CFTC Issues Time-Limited No-Action Letter for FCMs and SEFs (13-62)

The CFTC Divisions of Clearing and Risk and Market Oversight issued No-Action Letter 13-62, providing time-limited and specific relief for futures commission merchants (“FCMs”) from the requirement to comply with CFTC Rule 1.73(a)(2) (“Clearing FCM Risk Management”), and for temporarily registered swap execution facilities (“SEFs”) from the requirement to comply with CFTC Rule 37.702(b) (“General Financial Integrity”).  In short, the letter provides that FCMs are not required to guarantee clearance of trades sent to an SEF where the technology and rules are not in place to do so.

In order for an SEF to avail itself of the no-action relief, the SEF must submit the following materials to the CFTC by October 10, 2013:

  • any rule amendments that are necessary for full compliance with CFTC Rule 37.702(b), and any rule amendments that are necessary to facilitate full compliance with CFTC Rule 1.73(a)(2); and
  • a written representation that the SEF is undertaking all steps necessary to fully comply with these CFTC Rules.

Lofchie Comment: This letter seems to be written in an intentionally oblique manner. In short, on September 26 the CFTC says that it issued “guidance” (effectively a rule) to the effect that any order sent to a SEF must be pre-guaranteed to clear. Since this guidance (rule) was issued only a week before SEF registration was to become effective, it is not surprising that the market was unprepared to comply with it. Accordingly, the CFTC is issuing its ordinary last-minute no-action letter, subject to conditions that are burdensome.

See: CFTC No-Action Letter 13-62.
Related News: CFTC Issues Amendments to CFTC No-Action Letter 13-55 (October 2, 2013); Two CFTC No-Action Letters (13-55 and 13-56) on Swap Data Reporting (October 1, 2013); CFTC’s DMO Provides Time-Limited No-Action Relief to SEFs and Market Participants (September 30, 2013).


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