Conditional no-action relief related to CFTC No-Action Letter No. 15-29 with respect to swaps trading on Yieldbroker Pty Limited

Summary: Conditional no-action relief related to CFTC No-Action Letter No. 15-29 with respect to swaps trading on Yieldbroker Pty Limited

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

Division of Swap Dealer and

Intermediary Oversight

CFTC Letter No. 16-72

No-Action

September 14, 2016

Division of Market Oversight

Division of Swap Dealer and Intermediary Oversight

Conditional no-action relief related to CFTC No-Action Letter No. 15-29 with respect to

swaps trading on Yieldbroker Pty Limited

The Commodity Futures Trading Commission’s (CFTC’s) Divisions of Market Oversight

(DMO) and Swap Dealer and Intermediary Oversight (DSIO) (the Divisions) are jointly issuing

this letter to provide conditional no-action relief related to CFTC No-Action Letter No. 15-29

(Letter 15-29)1 for:

(1) Yieldbroker PTY Limited (Yieldbroker) from the swap execution facility (SEF)

registration requirement under section 5h(a)(1) of the Commodity Exchange Act (CEA)2

and Commission regulation 37.3(a)(1);3

(2) Parties executing swap transactions on Yieldbroker from:

tly issuing

this letter to provide conditional no-action relief related to CFTC No-Action Letter No. 15-29

(Letter 15-29)1 for:

(1) Yieldbroker PTY Limited (Yieldbroker) from the swap execution facility (SEF)

registration requirement under section 5h(a)(1) of the Commodity Exchange Act (CEA)2

and Commission regulation 37.3(a)(1);3

(2) Parties executing swap transactions on Yieldbroker from:

(i) the trade execution mandate under CEA section 2(h)(8);4 and

(ii) their obligations to report part 45 creation data and the initial part 43 data

associated with such swap transactions once Yieldbroker begins reporting part 45

creation data and the initial part 43 data associated with swap transactions to a

1 See Letter 15-29 (May 15, 2015), available at

http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/15-29.pdf.

2 7 U.S.C. § 7b-3(a)(1).

3 See 17 CFR 37.3(a)(1).

4 7 U.S.C. § 2(h)(8).

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Commission-registered or provisionally-registered swap data repository (SDR), as

if Yieldbroker were a SEF;5 and

(3) Subject to the conditions specified below, swap dealers (SDs) and major swap

participants (MSPs) executing swap transactions on Yieldbroker from:

Commission-registered or provisionally-registered swap data repository (SDR), as

if Yieldbroker were a SEF;5 and

(3) Subject to the conditions specified below, swap dealers (SDs) and major swap

participants (MSPs) executing swap transactions on Yieldbroker from:

(i) certain business conduct requirements under subpart H to part 23 of the

Commission’s regulations, which sets forth business conduct standards for SDs

and MSPs in their dealings with counterparties (the External BCS);6

(ii) the confirmation requirement under Commission regulation 23.501;7 and

(iii) the swap trading relationship documentation requirements under Commission

regulation 23.504.8

This no-action letter is structured in two basic parts: (1) Section I of the letter describes the

conditional no-action relief being provided by DMO to Yieldbroker, pursuant to this letter and

Letter 15-29, from the SEF registration requirement of CEA section 5h(a)(1) and Commission

regulation 37.3(a)(1) and to parties executing swap transactions on Yieldbroker from the trade

execution mandate of CEA section 2(h)(8) and from certain reporting obligations;9 and (2)

Section II of the letter describes the conditional no-action relief being provided by DSIO,

pursuant to this letter and Letter 15-29, to SDs and MSPs executing swap transactions on

Yieldbroker from certain specified business conduct, confirmation, and swap trading relationship

documentation requirements under part 23 of the Commission’s regulations.

All no-action relief provided pursuant to this letter and Letter 15-29 will expire upon the

effective date of any framework implementing the Commission’s authority, under CEA section

5h(g), to exempt swap execution facilities that are “subject to comparable, comprehensive

supervision and regulation on a consolidated basis by . . . the appropriate governmental

5 See 17 CFR parts 43 & 45

tions.

All no-action relief provided pursuant to this letter and Letter 15-29 will expire upon the

effective date of any framework implementing the Commission’s authority, under CEA section

5h(g), to exempt swap execution facilities that are “subject to comparable, comprehensive

supervision and regulation on a consolidated basis by . . . the appropriate governmental

5 See 17 CFR parts 43 & 45. Yieldbroker’s obligation to report part 45 creation data and the initial part 43 data

associated with swap transactions to a Commission-registered or provisionally-registered SDR, as if it were a SEF,

is a condition of Letter 15-29. Without the imposition of such a requirement by Letter 15-29, Yieldbroker would not

be obligated to report such data under the Commission’s swaps data reporting regime as Yieldbroker swap

transactions are considered “off-facility swaps” under Commission regulation 45.1 (i.e., non-SEF/designated

contract market transactions).

6 See Business Conduct Standards for Swap Dealers and Major Swap Participants with Counterparties, 77 Fed.

Reg. 9734 (Feb. 17, 2012).

7 See 17 CFR 23.501.

8 See 17 CFR 23.504. Nothing in this letter provides relief from the SD and MSP registration requirements.

9 A prerequisite to a trade execution mandate under CEA section 2(h)(8) is a clearing requirement issued by the

Commission under CEA section 2(h)(1) (see 7 U.S.C. § 2(h)(1)) and codified in part 50 of the Commission’s

regulations (see 17 CFR part 50).

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17, 2012).

7 See 17 CFR 23.501.

8 See 17 CFR 23.504. Nothing in this letter provides relief from the SD and MSP registration requirements.

9 A prerequisite to a trade execution mandate under CEA section 2(h)(8) is a clearing requirement issued by the

Commission under CEA section 2(h)(1) (see 7 U.S.C. § 2(h)(1)) and codified in part 50 of the Commission’s

regulations (see 17 CFR part 50).

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authorities in the home country of the facility” from the SEF registration requirement of CEA

section 5h(a)(1) and Commission regulation 37.3(a)(1).10

I. Conditional no-action relief provided by DMO

A. Background

1. Letter 15-29

On May 15, 2015, DMO and DSIO jointly issued Letter 15-29 to provide conditional no-action

relief to:

 Qualifying Australian Licensed Markets (QALMs)11 from the SEF registration

requirement;

 Parties executing swap transactions on QALMs from the trade execution mandate;12 and

 SDs and MSPs executing swap transactions on QALMs from certain business conduct

and documentation requirements.

