CFTC Continues Wave of Relief with Exemption for Foreign-Owned Banks

CFTC Continues Wave of Relief with Exemption for Foreign-Owned Banks

The U.S. Commodity Futures Trading Commission (CFTC) has issued no-action relief for certain banks owned by non-U.S. swap dealers. The relief for foreign-owned banks comes in a wave of recent swaps-oriented regulatory exemptions and delays.

The letter states that the CFTC’s Division of Swap Dealer and Intermediary Oversight will not recommend enforcement action against any

U.S. bank that is wholly owned by a foreign entity for failure to consider the swap dealing activities of its foreign affiliates, or the U.S. branches of such affiliates, with respect to swap positions executed from and after October 12, 2012, when determining whether such U.S. bank satisfies the de minimis exception to the swap dealer definition and registration requirements, so long as the U.S. bank meets certain conditions specified in the letter.

Congress and Cross-Border Compliance

The relief for foreign-owned banks comes as the CFTC is urged by Congress to establish workable cross-border compliance rules.

“We are very concerned that a lack of coordination between both foreign and domestic regulators could soon lead to a disruption of the derivatives markets,” 14 members of the House of Representatives, from both parties, said in a letter on Thursday.

As it stands, foreign banks will soon be required to abide by the same rules as U.S. entities, including a counting their transactions toward an $8 billion threshold. Crossing the threshold would lead to increased registration costs and monitoring.

Wave of Relief from CFTC

Today’s no-action delay is a part of a wave of relief from the regulator. The CFTC has issued 52 no-action orders this year, with more coming in the month of December than in the whole of 2011.

Yesterday the CFTC issued an interim rule to extended the compliance date for certain business conduct and documentation requirements for swap dealers (SDs) and major swap participants (MSPs). The rule issues separate compliance dates—May 1, 2013 and July 1, 2013—for a variety of these business conduct rules. The agency approved the extension in a 5-0 seriatim vote.

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About The Author


Felix Shipkevich

Felix Shipkevich

Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.

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