# CFTC Letter No. 14-108: Time-limited no-action relief granted by DMO to swap execution facilities (SEFs) for incorporating by reference previously-negotiated freestanding agreements into SEF-generated confirmations for uncleared swap transac..

> Federal · Agency guidance · Superseded

URL: https://www.frixlaw.com/law-library/statutes/CFTC_L14_108

## Section

- **Citation:** CFTC Letter No. 14-108
- **Heading:** Time-limited no-action relief granted by DMO to swap execution facilities (SEFs) for incorporating by reference previously-negotiated freestanding agreements into SEF-generated confirmations for uncleared swap transac..
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** Superseded
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** CFTC Staff Letters (2008-present) / Time-limited no-action relief granted by DMO to swap execution facilities (SEFs) for incorporating by reference previously-negotiated freestanding agreements into SEF-generated confirmations for uncleared swap transac...

## Text

Summary: Time-limited no-action relief granted by DMO to swap execution facilities (SEFs) for incorporating by reference previously-negotiated freestanding agreements into SEF-generated confirmations for uncleared swap transactions, executed on or pursuant to the rules of a SEF, without the SEF receiving the freestanding agreements prior to execution or maintaining them afterwards, as required in sections 36.7(b) and 45.2(a) of the Commission’s regulations.

U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5000
Facsimile: (202) 418-5521
www.cftc.gov

CFTC Letter No. 14-108
No-Action
August 18, 2014
Division of Market Oversight

Re:
Staff No-Action Position Regarding SEF Confirmations and Recordkeeping
Requirements under Certain Provisions Included in Regulations 37.6(b) and 45.2

This letter responds to requests received from multiple parties1 by the Division of Market
Oversight (“DMO” or the “Division”) of the Commodity Futures Trading Commission (the
“Commission”) for no-action relief from the confirmation provisions in Commission regulation
37.6(b)2 and the portions of Part 37 of the Commission’s regulations that discuss the
incorporation of terms by reference in these confirmations.3 As set forth below, the Division is
granting conditional time-limited no-action relief.

Background

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”)4 amended the Commodity Exchange Act (“CEA”)5 to establish a
comprehensive new regulatory framework for swaps
tions that discuss the
incorporation of terms by reference in these confirmations.3 As set forth below, the Division is
granting conditional time-limited no-action relief.

Background

Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”)4 amended the Commodity Exchange Act (“CEA”)5 to establish a
comprehensive new regulatory framework for swaps. Among other responsibilities, CEA
section 5h requires the Commission to promulgate rules for swap execution facilities (“SEFs”).6
Part 37 of the Commission’s regulations contains the general provisions governing SEFs,
including the fifteen Core Principles.7

1 This letter responds to no-action relief requested in, among others, the following: (1) Jointly-submitted Letter
from Bloomberg SEF LLC, ICE Swap Trade, LLC, INFX SEF, Inc., MarketAxess SEF Corporation, SwapEx, LLC,
TeraExchange, LLC, 360T Trading Networks Inc., Thomson Reuters (SEF) LLC, and Global FX Division of the
Global Financial Markets Association (GFMA), Request for Time-Limited No-Action Relief Relating to
Confirmations for Swaps Not Required or Intended to Clear (March 7, 2014); (2) Letter from the International
Swaps and Derivatives Association, Inc. (ISDA), Request for Relief for Confirmation Requirements under Part 37
for Swaps Executed on Swap Execution Facilities (March 10, 2014); and (3) Letter from Wholesale Markets’
Brokers Association Americas, Request for Relief from Certain Requirements under Parts 37 and 45 Related to
Trade Confirmations for Swaps Not Required or Intended to be Cleared (March 12, 2014). Notwithstanding the
scope of relief sought in any of these particular requests, relief is limited to that provided herein.

2 17 C.F.R. § 37.6(b) (2013).
3 See Core Principles and Other Requirements for Swap Execution Facilities, 78 Fed. Reg. 33491-92 (June 4, 2013).
4 Pub. L. 111-203, 124 Stat. 1376 (2010).
5 7 U.S.C. 1, et seq. (2012)
6 CEA § 5h; 7 U.S.C
o be Cleared (March 12, 2014). Notwithstanding the
scope of relief sought in any of these particular requests, relief is limited to that provided herein.

