CFTC Issues 3 Month No-Action Letter for Package Swaps

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The Commodity Futures Trading Commission (CFTC) has issued a no action letter in regards to package swap deals, giving both the CFTC and traders another 3 months to decide on how to properly monitor package swaps on SEFs.

Without the no-action letter, any traders participating in package swap trading would have to report any package swap that includes swaps subject to the made-available-to-trade (MAT) ruling to SEFs by February 15th.

A package swap is a trade that involves the simultaneous execution of several trades, and would currently be difficult handle through SEFs.

Initially, the CFTC had mandated that any package swap that included swaps subject to the MAT ruling would still have to be traded through a SEF in order to close a loophole that would allow traders to keep certain swaps off SEFs by packaging them with other swaps not subject to the MAT ruling. However, after finding that SEFs are currently ill-equipped to handle package swaps, the CFTC has decided to hold off on this, much to the relief of market traders.

Many traders had feared the required reporting of package swaps would drive down liquidity, an issue for many market participants who do the bulk of their trading through package swaps.

The no-action letter will keep package swaps off of SEFs until May 15th.