The relief provided under Letter 15-29 is not self-effectuating. Rather, Letter 15-29 is an

enabling no-action letter that requires the Australian Licensed Market to affirmatively undertake

to DMO that it will comply with the conditions set out in Letter 15-29. Relief pursuant to Letter

15-29 would be provided to an Australian Licensed Market upon issuance of a letter by DMO

and DSIO acknowledging receipt of an Australian Licensed Market’s relief request that includes

a certification that the Australian Licensed Market:

10 See 7 U.S.C. § 7b-3(g)

arket to affirmatively undertake

to DMO that it will comply with the conditions set out in Letter 15-29. Relief pursuant to Letter

15-29 would be provided to an Australian Licensed Market upon issuance of a letter by DMO

and DSIO acknowledging receipt of an Australian Licensed Market’s relief request that includes

a certification that the Australian Licensed Market:

10 See 7 U.S.C. § 7b-3(g).

11 For purposes of Letter 15-29, DMO and DSIO defined the term Qualifying Australian Licensed Market to mean

domestic financial markets that have been licensed to operate in Australia by the relevant Minister in accordance

with Chapter 7 of the Australian Corporations Act 2001 (Australian Licensed Markets), that satisfy the conditions

for SEF/designated contract market (DCM) registration relief set out in Letter 15-29. The Australian Securities and

Investments Commission (ASIC) is Australia’s corporate, markets and financial services regulator. See

http://www.asic.gov.au/asic/asic.nsf. The full list of Australian Licensed Markets is available at

http://asic.gov.au/regulatory-resources/markets/licensed-markets/licensed-domestic-financial-markets-operating-in­

australia/.

12 To qualify for relief from the SEF registration requirement, an Australian Licensed Market that plans to execute

only permitted transactions need not certify that it complies with the trading methodology requirements in Letter 15-

29 pertaining to the method of execution for Required Transactions and block trades. However, parties that execute

swap transactions on an Australian Licensed Market will not have relief from the CEA section 2(h)(8) trade

execution mandate with respect to trades executed on an Australian Licensed Market unless the Australian Licensed

Market certifies that it is in compliance with the trading methodology requirements that are specified in Letter 15-

29.

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s and block trades. However, parties that execute

swap transactions on an Australian Licensed Market will not have relief from the CEA section 2(h)(8) trade

execution mandate with respect to trades executed on an Australian Licensed Market unless the Australian Licensed

Market certifies that it is in compliance with the trading methodology requirements that are specified in Letter 15-

29.

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(1) is subject to and compliant with regulatory requirements established by the

appropriate Australian governmental authorities that are in accordance with certain SEF

regulatory requirements concerning trading methodology;

(2) is subject to and compliant with regulatory requirements established by the

appropriate Australian governmental authorities that are comparable to, and as

comprehensive as, certain SEF regulatory requirements concerning non-discriminatory

access by market participants and an appropriate level of oversight;

(3) meets certain reporting and clearing-related requirements;13

(4) does not allow trading by U.S. persons14 who are not eligible contract participants

(ECPs);15 and

opriate Australian governmental authorities that are comparable to, and as

comprehensive as, certain SEF regulatory requirements concerning non-discriminatory

access by market participants and an appropriate level of oversight;

(3) meets certain reporting and clearing-related requirements;13

(4) does not allow trading by U.S. persons14 who are not eligible contract participants

(ECPs);15 and

(5) is overseen by a regulatory authority that is a signatory to the International

Organization of Securities Commissions Multilateral Memorandum of Understanding

Concerning Consultation and Cooperation and the Exchange of Information, dated May

2002, revised May 2012 (IOSCO MMOU). Notably, ASIC is a signatory to the IOSCO

MMOU.

Relief would not be triggered until DMO reviews the applicant’s certification and issues a

responsive relief letter jointly with DSIO. Such relief would expire upon the effective date of

any Commission exempt SEF framework adopted pursuant to CEA section 5h(g).

2. Yieldbroker

Yieldbroker, an Australian licensed swap-trading platform that offers direct access to U.S.

persons, has operated pursuant to several no-action letters issued by DMO since 2013.16

Yieldbroker’s current no-action letter is scheduled to expire on September 15, 2016.17

13 Pursuant to Letter 15-29, an Australian Licensed Market is required to certify that (a) transactions executed on or

through the Australian Licensed Market that are required to be cleared pursuant to Commission regulations 50.2 and

50.4, and entered into by a person subject to CEA section 2(h)(1), are cleared by a registered DCO, an exempt DCO,

or a central counterparty that has received no-action relief; and (b) the Australian Licensed Market routes

transactions that are required to be cleared to a DCO, an exempt DCO, or a central counterparty with relief (as

appropriate), in a manner that is acceptable to such clearinghouse and the Australian Licensed Market coordinates

with each DCO, exempt DCO, or central counterparty with relief to whi

entral counterparty that has received no-action relief; and (b) the Australian Licensed Market routes

transactions that are required to be cleared to a DCO, an exempt DCO, or a central counterparty with relief (as

appropriate), in a manner that is acceptable to such clearinghouse and the Australian Licensed Market coordinates

with each DCO, exempt DCO, or central counterparty with relief to which it submits transactions for clearing, in the

development of rules and procedures to facilitate prompt and efficient transaction processing in accordance with the

requirements of Commission regulation 39.12(b)(7).

14 For purposes of this letter and Letter 15-29, the term “U.S. person” has the meaning used in the Commission’s

Cross-Border Guidance, 78 Fed. Reg. 45292, 45316–17 (July 26, 2013).

15 Pursuant to CEA section 2(e), it is unlawful for any person, other than an ECP, to enter into a swap unless the

swap is entered into on, or subject to the rules of, a board of trade designated as a contract market under CEA

section 5.

16 DMO has issued a series of short-term no-action letters providing conditional, time-limited relief for Yieldbroker.

See CFTC No-Action Letter No. 13-76 (December 20, 2013), CFTC No-Action Letter No. 14-70 (May 14, 2014),

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B. Yieldbroker’s request for no-action relief pursuant to Letter 15-29

On July 18, 2016, Yieldbroker submitted a request to DMO, consistent with the requirements of

Commission regulation 140.99, for no-action relief pursuant to Letter 15-29, for itself and on

behalf of its participants. In support of its relief request, Yieldbroker certified that it will comply

with the conditions set out in Letter 15-29.

Consistent with the terms of Letter 15-29, Yieldbroker has certified that it:

(1) is subject to pre-trade price transparency requirements in connection with executing

Required Transactions18 that are in accordance with the requirements for executing

Required Transactions on SEFs (as specified in Letter 15-29);

CFTC No-Action Letter No. 14-105 (August 11, 2014), CFTC No-Action Letter No. 14-139 (November 13, 2014),

CFTC No-Action Letter No. 15-04 (February 12, 2015), CFTC No-Action Letter No. 15-30 (May 15, 2015), CFTC

No-Action Letter No. 15-56 (October 15, 2015), and CFTC No-Action Letter No. 16-52 (May 12, 2016). Short-

term no-action relief for Yieldbroker under each of these letters has been predicated on Yieldbroker’s satisfaction of

the following conditions that were first specified in the December 2013 letter, and modified to include New Zealand

dollar-denominated interest rate swaps in the May 2016 letter:

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

mandate, pursuant to CEA section 2(h)(8), during the relief period.

2

ated on Yieldbroker’s satisfaction of

the following conditions that were first specified in the December 2013 letter, and modified to include New Zealand

dollar-denominated interest rate swaps in the May 2016 letter:

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

mandate, pursuant to CEA section 2(h)(8), during the relief period.