2 17 C.F.R. § 37.6(b) (2013).
3 See Core Principles and Other Requirements for Swap Execution Facilities, 78 Fed. Reg. 33491-92 (June 4, 2013).
4 Pub. L. 111-203, 124 Stat. 1376 (2010).
5 7 U.S.C. 1, et seq. (2012)
6 CEA § 5h; 7 U.S.C. 7b-3 (2012).
7 17 C.F.R. part 37 (2013).

August 18, 2014

Page 2

Among the requirements for a SEF is the duty under Commission regulation 37.6(b) to
“provide each counterparty to a transaction that is entered into on or pursuant to the rules of the
[SEF] with a written record of all of the terms of the transaction which shall legally supersede
any previous agreement and serve as a confirmation of the transaction”8 (the “Confirmation”).
Section 37.6(b) requires the Confirmation to take place at the same time as execution.9

The preamble to the Part 37 final rules (“Preamble”) discusses the reasoning behind the
confirmation requirement in Section 37.6(b).10 The Commission requires, for uncleared
transactions executed on or pursuant to the rules of a SEF, that the SEF “must have all terms,
including possible long-term credit support arrangements, agreed to no later than execution, such
that the SEF can provide a written confirmation inclusive of those terms at the time of execution
and report complete, non-duplicative, and non-contradictory data to an SDR as soon as
technologically practicable after execution.”11 This requirement “is necessary to provide market
participants who execute swap transactions on or pursuant to the rules of a SEF with legal
certainty with respect to such transactions, and to promote the Commission’s policy goals of
achieving ‘straight-through processing’ of swap transactions in order to facilitate orderly
markets, whether bilateral or facility traded.”12

Footnote 195 in the Preamble 13 (“Footnote 195”) observes that there is “no reason, under
certain specified
s on or pursuant to the rules of a SEF with legal
certainty with respect to such transactions, and to promote the Commission’s policy goals of
achieving ‘straight-through processing’ of swap transactions in order to facilitate orderly
markets, whether bilateral or facility traded.”12

Footnote 195 in the Preamble 13 (“Footnote 195”) observes that there is “no reason, under
certain specified circumstances, why a SEF’s written confirmation agreement cannot incorporate
by reference the privately negotiated terms from a freestanding master agreement. 14 Though
Footnote 195 only cites the incorporation by reference of master agreements, staff notes that
other previously-negotiated freestanding agreements and templates similarly may contain swap
transaction terms relevant to the Confirmation. Therefore, staff anticipates that SEFs may
incorporate swap transaction terms from these agreements. In order to incorporate by reference
terms from these freestanding agreements, staff expects that the agreement containing the terms
to be incorporated must be “submitted to the SEF ahead of execution” and that the counterparties
ensure that nothing in the confirmation terms contradicts the standardized terms intended to be
incorporated from the agreement, as provided in Footnote 195.15
Requested Relief

8 17 C.F.R. §37.6(b).
9 Id.
10 78 Fed. Reg. at 33491-92.
11 Id. at 33491.
12 Id. at 33491-92.
13 Id. at 33491, FN 195.
14 Id. (The relevant text of footnote 195 states “There is no reason why a SEF’s written confirmation terms cannot
incorporate by reference the privately negotiated terms of a freestanding master agreement for these types of
transactions, provided that the master agreement is submitted to the SEF ahead of execution and the
counterparties ensure that nothing in the confirmation terms contradict the standardized terms intended to be
incorporated from the master agreement.”).
15 Id.
onfirmation terms cannot
incorporate by reference the privately negotiated terms of a freestanding master agreement for these types of
transactions, provided that the master agreement is submitted to the SEF ahead of execution and the
counterparties ensure that nothing in the confirmation terms contradict the standardized terms intended to be
incorporated from the master agreement.”).
15 Id.

August 18, 2014

Page 3

The requesting parties raised questions regarding compliance obligations under
Commission regulation 37.6(b) generally and the interaction of this regulation with other
Commission regulations, including Part 45. Each requesting party proposed no-action relief
suspending enforcement of Section 37.6 for various periods of time.

Requesting parties stated, for example, that not all SEFs are prepared to issue
confirmations that include all terms of a swap transaction. Some participants stated that SEFs do
not have access to the relevant non-economic terms of the transaction, and it is not clear how
SEFs will be able to access the ISDA Master Agreements that contain terms that need to be
included in the Confirmation, such as ISDA templates, definitions, and the terms negotiated by
the counterparties with respect to the templates and definitions. Requestors also sought
clarification as to which individual terms must be included in the Confirmation and requested
time to standardize terms to be included in a Confirmation. Requesting parties were particularly
concerned that the lack of certainty over what terms must be included in a Confirmation would
lead to legal uncertainty over the terms of executed transactions, because the terms in the
Confirmation legally supersede any contradictory terms.

