On December 17, 2012, the CFTC's Division of Market Oversight (DMO) issued No-action Letter 12-53 providing temporary relief from certain real-time and "SDR" swap data reporting obligations for uncleared swaps entered into in a prime brokerage context (PB swaps). The DMO also granted temporary relief to prime brokers from the obligation to report under these rules the unique swap identifiers (USIs) of executing dealers. The relief granted in the letter expires no later than June 30, 2013.

In response to the request of the Financial Markets Lawyers Group (FMLG) and ISDA, the DMO issued temporary relief to swap dealers (SDs) or similarly situated persons entering into agreements that allow the allocation of swap data reporting responsibilities in PB swaps between the prime broker and executing dealer. An executing dealer is a dealer, selected by the customer, which has previously executed a "give-up" agreement with the prime broker) that offers terms and conditions acceptable to the customer that, if and when the customer accepts them, are given up to the customer's prime broker. The prime broker then steps into the middle of the transaction as a credit intermediary on behalf of the customer and becomes the counterparty to a pair of mirror image transactions with the customer and the executing dealer (the "mirror swap" and the "ED-PB swap").

This arrangement requires the splitting of swap data reporting responsibilities between the prime broker and the executing dealer. Otherwise, the result would indicate the occurrence of two pricing events for the same PB swap, suggesting an inflated picture of trading activity and price discovery.

Further, several hours may pass between the execution of the two swaps and the real-time reporting of the mirror swap data would not accurately reflect pricing changes that may have occurred in the interim since execution of the ED-PB swap.

The relief extends to all SDs:

Additionally, the DMO also extended this relief to reporting counterparties that, for the purposes of a mirror swap, treat the time of acceptance by the prime broker for the ED-PB swap associated with the mirror swap as the time of execution of the mirror swap.

This relief ends on or before June 30, 2013.

Because prime brokers may not know the USI for the ED-PB swap at the time that the prime broker initially reports the mirror swap data under the final SDR rules, the DMO also granted temporary relief to prime brokers from reporting USIs for ED-PB swaps as long as the prime broker:

This relief only applies to prime brokers reporting mirror swaps and only to the inclusion of the ED-PB swap USI in the initial mirror swap data reporting.

This relief expires on June 30, 2013 or earlier if reporting the ED-PB USI becomes technologically practicable prior to that date.

For information on other recent swap data reporting no-action relief from the CFTC, see Legal Updates, Legal Opinion Language Issued by CFTC in Connection with LEI No-action Compliance, Limited No-action Relief from Swap Data Reporting Rules Issued by CFTC, Further Limited Swap Data Reporting Relief for Swap Dealers Issued by CFTC, and Final Dodd-Frank Cross-border Swap Exemptive Order Issued by CFTC.