• CFTC No-Action Relief from SEF Trading for Package Transactions
  • November 9, 2017 | Authors: James M. Cain; Raymond A. Ramirez; Kristen N. Bertch
  • Law Firm: Eversheds Sutherland (US) LLP - Washington Office
  • FeaturesFull Legal Alert

    Earlier this week, the Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight extended existing no-action relief from trading on a swap execution facility for package transactions until November 15, 2020.

    A “package transaction” is a transaction involving two or more instruments: (1) that is executed between two or more counterparties; (2) that is priced or quoted as one economic transaction with simultaneous or near simultaneous execution of all components; (3) that has at least one component that is a swap that is made available to trade and therefore is subject to the Commodity Exchange Act (CEA) section 2(h)(8) trade execution requirement; and (4) where the execution of each component is contingent upon the execution of all other components.

    The no-action relief that was previously granted from trading on a swap execution facility for package transactions was scheduled to expire later this month, on November 15, 2017. The new expiration date is November 15, 2020.

    Package Transaction Category

    MAT/NEW Issuance Bond: At least one individual swap component is subject to the trade execution requirement and at least one individual component is a bond issued and sold in the primary market.

    MAT/Features: At least one individual swap component is subject to the trade execution requirement and all other components are contracts for the purchase or sale of a commodity for future delivery, i.e., futures contracts. This category may include:

    • MAT swap vs. Treasury futures
    • MAT swap vs. Eurodollar futures

    MAT/Non-MAT (Uncleared): At least one of the swap components is subject to the trade execution requirement and at least one of the components is a CFTC swap that is not subject to the clearing requirement. This category may include:

    • MAT swap vs. swaption
    • MAT swap vs. uncleared credit default swap

    MAT/Non-Swap Instruments: At least one of the swap components is subject to the trade execution requirement and at least one of the components is not a swap. This category excludes US Dollar Swap Spreads, MAT/Futures, MAT/Agency MBS, and MAT/New Issuance Bond. This category may include:

    • MAT swap vs. single-name credit default swap
    • MAT swap vs. bond (secondary market transaction)

    MAT/Non-CFTC Swap: At least one of the swap components is subject to the trade execution requirement and at least one of the components is a swap over which the CFTC does not have exclusive jurisdiction (e.g., a mixed swap).