Co-authored by Adam J. Spector.
The Division of Clearing and Risk (DCR) of the Commodity Futures Trading Commission issued temporary no-action relief from the swaps clearing requirement for swaps that are entered into between affiliated counterparties. Earlier this year, the CFTC released a proposed rule that would exempt from the clearing requirement swaps entered into by two affiliates (Inter-affiliate Exemption). As a result of the CFTC’s first clearing requirement determination (see “CFTC Issues Required Clearing Determination for Certain Credit Default and Interest Rate Swaps” in CFTC above) and the fact that the Inter-affiliate Exemption has not yet been finalized, the CFTC granted this temporary relief to remove any uncertainty pending adoption of a final rule. For this relief to apply: (i) the parties must be affiliates, (ii) the parties must issue consolidated financial statements and (iii) both parties must agree not to clear the swap.
The CFTC’s temporary no-action letter is available here.