necessarily represent the positions or views of the 

Commission or of any other office or division of the Commission. The relief issued by this letter 

does not excuse persons relying on it from compliance with any other applicable requirements 

contained in the CEA or in the Regulations issued thereunder. Further, this letter, and the relief 

contained herein, is based upon the representations made to the Divisions. Any different, 

changed or omitted material facts or circumstances might render this no-action relief void. This 

letter does not create or confer any rights for or obligations on any person or persons subject to 

compliance with the CEA that bind the Commission or any of its other offices or divisions. As 

 

8

For purposes of this letter, the term “conduit affiliate” has the same meaning as in the Guidance. See 78 FR at 

45358-59.
Extension: Non-U.S. Swap Dealer Transaction-Level Requirements

Page 4

with all no-action letters, the Divisions retain the authority to condition further, modify, suspend, 

terminate, or otherwise restrict the terms of the no-action relief provided herein, in its discretion.

Should you have any questions, please do not hesitate to contact Gary Barnett, Director, 

DSIO, at (202) 418-5977; Frank Fisanich, Chief Counsel, DSIO, at (202) 418-5949; or Ward 

Griffin, Associate Chief Counsel, DSIO, at (202) 418-5425.

Very truly yours,

Gary Barnett

Director

Division of Swap Dealer and Intermediary Oversight

Ananda Radhakrishnan

Director

Division of Clearing and Risk

Vincent A. McGonagle

Director

Division of Market Oversight

cc: Regina Thoele, Compliance

National Futures Association, Chicago

Jamila A. Piracci, OTC Derivatives

National Futures Association, New York