October 7, 2016

CFTC’S Division of Market Oversight Extends Time-Limited No-Action relief for Swap Execution Facilities from Certain “Block Trade” Requirements

Washington, DC — The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (Division) today extended time-limited no-action relief to Swap Execution Facilities (SEFs) from certain requirements in the definition of “block trade” in CFTC Regulations.

CFTC Regulation Section 43.2 defines a “block trade” as, among other things, a publicly reportable swap transaction that “[o]ccurs away from the registered [SEF’s] or [DCM’s] trading system or platform and is executed pursuant to the registered [SEF’s] or [DCM’s] rules and procedures.”

The no-action letter extends time-limited relief to SEFs from the “occurs away” requirement under Section 43.2 until November 15, 2017 before 11:59 p.m., Eastern Standard Time, or the effective date of any CFTC action with respect to the issues discussed in this no-action letter. Among other things, the extension will allow the Division to continue to evaluate best practices and a more permanent solution to the issues involved in screening block trade orders for compliance with risk-based limits including, if appropriate, amendments to CFTC regulations.

The relief is subject to the following conditions as stated in the letter:

• The block trade is not executed on the SEF’s Order Book functionality, as defined in Section 37.3(a)(3);
  
  
• The SEF adopts rules pertaining to cleared blocks that indicate that the SEF is relying on the relief provided in the no-action letter and that requires each cleared block trade executed on a non-Order Book trading system or platform to comply with the other requirements in the block trade definition in Section 43.2;
  
  
• The FCM completes the pre-execution credit check pursuant to Section 1.73 at the time the order for a block trade enters the SEF’s non-Order Book trading system or platform; and
  
  
• The block trade is subject to void ab initio requirements where the swap is rejected on the basis of credit.
  

Parties to a swap who do not use the SEF functionalities this letter provides must ensure the required pre-execution credit check occurs.

Last Updated: October 7, 2016