U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

Facsimile: (202) 418-5521

www.cftc.gov

Division of Clearing and 

Risk

CFTC Letter No. 14-144

No-Action

November 26, 2014

Division of Clearing and Risk

RE: No-Action Relief from the Clearing Requirement for Swaps Entered into by Eligible 

Treasury Affiliates

The purpose of this letter is to amend the no-action relief previously granted by the 

Division of Clearing and Risk (“Division”) of the Commodity Futures Trading Commission 

(“Commission”) under No-Action Letter 13-22 to address certain challenges faced by treasury 

affiliates in undertaking hedging activities on behalf of non-financial affiliates within a corporate 

group. Those challenges pertained to certain conditions in the prior relief. The Division in this 

letter is altering some of those conditions to enable additional market participants to avail 

themselves of the treasury affiliate relief originally set forth in No Action Letter 13-22. 

Treasury Affiliate Exemption from Clearing

On June 4, 2013, the Division granted no-action relief from the clearing requirement under 

section 2(h)(1) of the Commodity Exchange Act (“CEA”) and part 50 of the Commission’s 

regulations, for swaps entered into by certain affiliates acting on behalf of non-financial affiliates 

within a corporate group for the purpose of hedging or mitigating commercial risk (hereinafter 

referred to as “treasury affiliates”).1

No-Action Letter 13-22 was issued based on the Division’s understanding that treasury 

affiliates were undertaking hedging activities on behalf of non-financial affiliates that were eligible 

to elect the end-user exception from clearing,

2 but were themselves ineligible to elect the 

exception. As discussed further below, because treasury affiliates can act in a wider capacity as 

treasury centers that provide financial services for all or most of the affiliates within a corporate 

group, including daily cash management, debt administration, and risk hedging and mitigation, 

treasury affiliates met the definition of “financial entity” under section 2(h)(7)(C)(i)(VIII) of the 

CEA and thus could not elect the end-user exception. As a result, the Division granted treasury 

affiliates relief to continue entering into non-cleared swaps on behalf of the non-financial affiliates, 

subject to specific conditions and requirements.

 1 See Staff No-Action Letter 13-22, available at 

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-22.pdf.

2 End-User Exception to the Clearing Requirement for Swaps, 77 FR 42559 (July 19, 2012) (codified at 

17 C.F.R. § 50.50).
November 26, 2014

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The Division has since learned that there are treasury affiliates precluded from electing the

relief in No-Action Letter 13-22 because they do not meet certain conditions contained in the 

letter. As discussed below, based on input from market participants, the Division is hereby issuing 

this letter to amend some of the conditions and requirements contained in No-Action Letter 13-22 

to allow additional treasury affiliates to rely on the relief from clearing.

Applicable Regulatory Requirements

Under section 2(h)(1)(A) of the CEA, it is unlawful for any person to engage in a swap 

unless that person submits such swap for clearing to a derivatives clearing organization (“DCO”)

that is registered under the CEA or exempt from registration if the swap is required to be cleared. 

On November 29, 2012, the Commission adopted its first clearing requirement determination, 

requiring that swaps meeting certain specifications within four classes of interest rate swaps and 

two classes of credit default swaps be cleared.3 

Pursuant to section 2(h)(7) of the CEA and § 50.50 of the Commission’s regulations, a 

counterparty to a swap that is subject to the clearing requirement may elect the end-user exception 

from required clearing provided that such counterparty is not a financial entity,

4 as defined in 

section 2(h)(7)(C) of the CEA, and otherwise meets the requirements of § 50.50 of the 

Commission’s regulations.5 Thus, the end-user exception from required clearing may be elected 

for swaps that are entered into between two non-financial entities, or between a non-financial 

entity and a financial entity, for swaps that hedge or mitigate commercial risk.

