Letter

CFTC grants relief from required clearing for swaps by certain cooperatives

The Commodity Futures Trading Commission’s division of clearing and risk (DCR) has issued a time-limited, no-action letter granting relief from required clearing for certain swaps entered into by qualifying cooperatives.

The no-action letter provides that DCR will not recommend an enforcement action for failure to clear a swap entered into by a cooperative if the cooperative and the swap meet certain conditions set forth in the no-action letter.

To qualify for the no-action relief, one of the counterparties to the swap must be a cooperative whose members are either non-financial entities or cooperatives whose members are non-financial entities.

In addition, the no-action relief only applies to swaps entered into in connection with originating loans to cooperative members or that are related to loans to, or swaps with, members.

The conditions are substantially similar to the conditions included in the proposed cooperative exemption rule published by the Commission in the Federal Register on 17 July 2012. The proposed rule is not yet final. This no-action relief will remain in effect until the earlier of 1 April 2013 or the effective date of a Commission rule-making finalising the proposed cooperative exemption.

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