The US CFTC has issued an extension of the time-limited no-action relief provided in CFTC Staff Letter 17-05 from 8 May 2017 until 7 November 2017.
The extended relief states that the CFTC will not recommend enforcement action against a swap dealer (SD) that is subject to, and in compliance with, the margin requirements for non-centrally cleared OTC derivatives in the European Union (EMIR RTS) for failure to comply with the CFTC’s final margin rule.
On 4 February, 2017, many SDs were required to begin complying with the EMIR RTS. Some of the same SDs have had to comply with the final margin rule since 1 September 2016.
Pursuant to the substituted compliance framework established in the CFTC’s Cross-Border Margin Rule, the CFTC has been analysing the European Commission’s (EC) request that the CFTC determine that the EMIR RTS provide a sufficient basis for an affirmative finding of comparability with respect to the final margin rule, but has not yet made a determination.
DSIO understands that the EC has likewise been pursuing an equivalence determination with respect to the final margin rule, but has not yet completed its work in this regard.
Nevertheless, without a comparability determination by the CFTC with respect to the EMIR RTS, an equivalence determination from the EU regulatory authorities with respect to the final margin rule, or an extension of the no-action relief provided in CFTC Staff Letter 17-05, starting 8 May 2017 many SDs operating in the EU will be required to comply with both the final margin rule and the EMIR RTS. The CFTC believes an extension of the relief is necessary to give SDs certainty about their regulatory obligations while the CFTC undertakes its substituted compliance determination and the EC its equivalence decision.
