Extension of conditional time-limited no-action relief for Yieldbroker Pty Limited with regard to Section 5h(a)(1) of the Commodity Exchange Act and Commission Regulation 37.3(a)(1) until September 15, 2016.

Summary: Extension of conditional time-limited no-action relief for Yieldbroker Pty Limited with regard to Section 5h(a)(1) of the Commodity Exchange Act and Commission Regulation 37.3(a)(1) until September 15, 2016.

U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5260

Facsimile: (202) 418-5527

Division of

Market Oversight

CFTC Letter No. 16-52

No-Action

May 12, 2016

Division of Market Oversight

Richard Swift

Chief Executive Officer

Yieldbroker Pty Limited

Level 12, 130 Pitt Street

Sydney, NSW 2000, Australia

Re:

Conditional Time-Limited No-Action Relief with Regard to Section 5h(a)(1) of

the Commodity Exchange Act and Commission Regulation 37.3(a)(1)

Dear Mr. Swift:

This letter is in response to Yieldbroker’s letter dated April 26, 2016, to the Division of

Market Oversight (“DMO” or “Division”) of the Commodity Futures Trading Commission

(“CFTC” or “Commission”) in which Yieldbroker requested an extension of conditional no-

action relief from the swap execution facility (“SEF”) registration requirement. Yieldbroker is

currently operating pursuant to the no-action relief provided by CFTC No-Action Letter No. 15-

56, which will expire on May 15, 2016. The Division is extending conditional no-action relief

from the SEF registration requirement for Yieldbroker until September 15, 2016.

I. Background:

On December 20, 2013, DMO issued CFTC No-Action Letter No. 13-76 (“December

2013 Letter”)1 granting time-limited conditional relief to Yieldbroker Pty Limited

(“Yieldbroker”)

No-Action Letter No. 15-

56, which will expire on May 15, 2016. The Division is extending conditional no-action relief

from the SEF registration requirement for Yieldbroker until September 15, 2016.

I. Background:

On December 20, 2013, DMO issued CFTC No-Action Letter No. 13-76 (“December

2013 Letter”)1 granting time-limited conditional relief to Yieldbroker Pty Limited

(“Yieldbroker”). Pursuant to the December 2013 Letter, DMO would not recommend to the

Commission that it commence an enforcement action against Yieldbroker for violation of section

5h(a)(1) of the Commodity Exchange Act (the “Act”)2 or Commission Regulation 37.3(a)(1),3 or

against any other market participant that uses or has other relationships with Yieldbroker, based

on Yieldbroker’s failure to register as a SEF, until May 15, 2014. On May 14, 2014, DMO

1 See CFTC No-Action Letter No. 13-76 (December 20, 2013), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/13-76.pdf.

2 7 U.S.C. 7b-3(a)(1).

3 17 CFR 37.3(a)(1).

2

issued No-Action Letter No. 14-70 extending the conditional no-action relief granted to

Yieldbroker by the December 2013 Letter through August 15, 2014.4 On August 11, 2014,

DMO issued No-Action Letter No. 14-105 extending the same conditional relief to Yieldbroker

through November 15, 2014.5

On September 15, 2014, DMO and the CFTC’s Division of Swap Dealer and

Intermediary Oversight (“DSIO”) jointly issued CFTC No-Action Letter No. 14-117 (“Letter 14-

117”) providing conditional relief with respect to swaps trading on qualifying financial markets

that are licensed in Australia and overseen by the Australian Securities & Investments

Commission (“ASIC”) (“Australian Licensed Markets”).6 Letter 14-117 was an enabling no-

action letter that required an Australian Licensed Market to affirmatively undertake to DMO that

it will comply with the conditions set out in the letter

elief with respect to swaps trading on qualifying financial markets

that are licensed in Australia and overseen by the Australian Securities & Investments

Commission (“ASIC”) (“Australian Licensed Markets”).6 Letter 14-117 was an enabling no-

action letter that required an Australian Licensed Market to affirmatively undertake to DMO that

it will comply with the conditions set out in the letter. As such, relief under Letter 14-117 would

not have been triggered until DMO reviews the applicant’s certification and issues a responsive

relief letter.

