Time Limited DCO Registration Relief
On May 7th, the Commodity Futures Trading Commission (“CFTC”) issued a time-limited no-action letter stating that the Division of Clearing and Risk will not recommend enforcement action against OTC Clearing Hong Kong Limited (OTC Clear) for failing to register as a derivatives clearing organization (DCO) or against U.S. clearing participants of OTC Clear for failure to clear certain interest rate swaps and certain non-deliverable forwards through a registered DCO. The no-action relief is effective until the earlier of December 31, 2014 or the date upon which the CFTC either registers OTC Clear as a DCO or exempts OTC Clear from registration. CFTC Release No. 14-68.
On May 6th, Reuters reported CFTC staff is preparing a proposed rule that would govern algorithmic trading. Staff Proposal.
CFTC Expands Electronic Filing Capabilities
On May 5th, the CFTC announced new enhancements to its filing portal. The CFTC Portal has been expanded to allow market participants, including designated contract markets, swap execution facilities, and swap data repositories, to electronically submit event specific reports to the CFTC to comply with CFTC regulations that requires them to report to the agency in a timely and confidential manner. CFTC Press Release.
Interposed Longevity Reinsurance Transaction Receives No-Action Relief
The CFTC’s Division of Swap Dealer and Intermediary Oversight issued a letter granting an insurance company’s request for no-action relief in order to allow the company to provide reinsurance of pension plans’ longevity risks through multi-step “Interposed Longevity Reinsurance Transactions,” without such reinsurance being considered as insurance or a guarantee of a swap. The Division found that the use of derivatives in the Interposed Longevity Reinsurance Transaction serves merely as a conduit for longevity risk coverage and payments made pursuant to a bona fide reinsurance transaction. Therefore, the Division agreed not to recommend an enforcement action against the insurance company on the basis that, under this specific fact pattern, the reinsurance of longevity risk is or should be characterized as a swap, as insurance of a swap or a guarantee of a swap, or that the insurance company is a provider of, a party to, guarantor of, or insurer of, a swap. CFTC Letter No. 14-67.