The requesting parties therefore have requested no-action relief from the requirements of
Commission regulation 37.6(b), as well as Commission regulation 45.2
at the lack of certainty over what terms must be included in a Confirmation would
lead to legal uncertainty over the terms of executed transactions, because the terms in the
Confirmation legally supersede any contradictory terms.

The requesting parties therefore have requested no-action relief from the requirements of
Commission regulation 37.6(b), as well as Commission regulation 45.2.

Discussion

Under Commission regulation 37.6(b), all terms of the swap transaction are required to
be included in the Confirmation. Terms included in other documents governing the transaction
are not superseded by the Confirmation if such terms do not conflict with the swap terms
included in the Confirmation. However, if specific terms of the swap transaction conflict with
specific terms from the previously-negotiated freestanding agreement(s), the swap terms will
legally supersede the conflicting previously-negotiated terms incorporated by reference from
such agreements. Further, all transaction terms included in previously-negotiated freestanding
agreements existing at the time of execution of the swap transaction shall be superseded by the
Confirmation unless they are not expressly included, or incorporated by reference in the
Confirmation.

In regard to the interaction of Commission regulations 37.6(b) and 45.3, SEFs have an
obligation to report swap confirmation data to an SDR under Part 45 of the Commission’s
regulations. Some market participants have asserted to the Commission that the Primary
Economic Terms (“PET”) of a swap transaction alone should be sufficient to satisfy the “all the
terms of the transaction” requirement of Section 37.6(b).16 However, the terms that must be
included in the Confirmation under Section 37.6, include terms that are not primary economic

16 17 C.F.R
nts have asserted to the Commission that the Primary
Economic Terms (“PET”) of a swap transaction alone should be sufficient to satisfy the “all the
terms of the transaction” requirement of Section 37.6(b).16 However, the terms that must be
included in the Confirmation under Section 37.6, include terms that are not primary economic

16 17 C.F.R. § 37.6(b) (“A swap execution facility shall provide each counterparty to a transaction that is entered
into on or pursuant to the rules of the swap execution facility with a written record of all of the terms of the
transaction which shall legally supersede any previous agreement and serve as a confirmation of the
transaction.”)

August 18, 2014

Page 4

terms of the transaction. Examples of such terms include, but are not limited to, the date of the
confirmation, the type of agreement (i.e., ISDA Master, CSA, etc.), additional information
regarding settlement, additional payment details, options exercise, maturity and definitional
terms.

For uncleared swaps executed on or pursuant to the rules of a SEF, Commission
regulation 45.3(a)(1) requires that the SEF “report all required swap creation data, as soon as
technologically practicable after execution of the swap. This report must include all
confirmation data for the swap…and all primary economic terms data for the swap, as defined in
§ 45.1.” Section 45.1 defines “Required Swap Creation Data” (or “Creation Data”) to include all
confirmation data for the swap…and all primary economic terms data for the swap.17 The same
section also defines “Primary Economic Terms” as “all of the terms of a swap matched or
affirmed by the counterparties in verifying the swap.…”18 In addition, § 45.1 defines
“Confirmation Data” as “all of the terms of a swap matched and agreed upon by the
counterparties in confirming the swap.”19

Where a SEF has incorporated the swap’s governing documents by reference into the
Confirmation under Commission regulati
y Economic Terms” as “all of the terms of a swap matched or
affirmed by the counterparties in verifying the swap.…”18 In addition, § 45.1 defines
“Confirmation Data” as “all of the terms of a swap matched and agreed upon by the
counterparties in confirming the swap.”19

Where a SEF has incorporated the swap’s governing documents by reference into the
Confirmation under Commission regulation 37.6(b), the SEF must glean all confirmation data
from the terms of the incorporated documents and report the confirmation data to an SDR. The
specific individual terms contained in the referenced documents would be included in the
confirmation data that the SEF must report. The Confirmation Data reporting requirement of
Section 45.3(a)(1) resulting from creation of the Section 37.6(b) Confirmation includes
additional terms that are not reportable to an SDR as PET. Further, the preamble to the Part 37
Notice of Final Rulemaking also indicates that the SEF’s Confirmation should contain all of the
terms of the transaction, “including possible long-term credit support arrangements.”20 The
terms included in long-term credit support agreements, if not “matched and affirmed by the
counterparties in verifying the swap,” are not required to be reported as PET data, but are
required to be reported as confirmation data.

