The CFTC Division of Clearing and Risk (the "Division") provided no-action relief to three international financial institutions from the swap clearing requirement in CEA Section 2(h)(1) (as implemented by CFTC Rules 50.2 and 50.4).
The three institutions that are being granted relief in the letters – Banco Centroamericano de Integración Económica, the European Stability Mechanism, and North American Development Bank – requested relief on the basis that policy considerations used previously to grant relief to an international financial institution in CFTC Letter 13-25 were also applicable to their particular situations. In CFTC Letter 13-25, the CFTC provided relief to an international financial entity whose ownership structure, mission and credit risks were analogous to that of the international financial institutions referenced in the final Federal Register release adopting the " end-user exception."
As explained in three separate letters, the Division concluded that granting relief in the instant matter would be consistent with the " end-user exception" to the clearing requirement. In adopting the rule governing the end-user exception, CFTC Rule 39.6 ( Federal Register release), the CFTC had previously determined that foreign governments, foreign central banks and international financial institutions should not be subject to the clearing requirement of CEA Section 2(h)(1).
The Division explained that the relief does not extend to recordkeeping and reporting requirements, which will still apply to non-cleared swaps.
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