The CFTC has adopted a rule that exempts interaffiliate trades from the Dodd-Frank Act requirements for clearing. Barclays, JPMorgan Chase & Co., and other banks are among those exempt from the Dodd-Frank Act swap market rules when trading between their own affiliates.
Commissioners at the CFTC approved a rule excluding inter-affiliate trades from requirements that swaps are guaranteed at clearinghouses that in place to protect buyers and sellers against defaults. The rule comes as part of the CFTC’s mandate to minimize risk and emphasize transparency in the trillion dollar global swaps market.
Gary Gensler, the CFTC’s Chairman said in a statement to Bloomberg, “The rule requires documentation of such exempted swaps, centralized risk management and reporting requirements for such swaps.”
Lobby groups affiliated with the New York based JP Morgan and Goldman Sachs, along with London-based Barclays encouraged the CFTC to exclude such trades from Dodd-Frank rules enacted in response to the 2008 credit crisis. Among those who aslo asked for exemption were Prudential Financial Inc. and a group of end users composed of commercial and manufacturing firms that use swaps to hedge risk.
Robert Pickel, chief executive of the International Swaps and Derivatives Association Inc., and Ken Bentsen, executive vice president at the Securities Industry and Financial Markets Association told the CFTC in September of last year that, “Interaffiliate swaps do not introduce risks to a corporate group…They allocate and transfer risks among group members.”