Conditional Time-Limited No-Action Relief
As described in more detail below, the Division will grant time-limited no-action relief to
a SEF,21 in the context of uncleared swap transactions executed on or pursuant to the rules of the
SEF, from the following requirements:

17 17 C.F.R. § 45.1 (2013) (definition of “Required Swap Creation Data”).
18 17 C.F.R. § 45.1 (2013) (definition of “Primary Economic Terms”).
19 17 C.F.R. § 45.1 (2013) (definition of “Confirmation Data”).
20 78 Fed. Reg. at 33491
of uncleared swap transactions executed on or pursuant to the rules of the
SEF, from the following requirements:

17 17 C.F.R. § 45.1 (2013) (definition of “Required Swap Creation Data”).
18 17 C.F.R. § 45.1 (2013) (definition of “Primary Economic Terms”).
19 17 C.F.R. § 45.1 (2013) (definition of “Confirmation Data”).
20 78 Fed. Reg. at 33491.
21 An entity not registered with the Commission as a SEF, but reporting swap transaction data to an SDR in the time
and manner as a SEF would report consistent with parts 43 and 45 of Commission regulations, as a condition of
existing no-action relief, such as Qualifying Multilateral Trading Facilities under CFTC NAL 14-46, may rely
on the relief with associated conditions provided in this Letter.

August 18, 2014

Page 5

(1) Requirement that freestanding previously-negotiated agreements incorporated
by reference into the Confirmation are submitted to the SEF prior to execution of the
relevant swap transaction.22
During the period of relief, the Division will not recommend that the Commission take
enforcement action if a SEF incorporates terms from underlying previously-negotiated
freestanding agreements of the counterparties by reference into the Confirmation generated and
transmitted to the counterparties to a swap transaction as required under Commission regulation
37.6(b), without copies of the underlying previously-negotiated freestanding agreements being
submitted to the SEF prior to execution of the swap transaction.23 A SEF must still provide a
Confirmation as required under Commission regulation 37.6(b). This relief is conditioned upon
all previously-negotiated freestanding agreements incorporated by reference into the
Confirmations being available to Commission staff upon request within a reasonable period of
time. This relief only applies to uncleared swap transactions executed on or pursuant to the rules
of the SEF
l provide a
Confirmation as required under Commission regulation 37.6(b). This relief is conditioned upon
all previously-negotiated freestanding agreements incorporated by reference into the
Confirmations being available to Commission staff upon request within a reasonable period of
time. This relief only applies to uncleared swap transactions executed on or pursuant to the rules
of the SEF. The relief provided in this paragraph shall expire at midnight, Eastern Standard
Time, on September 30, 2015.
(2) Requirement that SEF keep a record of the documents incorporated by
reference in the Confirmation pursuant to §§ 37.1000, 37.1001, and 45.2(a) of the
Commission’s regulations.
During the period of relief, the Division will not recommend that the Commission take
enforcement action against a SEF for failure to receive or maintain a copy of the documents
incorporated by reference in the SEF’s Confirmation as a record currently required under
Commission regulations 37.1000, 37.1001, and 45.2(a). This relief is conditioned upon the
documentation being available to Commission staff upon request within a reasonable period of
time. This relief only applies to uncleared transactions executed on or pursuant to the rules of
the SEF. The relief provided in this paragraph shall expire at midnight, Eastern Standard
Time, on September 30, 2015.24
This letter, and the no-action positions taken herein, represent the views of the Division
only, and do not necessarily represent the positions or views of the Commission or of any other
division or office of the Commission’s staff. The no-action positions taken herein do not excuse
affected persons from compliance with any other applicable requirements of the Commodity
Exchange Act or the Commission’s regulations thereunder. As with all no-action letters, the
Division retains the authority to further condition, modify, suspend, terminate, or otherwise
restrict the terms of the no-action relief provided herein, in its discretion
ction positions taken herein do not excuse
affected persons from compliance with any other applicable requirements of the Commodity
Exchange Act or the Commission’s regulations thereunder. As with all no-action letters, the
Division retains the authority to further condition, modify, suspend, terminate, or otherwise
restrict the terms of the no-action relief provided herein, in its discretion.
If you have any questions concerning this correspondence, please contact Laurie Gussow,
Special Counsel, Division of Market Oversight, at (202) 418-7623 or lgussow@cftc.gov; Ben

22 See 78 Fed. Reg. at 33491, FN 195.
23 See id. (Currently, the agreements to be incorporated by reference must be submitted to the SEF prior to
execution).
24 Although broader relief was requested from the recordkeeping and reporting requirements of Part 45, the Division
finds it appropriate, in this letter, to limit the relief solely to those specific matters addressed herein.

