December 27, 2021

US CFTC Issues Further Technical No-Action Relief and Guidance for LIBOR Transition


On December 22, 2021, in response to a request from the Alternative Reference Rate Committee (ARRC) and a further request from the Futures Industry Association (FIA), the United States Commodity Futures Trading Commission (CFTC) issued five technical no-action letters providing additional, and extending existing, time-limited, no-action relief and guidance for certain London Interbank Offered Rate (LIBOR) transition matters.

End-User Exception

In CFTC Staff Letter 21-26, the CFTC’s Market Participants Division (MPD) amends and restates CFTC Staff Letter 20-23 to modify its discussion of the end-user exception to be consistent with a statement by the UK Financial Conduct Authority (FCA), which regulates ICE Benchmark Administration Limited, the administrator of ICE LIBOR. On March 5, 2021, the FCA confirmed that all LIBOR settings will either cease to be provided by any administrator or will no longer be representative (i) for all British Pound Sterling, Euro, Swiss Franc and Japanese Yen LIBOR settings and the one-week and two-month USD LIBOR settings immediately after December 31, 2021; and (ii) for all other USD LIBOR settings immediately after June 30, 2023.

Swap Transition 

In CFTC Staff Letter 21-27, the CFTC’s Division of Market Oversight (DMO) extends and restates CFTC Staff Letter 20-24 and clarifies the application of the trade execution requirement under section 2(h)(8) of the Commodity Exchange Act (CEA) in order to support the industry-wide initiative associated with the transition of swaps that reference LIBOR and other interbank offered rates (collectively, with LIBOR, “IBORs”) to swaps that reference alternative benchmarks, including the risk-free rates (collectively, with alternative benchmarks, “RFRs”).

Uncleared Interest Rate Swaps

In CFTC Staff Letter 21-28, the CFTC’s Division of Clearing and Risk (DCR) amends and restates CFTC Staff Letter 20-25 and grants no-action relief for failure to comply with certain provisions of the swap clearing requirement promulgated pursuant to section 2(h)(1)(A) of the CEA for uncleared interest rate swaps (IRS) that were executed prior to an applicable clearing requirement compliance date and for which swap counterparties subsequently amend certain terms solely as part of an industry-wide initiative to amend swaps that reference IBORs to RFRs.

Separate Accounts by Futures Commission Merchants

In CFTC Staff Letter 21-29, the CFTC’s DCR and MPD extend the prior advisory and no-action relief in CFTC Staff Letters 19-17 and 20-28 regarding the treatment of separate accounts by futures commission merchants.

Swap Data Reporting  

Finally, in CFTC Staff Letter 21-30, the CFTC’s Division of Data (DOD) takes a no-action position with respect to certain requirements of the swap data reporting rules set forth in Parts 43 and 45 of the CFTC’s regulations. The letter states that DOD will not recommend that the CFTC take an enforcement action against an entity for failure to timely report under Part 45 the change in a swap’s floating rate made under the ISDA LIBOR fallback provisions from any tenor of Swiss Franc, Euro, British Pound Sterling or Japanese Yen LIBOR to the applicable RFR. This action is conditioned on the entity using its best efforts to report the change by the applicable deadline in Part 45 and in no case reports the required information later than five business days from, but excluding, December 31, 2021. The letter also states that DOD will not recommend that the CFTC take an enforcement action against an entity for failure to report under Part 43 the change in the floating rate for a swap modified after execution to incorporate the ISDA LIBOR fallback provisions to transition from referencing any tenor of Swiss Franc, Euro, British Pound Sterling and Japanese Yen LIBOR to referencing an RFR.

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