Relief under Parts 43 and 45 to entities submitting swaps for clearing by derivatives clearing organizations (DCOs) operating under CFTC exemptive orders or no-action relief provided by CFTC staff.

Summary: Relief under Parts 43 and 45 to entities submitting swaps for clearing by derivatives clearing organizations (DCOs) operating under CFTC exemptive orders or no-action relief provided by CFTC staff.

CFTC Letter No. 22-05 No-Action May 25, 2022

Re: No-Action Position from Certain Reporting Obligations for

Counterparties Clearing Swaps through Derivatives Clearing Organizations

Acting Under Exemptive Orders or No-Action Letters

Dear Mr. Young:

This letter responds to a request received by the Division of Data (“DOD”) of the

Commodity Futures Trading Commission (the “Commission” or “CFTC”) from the International

Swaps and Derivatives Association, Inc. (“ISDA”), pursuant to Commission Regulation 140.99.1

ISDA has requested, on behalf of its members with swap data reporting obligations and

other similarly situated persons, that DOD renew the no-action position provided in CFTC Letter

No. 21-122 regarding certain reporting obligations under Part 45 of the Commission’s regulations

in connection with the clearing of swaps with derivatives clearing organizations (“DCOs”)

operating pursuant to (a) exemptive orders issued by the Commission,3 or (b) a no-action letter

granted by the Commission’s Division of Clearing and Risk (“DCR”).4 ISDA has also requested

that DOD renew certain no-action positions relating to the identification of swaps to be cleared

with such DCOs in swap data reporting under Parts 43 and 45 of the Commission’s regulations.

I.

Definitions for No-Action Position

Exclusively for the purposes of this letter, DOD will define the following terms:

1 Letter from Christopher Young, Head of U.S. Public Policy, ISDA, to Dr. Tamara Roust, Director, CFTC Division

of Data, dated April 18, 2022 (the “ISDA Letter”), to be available at

https://www.cftc.gov/LawRegulation/CFTCStaffLetters/letters.htm soon after the issuance of this letter.

2 CFTC Letter 21-12 (Apr

OD will define the following terms:

1 Letter from Christopher Young, Head of U.S. Public Policy, ISDA, to Dr. Tamara Roust, Director, CFTC Division

of Data, dated April 18, 2022 (the “ISDA Letter”), to be available at

https://www.cftc.gov/LawRegulation/CFTCStaffLetters/letters.htm soon after the issuance of this letter.

2 CFTC Letter 21-12 (Apr. 28, 2021), available at https://www.cftc.gov/csl/21-12/download, renews relief extended

in CFTC Letter 18-03 (Feb. 20, 2018), available at https://www.cftc.gov/csl/18-03/download. CFTC Letter 18-03

renewed relief originally granted in CFTC Letter 16-85 (Dec. 19, 2016), available at

http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/16-85.pdf. The relief granted in CFTC

Letter No. 21-12 will expire on May 25, 2022.

3 The Commission adopted regulations for exempt DCOs in 2021. See Exemption From Derivatives Clearing

Organization Registration, 86 FR 949 (Jan. 7, 2021). However, exempt DCOs still operate pursuant to the

exemptive orders issued by the Commission.

4 CFTC Letter No. 16-56 (May 31, 2016), available at

http://www.cftc.gov/idc/groups/public/@lrlettergeneral/documents/letter/16-56.pdf.

U.S. COMMODITY FUTURES TRADING COMMISSION

Three Lafayette Centre

1155 21st Street, NW, Washington, DC 20581

Telephone: (202) 418-5000

Facsimile: (202) 418-5521

www.cftc.gov

Division of

Data

2

(a) Relief DCO: Any DCO or central counterparty acting pursuant to a current and valid

exemptive order issued by the Commission, or a current and valid no-action letter issued

by DCR. As of the date of this letter, there are four DCOs acting pursuant to exemptive

orders: ASX Clear (Futures) Pty Limited, Japan Securities Clearing Corporation, Korea

Exchange, Inc., and OTC Clearing Hong Kong Limited. Additionally, there is one DCO

acting pursuant to a DCR no-action letter: Shanghai Clearing House.

ed by the Commission, or a current and valid no-action letter issued

by DCR. As of the date of this letter, there are four DCOs acting pursuant to exemptive

orders: ASX Clear (Futures) Pty Limited, Japan Securities Clearing Corporation, Korea

Exchange, Inc., and OTC Clearing Hong Kong Limited. Additionally, there is one DCO

acting pursuant to a DCR no-action letter: Shanghai Clearing House.

