The CFTC Division of Market Oversight ("DMO") extended previously issued no-action relief for package transactions. The relief, which primarily relates to the trade execution requirement under CEA Section 2(h)(8), was previously extended by CFTC Letter 17-55 and was set to expire on November 15, 2020. The new letter extends the relief until the earlier of (i) November 15, 2022 or (ii) the effective or compliance date of a CFTC action, including a rulemaking or order, that would provide a permanent solution for the package transactions supported by this relief.

The DMO stated that the extension of the relief is meant to allow market participants to continue engaging in certain package transactions until the adoption of a proposal to codify relief outlined in CFTC Letter 17-55, which the CFTC proposed in February of 2020 (see previous coverage).

As previously covered, the DMO said that ongoing assessments of how to enable swap execution facilities and designated contract markets to "facilitate trading of certain package transactions in a manner that balances the utility of package transactions against the policy goals of the trade execution requirement" have indicated that trading certain package transactions in a fully compliant manner remains "unfeasible."

Commentary

After a series of shorter (generally one-year) extensions, in 2017 DMO went further and provided a three-year extension of this particular no-action relief. As it turns out, that also was insufficient but, hopefully, the additional two years are only a buffer period. The CFTC proposal from earlier this year to (essentially) codify this and other relief was relatively noncontroversial.

Primary Sources

  1. CFTC No-Action Letter 20-31: Extension of No-Action Relief from Sections 2(h)(8) and 5(d)(9) of the Commodity Exchange Act and from Commission Regulations 37.3(a)(2) and 37.9 for Swaps Executed as Part of Certain Package Transactions
  2. CFTC Press Release: CFTC Staff Extends No-Action Relief from the Execution Requirement for Swaps in Certain Types of Package Transactions

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