2. Yieldbroker will only offer trading in Australian dollar-denominated and New Zealand dollar-

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

3. Yieldbroker will maintain its Australian Market 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. 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 SDR.

17 See Letter 16-52, available at http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/16­

52.pdf.

18 The term “Required Transaction” is defined in Commission regulation 37.9(a)(1) to mean any transaction

involving a swap that is subject to the trade execution requirement in CEA section 2(h)(8)

) and has therefore been reported to a provisionally-registered or registered SDR.

17 See Letter 16-52, available at http://www.cftc.gov/ucm/groups/public/@lrlettergeneral/documents/letter/16­

52.pdf.

18 The term “Required Transaction” is defined in Commission regulation 37.9(a)(1) to mean any transaction

involving a swap that is subject to the trade execution requirement in CEA section 2(h)(8). A prerequisite for any

trade execution requirement is the issuance of a Commission clearing requirement determination under CEA section

2(h)(1).

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(2) maintains an order book, pursuant to its operating rules, that is in accordance with the

order book definition in Commission regulation 37.3(a)(3) and which is available as an

execution method for all swaps traded on Yieldbroker;19

(3) is subject to and compliant with regulatory requirements and supervision in Australia

that are comparable to the SEF regulatory requirements concerning non-discriminatory

access by market participants and an appropriate level of oversight as specified in Letter

15-29;20

(4) will comply with the reporting and clearing-related requirements specified in Letter

15-29;

(5) does not allow trading by U.S. persons who are not ECPs on its platform; and

ts and supervision in Australia

that are comparable to the SEF regulatory requirements concerning non-discriminatory

access by market participants and an appropriate level of oversight as specified in Letter

15-29;20

(4) will comply with the reporting and clearing-related requirements specified in Letter

15-29;

(5) does not allow trading by U.S. persons who are not ECPs on its platform; and

(6) will use all reasonable endeavors to obtain affirmative certification letters, on an

annual basis, from all members, persons and firms subject to its recordkeeping

requirements confirming that such members, persons and firms have complied with such

recordkeeping requirements.

1. Yieldbroker’s comparative regulatory analysis, operating rules and Australian Market

License

In support of its request for relief pursuant to Letter 15-29, Yieldbroker submitted an analysis to

DMO comparing the requirements for SEFs as specified in Letter 15-29 with the relevant

statutory and regulatory requirements that Yieldbroker is subject to in Australia as an Australian

Licensed Market. Yieldbroker also provided copies of its current operating rules and current

Australian Market License (AML) to DMO, which Yieldbroker has implemented in consultation

with its home country regulator, ASIC.

Notably, in order to comply fully with the requirements of Letter 15-29, Yieldbroker, in

consultation with ASIC, has taken two important steps. First, Yieldbroker has added operating

rules that align with the SEF requirements that are listed in Letter 15-29.21

19 Yieldbroker included within its application a detailed description of its order book and a list of those operating

rules pertaining to its order book.

20 Yieldbroker’s relief request was accompanied by supporting explanations as to why the regulations and

supervision that it is subject to in Australia are comparable to those CFTC regulatory requirements applicable to

SEFs that are specified in Letter 15-29

ncluded within its application a detailed description of its order book and a list of those operating

rules pertaining to its order book.

20 Yieldbroker’s relief request was accompanied by supporting explanations as to why the regulations and

supervision that it is subject to in Australia are comparable to those CFTC regulatory requirements applicable to

SEFs that are specified in Letter 15-29.

21 Yieldbroker added a suite of operating rules that applies to its derivatives trading platform to the extent that

Yieldbroker relies on the relief provided by Letter 15-29. Those revised operating rules became effective on June

28, 2016.

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Second, ASIC has established as part of Yieldbroker’s AML a new condition that affirmatively

requires Yieldbroker to comply with the terms of Letter 15-29 in order for it to maintain good

regulatory standing as a Licensed Market in Australia.

Through operation of its AML, compliance with the terms of Letter 15-29 will be effectively

converted to mandatory requirements for Yieldbroker to maintain its Licensed Market status in

Australia. Accordingly, ASIC will have regulatory jurisdiction over Yieldbroker with respect to

its compliance with Letter 15-29 such that ASIC would partially revoke or suspend

Yieldbroker’s AML should it fail to comply with the requirements in Letter 15-29.

2

s of Letter 15-29 will be effectively

converted to mandatory requirements for Yieldbroker to maintain its Licensed Market status in

Australia. Accordingly, ASIC will have regulatory jurisdiction over Yieldbroker with respect to

its compliance with Letter 15-29 such that ASIC would partially revoke or suspend

Yieldbroker’s AML should it fail to comply with the requirements in Letter 15-29.

2. Trading methodology requirements in connection with the execution of Required

Transactions

The trade execution mandate set out in CEA section 2(h)(8) requires that a swap that is subject to

the clearing requirement must be executed on a DCM, SEF, or SEF that is exempt from

registration under CEA section 5h(g) (unless no DCM or SEF makes the swap available to

trade).22 Yieldbroker is not a Commission-registered SEF or DCM, nor is it a SEF that is exempt

from registration under CEA section 5h(g).

Yieldbroker has certified that it maintains an order book, pursuant to its operating rules, that is in

accordance with the order book definition in Commission regulation 37.3(a)(3)23 and which is

available as an execution method for all swaps traded on Yieldbroker. Yieldbroker has further

certified that any Required Transaction, as defined by Commission regulation 37.9(a)(1),24 will

be executed on Yieldbroker’s trading platform in a manner that is in accordance with the

requirements of Commission regulation 37.9(a)(2)(i).25

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finition in Commission regulation 37.3(a)(3)23 and which is

available as an execution method for all swaps traded on Yieldbroker. Yieldbroker has further

certified that any Required Transaction, as defined by Commission regulation 37.9(a)(1),24 will

be executed on Yieldbroker’s trading platform in a manner that is in accordance with the

requirements of Commission regulation 37.9(a)(2)(i).25

3. Clearing and straight through processing

Swaps that are required to be cleared pursuant to CEA section 2(h)(1) and Commission

regulations 50.2 and 50.4 (swaps required to be cleared), and that are entered into by a person

subject to CEA section 2(h)(1), must be cleared by: (1) an eligible Commission-registered

derivatives clearing organization (registered DCO); or (2) an eligible derivatives clearing

22 Although CEA section 2(h)(8)(A)(ii) refers to exemption from registration under CEA section 5h(f), it is DMO’s

view that this reference to 5h(f) is a mis-citation and should be interpreted to mean 5h(g). CEA section 5h(g) is the

only provision in CEA section 5h that addresses exempting facilities from the SEF registration requirement.

23 17 CFR 37.3(a)(3).

24 17 CFR 37.9(a)(1).

25 17 CFR 37.9(a)(2)(i). Under Commission regulation 37.9(a)(2)(i), Required Transactions, that are not block

trades, must be traded: (1) on an order book, or (2) on an order book operating in conjunction with an RFQ system,

as defined in Commission regulation 37.9(a)(3). Commission regulation 37.9(a)(3) provides that under such an

RFQ system, market participants must transmit an RFQ to buy or sell a specific instrument to no less than three

market participants in the trading system or platform.