(b) Relief DCO Counterparty: Any market participant, not acting as a DCO or central

counterparty, that is a counterparty to a swap cleared by a Relief DCO.

(c) Relief DCO Original Swap: A swap reported or required to be reported pursuant to Part

45 of the Commission’s regulations that is subsequently accepted for clearing by a Relief

DCO.

(d) Relief DCO Clearing Swap: Any swaps created pursuant to the rules of a Relief DCO

between a Relief DCO and Relief DCO Counterparty.

(e) Relief ITBC Swap: Any swap which, at the time it is executed, is intended by the

counterparties to be cleared by a Relief DCO.

II.

Background

A. Certain Reporting Obligations

On June 27, 2016, the Commission published its final rule on Amendments to Swap Data

Recordkeeping and Reporting Requirements for Cleared Swaps (the “Cleared Swap Rule”).5

The Cleared Swap Rule amended Part 45 of the Commission’s regulations6 to clarify or address

certain reporting obligations, including the obligations for DCOs to (a) report the termination of

swaps accepted for clearing by the DCO (defined as “original swaps” and known in the industry

as “alpha swaps”);7 (b) report creation data and continuation data for swaps to which the DCO is

a counterparty (defined as “clearing swaps”)8; and (c) generate the unique swap identifier

(“USI”) for each clearing swap and transmit that USI to the DCO’s counterparty.9

The Cleared Swap Rule defined “derivatives clearing organization” exclusively as a DCO

registered with the Commission.10 Because a Relief DCO would not be a “derivatives clearing

ounterparty (defined as “clearing swaps”)8; and (c) generate the unique swap identifier

(“USI”) for each clearing swap and transmit that USI to the DCO’s counterparty.9

The Cleared Swap Rule defined “derivatives clearing organization” exclusively as a DCO

registered with the Commission.10 Because a Relief DCO would not be a “derivatives clearing

5 81 FR 41736 (June 27, 2016). The compliance date for the Cleared Swap Rule was December 27, 2016.

6 17 CFR part 45.

7 17 CFR 45.4(c).

8 17 CFR 45.3(e) (creation data for clearing swaps); 17 CFR 45.4(b) (continuation data for clearing swaps).

9 17 CFR 45.5(d).

10 17 CFR 45.1 (definition of “derivatives clearing organization”); Cleared Swap Rule, 81 FR at 41739 (declining to

extend the definition of “derivatives clearing organization” to include exempt DCOs). While the Commission

recently amended certain Part 45 regulations, Swap Data Recordkeeping and Reporting Requirements, 85 FR 75503

(Nov. 25, 2020), the definition of “derivatives clearing organization” remains a DCO registered with the

3

organization” for purposes of the Cleared Swap Rule, a swap accepted for clearing by a Relief

DCO would not be an “original swap” under § 45.4 of the Commission’s regulations.11

Therefore, the obligation to terminate the Relief DCO Original Swap did not fall to the Relief

DCO. Further, it meant Relief DCO Clearing Swaps were not considered “clearing swaps” for

purposes of the Cleared Swap Rule. As a result, reporting obligations for Relief DCO Clearing

Swaps fell to the Relief DCO Counterparty (either a swap dealer (“SD”), major swap participant

(“MSP”), or non-SD/MSP counterparty) by operation of the reporting hierarchy under § 45.8.12

While not subject to reporting obligations imposed on registered DCOs under the Cleared

Swap Rule, Relief DCOs are required pursuant to a term of an exemptive order or as condition to

no-action letters to fulfill many of the same obligations

rparty (either a swap dealer (“SD”), major swap participant

(“MSP”), or non-SD/MSP counterparty) by operation of the reporting hierarchy under § 45.8.12

While not subject to reporting obligations imposed on registered DCOs under the Cleared

Swap Rule, Relief DCOs are required pursuant to a term of an exemptive order or as condition to

no-action letters to fulfill many of the same obligations. As noted above, there are currently four

DCOs acting under exemptive orders issued by the Commission13 and an additional DCO,

Shanghai Clearing House, acting pursuant to a no-action letter from DCR (“Shanghai NAL”).

