Alert October 16, 2012

CFTC Issues Range of Swaps-Related Interpretive Guidance and No-Action Relief

The CFTC issued a number of no-action relief letters and interpretive guidance in the days leading up to the October 12, 2012 effective or compliance dates for several swaps-related CFTC regulations, including the product definition rules and various registration and reporting rules. 

The CFTC responded to a request from the National Association of Real Estate Investment Trusts (NAREIT) for guidance regarding whether certain real estate investment trusts are commodity pools, which is the subject of a Goodwin Procter REIT Alert, and issued separate guidance conducting a similar analysis with respect to securitization vehicles (as discussed in greater detail here).  It also provided temporary no-action relief with respect to certain market participants from certain registration requirements arising from swaps activities (as discussed in greater detail here).

Additional interpretive guidance issued by the CFTC clarified the scope of the bona fide hedging exemption from trading thresholds in light of a federal court’s September 28, 2012 decision (discussed in the October 2, 2012 Financial Services Alert) to vacate position limits rules that were referenced in the bona fide hedging exemption rules.  The Commission also issued certain interpretive guidance and no-action relief regarding eligible contract participants.

In addition, the CFTC issued no-action relief letters concerning what swaps must be included in calculations of the de minimis thresholds included in the definition of “swap dealer” and in certain calculations included within the “major swap participant” definition (as discussed in greater detail here).  The CFTC provided similar relief in a no-action letter regarding certain swaps with utility Special Entities and a no-action letter regarding swaps calculations made by certain non-US entities. 

The CFTC also issued no-action relief regarding the treatment of foreign exchange swaps and foreign exchange forwards for certain purposes.  This relief temporarily allows foreign exchange swaps and foreign exchange forwards to be currently excluded from the swap dealer de minimis thresholds and major swap participant definition, to the extent that the Secretary of the Treasury issues a final determination that is effective prior to December 31, 2012, that they should not be regulated as swaps.  The Treasury Department has issued a proposed determination, but has not yet finalized it.

The Commission also issued no-action relief regarding a final rule published in February 2012, regarding the protection of cleared swaps customer contracts and collateral, as well as commodity broker bankruptcy provisions, to ease confusion regarding whether and how certain rules would apply before a November 8, 2012 compliance date.  It also issued two separate no-action relief letters (available here and here) involving certain electric utilities, in each case to “maintain the regulatory status quo” pending final resolution of previously issued proposed orders.

The CFTC also issued a “question and answer” document on the timing of swap data reporting as well as a “Frequently Asked Questions” document on the reporting of cleared swaps.