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trades, must be traded: (1) on an order book, or (2) on an order book operating in conjunction with an RFQ system,

as defined in Commission regulation 37.9(a)(3). Commission regulation 37.9(a)(3) provides that under such an

RFQ system, market participants must transmit an RFQ to buy or sell a specific instrument to no less than three

market participants in the trading system or platform.

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organization that the Commission has exempted from registration (exempt DCO).26 Under

regulation 39.5(a), a DCO is “presumed eligible to accept for clearing any swap that is within a

group, category, type, or class of swaps that the [DCO] already clears … subject to review by the

Commission.”27 Commission regulation 50.2 describes the obligations of those persons who are

subject to the clearing requirement in CEA section 2(h)(1). Commission regulation 50.4

specifies the classes of swaps that must be cleared.28

Pursuant to the process set forth under Letter 15-29, Yieldbroker has represented to Commission

staff that it is working to establish a process by which swaps executed on or through Yieldbroker

that are required to be cleared pursuant to CEA section 2(h)(1) and Commission regulations 50.2

and 50.4, and that are entered into by a person subject to CEA section 2(h)(1), will be routed to

either a Commission-registered DCO or a DCO that is exempt from registration with the

Commission. At this time, however, Yieldbroker does not have clearing arrangements in place

with any registered DCOs or exempt DCOs

ed to be cleared pursuant to CEA section 2(h)(1) and Commission regulations 50.2

and 50.4, and that are entered into by a person subject to CEA section 2(h)(1), will be routed to

either a Commission-registered DCO or a DCO that is exempt from registration with the

Commission. At this time, however, Yieldbroker does not have clearing arrangements in place

with any registered DCOs or exempt DCOs.

Nothing in this letter is intended to relieve market participants executing swaps on Yieldbroker’s

platform (or subject to Yieldbroker’s rules) of their obligations under CEA section 2(h)(1) and

part 50 of the Commission’s regulations. Each executing counterparty subject to the clearing

requirement under CEA section 2(h)(1) and part 50 of the Commission’s regulations retains all

obligations to submit swaps required to be cleared to a registered DCO or an exempt DCO,

pursuant to CEA section 2(h)(1) and Commission regulation 50.2.

For swaps required to be cleared pursuant to CEA section 2(h)(1) and part 50 of the

Commission’s regulations, and for transactions that are cleared voluntarily, Yieldbroker has

certified that when it begins routing such transactions to a registered DCO, and/or an exempt

DCO, Yieldbroker will route such transactions in a manner that is acceptable to such DCOs and

will coordinate with each such registered DCO, and/or exempt DCO, to which it submits

transactions for clearing, in the development of rules and procedures to facilitate prompt and

efficient transaction processing in accordance with the requirements of Commission regulation

26 Pursuant to Commission orders, an exempt DCO is permitted to clear for U.S. proprietary accounts but not for

U.S. customers. See, e.g., Order of Exemption from Registration to Japan Securities Clearing Corp. (JSCC) (Oct.

26, 2015) and Amended Order of Exemption from Registration to ASX Clear (Futures) Pty Ltd. (ASX) (Jan. 28,

2016).

27 See 17 CFR 39.5(a)

quirements of Commission regulation

26 Pursuant to Commission orders, an exempt DCO is permitted to clear for U.S. proprietary accounts but not for

U.S. customers. See, e.g., Order of Exemption from Registration to Japan Securities Clearing Corp. (JSCC) (Oct.

26, 2015) and Amended Order of Exemption from Registration to ASX Clear (Futures) Pty Ltd. (ASX) (Jan. 28,

2016).

27 See 17 CFR 39.5(a). There are two eligible registered DCOs that currently clear AUD-denominated interest rate

swaps: CME Clearing Inc. and LCH.Clearnet Ltd. There are two eligible exempt DCOs that currently clear or offer

to clear AUD-denominated interest rate swaps: ASX and JSCC.

28 Under regulation 50.4(a), currently four classes of interest rate swaps, denominated in particular currencies and

having certain other specifications, are required to be cleared: (1) fixed-to-floating interest rate swaps; (2) basis

swaps; (3) forward rate agreements; and (4) overnight index swaps. The Commission’s first clearing requirement

determination applied to the following currencies: U.S. dollar (USD), euro (EUR), sterling (GBP), and Japanese yen

(JPY). See Clearing Requirement Determination Under Section 2(h) of the CEA, 77 Fed. Reg. 74284 (Dec. 13,

2012). Note that the Commission has proposed regulations that would expand the clearing requirement under

regulation 50.4 to include AUD-denominated interest rate swaps. See Clearing Requirement Determination Under

Section 2(h) of the CEA for Interest Rate Swaps, Notice of Proposed Rulemaking, 81 Fed. Reg. 39506 (June 16,

2016).

8

Under Section 2(h) of the CEA, 77 Fed. Reg. 74284 (Dec. 13,

2012). Note that the Commission has proposed regulations that would expand the clearing requirement under

regulation 50.4 to include AUD-denominated interest rate swaps. See Clearing Requirement Determination Under

Section 2(h) of the CEA for Interest Rate Swaps, Notice of Proposed Rulemaking, 81 Fed. Reg. 39506 (June 16,

2016).

8

39.12(b)(7).29 Commission staff will review all such rules and procedures, along with any other

clearing arrangement documentation, once Yieldbroker has executed and implemented its

arrangements with one or more registered or exempt DCOs.

4. Mandatory SDR reporting

Consistent with the terms of Letter 15-29, Yieldbroker has certified that it will begin reporting

part 45 creation data and the initial part 43 data30 to a Commission-registered SDR of its choice,

as if it were a SEF,31 in connection with all swap transactions executed on or pursuant to

Yieldbroker’s rules that are subject to the clearing requirement or involve a counterparty that is a

U.S. Person. Yieldbroker has further certified that it will commence such reporting within sixty

days of the issuance of this no-action letter

l part 43 data30 to a Commission-registered SDR of its choice,

as if it were a SEF,31 in connection with all swap transactions executed on or pursuant to

Yieldbroker’s rules that are subject to the clearing requirement or involve a counterparty that is a

U.S. Person. Yieldbroker has further certified that it will commence such reporting within sixty

days of the issuance of this no-action letter.

Upon Yieldbroker’s initiation of SDR reporting:

 Counterparties to such swap transactions will be relieved from any applicable

requirement to report part 45 creation data and the initial part 43 data associated with

such swap transactions. Yieldbroker has certified that it will notify its participants in a

29 17 CFR 39.12(b)(7). Yieldbroker has included within its relief request a description of its clearing workflows that

it represents would ensure prompt and efficient transaction processing, consistent with CFTC No-Action Letter No.

15-67 (Straight Through Processing and Affirmation of SEF Cleared Swaps) (Dec. 21, 2015), given that delays in

transaction processing may occur due to an applicable registered DCO, or exempt DCO, being closed during

Australian trading hours. Commission staff will review these workflows again upon execution and implementation

of specific clearing arrangements between Yieldbroker and any registered DCOs or exempt DCOs.