As noted above, the Division granted relief from required clearing for treasury affiliates of 

non-financial companies that fall within the definition of “financial entity” under section 

2(h)(7)(C)(i)(VIII) of the CEA when acting on behalf of affiliates that otherwise would be eligible 

to elect the end-user exception from required clearing.6

 As such, No-Action Letter 13-22 

effectively allowed treasury affiliates, subject to certain additional requirements and conditions, to 

 3 Clearing Requirement Determination Under Section 2(h) of the CEA, 77 FR 74284 (Dec. 13, 2012) (codified at 17 

C.F.R. § 50).

4 Certain small financial institutions, captive finance companies, and affiliate agents may also use the end-user 

exception under certain circumstances. See CEA sections 2(h)(7)(C)(iii) and 2(h)(7)(D); see also Commission 

regulation 50.50(d). 

5 In addition to being a non-financial entity, entities electing the end-user exception must: (i) be using the swap to 

hedge or mitigate commercial risk; and (ii) report certain information about the swap and the counterparties to a swap 

data repository. See Commission regulation 50.50.

6 In the final rule adopting the end-user exception, the Commission specifically noted that a financial entity acting 

solely on behalf of and as agent for an affiliate that satisfies the criteria for the end-user exception is deemed to satisfy 

the statutory criteria for “acting on behalf of the person and as an agent,” as permitted by section 2(h)(7)(D)(i) of the 

CEA. End-User Exception to the Clearing Requirement for Swaps, 77 FR at 42563. Market participants indicated, 

however, that treasury affiliates often enter into swaps on behalf of non-financial affiliates as principal to the swap and 

not as agent, and are thus unable to take advantage of the relief from clearing provided in section 2(h)(7)(D).
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take advantage of the end-user exception from clearing that its non-financial affiliates in the 

corporate group would otherwise have been eligible to elect had they entered into the transactions 

directly.

Summary of Relief

Since the Division issued No-Action Letter 13-22, market participants have highlighted 

several requirements and conditions that make use of the relief granted thereunder impractical for 

many treasury affiliates. As discussed below, the Division is therefore amending the following 

requirements and conditions.

i. The requirement that the ultimate parent of a treasury affiliate identify all whollyand majority-owned affiliates and ensure a majority qualify for the end-user 

exception.

Market participants have expressed concerns about the second condition for eligible 

treasury affiliate status in No-Action Letter 13-22. The second condition requires that the ultimate 

parent of a treasury affiliate identify all wholly- and majority-owned affiliates within the corporate 

group and ensure that a majority qualify for the end-user exception.

Market participants have noted the ratio of the absolute number of financial entities to nonfinancial entities does not necessarily provide meaningful information about the corporate family 

as a whole, and adds on-going surveillance responsibilities and expenses for the corporate family.

The Division agrees and has removed the requirement accordingly in the revised relief set forth 

herein.

ii. The requirement that the treasury affiliate is not itself or is not affiliated with a 

systemically important nonbank financial company.

Market participants have also expressed concerns about the fourth condition for eligible 

treasury affiliate status in No-Action Letter 13-22. The fourth condition prohibits the treasury 

affiliate from being, or being affiliated with, a nonbank financial company that has been 

designated as systemically important by the Financial Stability Oversight Council. As explained 

above, section 2(h)(7)(D) of the CEA permits affiliates acting as an agent and on behalf of entities 

eligible for the end-user exception to elect the end-user exception themselves, unless the affiliate is 

one of seven enumerated types of entities listed in section 2(h)(7)(D)(ii). Among others, these 

prohibited entities include swap dealers, commodity pools, and bank holding companies with over 

$50 billion in consolidated assets.

Market participants have pointed out that the fourth condition for eligible treasury affiliate 

status provides a list of entities that generally tracks the list in section 2(h)(7)(D)(ii), except for the 

addition of systemically important nonbank financial companies. The Division believes that 

additional restrictions relating to systemically important nonbank financial companies are 

appropriate. As a result, the Division is maintaining the requirement that the treasury affiliate itself 

cannot be a systemically important nonbank financial company. However, the Division also 
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recognizes that certain corporate families with significant non-financial operations are precluded 

from using the existing relief because of the affiliation with a systemically important nonbank 

financial company, regardless of the degree to which the operations of the financial and nonfinancial entities are conducted separately. 

