U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5977

Facsimile: (202) 418-5407

gbarnett@cftc.gov

Division of Swap Dealer and

Intermediary Oversight

Gary Barnett

Director

CFTC Letter No. 13-61

No-Action

September 30, 2013

Division of Swap Dealer and Intermediary Oversight

Re: Time-Limited No-Action Relief: Request that Certain Swaps Not Be Considered in 

Calculating Aggregate Gross Notional Amount for Purposes of the Swap Dealer De 

Minimis Exception for Persons Engaging in Floor Trader Activities

Ladies and Gentlemen:

This letter is in response to a request dated September 24, 2013, from the Futures 

Industry Association Principal Traders Group (“FIA PTG”) to the Division of Swap Dealer and 

Intermediary Oversight (“DSIO”) of the U.S. Commodity Futures Trading Commission 

(“Commission”), in which FIA PTG requested additional time-limited no-action relief that 

would allow firms to exclude certain cleared swaps from their aggregate gross notional amount 

of swap dealing activity in determining whether they may rely on the de minimis exception from 

swap dealer (“SD”) registration set forth in Commission Regulation (“Regulation”) 

1.3(ggg)(4).1 Specifically, FIA PTG requests that the Division extend the time-limited no-action 

relief that it issued on June 27, 2013 (pursuant to CFTC Letter No. 13-37),2 which expires on 

October 2, 2013. FIA PTG contends that the extension is necessary because the conditions 

necessitating the earlier no-action relief have not been fully resolved. FIA PTG requests that 

market participants who would otherwise be entitled to take advantage of the relief provided by 

Regulation 1.3(ggg)(6)(iv)3be permitted to trade in cleared swaps that are not traded on, or 

subject to the rules of, a designated contract market (“DCM”) or a swap execution facility 

(“SEF”) without having these swaps included in their aggregate gross notional amount of swap 

 

1

17 C.F.R. § 1.3(ggg)(4); see Further Definition of “Swap Dealer,” “Security-Based Swap Dealer,” “Major Swap 

Participant,” “Major Security-Based Swap Participant,” and “Eligible Contract Participant,” 77 Fed. Reg. 30,596, 

30,744 (May 23, 2012) [hereinafter the “Entity Definition Rules”].

2 CFTC Letter No. 13-37, available at http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-

37.pdf. CFTC Letter No. 13-37 was an extension of previously-issued time-limited no-action relief that was issued 

by the Division on December 19, 2012. See CFTC Letter No. 12-60, available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/12-60.pdf.

3

17 C.F.R. 1.3(ggg)(6)(iv); Entity Definition Rules, 77 Fed. Reg. at 30,746.
Futures Industry Association Principal Traders Group

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dealing activity until 90 days after the compliance date for the rules governing the registration 

and operation of SEFs.4

Applicable Regulatory Requirements

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,5in relevant 

part, added § 1a(49) to the Commodity Exchange Act (“CEA” or “Act”), which defined the term 

“swap dealer” for purposes of the CEA.6Section 1a(49)(D) of the CEA states that “[t]he 

Commission shall exempt from designation as a swap dealer an entity that engages in a de 

minimis quantity of swap dealing in connection with transactions with or on behalf of its 

customers. The Commission shall promulgate regulations to establish factors with respect to the 

making of this determination to exempt.”7

On April 18, 2012, the Commission, jointly with the Securities and Exchange 

Commission (“SEC”), issued final rules to further define “swap dealer,” “security-based swap 

dealer,” “major swap participant,” “major security-based swap participant,” and “eligible 

contract participant” (the “Entity Definition Rules”).8Included in the Entity Definition Rules 

was Regulation 1.3(ggg)(4)(i), which provides that a person shall not be deemed a swap dealer if 

the aggregate gross notional amount of their swap dealing activity falls below certain thresholds.

