December 18, 2012

CFTC’s Division of Swap Dealer and Intermediary Oversight Issues No-Action Letter on the Obligation of Swap Dealers and Major Swap Participants to Provide the Pre-Trade Mid-Market Mark for Certain Credit Default Swaps and Interest Rate Swaps

Washington, DC – The Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) today issued a no-action letter that provides swap dealers and major swap participants with relief from the requirement to disclose the pre-trade mid-market mark to counterparties in certain credit default swaps and interest rate swaps that are identified in the no-action letter (Covered Derivative Transactions).

The disclosure requirements prescribed in Regulation 23.431 state, among other things, that a swap dealer or major swap participant must disclose to certain counterparties the pre-trade mid-market mark of a swap.

The no-action letter issued today by DSIO states that a swap dealer or major swap participant need not disclose the pre-trade mid-market mark for a Covered Derivative Transaction prior to the issuance of final Commission Regulations governing the registration of swap execution facilities (SEFs), subject to any compliance implementation period contained therein, provided that: (1) real-time tradeable bid and offer prices for the Covered Derivative Transaction are available electronically, in the marketplace, to the counterparty; and (2) the counterparty to the Covered Derivative Transaction agrees in advance, in writing, that the swap dealer or major swap participant need not disclose a pre-trade mid-market mark.

The no-action letter also states that a swap dealer or major swap participant need not disclose the pre-trade mid-market mark for a Covered Derivative Transaction subsequent to the issuance of final Commission Regulations governing the registration of SEFs, subject to any compliance implementation period contained therein, provided that: (1) real-time executable bid and offer prices for the Covered Derivative Transaction are available on a designated contract market or SEF; and (2) the counterparty to the Covered Derivative Transaction agrees in advance, in writing, that the swap dealer or major swap participant need not disclose a pre-trade mid-market mark.

The relief provided in the no-action letter is applicable to all swap dealers and major swap participants.

Last Updated: December 18, 2012