The Division of Clearing and Risk extended the no-action relief granted in CFTC Letter 14-156 to Eurex Clearing and its U.S. clearing members with regard to Sections 5b(a) and 2(h)(1)(A) of the Commodity Exchange Act....

Summary: The Division of Clearing and Risk extended the no-action relief granted in CFTC Letter 14-156 to Eurex Clearing and its U.S. clearing members with regard to Sections 5b(a) and 2(h)(1)(A) of the Commodity Exchange Act. The time-limited no-action relief is subject to several conditions.

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5044

Facsimile: (202) 418-5547

jbandman@cftc.gov

Division of Clearing and Risk

Jeffrey Bandman

Acting Director

a

U.S. COMMODITY FUTURES TRADING COMMISSION

CFTC Letter No. 15-54

No-Action

September 30, 2015

Division of Clearing and Risk

Mr. Thomas Book, Chief Executive Officer

Mr. Oliver Haderup, Executive Director

Eurex Clearing AG

Mergenthalerallee 61

65760 Eschborn, Germany

Re:

Extension of Time-Limited No-Action Relief with Regard to Sections 5b(a) and

2(h)(1)(A) of the Commodity Exchange Act and Implementing Regulations

Thereunder

Dear Mr. Book and Mr. Haderup:

This is in response to your letter dated September 21, 2015 (“Letter”), to the Division

of Clearing and Risk (“Division”) of the Commodity Futures Trading Commission

(“Commission” or “CFTC”) requesting a further extension of the no-action relief that the

Division granted to Eurex Clearing AG (“Eurex Clearing”) in CFTC Letter 14-156 and that

expires on September 30, 2015 (the “No-Action Relief”). 1 In CFTC Letter 14-156, the

Division stated it would not recommend that the Commission take enforcement action against

(1) Eurex Clearing for failure to register as a derivatives clearing organization (“DCO”)

pursuant to the requirements of Section 5b(a) of the Commodity Exchange Act (“CEA”),2 or

learing”) in CFTC Letter 14-156 and that

expires on September 30, 2015 (the “No-Action Relief”). 1 In CFTC Letter 14-156, the

Division stated it would not recommend that the Commission take enforcement action against

(1) Eurex Clearing for failure to register as a derivatives clearing organization (“DCO”)

pursuant to the requirements of Section 5b(a) of the Commodity Exchange Act (“CEA”),2 or

(2) clearing members of Eurex Clearing that are U.S. persons (each, a “U.S. Clearing

Member”) for failure to clear certain interest rate swaps (“IRS”) through a registered or

exempt DCO pursuant to the requirements of Section 2(h)(1)(A) of the CEA and the

implementing regulations thereunder, as applicable.3 You have requested that the No-Action

1 CFTC Letter No. 14-156 (Dec. 23, 2014) and its attachment, available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-156.pdf. Letter No. 14-156

extended the no-action relief originally granted in CFTC Letter No. 13-44 (July 11, 2013).

2 7 U.S.C. § 7a-1(a).

3 7 U.S.C. § 2(h)(1)(A); 17 C.F.R. pt 50.

Mr. Thomas Book

Mr. Oliver Haderup

September 30, 2015

Page 2

Relief be extended until the earlier of January 31, 2016, or the date upon which Eurex

Clearing becomes registered as a DCO with respect to its IRS clearing business.4

Eurex Clearing filed its initial application for DCO registration on May 17, 2011 and

amended applications on September 14, 2012, September 21, 2012, and June 1, 2015.

Subsequently, Eurex Clearing submitted additional materials, which further support its

application, most recently on August 19, 2015

which Eurex

Clearing becomes registered as a DCO with respect to its IRS clearing business.4

Eurex Clearing filed its initial application for DCO registration on May 17, 2011 and

amended applications on September 14, 2012, September 21, 2012, and June 1, 2015.

Subsequently, Eurex Clearing submitted additional materials, which further support its

application, most recently on August 19, 2015. The review period for consideration of the

application has been extended to January 31, 2016.5

Eurex Clearing requests the further extension of the No-Action Relief in order to

maintain the status quo during the pendency of its application for registration. Eurex Clearing

further states that such extension of the No-Action Relief is an appropriate means of

promoting competition and enhancing choice in clearing services and is in the public interest.

In view of the foregoing, the Division has decided to extend the No-Action Relief,

subject to the conditions described below, until the earlier of the date on which Eurex

Clearing becomes registered as a DCO with respect to its IRS clearing business or January 31,

2016.

