The CFTC Market Participants Division ("MPD"), the Division of Clearing and Risk, the Division of Data and the Division of Market Oversight (collectively, the "Divisions") granted CFTC-registered swap dealers ("SDs") no-action relief from certain transaction-level requirements in an effort to maintain the regulatory status quo following the UK's exit from the European Union.

In CFTC Letter 21-09, the CFTC staff stated that it will not recommend enforcement action against any U.S. SD person for failure to comply with "Category A" transaction-level requirements ("Category A TLRs") in a swap between a foreign branch of the U.S. SD and a non-U.S. SD person, subject to the following conditions:

  • the swap does not take place in one of the six jurisdictions (Australia, Canada, the EU, Hong Kong, Japan or Switzerland) specified in the original 2013 cross-border guidance (the "2013 Cross-Border Guidance") or the UK (the "Seven Jurisdictions");
  • the aggregate notional value of all the swaps executed outside of the Seven Jurisdictions does not exceed five percent of the aggregate notional value of all of the SD's swaps (the "5% Condition");
  • the SD complies with the transaction-level requirements of the relevant foreign jurisdiction; and
  • the SD maintains records that (i) verify compliance with the 5% Condition and (ii) identify and address any "significant" risk arising from the non-application of the Category A TLRs.

(For purposes of the letter, the CFTC defined "Category A TLRs" with reference to the reporting, recordkeeping, and daily trading records requirements for SDs set forth under CFTC Rules 23.202 and 23.205; swap documentation regulations set forth under Rule 23.501, et seq.; clearing member acceptance for clearing requirements under Rule  23.610; segregation of assets held as collateral in uncleared swap transactions under Rule  23.700-704; and applicable requirements in parts 37, 38, 43, 50 and CEA Section 2(h)(8), but not including margin requirements under CFTC Rules 23.150-161.)

The Divisions stated that this relief will expire (i) with respect to "Group B" requirements under CFTC Reg. 23.23, on the compliance date of the CFTC's recent cross-border rule (September 14, 2021), and (ii) with respect to Category A TLRs under the 2013 Cross-Border Guidance, on the effective date of any future CFTC action addressing Category A TLRs.

Additionally, the MPD stated that it will not recommend enforcement action against any CFTC-registered SD for failing to comply with any "Group B" requirement as a result of its reliance on CFTC Letter 20-39 as if it were a comparability determination. The MPD stated that this relief will expire (i) with respect to any Group B requirement, on the effective date of any comparability determination issued by the CFTC for the UK in relation to the relevant requirement, and (ii) with respect to any Group B requirement not addressed in the comparability determination, upon expiration of CFTC Letter 20-39.

Primary Sources

  1. CFTC No-Action Letter 21-09: Brexit-Related Time Limited No-Action Position with Respect to Certain Swap Dealer Transaction-Level Requirements
  2. CFTC Press Release: CFTC Staff Issues Further Brexit-Related Relief to Provide Market Certainty

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