9

 

The Entity Definition Rules also include a list of swaps that are not considered in 

determining whether a person is a swap dealer.10 In particular, Regulation 1.3(ggg)(6)(iv) 

provides that: 

[i]n determining whether a person is a swap dealer, each swap that 

the person enters into in its capacity as a floor trader as defined by 

 

4 Core Principles and Other Requirements for Swap Execution Facilities; Final Rule, 78 Fed. Reg. 33,476 (June 4, 

2013). The final trading rules with respect to DCMs became effective on August 20, 2012. Core Principles and 

Other Requirements for Designated Contract Markets. 77 Fed. Reg. 36,611 (June 19, 2012). 

5

Pub. L. No. 111-203, 124 Stat. 1376 (2010). 

6

7 U.S.C. § 1a(49).

7

7 U.S.C. § 1a(49)(D). 

8

See Entity Definition Rules, supra note 1. 

9

Id. at 30,744. Regulation 1.3(ggg)(4)(i) provides that:

a person that is not currently registered as a swap dealer shall be deemed not to 

be a swap dealer as a result of its swap dealing activity involving counterparties, 

so long as the swap positions connected with those dealing activities into which 

the person—or any other entity controlling, controlled by or under common 

control with the person—enters over the course of the immediately preceding 12 

months (or following the effective date of final rules implementing Section 

1a(47) of the Act, 7 U.S.C. 1a(47), if that period is less than 12 months) have an 

aggregate gross notional amount of no more than $3 billion, subject to a phase in 

level of an aggregate gross notional amount of no more than $8 billion.

10 Entity Definition Rules, 77 Fed. Reg. at 30,746; see Regulation 1.3(ggg)(6), 17 C.F.R. § 1.3(ggg)(6). 
Futures Industry Association Principal Traders Group

Page 3

section 1a(23) of the Act or on or subject to the rules of a swap 

execution facility shall not be considered for the purpose of 

determining whether the person is a swap dealer if the person: 

(A) Is registered with the Commission as a floor trader pursuant 

to § 3.11 of this chapter;

(B) Enters into swaps with proprietary funds for that trader’s 

own account solely on or subject to the rules of a 

designated contract market or swap execution facility and 

submits each such swap for clearing to a derivatives 

clearing organization; 

(C) Is not an affiliated person of a registered swap dealer; 

(D) Does not directly, or through an affiliated person, negotiate 

the terms of swap agreements, other than price and quantity 

or to participate in a request for quote process subject to the 

rules of a designated contract market or a swap execution 

facility; 

(E) Does not directly or through an affiliated person offer or 

provide swap clearing services to third parties; 

(F) Does not directly or through an affiliated person enter into 

swaps that would qualify as hedging physical positions 

pursuant to paragraph (ggg)(6)(iii) of this section or 

hedging or mitigating commercial risk pursuant to 

paragraph (kkk) of this section (except for any such swap 

executed opposite a counterparty for which the transaction 

would qualify as a bona fide hedging transaction); 

(G) Does not participate in any market making program offered 

by a designated contract market or swap execution facility; 

and 

(H) Notwithstanding the fact such person is not registered as a 

swap dealer, such person complies with §§ 23.201, 23.202, 

23.203, and 23.600 of this chapter with respect to each such 

swap as if it were a swap dealer.11

On July 18, 2012, the Commission approved, jointly with the SEC, final rules further 

defining the products terms “swap,” “security-based swap,” “security-based swap agreement,” 

and “mixed swap.”12 The effective date of these joint final rules was October 12, 2012. All 

swaps entered into by a person after October 12, 2012, in connection with the person’s swap 

dealing activity are relevant in determining whether the person meets the SD definition and 

therefore must register with the Commission as an SD. 

 

11 Id. at 30,746; 17 C.F.R. § 1.3(ggg)(6)(iv). 

12 Further Definition of “Swap,” “Security-Based Swap,” and “Security-Based Swap Agreement”; Mixed Swaps; 

Security-Based Swap Agreement Recordkeeping, 77 Fed. Reg. 48,208 (Aug. 13, 2012). 
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In a letter dated December 11, 2012 requesting relief, FIA PTG stated that because the 

Commission had not, at that time, finalized its rules regarding SEFs, there could be no swaps to 

trade on, or subject to the rules of, a SEF.13 Thus, any market participants that had wanted to 

deal in swaps would not have been able to qualify for the exception for floor traders provided in 

Regulation 1.3(ggg)(6)(iv) and would have been required to register as SDs unless their dealing 

activity fell below the de minimis threshold. 