Each of the exemptive orders includes the following requirement:

(10) Swap Data Recordkeeping and Reporting Requirements. If a clearing member

clears through [Relief DCO] a swap that has been reported to a Commission-registered

swap data repository (“SDR”) pursuant to Part 45 of the Commission's regulations, then

[Relief DCO] must report to an SDR, pursuant to this Order, data regarding the two

swaps resulting from the novation of the original swap that had been submitted to [Relief

DCO] for clearing. [Relief DCO] must also report the termination of the swap accepted

for clearing by [Relief DCO], to the SDR to which the swap was originally reported. In

order to avoid duplicative reporting for such transactions, [Relief DCO] shall have rules

that prohibit the Part 45 reporting of the two new swaps by the original counterparties to

the original swap.14

While the exemptive orders and Shanghai NAL place certain reporting obligations on the

Relief DCOs, neither the exemptive orders nor Shanghai NAL provide any relief or no-action

position to the Relief DCO Counterparty for any reporting obligations.

B. Certain Reporting Data Fields in Parts 43 and 45

The Cleared Swap Rule’s definition of “derivatives clearing organization” also implicates

certain data elements that must be reported for Relief ITBC Swaps

obligations on the

Relief DCOs, neither the exemptive orders nor Shanghai NAL provide any relief or no-action

position to the Relief DCO Counterparty for any reporting obligations.

B. Certain Reporting Data Fields in Parts 43 and 45

The Cleared Swap Rule’s definition of “derivatives clearing organization” also implicates

certain data elements that must be reported for Relief ITBC Swaps. When the Cleared Swap

Rule was promulgated in 2016, Part 45 of the Commission’s regulations required certain primary

economic terms (“PET”) data to be reported for every swap. Two PET data fields, “Clearing

Commission. Therefore, Relief DCO counterparties would still need the relief described below from their reporting

obligations.

11 17 CFR 45.4.

12 17 CFR 45.8.

13 ASX Clear (Futures) Pty Limited, Japan Securities Clearing Corporation, Korea Exchange, Inc., and OTC

Clearing Hong Kong Limited.

14 E.g., http://www.cftc.gov/idc/groups/public/@otherif/documents/ifdocs/asxclearamdorderdcoexemption.pdf (ASX

exemptive order). The Shanghai NAL includes similar language.

4

indicator” and “Clearing venue,” referenced DCOs.15 As Relief DCOs would not be “derivatives

clearing organizations” for purposes of those data fields, absent relief any entity reporting a

Relief ITBC Swap would have had to indicate that the swaps are not intended to be cleared under

the terms of the Cleared Swap Rule

(ASX

exemptive order). The Shanghai NAL includes similar language.

4

indicator” and “Clearing venue,” referenced DCOs.15 As Relief DCOs would not be “derivatives

clearing organizations” for purposes of those data fields, absent relief any entity reporting a

Relief ITBC Swap would have had to indicate that the swaps are not intended to be cleared under

the terms of the Cleared Swap Rule.

Additionally, when the Cleared Swap Rule was promulgated, Part 43 of the

Commission’s regulations required certain data to be reported for every publicly reportable swap

transaction, including whether the swap is “Cleared or Uncleared” with a “derivatives clearing

organization.”16 The term “derivatives clearing organization” was not defined in Part 43 of the

Commission’s regulations, making it ambiguous as to whether a Relief ITBC Swap was “Cleared

or Uncleared” for the purposes of reporting pursuant to Part 43.

On September 17, 2020, the Commission amended certain Parts 45 and 43 regulations.17

As part of these amendments, the Commission updated the technical specifications for the data

fields to specify that exempt DCOs should report swaps to SDRs.18 The compliance date for the

regulations amending Parts 45 and 43 is May 25, 2022. However, on January 31, 2022, DOD

issued CFTC Letter No. 22-03, stating that DOD will not recommend that the Commission take

an enforcement action against an entity for failure to comply with the regulations amending Parts

45 and 43 before December 5, 2022.19 If the no-action position granted in CFTC Letter No. 21-

12 is not renewed, market participants will need to comply with portions of the amended Parts 45

and 43 regulations before December 5, 2022.

III

ing that DOD will not recommend that the Commission take

an enforcement action against an entity for failure to comply with the regulations amending Parts

45 and 43 before December 5, 2022.19 If the no-action position granted in CFTC Letter No. 21-

12 is not renewed, market participants will need to comply with portions of the amended Parts 45

and 43 regulations before December 5, 2022.

III.

Requested No-Action Position

ISDA requests the renewal of the no-action position ISDA originally requested regarding

reporting obligations for counterparties facing Relief DCOs.20 First, ISDA requested that

reporting counterparties that are neither DCOs nor central counterparties be relieved of the

following reporting obligations:

1. Reporting swap continuation data for alpha swaps that have been accepted for clearing by

a Relief DCO;21

15 Appendix 1 to Swap Data Recordkeeping and Reporting Requirements, 77 FR 2136 (Jan. 13, 2012).

16 Appendix A to Real-Time Public Reporting of Swap Transaction Data, 77 FR 1182 (Jan. 9, 2012).

17 Swap Data Recordkeeping and Reporting Requirements, 85 FR 75503 (Nov. 25, 2020); Real-Time Public

Reporting Requirements, 85 FR 75422 (Nov. 25, 2020).

