The CFTC Division of Market Oversight ("DMO") extended its time-limited no-action relief from the CEA's trade execution requirement for swaps executed as part of package transactions. The relief was most recently extended by CFTC Letter 16-76 and was set to expire on November 15, 2017. The new letter extends the relief until November 15, 2020.

The DMO said that ongoing assessments of how to enable swap execution facilities and designated contract markets to "facilitate trading of certain package transactions in a manner that balances the utility of package transactions against the policy goals of the trade execution requirement" have indicated that trading certain package transactions in a fully compliant manner remains "unfeasible." As a result, the DMO is providing relief, as summarized in the following table:

Package Transaction Category Relief Expiration
MAT/New Issuance Bond: At least one individual swap component is subject to the trade execution requirement and at least one individual component is a bond issued and sold in the primary market. Relief from CEA section 2(h)(8). Under this relief, the swap components subject to the trade execution requirement are not required to be executed on an SEF or DCM. Relief from CFTC Regulation § 37.9 and CEA section 5(d)(9), which permits an SEF or DCM to offer any method of execution for the swap components. Relief from CFTC Regulation § 37.3(a)(2), which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components.
MAT/Futures: At least one individual swap component is subject to the trade execution requirement and all other components are contracts for the purchase or sale of a commodity for future delivery; i.e., futures contracts. This category may include:
  • MAT swap v. Treasury futures
  • MAT swap v. Eurodollar futures
 Relief from CEA section 2(h)(8). Under this relief, the swap components subject to the trade execution requirement are not required to be executed on an SEF or DCM. Relief from CFTC Regulation § 37.9 and CEA section 5(d)(9), which permits an SEF or DCM to offer any method of execution for the swap components. Relief from CFTC Regulation § 37.3(a)(2), which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components.

MAT/Non-MAT (Uncleared): At least one of the swap components is subject to the trade execution requirement and at least one of the components is a CFTC swap that is not subject to the clearing requirement. This category may include:

  • MAT swap v. swaption
  • MAT swap v. uncleared credit default swap
 Relief from CFTC Regulation § 37.9 and CEA section 5(d)(9), which permits a SEF or DCM to offer any method of execution for the swap components. Relief from CFTC Regulation § 37.3(a)(2), which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components.
MAT/Non-Swap Instruments: At least one of the swap components is subject to the trade execution requirement and at least one of the components is not a swap. This category excludes U.S. Dollar Swap Spreads, MAT/Futures, MAT/Agency MBS, and MAT/New Issuance Bond. This category may include:
  • MAT swap v. single-name credit default swap
  • MAT swap v. bond (secondary market transaction)
 Relief from CFTC Regulation § 37.9 and CEA section 5(d)(9), which permits an SEF or DCM to offer any method of execution for the swap components. Relief from CFTC Regulation § 37.3(a)(2), which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components.
MAT/Non-CFTC Swap: At least one of the swap components is subject to the trade execution requirement and at least one of the components is a swap over which the CFTC does not have exclusive jurisdiction (e.g., a mixed swap). Relief from CFTC Regulation § 37.9 and CEA section 5(d)(9), which permits an SEF or DCM to offer any method of execution for the swap components. Relief from CFTC Regulation § 37.3(a)(2), which permits SEFs to not offer an Order Book as a minimum trading functionality for the swap components.

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