To allow market participants to deal in certain cleared swaps prior to the issuance of final 

rules governing the registration and operation of SEFs without requiring such persons to register 

as swap dealers, FIA PTG requested relief for firms who have not registered a swap dealer 

affiliate and enter into swaps with proprietary funds that are submitted to a derivatives clearing 

organization (“DCO”) for clearing, and would be permitted to be transacted by a floor trader but 

for the fact that the swap is not transacted on a SEF or DCM. The requested relief would apply 

when computing the aggregate notional amount of swaps connected with an entity’s swap 

dealing activity based on the condition that the firm in good faith intends to apply as a floor 

trader based on reasonable assumptions made today regarding the future development of the 

cleared swaps markets in conjunction with the final trading rules surrounding DCMs and SEFs.14

On December 19, 2012, the Division issued CFTC Letter No. 12-60, which granted noaction relief until July 1, 2013. Specifically, the Division stated that it would not recommend 

that the Commission take an enforcement action against any entity for failure to include, prior to 

July 1, 2013, in its calculation of the aggregate gross notional amount of swaps connected with 

its swap dealing activity for purposes of Regulation 1.3(ggg)(4), a swap that is submitted to a 

registered DCO for clearing, provided that: (1) the entity does not have a registered SD affiliate; 

(2) the entity entered into the swap using proprietary funds for its own account; and (3) the entity 

complies with the requirements set forth in Regulations 1.3(ggg)(6)(iv)(D)-(H).15

The no-action relief provided in CFTC Letter No. 12-60 was not self-executing; rather, 

an entity that was eligible for the relief had to file a claim to perfect the use of the relief. The 

Division stated that a claim submitted would be effective upon filing, so long as the claim was 

materially complete. Specifically, the claim of no-action relief had to:

a. State the name, main business address, and main business telephone number of 

the entity for which the relief is being claimed; 

b. Be electronically signed by a person authorized to bind the entity; and 

c. Be filed with the Division using the email address dsionoaction@cftc.gov, with 

the subject line of such email “Floor Trader,” prior to December 31, 2012. 

 

13 Letter from FIA PTG to Gary Barnett at 2 (Dec. 11, 2012). 

14 Id. at 3. 

15 Regulation 1.3(ggg)(6)(iv)(G) states that, to qualify for the floor trader exception, a person must not participate in 

any market making program offered by a DCM or SEF. To qualify for the no-action relief provided in this letter, a 

person must not participate in any market making program offered by the trading platform on which the person’s 

swaps are transaction.
Futures Industry Association Principal Traders Group

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In CFTC Letter No. 13-37, the Division provided additional time-limited no-action relief,

extending the no-action relief that was granted in CFTC Letter No. 12-60 until the compliance 

date for the Commission’s final SEF rules (October 2, 2013).16 Similar to the relief provided in 

CFTC Letter No. 12-60, an entity that was eligible for the relief in CFTC Letter No. 13-37 was 

required to file a claim to perfect the use of the relief.

Summary of Request for Relief

FIA PTG states that additional time-limited no-action relief is needed because “[t]he SEF 

structure remains in its infancy, with several temporarily approved SEFs not beginning 

operations until October 2, the date the current no-action relief expires, and negligible liquidity 

on those that are operational.”17 FIA PTG also contends that “there is a lack of clarity around 

timing of the SEF applicants that have yet to receive temporary registration.”18 FIA PTG further 

contends as follows: 