August 18, 2014

Page 6

DeMaria, Attorney Advisor, Division of Market Oversight, at (202) 418-5988 or
bdemaria@cftc.gov; or David P. Van Wagner, Chief Counsel, Division of Market Oversight, at
(202) 418-5481 or dvanwagner@cftc.gov.
Sincerely,
Vincent A. McGonagle

Director

Division of Market Oversight

## Nearby sections

- [CFTC Letter No. 08-03 Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of Eight Futures Contracts Based on Security Indices Derived from the Dow Jones STOXX 600 Index.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_03.md)
- [CFTC Letter No. 08-05 Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the RDXxt USD-RDX Extended Index.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_05.md)
- [CFTC Letter No. 08-11 Euronext Paris SAs request for no-action relief in connection with the offer and sale in the United States of its futures contracts based on the FTSE EPRA/NAREIT Europe Index and the FTSE EPRA/NAREIT Euro Zone Index.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_11.md)
- [CFTC Letter No. 08-13 Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contracts Based on the SLI Swiss Leader Index, the Swiss Market Index Midcap, the Dow Jones Eur...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_13.md)
- [CFTC Letter No. 08-15 The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to lis...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_15.md)
- [CFTC Letter No. 08-17 DCIO received a request for guidance from the Joint Audit Committee concerning FCM regulatory reporting requirements for investments in a money market mutual fund. The fund had announced that its net asset value per s...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_17.md)
- [CFTC Letter No. 08-18 The Division of Market Oversight issued a letter granting no-action relief to permit the Brazilian Derivatives Exchange, BM&F Bovespa S.A. – Bolsa de Valores, Mercadorias e Futuros (BM&F), to make its electronic tradi...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_18.md)
- [CFTC Letter No. 08-19 Thailand Futures Exchange Pcls Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the SET50 Index Futures Contract.](https://www.frixlaw.com/law-library/statutes/CFTC_L08_19.md)
- [CFTC Letter No. 08-21 The Division of Market Oversight issued a no-action letter to BNP Paribas confirming that the Division will not recommend that the Commission initiate enforcement action against BNP Paribas or Fortis Bank S.A./N.V., o...](https://www.frixlaw.com/law-library/statutes/CFTC_L08_21.md)
- [CFTC Letter No. 09-02 The Division of Clearing and Intermediary Oversight provided no-action relief to the general partner of a commodity pool from registering as a CPO under Section 4m(1) of the Commodity Exchange Act, and allowed an affi...](https://www.frixlaw.com/law-library/statutes/CFTC_L09_02.md)
- [CFTC Letter No. 09-06 The CPO of a commodity pool requested that DCIO agree to accept the Annual Report for the period from January 1, 2008 through October 31, 2008 as the Pool’s final annual report despite the fact that the Pool had not f...](https://www.frixlaw.com/law-library/statutes/CFTC_L09_06.md)
- [CFTC Letter No. 09-07 The CPO of a commodity pool with a de minimus amount of its assets embroiled in a bankruptcy requested relief from the ongoing reporting requirements under Part 4. The CPO filed an Annual Report for the Pool for the 2...](https://www.frixlaw.com/law-library/statutes/CFTC_L09_07.md)
- [CFTC Letter No. 09-11 The CPO of two commodity pools requested relief to use IFRS in lieu of US GAAP. DCIO granted relief pursuant to Commission Regulations 140.93 and 4.12(a).](https://www.frixlaw.com/law-library/statutes/CFTC_L09_11.md)
- [CFTC Letter No. 09-13 The CPO of commodity pool requested relief to use IFRS in lieu of US GAAP. DCIO granted relief pursuant to Commission Regulations 140.93 and 4.12(a).](https://www.frixlaw.com/law-library/statutes/CFTC_L09_13.md)

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/CFTC_L14_108. Check the current official text before relying on it. Not legal advice.