The Division believes restricting the treasury affiliate from (i) entering into transactions 

with, or on behalf of, a systemically important nonbank financial company7 and (ii) providing any 

services, financial or otherwise, to such a designated entity,8 provides sufficient protection from 

the risks of systemically important affiliate, while allowing the treasury affiliate to provide the 

necessary support to its related operating entities. The Division is amending the conditions relating 

to systemically important nonbank financial companies accordingly.

iii. The requirement that treasury affiliates act only on behalf of certain types of related 

affiliates. 

Market participants have indicated that the definition of “related affiliates” under NoAction Letter 13-22 unnecessarily excludes certain entities that perform a cash pooling function for 

a corporate family that includes a financial entity. The definition of related affiliate currently

includes either: (i) a non-financial entity that is, or is directly or indirectly wholly- or majorityowned by, the ultimate parent; or (ii) a person that is another eligible treasury affiliate for an entity 

described in (i).

Market participants claim that the limitation is unnecessary, highlighting that the third 

General Condition to the Swap Activity already precludes an eligible treasury affiliate from 

entering into swaps with, and on behalf of, its financial affiliates. The Division agrees the 

definition is problematic because the collection and disbursement of cash within the corporate 

family is a core function of a treasury affiliate. Given the existing restrictions on swap activity by 

the eligible treasury affiliate with or on behalf of a financial affiliate, the Division has amended the 

related affiliate definition to allow entities that provide financial services on behalf of a financial 

entity to nonetheless qualify as an eligible treasury affiliate. 

iv. The requirement that treasury affiliates transfer the risk of related affiliates through 

the use of swaps.

Market participants have expressed concern with the first General Condition to Swap 

Activity in No-Action Letter 13-22. The condition requires the eligible treasury affiliate enter into 

the exempted swap for the sole purpose of hedging or mitigating the commercial risk of one or 

more related affiliates that was transferred to the eligible treasury affiliate by operation of one or 

more swaps with such related affiliates.

 7 See the third General Condition to the Swap Activity set forth below, as applies to transaction with, or on behalf of, 

“financial affiliates” generally.

8 See clause (vi) of the definition of Eligible Treasury Affiliate set forth below.
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According to market participants, there are a number of ways for commercial risk to be 

transferred between affiliates, and that the risk that a treasury affiliate may have been seeking to 

hedge or mitigate would not necessarily be transferred from the operating affiliate to the treasury 

affiliate by way of a swap transaction as required by No-Action Letter 13-22. The method by 

which the risk is transferred can be dependent on the type of risk being hedged. For example, it 

may be more common for foreign exchange risk to be transferred between affiliates through the 

use of book-entry transfers, as opposed to interest rate risk, where the use of back-to-back swaps 

may be more prevalent. The Division agrees that this limitation is unnecessarily strict and is 

revising the condition accordingly. However, as the transfer of risk from the related affiliate to the 

treasury affiliate will no longer be evinced by back-to-back swaps, the Division will require that 

the treasury affiliate be able to identify the related affiliate or affiliates on whose behalf the swap 

was entered into by the treasury affiliate. 

v. The requirement that treasury affiliates do not enter into swaps other than for 

hedging or mitigating the commercial risk of one or more related affiliates. 

Market participants have questioned whether an eligible treasury affiliate would lose its

status if the entity entered into hedging transactions that were mitigating a commercial risk of the 

treasury affiliate itself. The second General Condition to the Swap Activity states that the eligible 

treasury affiliate cannot enter into swaps with related affiliates or unaffiliated counterparties other 

than for the purposes of hedging or mitigating the commercial risk of one or more related affiliates.

