Wednesday, January 9, 2013

CFTC Kicks Cross-Border Swaps Guidance Further Down the Road

On December 21, 2012, the CFTC issued a final exemptive order providing temporary relief from compliance with certain swap regulations and further proposed guidance relating to the application of certain swap-related provisions of the U.S. Commodity Exchange Act to swap activities outside the United States. The December 21 exemptive order adopts a number of provisions proposed by the CFTC in a July 2012 release, and addresses many of the topics covered in the CFTC’s proposed cross-border guidance ("Proposed Cross-Border Guidance") also issued in July 2012.

The CFTC elected not to finalize the Proposed Cross-Border Guidance at this time.  It did, however, include in the December 21 exemptive order proposed further guidance (“Proposed Further Guidance”) regarding the definition of the term “U.S. person” and aggregation requirements for non-U.S. persons. Among other provisions, the final exemptive order:

  • adopts a new temporary definition of “U.S. person”;
  • clarifies what swap activity a non-U.S. person should include in determining whether it must register as a swap dealer or major swap participant and, in doing so, provides significant temporary relief from the requirement that non-U.S. persons must aggregate the U.S. swap dealing activity of their nonU.S. affiliates;
  • allows non-U.S. swaps dealers and major swap participants to delay compliance with most of the CFTC’s entity-level swap requirements; and
  • allows non-U.S. swaps dealers and major swap participants and non-U.S. branches of U.S. swaps dealers and major swaps participants to delay compliance with the CFTC’s transaction level swap requirements with non-U.S. persons and, in some cases, with non-U.S. branches of U.S. persons.

The CFTC requested comment on the Proposed Further Guidance, and also with regard to certain requirements the CFTC is considering for determining whether swaps are entered into with “foreign branches” of U.S. persons. The comment period ends 30 days after the date of publication of the order in the Federal Register.  The December 21 exemptive order is set to expire on July 12, 2013, by which time the CFTC expects to issue final rules.