Washington, D.C. —The Commodity Futures Trading Commission’s Division of Market Oversight (DMO) today published a no-action letter regarding the requirements in section 2(h)(8) of the Commodity Exchange Act (CEA) and CFTC regulation 37.9, for credit default swaps (CDS) that are executed for the sole purpose of migrating open CDS positions from ICE Clear Europe Ltd. (ICEU) to a new central clearing counterparty (CCP) ahead of ICEU’s planned discontinuation of CDS clearing services in October 2023.

The end of ICEU’s CDS clearing services means market participants will need to migrate their open CDS positions from ICEU to other CCPs. Certain transactions that must be executed to migrate open CDS positions from ICEU to a different CCP are subject to the trade execution requirement under CEA section 2(h)(8) and the required methods of execution in CFTC Regulation 37.9.

As explained in the no-action letter, in order to facilitate an orderly migration of open CDS positions from ICEU to other CCPs in a non-price forming, market risk neutral manner, DMO believes that a no-action position is warranted. Accordingly, the letter takes the position that DMO will not recommend the CFTC commence an enforcement action against:

• any person for failure to comply with the trade execution requirement under section 2(h)(8) of the CEA with respect to any CDS transaction that is entered into for the sole purpose of migrating CDS positions from ICEU to another CCP; or
• any person, including but not limited to any SEF, for failure to comply with required methods of execution under CFTC Regulation 37.9 with respect to any CDS transaction that is entered into for the sole purpose of migrating CDS positions from ICEU to another CCP.

The no-action letter will expire upon the later of either October 27, 2023 or ICEU’s cessation of its clearing services for CDS, but no later than January 1, 2024.

Since market participants’ migration of open CDS positions from ICEU is global in nature, market participants have made similar requests to the UK Financial Conduct Authority (FCA) and the European Securities and Markets Authority (ESMA). Accordingly, DMO staff and staff in the CFTC’s Office of International Affairs have engaged with FCA and ESMA staff in order to facilitate an orderly migration of CDS positions from ICEU to other CCPs.