CFTC Proposes Relief from Swaps Clearing Requirements

The Commodity Futures Trading Commission last week issued a proposal intended to provide relief for market participants from the swaps clearing requirement. CFTC rules provide an exemption whereby market participants may elect not to clear certain inter-affiliate swaps even if the swaps are subject to the CFTC’s clearing requirement. This exemption is subject to certain conditions, one of which is that each affiliate has to clear swaps executed with un-affiliated counterparties.

The changes proposed by the CFTC would make permanent two alternative compliance frameworks for the exemption, which had previously been time-limited and expired in March 2014. The alternative frameworks allow counterparties to pay and collect variation margin in place of clearing for certain outward-facing swaps. Comments on the proposal will be due 60 days after publication in the Federal Register.