It is expected that Yieldbroker’s clearing arrangements will not be limited to exempt DCOs because, as noted above,

Commission orders prohibit exempt DCOs from clearing for U.S. customers

ing

Australian trading hours. Commission staff will review these workflows again upon execution and implementation

of specific clearing arrangements between Yieldbroker and any registered DCOs or exempt DCOs.

It is expected that Yieldbroker’s clearing arrangements will not be limited to exempt DCOs because, as noted above,

Commission orders prohibit exempt DCOs from clearing for U.S. customers. According to the Commission’s

adopting release for the SEF Core Principles final rule, which was published prior to the first issuance of an order

exempting a DCO from registration, “if exempt DCOs are limited to clearing for only certain types of market

participants, then the Commission will take action to ensure that SEF market participants have impartial access to

swap clearing through registered DCOs.” Core Principles and Other Requirements for SEFs, Final Rule), 78 Fed.

Reg. 33,476, 33,534 (n. 700) (June 4, 2013) (discussing regulation 37.701 (Required clearing)). Moreover, the

Commission has indicated the importance of swap counterparties having a choice of which DCO will clear the

swaps they execute. Under Commission regulation 23.432(a) (Clearing disclosures for swaps required to be

cleared), an SD or MSP is required to “notify any counterparty (other than a swap dealer, major swap participant,

securities-based swap dealer, or major securities-based swap participant) with which it entered into a swap … that

the counterparty has the sole right to select the [DCO] at which the swap will be cleared.” An analogous provision

codified in Commission regulation 23.432(b) pertains to swaps not required to be cleared. See also Business

Conduct Standards for SDs and MSPs with Counterparties, Final Rule, 77 Fed. Reg. at 9,768–69 (Feb. 17, 2012)

(discussing regulation 23.432).

30 See 17 CFR parts 43 and 45. The specific reporting requirements for QALMs are listed in Letter 15-29 at pp. 17-

18

ared.” An analogous provision

codified in Commission regulation 23.432(b) pertains to swaps not required to be cleared. See also Business

Conduct Standards for SDs and MSPs with Counterparties, Final Rule, 77 Fed. Reg. at 9,768–69 (Feb. 17, 2012)

(discussing regulation 23.432).

30 See 17 CFR parts 43 and 45. The specific reporting requirements for QALMs are listed in Letter 15-29 at pp. 17-

18.

31 Yieldbroker’s obligation to report part 45 creation data and the initial part 43 data associated with swap

transactions to a Commission-registered or provisionally-registered SDR, as if it were a SEF, is a condition of Letter

15-29. Without the imposition of such a requirement by Letter 15-29, Yieldbroker would not be obligated to report

such data under the Commission’s swaps data reporting regime as Yieldbroker swap transactions are considered

“off-facility swaps” under Commission regulation 45.1 (i.e., non-SEF/DCM transactions).

9

timely fashion when it has commenced reporting part 45 creation data and the initial part

43 data associated with such swap transactions.

 Counterparties to such swap transactions must continue to comply with any applicable

subsequent reporting requirements under parts 43 and 45 including, but not limited to,

continuation/post-creation data reporting requirements pursuant to part 45 and

subsequent reporting requirements pursuant to part 43, in connection with such swap

transactions.32

Until such time as Yieldbroker begins reporting all swap transactions executed on its platform or

pursuant to its rules, which are subject to the clearing requirement or involve a counterparty that

is a U.S

limited to,

continuation/post-creation data reporting requirements pursuant to part 45 and

subsequent reporting requirements pursuant to part 43, in connection with such swap

transactions.32

Until such time as Yieldbroker begins reporting all swap transactions executed on its platform or

pursuant to its rules, which are subject to the clearing requirement or involve a counterparty that

is a U.S. Person, to an SDR, as if it were a SEF, counterparties will continue to retain all

applicable reporting responsibilities for off-facility swaps pursuant to parts 43 and 45 for such

swap transactions.33

In order to avoid duplicative reporting once Yieldbroker begins reporting all swap transactions

executed on its platform or pursuant to its rules, which are subject to the clearing requirement or

involve a counterparty that is a U.S. Person, to an SDR, as if it were a SEF, Yieldbroker will

prohibit reporting of part 45 creation data and initial part 43 data by the counterparties to such

transactions (whether directly or through use of a third party service provider), and will provide

notice to its market participants that it has commenced such reporting. Additionally, once

Yieldbroker begins reporting transactions to an SDR, it will use the Acknowledgment ID (AID)

that is has been provided by DMO in lieu of a CFTC assigned name space for creation of unique

swap identifiers (USIs)—as if it were a SEF in accordance with Commission regulation 45.5—

for all relevant swap transactions. Yieldbroker has represented that it will inform the SDR to

which it will report of its AID prior to the commencement of reporting to such SDR.

C

e the Acknowledgment ID (AID)

that is has been provided by DMO in lieu of a CFTC assigned name space for creation of unique

swap identifiers (USIs)—as if it were a SEF in accordance with Commission regulation 45.5—

for all relevant swap transactions. Yieldbroker has represented that it will inform the SDR to

which it will report of its AID prior to the commencement of reporting to such SDR.

C. Conditional no-action relief

After consulting with Yieldbroker representatives and ASIC staff, DMO believes that the SEF-

related requirements listed in Letter 15-29 concerning market access and oversight, rule

enforcement, limitation on participation, system safeguards, and pre-trade price transparency for

executing Required Transactions, appear to be satisfied by a combination of Australian statutes,

Australian regulations, Yieldbroker’s AML, and Yieldbroker’s operating rules.

DMO recognizes that regulations in Australia do not currently specify mandatory trading

procedures to be used in entering and executing orders traded or posted on an Australian

32 DMO notes that counterparties to swap transactions executed on or pursuant to the rules of Yieldbroker will not

be subject to any new continuation data reporting obligations under the terms of this no-action letter.

33 DMO notes that it has issued no-action relief to certain swap dealers and major swap participants established

under the laws of Australia, Canada, the European Union, Japan and Switzerland from the requirements of part 45 of

the Commission’s regulations. See CFTC No-Action Letter No. 15-61 (November 9, 2015), available at

http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/15-61.pdf.

10

has issued no-action relief to certain swap dealers and major swap participants established

under the laws of Australia, Canada, the European Union, Japan and Switzerland from the requirements of part 45 of

the Commission’s regulations. See CFTC No-Action Letter No. 15-61 (November 9, 2015), available at

http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/15-61.pdf.

10

II. Conditional no-action relief provided by DSIO

A. Background

Licensed Market, including block trades.34 However, DMO believes that Yieldbroker’s

operating rules, working in conjunction with Yieldbroker’s AML would provide transactions that

are executed on Yieldbroker’s trading platform with a level of pre-trade price transparency in

connection with the execution of Required Transactions that would be comparable to that for

SEFs. Based on the above-described arrangement and certification, DMO has deemed

Yieldbroker’s execution methods for Required Transactions as satisfying the requirements of

Letter 15-29 with respect to the execution of Required Transactions.

