CFTC No Action from Including International Swaps for Global Development
CFTC Reduces Marketplace Barriers for Global Development Initiatives
May 16, 2018
Washington, DC — The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) today granted relief to non-US counterparties who enter into swaps with International Financial Institutions (IFIs), such as development banks.
“International financial institutions like the International Monetary Fund and North American Development Bank play a vital role in the global community by promoting infrastructure projects, encouraging employment, and reducing poverty,” said DSIO Division Director Matt Kulkin. “DSIO is providing relief so that these entities can more easily access over-the-counter derivatives markets to hedge risk associated with financing projects in developing countries in order to promote global economic growth.”
In the no-action letter, released today, DSIO announced it would not recommend that the Commission take action if non-U.S. persons do not include swaps with IFIs when determining whether such non-U.S. persons meet or exceed agency-prescribed registration thresholds. The relief granted today is consistent with the Commission’s prior treatment of IFIs for purposes of foreign futures and options transactions, the swap dealer definition, and mandatory clearing.
The IFIs referenced in the no-action letter include the North American Development Bank, International Monetary Fund, International Bank for Reconstruction and Development, European Bank for Reconstruction and Development, International Development Association, International Finance Corporation, Multilateral Investment Guarantee Agency, African Development Bank, African Development Fund, Asian Development Bank, Inter-American Development Bank, Bank for Economic Cooperation and Development in the Middle East and North Africa, Inter-American Investment Corporation, Council of Europe Development Bank, Nordic Investment Bank, Caribbean Development Bank, European Investment Bank and European Investment Fund. The IFIs listed in this letter are the same international financial institutions referenced in the Commission’s Cross-Border Guidance, with the addition of the North American Development Bank.
No-Action Position: Relief for Certain Non-U.S. Persons from Including Swaps with International Financial Institutions in Determining Swap Dealer and Major Swap Participant Status
Summary of Request for No-Action Position
Based on representations by the Requestor, DSIO understands certain facts to be as follows. The Requestor is incorporated in the Netherlands and is regulated by the Netherlands Authority for the Financial Markets pursuant to the laws and regulations of the European Union and the Netherlands.
The Requestor is not currently registered, and is not required to be registered, with the Commission as an SD or as an MSP. The Requestor is a Non-U.S. person. The Requestor is also neither guaranteed by a U.S. person, nor a conduit affiliate of a U.S. person. The Requestor plans to enter into swaps with certain IFIs (as defined below). To the extent an IFI is incorporated in, or has its principal place of business in, the United States, it could be considered to be a U.S. person for purposes of the Cross-Border Guidance, and therefore the Requestor may be required to include swaps with such IFI for purposes of determining whether it is required to register as an SD or MSP. In addition, to the extent an IFI is or becomes guaranteed by a U.S. person, the Requestor may be required to include swaps with such IFI for purposes of determining whether it is required to register as an SD or MSP.
DSIO No-Action Position
Based on the facts presented and representations made by the Requestor, and consistent with certain regulatory exceptions provided by the Commission and Commission staff to the IFIs in similar contexts, DSIO believes that no-action relief is warranted. Accordingly, DSIO will not recommend that the Commission take an enforcement action against a Non-U.S. person that is neither a guaranteed affiliate nor conduit affiliate of a U.S. person if it does not include one or more swaps entered with IFI counterparties in determining whether it is (i) deemed to be an SD pursuant to the criteria set forth in the Commission’s definition of “swap dealer;” or (ii) an MSP pursuant to the criteria set forth in the Commission’s definition of “major swap participant.”
