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Another Day: Another Five CFTC No-Action Letters

On the 27th June the CFTC issued five more no-action letters (four for all practical purpose – one being a minor correction to one of the previous day’s letters).  A brief summary follows:

  • Time-limited relief for SD’s from certain External Business Conduct Standards rules with respect to foreign exchange intermediated prime brokerage arrangements.
  • Time limited relief for SD/MSP’s from the § 23.504 relationship documentation obligation with specific respect to FX swaps. If the SD/MSP’s counterparty is an active fund, relief extends until 1 September 2013.  For all other counterparties (except other SD’s or MSP’s), the relief will last until 31 December 2013.
  • Time-limited relief from certain reporting obligations under Parts 43 and 45. With respect to bespoke or complex swaps, the letter provides relief against failure to report certain data fields under Parts 43 and 45. The letter effectively extends elements of relief previously granted CFTC Letter No. 12-39. The relief will last until 30 September 2013.
  • Time-limited relief for eligible SD/MSP’s from the part 45 requirement to submit CDS data to facilitate a clearing organisation’s end-of-day settlement price calculations. The relief will last until 31 December 2013.

The past five years have shown a marked increase in the CFTC’s willingness and ability to pursue enforcement actions.  2012 saw 102 actions filed, resulting in fines/sanctions totalling USD 935 million, more than double that of the previous year.  Although Chairman Gary Gensler has testified to the Senate that enforcement actions are currently being “shelved” due to lack of resources; it would be unwise to underestimate the extent of the agency’s new powers and its resolve to enforce them. While the 34 no-action letters in 2013 to date represent extensive accommodation to heavily-burdened market participants; this “phony war” is not analogous to peace.  Amidst the uncertainty generated by constantly shifting deadlines, we may be certain that relief is not reprieve, and that such relief will be limited in duration.

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