18 For instance, the instructions on how to report whether a swap has been “Cleared” specify that references to

“central counterparty” in the data fields should be read to mean “derivatives clearing organizations” and “exempt

derivatives clearing organizations.” See Parts 43 and 45 Technical Specifications – September 2021, available at

https://www.cftc.gov/media/6576/Part43_45TechnicalSpecification093021CLEAN/download.

19 CFTC Letter No. 22-03 (Jan. 31, 2022), available at https://www.cftc.gov/csl/22-03/download.

20 Letter from Tara Kruse, Co-Head, Reporting & FpML, ISDA, to Vincent McGonagle, Director, Division of

Market Oversight (“DMO”), dated December 1, 2016, attached to the ISDA Letter as Attachment A

021, available at

https://www.cftc.gov/media/6576/Part43_45TechnicalSpecification093021CLEAN/download.

19 CFTC Letter No. 22-03 (Jan. 31, 2022), available at https://www.cftc.gov/csl/22-03/download.

20 Letter from Tara Kruse, Co-Head, Reporting & FpML, ISDA, to Vincent McGonagle, Director, Division of

Market Oversight (“DMO”), dated December 1, 2016, attached to the ISDA Letter as Attachment A.

21 ISDA requested certain relief relating to swaps intended to be cleared with central counterparties exempted by the

Commission and central counterparties that received no-action letters from DCR. DMO and DOD have combined

these two types of central counterparties as “Relief DCOs” for purposes of CFTC Letters 16-85, 18-03, 21-12, and

this letter.

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2. Reporting any creation data and continuation data for swaps resulting from novation of

an alpha swap accepted for clearing by a Relief DCO, as well as any related swaps which

may be entered into as part of post-trade activities including netting or compression

exercises or novations; and

3. Generating USIs for swaps created through the process of clearing a swap with a Relief

DCO.

Second, ISDA requested that reporting counterparties be allowed to report the “Clearing

indicator” and “Clearing venue” PET data fields for swaps intended to be cleared by a Relief

DCO as if those swaps would be cleared by a registered DCO. DOD notes this no-action

position would also be relevant to reporting entities other than the counterparties to a Relief

DCO Original Swap, such as swap execution facilities and designated contract markets.

ISDA has requested DOD renew the no-action position in CFTC Letters 16-85, 18-03,

and 21-12 to provide certainty as to the reporting obligations for the relevant market participants

and to resolve any conflicting reporting obligations of Relief DCOs and Relief DCO

Counterparties. To do so, DOD will renew the no-action position originally provided in CFTC

Letters 16-85, 18-03, and 21-12 as follows.

IV

quested DOD renew the no-action position in CFTC Letters 16-85, 18-03,

and 21-12 to provide certainty as to the reporting obligations for the relevant market participants

and to resolve any conflicting reporting obligations of Relief DCOs and Relief DCO

Counterparties. To do so, DOD will renew the no-action position originally provided in CFTC

Letters 16-85, 18-03, and 21-12 as follows.

IV.

Time Limited No-Action Position

A. Certain Reporting Obligations

Based on the facts presented and the representations that ISDA has made, DOD will not

recommend enforcement action to the Commission against Relief DCO Counterparties, solely

for failure to comply with the following reporting obligations:

a. Reporting continuation data pursuant to § 45.4 on Relief DCO Original Swaps after

the acceptance of such Relief DCO Original Swaps for clearing by the Relief DCO,

including reporting the termination of the Relief DCO Original Swap;

b. Reporting creation data pursuant to § 45.3 and continuation data pursuant to § 45.4 on

Relief DCO Clearing Swaps; and

c. Generating USIs for Relief DCO Clearing Swaps pursuant to § 45.5.

This no-action position is subject to the condition that the Relief DCO Counterparty must

provide to the Relief DCO all information on the Relief DCO Original Swap required by the

Relief DCO in its clearing agreement.

For Relief DCO Original Swaps and Relief DCO Clearing Swaps, the no-action position

taken in this section will continue until the earlier of: (a) December 5, 2022; or (b) the revocation

or expiration of the exemptive order or no-action letter issued to the relevant Relief DCO. Relief

DCO Counterparties retain all other reporting obligations for which they are responsible under

Parts 43 and 45 of the Commission’s regulations, and would be relieved of no obligations if the

Relief DCO rejects the swap for clearing.