Extension of Grant of No-Action Relief

Based on the facts presented and the representations you have made, the Division will

not recommend that the Commission take enforcement action against (i) Eurex Clearing for

failure to register as a DCO pursuant to the requirements of Section 5b(a) of the CEA, or (ii)

U.S. Clearing Members for failure to clear IRS through a registered or exempt DCO, pursuant

to the requirements of Section 2(h)(1)(A) of the CEA and the implementing regulations

thereunder as applicable, subject to the following conditions:

(1)

Product Scope. This relief is limited to IRS currently accepted for clearing by

Eurex Clearing for U.S. Clearing Members and identified in the attachment to

this letter;

or failure to clear IRS through a registered or exempt DCO, pursuant

to the requirements of Section 2(h)(1)(A) of the CEA and the implementing regulations

thereunder as applicable, subject to the following conditions:

(1)

Product Scope. This relief is limited to IRS currently accepted for clearing by

Eurex Clearing for U.S. Clearing Members and identified in the attachment to

this letter;

(2)

Participant Scope. The relief applies to Eurex Clearing and to its prospective

U.S. Clearing Members in connection with their proprietary6 IRS clearing

4 A list of IRS products offered for clearing by Eurex Clearing for U.S. Clearing Members is in the attachment to

this letter.

5 By separate letter dated September 21, 2015, Eurex Clearing requested that the review period for its DCO

application be extended until January 31, 2016.

6 The term “proprietary account” is defined in § 1.3(y) of the Commission’s regulations, 17 C.F.R. § 1.3(y). The

relief granted herein to U.S. Clearing Members includes transactions of a parent or affiliate of a U.S. Clearing

Member.

Mr. Thomas Book

Mr. Oliver Haderup

September 30, 2015

Page 3

businesses (Eurex Clearing will not accept, and no Eurex clearing member will

offer for clearing through Eurex Clearing, IRS on behalf of a U.S. customer7);

(3)

Limited Duration. The no-action relief shall expire at the earlier of: (i)

January 31, 2016, or (ii) the date upon which Eurex Clearing becomes

registered as a DCO with respect to its IRS clearing business;8 and

r 30, 2015

Page 3

businesses (Eurex Clearing will not accept, and no Eurex clearing member will

offer for clearing through Eurex Clearing, IRS on behalf of a U.S. customer7);

(3)

Limited Duration. The no-action relief shall expire at the earlier of: (i)

January 31, 2016, or (ii) the date upon which Eurex Clearing becomes

registered as a DCO with respect to its IRS clearing business;8 and

(4)

Reporting. If a U.S. Clearing Member clears through Eurex Clearing a swap

(referred to as the “alpha swap”) that has been reported to a Commission-

registered swap data repository (“SDR”) pursuant to Part 45 of the

Commission’s regulations,9 then Eurex Clearing must report to an SDR,

pursuant to Part 45, data regarding the two swaps resulting from the novation

of the alpha swap that had been submitted to Eurex Clearing for clearing

(referred to as “beta” and “gamma” swaps).10

7 The scope of the relief provided herein does not extend to customer clearing by U.S. Clearing Members or U.S.

customer clearing by any clearing member of Eurex Clearing. The term “customer” is defined in § 1.3(k) of the

Commission’s regulations, 17 C.F.R. § 1.3(k).

8 Should the Commission deny Eurex Clearing’s application for DCO registration, the Division will provide

Eurex Clearing and its U.S. Clearing Members with guidance and, as appropriate, no-action relief to facilitate the

orderly disposition of open positions.

9 See Swap Data Recordkeeping and Reporting Requirements, 77 Fed. Reg. 2136 (Jan. 13, 2012) (adopting Part

45).

10 Pursuant to Commission Regulation 39.12(b)(6), during the clearing process, a swap submitted for clearing to

a DCO (the alpha swap) is extinguished or terminated, and two new swaps (the beta and gamma swaps) are

created. The DCO must then report the beta and gamma swaps to an SDR under Part 45 and associate the

unique swap identifier (USI) of the alpha swap with the beta and gamma swap in order for the Commission to

confirm that such alpha swap was cleared

ng process, a swap submitted for clearing to

a DCO (the alpha swap) is extinguished or terminated, and two new swaps (the beta and gamma swaps) are

created. The DCO must then report the beta and gamma swaps to an SDR under Part 45 and associate the

unique swap identifier (USI) of the alpha swap with the beta and gamma swap in order for the Commission to

confirm that such alpha swap was cleared.

See Statement of the Commission concerning CME Rule 1001 (March 6, 2013), page 6, available at:

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/statementofthecommission.pdf.

