Shearman & Sterling LLP | Financial Regulatory Developments Focus | <span ><font >US Commodity Futures Trading Commission Extends No-Action Relief to Swap Execution Facilities and Designated Contract Markets from Certain CFTC Regulations for Correction of Errors</font ></span >
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  • US Commodity Futures Trading Commission Extends No-Action Relief to Swap Execution Facilities and Designated Contract Markets from Certain CFTC Regulations for Correction of Errors
    05/30/2017

    The U.S. Commodity Futures Trading Commission’s (CFTC) Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR) issued a no-action letter extending the relief provided in CFTC Staff Letter No. 16-58, which was set to expire on June 15, 2017. CFTC Staff Letter No. 16-58 extended relief form several CFTC regulations to allow swap execution facilities (SEFs) and designated contract markets (DCMs) to fix clerical or operational errors that resulted in a swaps failing to clear, and thus becoming void, and smilar errors discovered after a swap has been cleared.

    Regarding clerical or operational errors that cause a swap to be rejected from clearing, the DMO and DCR will not recommend that the CFTC take action against a SEF or DCM for failing to comply with certain CFTC regulations if, within one hour after such swap has been rejected for clearing, the SEF or DCM corrects such error by permitting a new pre-arranged trade with the same terms and conditions as the original trade.  Similarly, if an operational or clerical error is discovered after a swap has been cleared, the SEF or DCM may allow the parties to enter in a pre-arranged trade that offsets the erroneous trade and enter into a pre-arranged transaction with the original terms and intent of the counterparties.

    The relief described in CFTC Staff Letter 17-27 is subject to the terms and conditions within the letter and shall remain effective until the date of any revised CFTC regulations regarding methods of execution requirements and pre-arranged trading.

    View CFTC Staff Letter 17-27.
    TOPIC: Derivatives