B. Certain Reporting Data Fields in Parts 43 and 45

ocation

or expiration of the exemptive order or no-action letter issued to the relevant Relief DCO. Relief

DCO Counterparties retain all other reporting obligations for which they are responsible under

Parts 43 and 45 of the Commission’s regulations, and would be relieved of no obligations if the

Relief DCO rejects the swap for clearing.

B. Certain Reporting Data Fields in Parts 43 and 45

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Based on the facts presented and the representations that ISDA has made, DOD grants

this time-limited no-action letter to entities reporting Relief ITBC Swaps22 with respect to the

reporting of the PET data elements “Clearing indicator” and “Clearing venue,” pursuant to Part

45 of the Commission’s regulations. DOD will not recommend enforcement action to the

Commission against an entity reporting Relief ITBC Swaps for identifying such swaps as

intended to be cleared in the “Clearing indicator” PET data field, or for identifying the legal

entity identifier (“LEI”) of the Relief DCO in the “Clearing venue” PET data field.

In order to avoid any potential confusion over the requirements to report certain data

fields for Relief ITBC Swaps pursuant to Part 43 of the Commission’s regulations, DOD also

will not recommend enforcement action to the Commission against an entity reporting Relief

ITBC Swaps for identifying such swaps as intended to be cleared in the “Cleared or Uncleared”

data field to be reported pursuant to Part 43.

This no-action position is subject to the condition that the entity reporting a Relief ITBC

Swap must populate all “Clearing indicator” PET fields in Part 45 reporting, and all “Cleared or

Uncleared” fields in Part 43 reporting, for all swaps intended to be cleared through the relevant

Relief DCO. To comply with this relief, the entity reporting such swap must report all swaps

intended to be cleared by a particular Relief DCO as being intended for clearing in both Parts 43

and 45 reporting

st populate all “Clearing indicator” PET fields in Part 45 reporting, and all “Cleared or

Uncleared” fields in Part 43 reporting, for all swaps intended to be cleared through the relevant

Relief DCO. To comply with this relief, the entity reporting such swap must report all swaps

intended to be cleared by a particular Relief DCO as being intended for clearing in both Parts 43

and 45 reporting.

This no-action position is subject to the additional condition that the entity reporting a

Relief ITBC Swap must report the LEI of the relevant Relief DCO with all Part 45 reports for all

swaps intended to be cleared with that Relief DCO.

For all Relief ITBC Swaps, the no-action position taken in this section will continue until

the earlier of: (a) December 5, 2022; or (b) the revocation or expiration of the exemptive order or

no-action letter issued to the relevant Relief DCO.

The no-action positions taken herein do not excuse affected persons from compliance

with any other applicable CEA requirements or the Commission’s regulations, in particular, the

applicable swap reporting requirements and clearing requirements.23 This letter and the no-

action positions taken herein represent the views of DOD only, and do not necessarily represent

the positions or views of the Commission or of any other division or office. As with all no-

action letters, DOD retains the authority to condition further, modify, suspend, terminate or

otherwise restrict the terms of the no-action positions provided herein, at its discretion.

22 ISDA requested relief on the PET fields related to swaps intended to be cleared with a Relief DCO. Should the

Relief DCO reject such swaps from clearing, the swaps would not be “Relief DCO Original Swaps” under the terms

of this letter. Therefore, the Commission uses the term Relief ITBC Swaps to clarify that the relief relating to data

fields would apply even if the Relief DCO rejects the swap for clearing

relief on the PET fields related to swaps intended to be cleared with a Relief DCO. Should the

Relief DCO reject such swaps from clearing, the swaps would not be “Relief DCO Original Swaps” under the terms

of this letter. Therefore, the Commission uses the term Relief ITBC Swaps to clarify that the relief relating to data

fields would apply even if the Relief DCO rejects the swap for clearing.

23 The applicable swap reporting requirements are set forth under Parts 43, 45, 46, and 50 of the Commission’s

regulations, 17 CFR parts 43, 45, 46 and 50, respectively. The applicable clearing requirements are set forth under

CEA section 2(h)(1), 7 U.S.C. § 2(h)(1), and Part 50 of the Commission’s regulations.

7

If you have any questions concerning this correspondence, please contact Richard Mo,

Special Counsel, Division of Data, at (202) 418-7637 or rmo@cftc.gov, or Owen Kopon,

Associate Director, Division of Data, at (202) 418-5360 or okopon@cftc.gov.

Sincerely,

Tamara Roust

Director

Division of Data