On November 13, 2014, DMO issued No-Action Letter No. 14-139 (“Letter 14-139”)

extending conditional relief to Yieldbroker through February 15, 2015.7 On February 12, 2015,

DMO issued No-Action Letter No. 15-04 (“Letter 15-04”) extending conditional relief to

Yieldbroker through May 15, 2015.8 DMO issued Letters 14-139 and 15-04 to allow

Yieldbroker additional time to work toward compliance with the conditions set out in Letter 14-

117, while Commission staff evaluated certain proposed modifications to Letter 14-117.

On May 15, 2015, DMO and DSIO jointly issued CFTC No-Action Letter No. 15-29

(“Letter 15-29”), which superseded Letter 14-117.9 The conditional relief provided in Letter 15-

4 See CFTC No-Action Letter No. 14-70 (May 14, 2014), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-70.pdf.

5 See CFTC No-Action Letter No. 14-105 (August 11, 2014), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-105.pdf.

6 See CFTC No-Action Letter No. 14-117 (September 15, 2014), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-117.pdf

p://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-70.pdf.

5 See CFTC No-Action Letter No. 14-105 (August 11, 2014), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-105.pdf.

6 See CFTC No-Action Letter No. 14-117 (September 15, 2014), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-117.pdf. No-Action Letter 14-117

would have provided relief for:

•

Qualifying Australian Licensed Markets from the SEF registration requirement;

•

Parties executing swap transactions on qualifying Australian Licensed Markets from the trade execution

mandate; and

•

Swap dealers and major swap participants executing swap transactions on qualifying Australian Licensed

Markets from certain business conduct requirements.

Such relief would have expired upon the effective date of any exempt SEF rulemaking pursuant to CEA section

5h(g).

7 See CFTC No-Action Letter No. 14-139 (November 13, 2014), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/14-139.pdf.

8 See CFTC No-Action Letter No. 15-04 (February 12, 2015), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-04.pdf.

9 See CFTC No-Action Letter No. 15-29 (May 15, 2015), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-29.pdf. Similar to Letter 14-117,

oups/public/@lrlettergeneral/documents/letter/14-139.pdf.

8 See CFTC No-Action Letter No. 15-04 (February 12, 2015), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-04.pdf.

9 See CFTC No-Action Letter No. 15-29 (May 15, 2015), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-29.pdf. Similar to Letter 14-117,

3

29 generally tracks the conditional relief provided in Letter 14-117, but contains several notable

clarifications and changes to the conditions for relief.

On May 15, 2015, DMO also issued CFTC No-Action Letter No. 15-30 (“Letter 15-

30”)10 extending conditional relief to Yieldbroker through October 15, 2015. DMO issued Letter

15-30 to allow Yieldbroker additional time to work toward compliance with the amended

conditions for relief set out in Letter 15-29.

On October 15, 2015, DMO issued CFTC No-Action Letter No. 15-56 (“Letter 15-56”)11

extending conditional relief to Yieldbroker through May 15, 2016 to allow Yieldbroker

additional time to facilitate all modifications necessary for compliance with the conditions in

Letter 15-29, in consultation with its home country regulator, ASIC, and with the Australian

Treasurer.

II. Yieldbroker’s Request for Extension of Conditional No-Action Relief

In its April 2016 letter to DMO, Yieldbroker requested that DMO extend conditional no-

action relief for Yieldbroker from the SEF registration requirement to allow additional time for

Yieldbroker to comply with the conditions for relief set out in Letter 15-29. Yieldbroker represented

to DMO in its April 2016 letter that Yieldbroker expects to:

1. Complete, by June 10, 2016, testing of certain reporting and surveillance systems;

2. Finalize, by June 15, 2016, work with ASIC for approval of its amended operating rules;

and

3. Submit to DMO, by July 18, 2016, its formal request for relief pursuant to Letter 15-29

relief set out in Letter 15-29. Yieldbroker represented

to DMO in its April 2016 letter that Yieldbroker expects to:

1. Complete, by June 10, 2016, testing of certain reporting and surveillance systems;

2. Finalize, by June 15, 2016, work with ASIC for approval of its amended operating rules;

and

3. Submit to DMO, by July 18, 2016, its formal request for relief pursuant to Letter 15-29.

Based upon these representations, DMO believes it is appropriate to extend conditional no-action

relief to Yieldbroker with regard to Section 5h(a)(1) of the Commodity Exchange Act and

Commission Regulation 37.3(a)(1) until September 15, 2016, to allow: (1) Yieldbroker additional

time to comply with the terms and conditions in Letter 15-29; and (2) DMO additional time to review

Yieldbroker’s application for relief under Letter 15-29.

