The CFTC’s Division of Market Oversight (DMO) issued a no-action letter for all end-users, allowing them not to report under Part 45 of the CFTC’s regulations, as applicable, commodity trade options (as defined in Part 32), provided that the non-SD/MSP (1) reports such transactions pursuant to Form TO and (2) notifies DMO if it transacts in excess of $1 billion notional value of trade options in any calendar year.
Additionally, relief is provided with respect to related recordkeeping requirements if the firm entering into the trade option (1) obtains and provides a legal entity identifier to any swap dealer counterparty to its trade options and (2) notifies DMO if it transacts in excess of $1 billion notional value of trade options in any calendar year.
Lofchie Comment: Firms that enter into trade options will be required to institute compliance procedures in order to identify which of their options qualify for the Part 32 relief, and to track the notional value of their trades as against the $1 billion limit, and, if they do exceed such limit, to provide the required notice to the DMO.