The Division agrees that a treasury affiliate should not lose its status as an eligible treasury 

affiliate simply because it entered into a hedging transaction on its own behalf. The Division is 

therefore amending the language in the second condition to allow an eligible treasury affiliate to 

enter into its own hedging transactions. However, the Division notes that such transactions entered 

into by the eligible treasury affiliate on its own behalf would not be “exempted swaps” as defined

below, and may be required to be cleared if subject to the Commission’s clearing requirement and 

no other exception or exemption to clearing applied. Further, the Division notes that treasury 

affiliates entering into any speculative transaction, on its own behalf or otherwise, would not be 

consistent with this condition.

vi. The requirement that related affiliates entering into swaps with the treasury affiliate, 

or the treasury affiliate itself, may not enter into swaps with or on behalf of any 

affiliate that is a financial entity.

Market participants have expressed confusion as to whether a related affiliate can enter into 

transactions with multiple eligible treasury affiliates under the third General Condition to the Swap 

Activity in No-Action Letter 13-22. The third condition states that neither any related affiliate that 

enters into swaps with the eligible treasury affiliate nor the eligible treasury affiliate, may enter

into swaps with or on behalf of any affiliate that is a financial entity (a “financial affiliate”), or 

otherwise assumes, nets, combines, or consolidates the risk of swaps entered into by any financial 

affiliate.
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No-Action Letter 13-22 contemplated the use of multiple eligible treasury affiliates within 

a corporate family, but the Division agrees with market participants that the third condition does 

not accurately reflect this. The Division is accordingly amending the third condition to clarify that 

the restriction on related affiliates and eligible treasury affiliates from entering into swap 

transactions with financial entity affiliates does not preclude the circumstance where the financial 

entity affiliate is an eligible treasury affiliate. 

vii. The requirement for the payment obligations of the treasury affiliate to be 

guaranteed.

Market participants expressed concern with respect to the fifth General Condition to the

Swap Activity in No-Action Letter 13-22. The fifth condition states that the payment obligations 

of the eligible treasury affiliate on the exempted swap must be guaranteed by: (i) its non-financial 

parent; (ii) an entity that wholly-owns or is wholly-owned by its non-financial parent; or (iii) the 

related affiliates for which the swap hedges or mitigates commercial risk.

Market participants have explained that corporate parents and structures may avail 

themselves of other types of support arrangements, such as keepwell agreements, letters of credit, 

or revolving credit facilities for example, which would not satisfy the requirements of No-Action 

Letter 13-22. As a result, the Division is removing the condition to accommodate the additional 

support arrangements that may exist with regard to the eligible treasury affiliate’s payment 

obligations.

Division No-Action Position

The Division recognizes the benefits that arise from the use of treasury affiliates within 

corporate groups and has determined to provide the following no-action relief, described below. 

For purposes of this no-action letter only, the following definitions shall apply:

Eligible treasury affiliate means a person that meets each of the following qualifications:

(i) The person is (A) directly, wholly-owned9 by a non-financial entity or another 

eligible treasury affiliate (its “non-financial parent”), and (B) is not indirectly 

majority-owned10 by a financial entity, as defined in section 2(h)(7)(C)(i) of the 

CEA;

 9 An entity is wholly-owned by a person if the person, directly or indirectly, holds 100% of the equity securities of the 

entity, or the right to receive upon dissolution, or the contribution of, 100% of the capital of a partnership of the entity, 

and the entity’s financial results are included in the financial statements of the person as prepared on a consolidated 

basis under Generally Accepted Accounting Principles or International Financial Reporting Standards.

10 An entity is majority-owned by a person if the person, directly or indirectly, holds a majority of the equity securities 

of the entity, or the right to receive upon dissolution, or the contribution of, a majority of the capital of a partnership of 
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(ii) The person’s ultimate parent11 is not a financial entity as defined in section 

2(h)(7)(C)(i) of the CEA12;

(iii) The person is a financial entity as defined in section 2(h)(7)(C)(i)(VIII) of the CEA 

solely as a result of acting as principal to swaps with, or on behalf of, one or more 

of its related affiliates, or providing other services that are financial in nature to 

such related affiliates;

(iv) The person is not, and is not affiliated with, any of the following: 

(A) a swap dealer;

(B) a major swap participant;

(C) a security-based swap dealer; or

(D) a major security-based swap participant.

