In No-Action letter 14-1441 (“Letter 14-144”), the Division of Clearing and Risk of the US Commodity Futures Trading Commission (the “Division”) amended and restated No-Action letter 13-222 (“Letter 13-22”) in order to remove or amend several of the restrictive conditions on the relief from mandatory clearing provided to certain treasury affiliates by the earlier letter. As with Letter 13-22, the relief is intended to help treasury affiliates undertaking hedging activities on behalf of non-financial affiliates within a corporate group.
Like the prior letter, Letter 14-144 provides conditional no-action relief to “eligible treasury affiliates” from mandatory clearing for certain swaps between the eligible treasury affiliate and an unaffiliated counterparty or another eligible treasury affiliate. However, in response to industry comments highlighting the impracticality of several of the conditions of Letter 13-22, the Division modified certain conditions to make the relief available to a broader spectrum of market participants acting as treasury affiliates. The modifications are:
The other conditions of Letter 14-144, including the reporting conditions, remain unchanged from Letter 13-22.
1 CFTC Letter No. 14-144, No-Action Relief from the Clearing Requirement for Swaps Entered into by Eligible Treasury Affiliates, Division of Clearing and Risk, (November 26, 2014) available at http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-144.pdf.
2 CFTC Letter No. 13-22, No-Action Relief from the Clearing Requirement for Swaps Entered into by Eligible Treasury Affiliates, Division of Clearing and Risk, (June 4, 2013) available at http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-22.pdf.
3 Letter 14-144 at 5. See also id. at 9, “General Conditions to the Swap Activity,” para. (iv) (centralized risk management program must be reasonably designed to identify the related affiliate or affiliates on whose behalf each exempted swap has been entered into by the eligible treasury affiliate).
4 Id. at 4; id. at 8, “Definition of ‘related affiliate,’” para (ii) (no longer including the language “for an entity described in (i)” from the corresponding definition in Letter 13-22). It is unclear to us as a drafting matter whether this change accomplishes the Division’s intended purpose.
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