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CFTC Issues Staff Advisory on Applicability of Transaction-Level Requirements to Activity in the United States

On November 14, 2013, the Division of Swap Dealer and Intermediary Oversight ("DSIO") of the Commodity Futures Trading Commission ("CFTC") issued CFTC Staff Advisory No. 13-69 in response to certain inquiries as to the applicability of transaction-level requirements with respect to certain swaps of non-US swap dealers ("SD") if such swap is arranged, negotiated or executed by personnel or agents of the non-US SD located in the United States. The DSIO is of the view, however, that a non-US SD (whether an affiliate or not of a US person) regularly using personnel or agents located in the US to arrange, negotiate or execute a swap with a non-US person would generally be required to comply with the transaction-level requirements. For the avoidance of doubt, the DSIO states that the view would also apply to a swap between a non-US SD and a non-US person booked in a non-US branch of the non-US SD if the non-US SD is using personnel or agents located in the US to arrange, negotiate or execute the swap. While the DSIO notes that the CFTC's Cross-Border Guidance[1] provides for substituted compliance for transaction-level requirements with respect to swaps between a non-US SD and a non-US person , DSIO explains that it believes that the CFTC has a strong supervisory interest in swap dealing activities that occur within the United States, regardless of the status of the counterparties.[2]

Transaction-level requirements under the Cross Border Guidance include: (i) required clearing and swap processing, (ii) margining and segregation for uncleared swaps, (iii) trade execution, (iv) swap trading relationship documentation, (v) portfolio reconciliation and compression, (vi) real-time public reporting, (vii) trade confirmation, (viii) daily trading records, and (ix) external business conduct standards.


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[1] - Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations, 78 FR 45292 (July 26, 2013) ("Cross Border Guidance")
[2] - Such requirements would not apply at all depending on whether or not such non-US person is a guaranteed affiliate or affiliate conduit of a US person.


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