(v) The person is not any of the following:

(A) a private fund as defined in section 202(a) of the Investment Advisors Act of 

1940 (15 U.S.C. § 80-b-2(a));

(B) a commodity pool;

(C) an employee benefit plan as defined in paragraphs (3) and (32) of section 3 

of the Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1002);

(D) a bank holding company;

(E) an insured depository institution;

(F) a farm credit system institution;

(G) a credit union; 

(H) a nonbank financial company that has been designated as systemically 

important by the Financial Stability Oversight Council;

13 or

 

the entity, and the entity’s financial results are included in the financial statements of the person as prepared on a 

consolidated basis under Generally Accepted Accounting Principles or International Financial Reporting Standards.

11 For purposes of this no-action letter, a person’s ultimate parent is the top most, direct or indirect, majority owner of 

the person, in the corporate hierarchy of which the person is a member.

12 For purposes of this no-action relief as relevant to section 2(h)(7)(C)(i)(VIII) of the CEA, the Division notes that the 

Board of Governors of the Federal Reserve System (Federal Reserve) recently issued a final rule establishing, among 

other things, the requirements for determining whether a company is “predominately engaged in financial activities” 

for the purposes of Title I of the Dodd-Frank Act. See Definitions of “Predominantly Engaged In Financial Activities” 

and “Significant” Nonbank Financial Company and Bank Holding Company, 78 FR 20756 (Apr. 5, 2013). It is the 

Division’s view that market participants that otherwise meet the conditions of this no-action relief, and for the sole 

purpose of determining whether they are eligible for the relief provided in this no-action letter, may look to the Federal 

Reserve’s final rule for guidance in determining whether such entity is “predominately engaged in financial activities” 

pursuant to section 2(h)(7)(C)(i)(VIII) of the CEA.

13 For the purposes of this letter, “designated as systemically important by the Financial Stability Oversight Council” 

means that the Financial Stability Oversight Council has issued a final determination pursuant to 12 CFR Part 1310. 
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(I) an entity engaged in the business of insurance and subject to capital 

requirements established by an insurance governmental authority of a State, a 

territory of the United States, the District of Columbia, a country other than the 

United States, or a political subdivision of a country other than the United States 

that is engaged in the supervision of insurance companies under insurance law.

(vi) The person does not provide any services, financial or otherwise, to any affiliate 

that is a nonbank financial company that has been designated as systemically important by 

the Financial Stability Oversight Council. 

Non-financial entity means a person that is not a financial entity as defined in section 2(h)(7)(C)(i) 

of the CEA.

Related affiliate means with respect to an eligible treasury affiliate:

(i) A non-financial entity that is, or is directly or indirectly wholly- or majority-owned 

by, the ultimate parent; or

(ii) A person that is another eligible treasury affiliate.

The Division will not recommend that the Commission commence an enforcement action 

against an eligible treasury affiliate for its failure to comply with the requirements under section 

2(h)(1)(A) of the CEA and part 50 of the Commission’s regulations to clear a swap with an 

unaffiliated counterparty or another eligible treasury affiliate (the “exempted swap”) that is subject 

to required clearing pursuant to § 50.4 of the Commission’s regulations, subject to the following 

conditions:

General Conditions to the Swap Activity

(i) The eligible treasury affiliate enters into the exempted swap for the sole purpose of 

hedging or mitigating the commercial risk14

of one or more related affiliates that 

was transferred to the eligible treasury affiliate; 

(ii) The eligible treasury affiliate does not enter into swaps with its related affiliates or 

unaffiliated counterparties other than for the purpose of hedging or mitigating its 

own commercial risk or the commercial risk of one or more related affiliates;

