The Commodity Futures Trading Commission’s Division of Clearing and Risk and Division of Market Oversight have issued guidance to derivatives clearing organizations (DCOs) that use a “firm or forced trades” process to determine the price of swaps for which public market prices are not available. Specifically, the guidance confirms that a DCO is not required to register as a swap execution facility solely by virtue of using a “firm or forced trades” process.

The guidance also confirms that swaps executed during the “firm or forced trades” process are not subject to the clearing and trade execution requirements of the Commodity Exchange Act. However, DCOs must report such swaps as the reporting counterparty under Part 45 of CFTC Regulations.

The divisions’ interpretation is available here.