September 29, 2014

CFTC Staff Issues Time-Limited No-Action Relief Relating to Certain CDS Clearing-Related Swaps Executed Pursuant to a CDS Settlement Price Process

Washington, DC — The U.S. Commodity Futures Trading Commission’s (Commission) Division of Market Oversight (Division) today issued an extension to No-Action Letter 13-86, previously issued December 31, 2013, which provided time-limited relief relating to certain occasional, off-facility, cleared credit default swaps (CDS) that are entered into pursuant to a derivative clearing organization’s (DCO) rules related to its price submission process for determining end-of-day settlement prices for cleared CDSs. [For the purposes of this relief, this settlement price process is referred to as the “CDS Settlement Price Process,” and the swaps associated with this process are referred to as “Clearing-Related Swaps”].

This no-action letter provides the following relief (in each case subject to certain specified conditions):

• The Division will not recommend that the Commission take enforcement action against a DCO for failure to register as a swaps execution facility (SEF) pursuant to CFTC Regulation 37.3;
  
  
• The Division will not recommend that the Commission commence an enforcement action against any DCO clearing member for entering into a swap through the DCO’s CDS Settlement Price Process and not on a SEF or a designated contract market (DCM), even if such swap is subject to CEA Section 2(h)(8)’s trade execution requirement; and
  
  
• The Division will not recommend that the Commission take enforcement action against a reporting counterparty for failure to comply with its obligations to report swap data as required by Part 45 for CDS Clearing-Related Swaps.

The extension should provide a reasonable amount of time for DCOs relying on the relief to obtain additional experience using the CDS Settlement Price Process, to collect additional price data, and to consider possible viable alternatives, all of which can assist the Commission in considering a permanent approach to this issue.

All no-action relief provided by this letter will expire on the earlier of: 11:59 p.m. on September 30, 2015; or the effective date of any Division or Commission action to facilitate a longer term approach to establishing settlement prices for CDS.

Last Updated: September 29, 2014