On June 4, 2014, the CFTC issued No-action Letter 14-74 (No-action 14-74), which extends relief previously granted to swap dealers (SDs) registered with the CFTC and organized under the laws of a foreign jurisdiction (non-US SDs) from certain Dodd-Frank swap transaction-level requirements under the Commodity Exchange Act (CEA). No-action 14-74 extends the relief granted in No-action Letters 14-01 and 13-71 (see Legal Update, CFTC Issues Relief from Recent Cross-border Swaps Advisory and Requests Public Comment), which relieved non-US SDs that enter into swaps with non-US persons that are not guaranteed affiliates or conduit affiliates of a US person from CEA transaction-level requirements.

This relief was originally issued by the CFTC in response to market outcry over its controversial staff advisory issued in late 2013 (see Legal Update, CFTC Closes Cross-border Swaps Compliance Loophole), which prompted a lawsuit by banking groups in federal court (see Legal Update, CFTC Sued over Dodd-Frank Cross-border Swaps Rules). Under the staff advisory, the CFTC sought to apply Title VII transaction-level requirements for SDs to swaps entered into by non-US SDs with non-US persons if the swap was negotiated, arranged or executed in the US. The relief granted under No-action 14-74 applies regardless of whether the swap was negotiated, arranged or executed in the US (see Legal Update, CFTC Issues Relief from Recent Cross-border Swaps Advisory and Requests Public Comment).

Transaction-level requirements include swap clearing and real-time data reporting requirements (see Practice Note, The Dodd-Frank Act: Cross-border Application of Swaps Rules: Transaction-level Requirements).

No-action 14-74 recommends that the CFTC take no action against a non-US SD for failure to comply with:

For details on these, see Practice Note, The Dodd-Frank Act: Final Internal Business Conduct (IBC) Rules on Documentation, Confirmation, Reconciliation and Compression for Swap Dealers and MSPs.

In No-action Letter 13-71, the CFTC issued relief for these swaps from transaction-level requirements until January 14, 2014. In No-action Letter 14-01, that no-action relief was extended until September 15, 2014. No-action 14-74 further extends relief until December 31, 2014.

The CFTC has likely granted the extended relief as it considers how to handle the ongoing controversy over the staff advisory and its other cross-border swaps rulemaking and regulatory activity under Title VII. The staff advisory is believed to have been spearheaded by former CFTC Chairman Gary Gensler, who left the CFTC in early 2014. With new Chairman Timothy Massad as well as two other new CFTC commissioners recently confirmed, the new regime is likely taking additional time to review the staff advisory and other cross-border swaps rules. Many are viewing the new regime's determination on this matter as an important barometer of its approach to controversial Dodd-Frank implementation issues, such as cross-border comity and the extraterritorial extension of Title VII swaps rules.