Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The CFTC issued a no-action letter providing further relief for eligible treasury affiliates that enter into swaps that are subject to the clearing requirement in section 2(h)(1) of the Commodity Exchange Act, or CEA, and part 50 of the CFTC’s regulations. The no-action letter modifies relief that was previously issued for treasury affiliates on June 4, 2013 in CFTC No-Action Letter 13-22.

As in No-Action Letter 13-22, the letter provides relief from required clearing for “eligible treasury affiliates” that are wholly-owned by a non-financial parent company, and are “financial entities” under section 2(h)(7)(C)(i)(VIII) of the CEA because of the activities undertaken on behalf of its non-financial affiliates.

The revised no-action letter provides further relief to non-financial corporate groups and their treasury affiliates. Among other changes, the letter:

  • Amends requirements placed upon operations between a treasury affiliate and its affiliates.
  • Removes restrictions as to the number of financial affiliates that may be within the corporate group.
  • Allows treasury entities affiliated with nonbank financial companies designated as systemically important by the Financial Stability Oversight Council to elect the relief subject to certain conditions.

For an eligible treasury affiliate seeking to elect the relief from required clearing, the swap activity must still meet several conditions, including that the eligible treasury affiliate enters into the swaps for the sole purpose of hedging or mitigating the commercial risk of one or more non-financial affiliates.


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