March 16, 2016

CFTC Approves Final Rule to Amend the Trade Option Exemption by Eliminating Certain Reporting and Recordkeeping Requirements for End-Users

Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) today approved a final rule that removes reporting and recordkeeping requirements for trade option counterparties that are neither swap dealers nor major swap participants (Non-SD/MSPs), including commercial end-users that transact in trade options in connection with their businesses. The unanimous vote was conducted via seriatim. The Final Rule will become effective upon publication in the Federal Register.

With respect to reporting, the CFTC has eliminated the Form TO annual notice reporting requirement for otherwise unreported trade options in CFTC regulation 32.3(b). Additionally, Non-SD/MSPs will not be subject to part 45 reporting requirements in connection with their trade options. The CFTC has declined to impose the proposed requirement that a commercial participant would need to provide notice to the CFTC of its trade options activities if such activities have a value of more than $1 billion in any calendar year.

With respect to recordkeeping, the CFTC has eliminated the swap-related recordkeeping requirements for Non-SD/MSPs in connection with their trade option activities, although Non-SD/MSPs transacting in trade options with SDs or MSPs must obtain a legal entity identifier and provide it to their SD/MSP counterparties.

Additionally, the CFTC has amended Regulation 32.3(c) by eliminating the reference to the now-vacated part 151 position limits requirements.

CFTC No-Action Letter 13-08 will be withdrawn upon the effective date of the Trade Options Final Rule. No-Action Letter 13-08 has provided conditional relief for trade option counterparties that are Non-SD/MSPs from certain swap-related reporting and recordkeeping requirements in connection with their trade option activities. Under the Trade Options Final Rule, Non-SD/MSPs are no longer subject to swap-related reporting and recordkeeping requirements in connection with their trade option activities (other than the requirement that Non-SD/MSPs transacting in trade options with SDs or MSPs must obtain a legal entity identifier and provide it to their SD/MSP counterparties). Therefore, the relief provided in No-Action Letter 13-08 is no longer applicable.

Also, since the Form TO reporting requirement is being eliminated as part of this Final Rule, CFTC staff is of the view that a trade option counterparty that is a Non-SD/MSP is not required to report its otherwise unreported trade options for calendar year 2015 on Form TO.

Last Updated: March 16, 2016