Three divisions of the US Commodity Futures Trading Commission (CFTC) have announced that each has issued a no-action letter that provides relief to swap dealers and other market participants as it relates to the industry-wide initiative to transition from swaps that reference the London Interbank Offered Rate (Libor) and other interbank offered rates to swaps that reference alternative benchmarks.
Each letter outlines conditions under which counterparties will qualify for relief in connection with amending swaps to update provisions referencing LIBOR, or other interbank offered rates, to replacement rates. The Division of Swap Dealer and Intermediary Oversight CFTC letter provides relief to swap dealers from registration de minimis requirements, uncleared swap margin rules, business conduct requirements, confirmation, documentation, and reconciliation requirements, and certain other eligibility requirements.
The Division of Market Oversight letter provides time-limited relief from the trade execution requirement, while the Division of Clearing and Risk letter provides time-limited relief from the swap clearing requirement and related exceptions and exemptions.
“I am pleased that the CFTC is one of the first agencies out of the gate to provide Libor-transition relief. This is a testament to the hard work of our dedicated staff and our commitment to providing market participants with clarity,” says CFTC chairman Heath Tarbert. “Next year is going to be crucial for the transition away from Libor. Firms that fail to do so will put themselves and the global financial system at risk. The CFTC remains committed to working with market participants and our fellow regulators on this critical issue.”