On June 10, 2016, the US Commodity Futures Trading Commission issued a no-action letter extending the relief provided in CFTC Letter No. 15-24, which expires on June 15, 2016. That no-action letter provides relief to swap execution facilities (SEFs) and designated contract markets (DCMs) to correct clerical or operational errors that caused a swap to be rejected for clearing and thus become void, as well as errors discovered after a swap has been cleared.
Specifically, if, within one hour after a trade has been rejected for clearing, the SEF or DCM corrects an error by permitting a new, pre-arranged trade with terms and conditions that match the terms and conditions of the original trade, other than any such error and time of execution, the trade will be permitted. Moreover, if an error is discovered after a trade has been cleared, the SEF or DCM is permitted to enter into a pre-arranged trade between the original parties that offsets the swaps carried on the derivative clearing organization's books. The SEF or DCM may also permit the original or intended counterparties to enter into a pre-arranged transaction that reflects the correct terms to which the parties agreed.
The no-action letter extends relief to the earlier of June 15, 2017 or the effective date of revised CFTC regulations that establish a permanent solution to addressing clerical or operational errors.
The press release is available at: http://www.cftc.gov/PressRoom/PressReleases/pr7388-16 .
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