On February 10th, the CFTC granted time-limited no-action relief for so-called "Package Transactions".  The relief expires at 11:59 p.m. (eastern time) on May 15, 2014.

QUESTION: What is a Package Transaction?

ANSWER: A Package Transaction is a transaction involving two or more instruments:

  1.  that is executed between two counterparties;
  2.  that is priced or quoted as one economic transaction with simultaneous execution of all components;
  3. that has at least one component that is a swap that is subject to the mandatory SEF trading requirement (i.e., a swap that has been made available to trade or "MATTED"); and
  4. where the execution of each component is contingent upon the execution of all other components.

So, by way of non-limiting example, here are some package transactions:

Treasury note or Treasury futures vs. interest rate swaps (commonly called an "invoice spread");

Swaption vs. an interest rate swap (commonly called a "swap spread");

TBA MBS vs.. swap spread (commonly called an MBS basis trade);

A single-name credit default swap vs. a credit default index swap or "CDX"; and

A package of two interest rate swaps of differing tenors (a so-called "swap curve").

What about a package of a CDX and a Treasury security, like a TIP (i.e., a synthetic corporate inflation protected bond)?  (And, if you are a mutual fund, then you solved your section 18 asset segregation issues all at once.)

Not mentioned...but, if it is a package, then it qualifies for the recent no-action relief.  (No promise of liquidity, of course.  But, it does illustrate the point...at least we hope.