Based on the foregoing, DMO is providing conditional no-action relief in accordance with Letter

15-29 to:

1. Yieldbroker from the SEF registration requirement under CEA section 5h(a)(1) and

Commission regulation 37.3(a)(1);

2. Parties executing swap transactions on Yieldbroker from the trade execution mandate

under CEA section 2(h)(8); and

3

respect to the execution of Required Transactions.

Based on the foregoing, DMO is providing conditional no-action relief in accordance with Letter

15-29 to:

1. Yieldbroker from the SEF registration requirement under CEA section 5h(a)(1) and

Commission regulation 37.3(a)(1);

2. Parties executing swap transactions on Yieldbroker from the trade execution mandate

under CEA section 2(h)(8); and

3. Parties executing swap transactions on, or pursuant to the rules of, Yieldbroker from their

obligations to report part 45 creation data and the initial part 43 data associated with such

swap transactions once Yieldbroker begins reporting part 45 creation data and the initial

part 43 data associated with swap transactions to a Commission-registered or

provisionally-registered SDR, as if Yieldbroker were a SEF.

In addition to the foregoing, DSIO is providing no-action relief for SDs and MSPs from (i)

certain External BCS; (ii) the confirmation requirement under Commission regulation 23.501;

and (iii) the swap trading relationship documentation requirements under Commission

regulation 23.504. Such no-action relief is intended to provide broadly equivalent relief for

swaps executed by SDs and MSPs on or pursuant to the rules of Yieldbroker as is available to

SDs and MSPs when executing swaps on or pursuant to the rules of a SEF.

As background, DSIO notes that the Commission’s rules under the External BCS prohibit SDs

and MSPs from engaging in any act, practice, or course of business that is fraudulent, deceptive,

or manipulative.35 In addition, the External BCS require SDs and MSPs to provide or obtain

specific information from their counterparties, to obtain specific representations in writing from

their counterparties, and to perform certain due diligence inquiries with respect to their

counterparties prior to entering into (or in some cases, offering to enter into) a swap with such

34 Note that Yieldbroker has represented that no block trades are executed on or pursuant to its platform

ain

specific information from their counterparties, to obtain specific representations in writing from

their counterparties, and to perform certain due diligence inquiries with respect to their

counterparties prior to entering into (or in some cases, offering to enter into) a swap with such

34 Note that Yieldbroker has represented that no block trades are executed on or pursuant to its platform.

35 See Commission regulation 23.410(a)(3). Nothing in this letter provides relief from compliance with the

prohibition on fraud, manipulation, and other abusive practices under Commission regulation 23.410.

11

counterparties.36 Certain safe harbors under the External BCS permit SDs and MSPs to rely on

written representations from their counterparties and standardized disclosures, each of which

may require amendments or supplements to an SD’s or MSP’s relationship documentation with

such counterparties prior to entering into a swap with such counterparties.37

However, many of the External BCS do not apply either (i) when the SD or MSP does not know

the identity of the counterparty to a swap prior to the execution of the swap, or (ii) when the

swap is initiated on a DCM or SEF and the SD or MSP does not know the identity of the

counterparty to a swap prior to the exe

with

such counterparties prior to entering into a swap with such counterparties.37

However, many of the External BCS do not apply either (i) when the SD or MSP does not know

the identity of the counterparty to a swap prior to the execution of the swap, or (ii) when the

swap is initiated on a DCM or SEF and the SD or MSP does not know the identity of the

counterparty to a swap prior to the execution of the swap.38

SDs and MSPs are also deemed to meet the requirement under Commission regulation 23.501 to

ensure that each swap transaction is confirmed in writing whenever a swap transaction is

executed on a SEF, provided that the rules of the SEF require that confirmation of the transaction

take place at the same time as execution.39

Similarly, Commission regulation 23.504 contains an exception to the requirement that an SD or

MSP execute swap trading relationship documentation with a counterparty prior to or

contemporaneously with entering into a swap transaction with such counterparty. Commission

36 See Commission regulation 23.402(b) (requiring SDs to obtain essential facts about their counterparty prior to

execution of a transaction); § 23.430(a) (requiring SDs and MSPs to verify that a counterparty meets the eligibility

standards for an ECP before offering to enter into or entering into a swap with such counterparty); § 23.431(a)

(requiring SDs and MSPs to provide material information concerning a swap to its counterparty at a reasonably

sufficient time prior to entering into the swap); § 23.431(b) (requiring SDs and MSPs to provide notice to

counterparties that they can request and consult on the design of a scenario analysis; § 23.431(d) (requiring SDs and

MSPs to provide notice to counterparties of the right to receive the daily mark from a DCO for cleared swaps);

§ 23.432 (requiring SDs and MSPs to provide notice to counterparties of the right to select clearing and the DCO on

which a swap is to be cleared); § 23.434 (requiring SDs and MSPs that recommend a swap to have a reasonable

basis

n of a scenario analysis; § 23.431(d) (requiring SDs and

MSPs to provide notice to counterparties of the right to receive the daily mark from a DCO for cleared swaps);

§ 23.432 (requiring SDs and MSPs to provide notice to counterparties of the right to select clearing and the DCO on

which a swap is to be cleared); § 23.434 (requiring SDs and MSPs that recommend a swap to have a reasonable

basis to believe that the swap is suitable for the counterparty); § 23.440 (requiring SDs and MSPs that act as an

advisor to a Special Entity to act in such entity’s best interest); § 23.450 (requiring SDs and MSPs to inquire into the

knowledge and status of a representative of a counterparty that is a Special Entity); and § 23.451 (prohibiting SDs

from entering into swaps with certain governmental entities if it has made political contributions to an official of

such entity).

37 See Commission regulations 23.402(d), (e), and (f).

38 See Commission regulations 23.402(b) and (c) (requiring SDs and MSPs to obtain and retain certain information

only about each counterparty “whose identity is known to the SD or MSP prior to the execution of the transaction”),

§ 23.430(e) (not requiring SDs and MSPs to verify counterparty eligibility when a transaction is entered on a DCM

or SEF and the SD or MSP does not know the identity of the counterparty prior to execution), § 23.431(c) (not

requiring disclosure of material information about a swap if initiated on a DCM or SEF and the SD or MSP does not

know the identity of the counterparty prior to execution (but see general prohibition of fraudulent, deceptive, or

manipulative practices under § 23.410)), § 23.450(h) (not requiring SDs and MSPs to have a reasonable basis to

believe that a Special Entity has a qualified, independent representative if the transaction with the Special Entity is

initiated on a DCM or SEF and the SD or MSP does not know the identity of the Special Entity prior to execution),

and § 23.451(b)(2)(iii) (disapplying the prohibition on entering into swaps

under § 23.410)), § 23.450(h) (not requiring SDs and MSPs to have a reasonable basis to

believe that a Special Entity has a qualified, independent representative if the transaction with the Special Entity is

initiated on a DCM or SEF and the SD or MSP does not know the identity of the Special Entity prior to execution),

and § 23.451(b)(2)(iii) (disapplying the prohibition on entering into swaps with a governmental Special Entity

within two years after any contribution to an official of such governmental Special Entity if the swap is initiated on a

DCM or SEF and the SD or MSP does not know the identity of the Special Entity prior to execution).