(iii) Neither any related affiliate that enters into swaps with the eligible treasury affiliate

nor the eligible treasury affiliate, enters into swaps with or on behalf of any affiliate 

that is a financial entity (“financial affiliate”), or otherwise assumes, nets, 

combines, or consolidates the risk of swaps entered into by any financial affiliate, 

 14 For purposes of this relief, a swap “hedges or mitigates commercial risk” if it meets the requirement of Commission 

regulation 50.50(c).
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except in the case of financial affiliates that qualify as eligible treasury affiliates

under this letter; and

(iv) Each swap entered into by the eligible treasury affiliate is subject to a centralized 

risk management program that is reasonably designed (A) to monitor and manage 

the risks associated with the swap, and (B) to identify the related affiliate or 

affiliates on whose behalf each exempted swap has been entered into by the eligible 

treasury affiliate.

Reporting Conditions 

With respect to each swap that an eligible treasury affiliate (“electing counterparty”) elects 

not to clear in reliance on the relief provided in this letter, the reporting counterparty, as 

determined in accordance with § 45.8 of the Commission’s regulations, shall provide or cause to 

be provided the following information to a registered swap data repository or, if no registered swap 

data repository is available to receive the information from the reporting counterparty, to the 

Commission, in the form and manner specified by the Commission:15

(i) Notice of the election of the relief and confirmation that the electing counterparty 

satisfies the General Conditions to the Swap Activity of this no-action relief specified 

above;

(ii) How the electing counterparty generally meets its financial obligations associated 

with entering into non-cleared swaps by identifying one or more of the following 

categories, as applicable:

(A) A written credit support agreement;

(B) Pledged or segregated assets (including posting or receiving margin 

pursuant to a credit support agreement or otherwise);

(C) A written guarantee from another party;

(D) The electing counterparty’s available financial resources; or 

(E) Means other than those described in (A)-(D); and

(iii) If the electing counterparty is an entity that is an issuer of securities registered 

under section 12 of, or is required to file reports under section 15(d) of, the Securities 

Exchange Act of 1934:

(A) The relevant SEC Central Index Key number for such counterparty; and

(B) Acknowledgment that an appropriate committee of the board of directors (or 

equivalent body) of the electing counterparty has reviewed and approved the 

 15 Electing counterparties may rely on the relief provided in CFTC Letter No. 13-09 for intra-group swaps that are 

entered into between two eligible treasury affiliates, to the extent that such counterparties elect not to clear such swap 

based on the relief provided in this no-action letter. 
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decision to enter into swaps that are exempt from the requirements of section 

2(h)(1), and if applicable, section 2(h)(8) of the CEA.

(iv) If there is more than one electing counterparty to a swap, the information specified 

in the Reporting Conditions of this no-action relief specified above shall be provided with 

respect to each of the electing counterparties. 

(v) An entity that qualifies for the relief provided in this no-action letter may report the 

information listed in paragraphs (ii) and (iii) above, annually in anticipation of electing the 

relief for one or more swaps. Any such reporting under this paragraph will be effective for 

purposes of paragraphs (ii) and (iii) above for 365 days following the date of such 

reporting. During the 365-day period, the entity shall amend the report as necessary to 

reflect any material changes to the information reported. 

(vi) Each reporting counterparty shall have a reasonable basis to believe that the 

electing counterparty meets the General Conditions to the Swap Activity for the no-action 

relief specified above.

This no-action letter, and the positions taken herein, represent the view of the 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 the affected 

persons from compliance with any other applicable requirements contained in the CEA or in the 

Commission’s regulations issued thereunder. Further, this letter, and the relief contained herein, is 

based upon the information available to the Division. Any different or changed material facts or 

circumstances might render this letter void. As with all no-action letters, the Division retains the 

authority to, in its discretion, further condition, modify, suspend, terminate or otherwise restrict the 

terms of the no-action relief provided herein. This letter supersedes No-Action Letter 13-22.

If you have any questions, please do not hesitate to contact Meghan Tente, AttorneyAdvisor, at (202) 418-5785.

Sincerely,

Phyllis Dietz

Acting Director