On October 7, the Commodity Futures Trading Commission’s Division of Market Oversight and Division of Clearing and Risk issued No-Action Letter No. 16-74 granting relief to Swap Execution Facilities (SEFs) from the requirement in CFTC Regulation 43.2 that a swap block trade must take place away from a SEF’s trading system or platform. The No-Action letter extends relief previously granted to SEFs in CFTC Letter No. 15-60 and Letter No. 14-118.
The relief is subject to the following conditions: 1) the block trade is not executed on a SEF’s order book, as defined in CFTC Regulation 37.3(a)(3); 2) the SEF adopts rules for cleared block trades that indicate the SEF is relying upon this relief and require each cleared block trade to comply with the notional size and other requirements of CFTC Regulation 43.2; 3) the futures commission merchant (FCM) completes a pre-execution credit check at the time the order enters the SEF trading system or platform; and 4) the block trade is subject to void ab initio requirements if the trade is rejected for clearing on the basis of credit.
CFTC Letter No. 16-74 extends the relief until the earlier of November 15, 2017, at 11:59 p.m. or the effective date of any CFTC action with respect to swap block trades.
More information on CFTC Letter No. 14-118 is available in the Corporate & Financial Weekly Digest edition of September 26, 2014.
CFTC Letter No. 15-60 is available here.
CFTC Letter No. 16-74 is available here.