These conditions provide no opportunity for market participants 

who intend to use the floor trader exclusion to adjust to the new 

market and no time for liquidity in swaps to actually move onto 

SEFs. Further, given the wide variations in the SEF rulebooks and 

user agreements, and the Commission’s cursory completeness 

review process for temporary registration, we believe many rules 

will continue to evolve. Some of the provisions, such as those that 

require bilateral execution agreements, may not be acceptable to all 

market participants and impair the ability to comply with the 

conditions in the floor trader exclusion. For these reasons, we 

request that the Commission confirm that it will not initiate an 

enforcement action against firms if, prior to 90 days after the 

compliance date of the final rules governing the registration and 

operation of SEFs, each such firm excludes certain cleared swaps 

from its aggregate gross notional amount of swaps transactions in 

determining whether such person may rely on the de minimis

exception from swap dealer registration set forth in Commission 

Rule 1.3(ggg)(4).19

Accordingly, FIA PTG asks the Division to continue to not recommend enforcement 

actions if firms that do not have registered SD affiliates exclude swaps entered into with 

proprietary funds that are submitted to DCOs for clearing from the aggregate notional amount of 

swaps connected with an entity’s swap trading activity, under the condition that the firm in good 

 

16 Core Principles and Other Requirements for Swap Execution Facilities; Final Rule, 78 Fed. Reg. 33,476 (June 4, 

2013).

17 Letter from FIA PTG to Gary Barnett at 2 (September 24, 2013).

18 Id. 

19 Id. (citations omitted).
Futures Industry Association Principal Traders Group

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faith intends to apply as a floor trader based on reasonable assumptions made today regarding the 

future development of the cleared swaps market. FIA PTG states that extending this no-action 

relief would allow those market participants who in good faith intend to apply for registration as 

floor traders to continue to undertake dealing activities in cleared swaps and facilitate the 

efficient migration of bilateral swap markets to centrally-cleared environments. 

Division No-Action Position

Based upon the information provided by FIA PTG, the Division believes that additional 

time-limited no-action relief is warranted. Accordingly, the Division hereby extends the noaction relief that was granted in CFTC Letter Nos. 12-60 and 13-37 (and described in this letter 

above) for an additional 30 days, until November 1, 2013.

20

 Specifically, the Division will not 

recommend that the Commission take an enforcement action against any entity for failure to 

include, prior to November 1, 2013, in its calculation of the aggregate gross notional amount of 

swaps connected with its swap dealing activity for purposes of Regulation 1.3(ggg)(4), a swap 

that is submitted to a registered DCO for clearing, provided that: (1) the entity does not have a 

registered SD affiliate; (2) the entity entered into the swap using proprietary funds for its own 

account; and (3) the entity complies with the requirements set forth in Regulations 

1.3(ggg)(6)(iv)(D)-(H). 

As with the relief granted in CFTC Letter Nos. 12-60 and 13-37, the relief granted in this 

letter is not self-executing. Rather, an entity that is eligible for the relief must file a claim to 

perfect the use of the relief in the manner prescribed by CFTC Letter Nos. 12-60 and 13-37, 

except that, in addition to (i) stating the name, main business address, and main business 

telephone number of the entity for which the relief is being claimed and (ii) being electronically 

signed by a person authorized to bind the entity, claims for relief must be filed with the Division 

using the email address dsionoaction@cftc.gov, with the subject line of such email “Floor 

Trader,” prior to October 2, 2013. However, if an entity that is eligible for the relief has 

previously filed a claim to perfect the use of the relief in the manner prescribed by CFTC Letter 

Nos. 12-60 and 13-37, the entity need not file a new claim to perfect the use of the relief 

provided in this letter.

This letter, and the positions taken herein, represent the view of this Division only, and 

do not necessarily represent the position or view 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 Act or in the 

Regulations issued thereunder. Further, this letter, and the relief contained herein, is based upon 

the representations made to the Division. Any different, changed or omitted material facts or 

circumstances might render this no-action relief void.

 

20 To the extent that FIA PTG requested relief beyond the 30-day period granted through this no-action letter, the

request is denied.
Futures Industry Association Principal Traders Group

Page 7

Should you have any questions, please do not hesitate to contact me at (202) 418-5977; 

Frank Fisanich, Chief Counsel, at (202) 418-5949; or Ward Griffin, Associate Chief Counsel, at 

(202) 418-5425.

Very truly yours,

Gary Barnett

Director

Division of Swap Dealer and Intermediary Oversight

cc: Regina Thoele, Compliance

National Futures Association, Chicago

Jamila A. Piracci, OTC Derivatives

National Futures Association, New York