October 23, 2013

CFTC Announces that the Third Phase of Mandatory Clearing of iTraxx CDS Indices Begins Today and Reminds Market Participants that Cross-Border Exemptive Relief Expired on October 9, 2013

Washington, DC — The Division of Clearing and Risk (Division) of the Commodity Futures Trading Commission (Commission) announces that the final phase of required clearing for certain iTraxx credit default swap (CDS) indices begins today. Accounts managed by third-party investment managers, ERISA pension plans, and other entities that were not subject to the Commission’s first two implementation deadlines are required to begin clearing transactions in these iTraxx CDS indices that are executed on or after October 23, 2013.

The Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Commodity Exchange Act (CEA) to require that the Commission determine whether a swap is required to be cleared by a derivatives clearing organization (DCO). The Commission adopted its first clearing requirement determination for four classes of interest rate swaps and two classes of CDS on November 28, 2012. The specifications for the CDS and interest rate swaps required to be cleared are set forth in Commission Regulation 50.4.

At the time of the Commission’s first clearing requirement determination, no DCO was offering client clearing for the iTraxx CDS indices. The Commission specified that if no DCO offered client clearing for the indices by February 11, 2013, compliance with the required clearing of iTraxx would begin 60 days after the date on which iTraxx was first offered for client clearing by an eligible DCO. On February 25, 2013, ICE Clear Credit LLC notified the Commission that it had begun offering customer clearing of the iTraxx CDS indices that are subject to the clearing requirement.

The following are the compliance dates previously announced for required clearing of these iTraxx swaps: Category 1 Entities: Friday, April 26, 2013; Category 2 Entities: Thursday, July 25, 2013; and all other entities: Wednesday, October 23, 2013.

The Division also reminds all swaps market participants that certain exemptive relief regarding the Clearing Requirement expired on October 9, 2013. As of October 10, 2013, exemptive relief from the Clearing Requirement is no longer available for an entity that is covered as a U.S. person under the Commission’s interpretive guidance and policy statement regarding the cross-border application of the swaps-related provisions of the CEA, including certain collective investment vehicles organized outside of the United States. Staff anticipates that the following transactions will be submitted for clearing to a registered DCO (unless an exception, exemption, or other relief from the clearing requirement is available and properly elected): (1) all transactions by foreign branches of U.S. banks that are registered swap dealers (SDs) or major swap participants (MSPs), (2) transactions between SDs and MSPs that are not U.S. persons and guaranteed affiliates or affiliate conduits of U.S. persons (established in any jurisdiction outside the U.S.), and (3) transactions between guaranteed affiliates or affiliate conduits of U.S. persons (established in any jurisdiction outside the U.S.) that are not SDs or MSPs and other such entities.

Last Updated: October 23, 2013