September 30, 2013

CFTC’s Division of Clearing and Risk and Division of Market Oversight Provide Time-Limited No-Action Relief for (1) Futures Commission Merchants from Requirement to Comply with Commission Regulations 1.73(a)(2)(i) and (a)(2)(ii); and (2) Temporarily Registered Swap Execution Facilities from Requirement to Comply with Commission Regulation 37.702(b)

Washington, DC – The Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk and Division of Market Oversight (together, “the Divisions”) today announced the issuance of no-action letter providing time-limited and specific relief for futures commission merchants (“FCMs”) from the requirement to comply with Commission Regulation 1.73(a)(2)(i) and (a)(2)(ii), and for temporarily registered swap execution facilities (“SEFs”) from the requirement to comply with Commission Regulation 37.702(b), if the SEFs do not already have the ability to facilitate pre-execution screening.  The no-action relief in this letter only applies to entities that have achieved temporary registration status as SEFs as of October 2, 2013.

While recognizing the important regulatory objectives underlying Commission Regulations 1.73(a)(2)(i) and (a)(2)(ii) and 37.702(b), the Divisions nevertheless believe that SEFs should be provided additional time to comply with the requirements of Commission Regulation 37.702(b) to facilitate pre-execution credit checks by FCM clearing members (Clearing FCMs).  The Divisions further believe that Clearing FCMs should be provided additional time to comply with  Commission Regulations 1.73(a)(2)(i) and (a)(2)(ii) for swaps executed on or subject to the rules of any SEF that does not currently facilitate pre-execution screening on an order-by-order basis by Clearing FCMs in accordance with Regulation 1.73.

Additionally, in order for a SEF to avail itself of the no-action relief, the SEF must submit to the Commission by October 10, 2013:

(1)  Pursuant to Commission Regulation 40.6, any rule amendments that are necessary for full compliance with Commission Regulation 37.702(b), and any rule amendments that are necessary to facilitate full compliance with Commission Regulation 1.73(a)(2)(i) and (a)(2)(ii), in accordance with the guidance issued by the Divisions on September 26, 2013 (Staff Guidance);  and

(2)  A written representation that the SEF is undertaking all steps necessary to fully comply with Commission Regulation 37.702(b), and is undertaking all steps necessary to facilitate full compliance with Commission Regulation 1.73(a)(2)(i) and (a)(2)(ii), in accordance with the Staff Guidance.

This letter does not relieve FCMs or SEFs from any other requirements applicable to FCMs or SEFs under the Commodity Exchange Act, the Commission’s regulations thereunder.

This no-action relief commences on September 30, 2013, and expires on November 1, 2013 at 12:01 am EST.

Last Updated: September 30, 2013