39 See Commission regulation 23.501(a)(4)(i).

12

regulation 23.504(a)(1) states that such documentation is not required with respect to swaps

executed on a DCM or anonymously on a SEF if such swaps are cleared by a DCO and all terms

of the swaps conform to the rules of the DCO and Commission regulation 39.12(b)(6).40

Recognizing the exceptions to the documentation requirements and the External BCS outlined

above, and encouraged by the pre-clearing risk mitigation provided by compliance with the

Commission’s regulations for straight-through-processing of swaps intended to be cleared in

parts 1, 23, 39, and 50 of the Commission’s regulations, DSIO published No-Action Letter No.

13-70 on November 15, 2013 (the November No-Action Letter)

o the documentation requirements and the External BCS outlined

above, and encouraged by the pre-clearing risk mitigation provided by compliance with the

Commission’s regulations for straight-through-processing of swaps intended to be cleared in

parts 1, 23, 39, and 50 of the Commission’s regulations, DSIO published No-Action Letter No.

13-70 on November 15, 2013 (the November No-Action Letter).

The November No-Action Letter provided no-action relief to SDs and MSPs when entering into

swaps that are (i) of a type accepted for clearing by a DCO,41 and (ii) intended to be submitted

for clearing contemporaneously with execution (such swaps, Intended-To-Be-Cleared Swaps or

ITBC Swaps). The November No-Action Letter provides relief for these swaps from certain

disclosure and notice requirements and other duties imposed on SDs and MSPs pursuant to the

External BCS, as well as certain documentation requirements imposed on SDs and MSPs

pursuant to Commission regulation 23.504.

Given the similarities between Yieldbroker and SEFs, DSIO believes that no-action relief for

SDs and MSPs is warranted in the context of a swap executed by SDs and MSPs on or pursuant

to the rules of Yieldbroker where such relief would be available to SDs and MSPs if executing

the swap on or pursuant to the rules of a SEF. DSIO believes that such relief should be subject

to the same conditions that would be applicable if the swap were executed on or pursuant to the

rules of a SEF, including, for ITBC Swaps, whether or not the swap is currently cleared by a

DCO, or exempt DCO, or subject to a mandatory clearing determination by the Commission.

40 Commission regulation 39.12(b)(6):

(6) A derivatives clearing organization that clears swaps shall have rules providing that, upon

acceptance of a swap by the derivatives clearing organization for clearing:

the

rules of a SEF, including, for ITBC Swaps, whether or not the swap is currently cleared by a

DCO, or exempt DCO, or subject to a mandatory clearing determination by the Commission.

40 Commission regulation 39.12(b)(6):

(6) A derivatives clearing organization that clears swaps shall have rules providing that, upon

acceptance of a swap by the derivatives clearing organization for clearing:

(i) The original swap is extinguished;

(ii) The original swap is replaced by an equal and opposite swap between the derivatives

clearing organization and each clearing member acting as principal for a house trade or acting

as agent for a customer trade;

(iii) All terms of a cleared swap must conform to product specifications established under

derivatives clearing organization rules; and

(iv) If a swap is cleared by a clearing member on behalf of a customer, all terms of the swap,

as carried in the customer account on the books of the clearing member, must conform to the

terms of the cleared swap established under the derivatives clearing organization’s rules.

41 The November No-Action Letter referred only to registered DCOs. The Commission first exempted a DCO from

registration in 2015, subsequent to the issuance of the November No-Action Letter. In light of the fact that the

Commission has now exempted certain DCOs from registration, DSIO deems the November No-Action Letter to

apply equally to both registered DCOs and exempt DCOs.

13

(a)

The SD or MSP does not know the identity of the counterparty prior to execution

of the swap; and

the

Commission has now exempted certain DCOs from registration, DSIO deems the November No-Action Letter to

apply equally to both registered DCOs and exempt DCOs.

13

(a)

The SD or MSP does not know the identity of the counterparty prior to execution

of the swap; and

(b)

The swap is executed on or subject to the rules of Yieldbroker; or

B. Conditional no-action relief

Based on the foregoing, DSIO will not recommend that the Commission commence an

enforcement action against an SD or MSP for:

1. Failure to comply with the requirements of the External BCS specified in Table 1 of

Appendix A attached hereto with respect to any swap where:

2. Failure to comply with the requirements of the External BCS specified in Table 2 of

Appendix A attached hereto, or the requirements of Commission regulation 23.504

(Swap trading relationship documentation) with respect to an ITBC Swap where:

(a)

The ITBC Swap is executed on or subject to the rules of Yieldbroker; and either

(b)

The ITBC Swap is of a type that was accepted for clearing by a registered DCO or

exempt DCO on or after the date that Yieldbroker establishes a clearing

arrangement with one or more registered DCOs and/or exempt DCOs; or

(c)

The ITBC Swap is of a type that is, as of the date of execution of the swap,

required to be cleared pursuant to section 2(h)(1) of the CEA and part 50 of the

Commission’s regulations; or

3. Failure to comply with the requirements of the External BCS specified in Table 3 of

Appendix A attached hereto, or the requirements of Commission regulation 23.504

(Swap trading relationship documentation) with respect to an ITBC Swap where:

(a)

The ITBC Swap is executed on or subject to the rules of Yieldbroker;

(b)

The ITBC Swap is of a type that was not being accepted for clearing by a

registered DCO or exempt DCO as of the date of this letter; and

ecified in Table 3 of

Appendix A attached hereto, or the requirements of Commission regulation 23.504

(Swap trading relationship documentation) with respect to an ITBC Swap where:

(a)

The ITBC Swap is executed on or subject to the rules of Yieldbroker;

(b)

The ITBC Swap is of a type that was not being accepted for clearing by a

registered DCO or exempt DCO as of the date of this letter; and

(c)

The ITBC Swap is not of a type that is, as of the date of execution, required to be

cleared pursuant to section 2(h)(1) of the CEA and part 50 of the Commission’s

regulations.

4. Failure to comply with the confirmation requirements of Commission regulation 23.501

with respect to any swap transaction executed on Yieldbroker, provided that

14

Yieldbroker’s rules establish that confirmation of all terms of the transaction shall take

place at the same time as execution.42

The relief specified in 2 and 3 above is, in each case, subject to the following conditions:

(i)

The SD or MSP is either a clearing member of the registered DCO or exempt

DCO to which the ITBC Swap will be submitted, or has entered into an

agreement with a clearing member of such DCO or exempt DCO for clearing of

swaps of the same type as the ITBC Swap; and

at the same time as execution.42

The relief specified in 2 and 3 above is, in each case, subject to the following conditions:

(i)

The SD or MSP is either a clearing member of the registered DCO or exempt

DCO to which the ITBC Swap will be submitted, or has entered into an

agreement with a clearing member of such DCO or exempt DCO for clearing of

swaps of the same type as the ITBC Swap; and

(ii)

The SD or MSP does not require the counterparty or its clearing futures

commission merchant to enter into a breakage agreement or similar agreement as

a condition to executing the ITBC Swap.

