On February 13, 2017, the US Commodity Futures Trading Commission's Division of Swap Dealer and Intermediary Oversight (DSIO) issued a time-limited no-action letter (CFTC staff letter 17-11) which provides that, from March 1, 2017 to September 1, 2017, DSIO will not recommend an enforcement action against a swap dealer for failure to comply with the variation margin requirements for swaps that are subject to a March 1, 2017 compliance date. The no-action letter does not postpone the March 1, 2017 compliance date for variation margin, rather it allows market participants a grace period to come into compliance. DSIO believes that without a sufficient transition period, there could be a significant impact on the ability to hedge positions for pension funds, asset managers and insurance companies that manage Americans' retirement savings and financial security. This sort of phased compliance has been used many times in the implementation of the swaps rules contained in the Dodd-Frank Act.
DSIO also issued a no-action letter (CFTC staff letter 17-12) stating that DSIO will not recommend an enforcement action against a SD, subject to certain conditions, that does not comply with the minimum transfer amount (MTA) requirements of CFTC regulations 23.152(b)(3) or 23.153(c) with respect to one or more swaps with any legal entity that is the owner of more than one separately managed account (SMA). DSIO is providing this relief to allow SDs entering into swaps with SMAs to treat each account as a separate counterparty, subject to certain limits, for purposes of applying the MTA, despite that such accounts are owned by the same legal entity.
The CTFC staff letter 17-11 is available at: http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/17-11.pdf and CFTC staff letter 17-12 is available at: http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/17-12.pdf .
For a more detailed discussion of the CFTC's action, please see Shearman & Sterling's publication available at: http://www.shearman.com/en/newsinsights/publications/2017/02/cftc-offers-limited-relief-for-march-1
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