The following is a brief update for our clients and friends who are end-users of swaps (for example, interest rate, commodity, energy or currency/FX swaps).

Late Friday, April 5, 2013, the Commodity Futures Trading Commission’s Division of Market Oversight and Division of Clearing and Risk issued no-action relief for swaps entered into between affiliates of certain wholly-owned and majority-owned market participants from the requirement to report their intra-group swaps to a registered swap data repository (“SDR”), under Part 45 (for post-compliance date swaps), Part 46 (for pre-enactment and transition swaps), and Regulation 50.50(b) (for the election of the end-user exception to swap clearing) of the CFTC’s regulations, subject to several conditions.

Relief for swaps between wholly-owned affiliates

The relief under Part 45 of the CFTC regulations for post-compliance date swaps and the end-user exception to mandatory clearing extends to intra-group swaps involving wholly-owned affiliated counterparties that are neither swap dealers (“SDs”) or major swap participants (“MSPs”) nor affiliated with an SD or MSP.

Conditions include, among others, that:

  • The swap not be executed on a trading facility;
  • All outward-facing swaps with unaffiliated counterparties are reported to an SDR; and
  • The affiliated counterparties retain records of the intra-group swaps.

Relief for swaps between majority-owned affiliates

The Divisions also granted certain relief from reporting requirements under Part 45 of the CFTC regulations for post-compliance date swaps and the end-user exception to mandatory clearing for intra-group swaps involving majority-owned affiliates. Reporting for swaps between majority-owned affiliates will be permitted on a quarterly basis, subject to similar conditions as applicable to wholly-owned affiliates.

Relief for both wholly-owned and majority-owned affiliates

Finally, the no-action relief also provides both wholly-owned and majority-owned affiliates with certain relief from reporting historical swap data for intra-group swaps to an SDR under Part 46 of the CFTC regulations, subject to the conditions provided in the letter.

The relief does not apply to the reporting requirements under the inter-affiliate exemption from mandatory clearing that the CFTC adopted on April 1, 2013.

You can find a copy of the announcement here, and a copy of the no-action letter here.

This is very good news for swaps end users! Too bad it did not come sooner!