The no-action relief provided by this letter shall remain contingent on Yieldbroker’s

satisfaction of the six conditions listed in the December 2013 Letter throughout the relief

period,12 and Yieldbroker may offer trading in New Zealand Dollar-denominated interest rate

Letter 15-29 is an enabling no-action letter that requires an Australian Licensed Market to affirmatively undertake to

DMO that it will comply with the conditions set out in the letter.

10 See CFTC No-Action Letter No. 15-30 (May 15, 2015), available at

http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/15-30.pdf.

11 See CFTC No-Action Letter No. 15-56 (October 15, 2015), available at

http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/15-56.pdf.

12 No-action relief for Yieldbroker will continue to be predicated on Yieldbroker’s satisfaction of the following

conditions specified in the December 2013 Letter:

.gov/idc/groups/public/@lrlettergeneral/documents/letter/15-30.pdf.

11 See CFTC No-Action Letter No. 15-56 (October 15, 2015), available at

http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/15-56.pdf.

12 No-action relief for Yieldbroker will continue to be predicated on Yieldbroker’s satisfaction of the following

conditions specified in the December 2013 Letter:

4

swaps on its platform during the relief period.13 The Division continues to believe that

predicating Yieldbroker’s relief upon satisfaction of these conditions will help foster

transparency on, and impartial access to, Yieldbroker’s trading platform during the relief period.

This letter, and the no-action position taken herein, represents the views of DMO only,

and does not necessarily represent the positions or views of the Commission or of any other

division or office of the Commission. The no-action positions announced herein do not excuse

Yieldbroker from compliance with any other applicable requirements of the Act or the

Commission’s regulations thereunder. As with all no-action letters, DMO retains the authority to

condition further, 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 David Van

Wagner, Chief Counsel, Division of Market Oversight, at (202) 418-5481 or

dvanwagner@cftc.gov, or David Pepper, Special Counsel, Division of Market Oversight, at

thority to

condition further, 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 David Van

Wagner, Chief Counsel, Division of Market Oversight, at (202) 418-5481 or

dvanwagner@cftc.gov, or David Pepper, Special Counsel, Division of Market Oversight, at

(202) 418-5565 or dpepper@cftc.gov.

Sincerely,

Vincent McGonagle

Director, Division of Market Oversight

1. Yieldbroker will not offer trading on its platform in any product that is subject to the trade execution

mandate, pursuant to Section 2(h)(8) of the Act, during the relief period.

2. Yieldbroker will only offer trading in Australian dollar-denominated interest rate swaps on its platform

during the relief period.

3. Yieldbroker will maintain its AML license and will remain an exchange in good standing with ASIC and

other applicable regulators.

4. Yieldbroker must provide impartial access to its platform consistent with the requirements of

Commission regulation 37.202(a) and with any Commission- or Commission staff-issued guidance and

interpretations thereto.

5. Yieldbroker must at all times maintain an “order book” that complies with Commission regulation

37.3(a)(3).

6. Yieldbroker must provide notice to its participants that each swap transaction executed on or pursuant to

the rules of its platform during the period of relief provided herein is not occurring on a registered SEF and

that the counterparties to such Off-facility swaps may have swap data reporting obligations pursuant to

parts 43 and 45 of the Commission’s regulations

ulation

37.3(a)(3).

6. Yieldbroker must provide notice to its participants that each swap transaction executed on or pursuant to

the rules of its platform during the period of relief provided herein is not occurring on a registered SEF and

that the counterparties to such Off-facility swaps may have swap data reporting obligations pursuant to

parts 43 and 45 of the Commission’s regulations. Additionally, Yieldbroker will undertake to monitor that

any trade that is reportable under part 45 that is executed on its platform has been assigned a unique swap

identifier (“USI”) and has therefore been reported to a provisionally-registered or registered swap data

repository (“SDR”).

These six conditions are the only conditions upon which the relief provided to Yieldbroker by this letter is

predicated.

13 Thus, as a condition of this relief, Yieldbroker will only offer trading in Australian dollar-denominated or New

Zealand dollar-denominated interest rate swaps on its platform during the relief period.