III. Conclusion

The no-action relief provided by this letter is limited to the application of CEA sections 5h(a)(1),

and 2(h)(8), Commission regulation 37.3(a)(1), and parts 23, 43 and 45,43 and to the entities and

transactions described herein. This letter, and the positions taken therein, represent the views of

DMO and DSIO only, and do not necessarily represent the position or view of the Commission

or of any other office or division of the Commission. The relief issued by this letter does not

excuse persons relying on it from compliance with any other applicable requirements contained

in the CEA or in the Regulations issued thereunder, including all antifraud provisions of the

CEA. In particular, the no-action positions taken herein do not excuse affected persons from

compliance with any other applicable clearing-related requirements of the CEA or the

Commission’s regulations thereunder, in particular, the clearing requirement, pre-execution

credit check requirements, and straight-through processing requirements.44

Further, this letter, and the relief contained herein, is based upon the representations made to the

Divisions. Any different, changed or omitted material facts or circumstances might render this

no-action relief void

CEA or the

Commission’s regulations thereunder, in particular, the clearing requirement, pre-execution

credit check requirements, and straight-through processing requirements.44

Further, this letter, and the relief contained herein, is based upon the representations made to the

Divisions. Any different, changed or omitted material facts or circumstances might render this

no-action relief void. As with all no-action letters, the Divisions retain the authority, in their

42 For purposes of this letter, “confirmation” has the same meaning as provided in Commission regulation 23.500(c).

43 In the event that a comparability determination is issued by the Commission with respect to the SDR Reporting

Rules for Australia, Yieldbroker will be deemed to be in compliance with the part 45 reporting requirements in

Letter 15-29 if a transaction for which substituted compliance is available is executed on or pursuant to the rules of

Yieldbroker and is reported to a foreign trade repository in compliance with laws and regulations applicable in

Australia, in reliance on the Commission’s comparability determination.

44 The clearing requirement is set forth under part 50 of the Commission’s regulations, as discussed above. The

applicable pre-execution credit check requirements are set forth under § 1.73 and § 23.609 of the Commission’s

regulations. Applicable straight-through processing requirements include those set forth under § 1.74, § 23.610, and

§ 39.12(b)(7) of the Commission’s regulations.

15

ion.

44 The clearing requirement is set forth under part 50 of the Commission’s regulations, as discussed above. The

applicable pre-execution credit check requirements are set forth under § 1.73 and § 23.609 of the Commission’s

regulations. Applicable straight-through processing requirements include those set forth under § 1.74, § 23.610, and

§ 39.12(b)(7) of the Commission’s regulations.

15

discretion, to further condition, modify, suspend, terminate or otherwise restrict the terms of the

no-action relief provided herein.45

All no-action relief pursuant to this letter will expire upon the effective date of any framework

implementing the Commission’s authority, under CEA section 5h(g), to exempt facilities that are

“subject to comparable, comprehensive supervision and regulation on a consolidated basis by . . .

the appropriate governmental authorities in the home country of the facility” from the SEF

registration requirement of CEA section 5h(a)(1) and Commission regulation 37.3(a)(1).

IV. Contact Information

If you have any questions concerning this correspondence, please contact David N. Pepper,

Special Counsel, DMO, at (202) 418-5565 or dpepper@cftc.gov; David P. Van Wagner, Chief

Counsel, DMO, at (202) 418-5481 or dvanwagner@cftc.gov; or Frank Fisanich, Chief Counsel,

DSIO, at (202) 418-5949 or ffisanich@cftc.gov.

Sincerely,

Vincent McGonagle

Director

Division of Market Oversight

Eileen Flaherty

Director

Division of Swap Dealer and Intermediary Oversight

45 Commission guidance or action taken during the pendency of this no-action relief, could supersede the relief

granted herein

(202) 418-5481 or dvanwagner@cftc.gov; or Frank Fisanich, Chief Counsel,

DSIO, at (202) 418-5949 or ffisanich@cftc.gov.

Sincerely,

Vincent McGonagle

Director

Division of Market Oversight

Eileen Flaherty

Director

Division of Swap Dealer and Intermediary Oversight

45 Commission guidance or action taken during the pendency of this no-action relief, could supersede the relief

granted herein. The Divisions retain the authority, in their discretion, to terminate or otherwise modify the terms of

the no-action relief provided herein at any time, including upon a determination by DMO or DSIO that

Yieldbroker’s certification is inaccurate.

16

APPENDIX A

Specified External BCS Requirements

TABLE 1

Commission Regulation

Subject Matter

§ 23.430

Verification of counterparty eligibility

§ 23.431(a)

Material risks, characteristics, incentives, mid-

market mark

§ 23.431(b)

Scenario analysis

§ 23.431(d)(1)

Notice of right to receive daily mark from

DCO for cleared swaps

§ 23.450

Requirements for swap dealers and major swap

participants acting as counterparties to Special

Entities

§ 23.451

Political contributions by certain swap dealers

TABLE 2

Commission Regulation

Subject Matter

§ 23.402(b)-(f)

Know your counterparty, True name and

owner, Reasonable reliance on representations,

Manner of disclosure, and Disclosures in a

standard format

§ 23.430

Verification of counterparty eligibility

§ 23.431(a)

Material risks, characteristics, incentives, mid-

market mark

§ 23.431(b)

Scenario analysis

§ 23.431(d)(1)

Notice of right to receive daily mark from

DCO for cleared swaps

§ 23.432(a)

Notice of right to select DCO

§ 23.432(b)

Notice of right to clearing

§ 23.434

Recommendations

to

counterparties-­

institutional suitability

§ 23.440

Requirements for swap dealers acting as

advisors to Special Entities

§

characteristics, incentives, mid-

market mark

§ 23.431(b)

Scenario analysis

§ 23.431(d)(1)

Notice of right to receive daily mark from

DCO for cleared swaps

§ 23.432(a)

Notice of right to select DCO

§ 23.432(b)

Notice of right to clearing

§ 23.434

Recommendations

to

counterparties-­

institutional suitability

§ 23.440

Requirements for swap dealers acting as

advisors to Special Entities

§ 23.450

Requirements for swap dealers and major swap

participants acting as counterparties to Special

Entities

§ 23.451

Political contributions by certain swap dealers

1

TABLE 3

Commission Regulation

Subject Matter

§ 23.402(b)-(f)

Know your counterparty, True name and

owner, Reasonable reliance on representations,

Manner of disclosure, and Disclosures in a

standard format

§ 23.430

Verification of counterparty eligibility

§ 23.431(b)

Scenario analysis

§ 23.431(d)(1)

Notice of right to receive daily mark from

DCO for cleared swaps

§ 23.432(a)

Notice of right to select DCO

§ 23.432(b)

Notice of right to clearing

§ 23.451

Political contributions by certain swap dealers

2