See also Commission Regulation 45.4(a) (“[R]eporting counterparties and [DCOs] required to report swap

continuation data must do so in a manner sufficient to ensure that all data in the [SDR] concerning the swap

remains current and accurate, and includes all changes to the primary economic terms of the swap occurring

during the existence of the swap.”); 77 Fed. Reg. at 2153 (“[T]he final rule requires registered entities and

reporting counterparties to report continuation data in a manner sufficient to ensure that the information in the

SDR concerning the swap is current and accurate, and includes all changes to any of the primary economic terms

of the swap.”); see also Commission Regulation 49.11 (Confirmation of data accuracy).

In order to avoid duplicative reporting for such transactions, Eurex Clearing should have rules that prohibit the

Part 45 reporting of the beta and gamma swaps by the original counterparties to the alpha swap. These rules

should make it clear to market participants that Eurex Clearing is reporting the beta and gamma swaps as if it

were a registered DCO under the Part 45 rules.

ata accuracy).

In order to avoid duplicative reporting for such transactions, Eurex Clearing should have rules that prohibit the

Part 45 reporting of the beta and gamma swaps by the original counterparties to the alpha swap. These rules

should make it clear to market participants that Eurex Clearing is reporting the beta and gamma swaps as if it

were a registered DCO under the Part 45 rules.

Mr. Thomas Book

Mr. Oliver Haderup

September 30, 2015

Page 4

The position taken herein concerns enforcement action only and does not represent a

legal conclusion with respect to the applicability of any provision of the CEA or the

Commission’s regulations. In addition, the Division’s position does not necessarily reflect the

views of the Commission or any other division or office of the Commission. Because this

position is based upon the representations contained in the Letter and in Eurex Clearing’s

DCO application, it should be noted that any different, changed, or omitted material facts or

circumstances may require a different conclusion or render this letter void. Finally, as with all

no-action letters, the Division retains the authority to condition further, modify, suspend,

terminate, or otherwise restrict the terms of the no-action relief provided herein, in its

discretion.

Should you have any questions, please do not hesitate to contact Laura Astrada at

material facts or

circumstances may require a different conclusion or render this letter void. Finally, as with all

no-action letters, the Division retains the authority to condition further, modify, suspend,

terminate, or otherwise restrict the terms of the no-action relief provided herein, in its

discretion.

Should you have any questions, please do not hesitate to contact Laura Astrada at

(202) 418-7622, or Alicia Lewis, Special Counsel, at (202) 418-5862.

Sincerely,

Jeffrey Bandman

Acting Director

Attachment

ATTACHMENT A- Products Offered for Clearing by Eurex Clearing AG for U.S. Persons

Interest Rate Swaps:

Products:

Single currency interest rate swaps ("IRS")

Forward rate agreements ("FRA")

Overnight index swap ("OIS"),

Single currency basis swaps

Zero coupon swaps

Spot and forward starts

Compounding -flat and straight (for IRS and basis swaps)

Linear interpolation of stub periods

Front and back stubs (for IRS and OIS)

Negative interest rates

Variable notional- amortizing and roller coaster (for IRS and basis swaps)

Variable index spread on floating rates that can differ period per period (IRS and basis swaps)

Fixed coupon rates that can differ period per period (IRS and basis swaps)

IMM - International Monetary Markets- roll dates

Currencies:

Euro, U.S. dollar, British pounds, Swiss franc, and Japanese yen

Terms:

Swaps entered into under ISDA® 2000/2006 and German Master Agreements - standard swaps

and forward rate agreement with standard day count and business day conventions, fee legs,

constant nationals, front or back stubs and floating rate indexes for each currency

MM - International Monetary Markets- roll dates

Currencies:

Euro, U.S. dollar, British pounds, Swiss franc, and Japanese yen

Terms:

Swaps entered into under ISDA® 2000/2006 and German Master Agreements - standard swaps

and forward rate agreement with standard day count and business day conventions, fee legs,

constant nationals, front or back stubs and floating rate indexes for each currency.

Type

Currencies

Matuntv

Supported typas

Other chamcterlstics

IRS

EUR, GBP, USD

Up to 50 years

Plain vanilla (fixed/float)

Basis/tenor (floaUfloat)

ISDA, German framework

Constant nationals

Front, end stubs, forward starts

EUR (Eurlbor) and GBP (Libor), 1m, 3m, 6m, 12m

USD, CHF and JPY (Libor) 1m, 3m, 6m

Zero Coupon

Variable notional- amortizing & roller coaster

Negative Interest rates

IMM roll dates

Variable spreads &fiXed coupons

~C~mjlOUn~I(]L__

CHF, JPY

Up to 30 years

OIS

EUR, GBP, USD, CHF,

JPY

Up to 30 years

Plain vanilla (fixed/float)

FRA

EUR, GBP, USD, CHF,

JPY

Up to 2years

Plain vanilla (fixed/float)

... _

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