CFTC Staff Issues No-Action Letter for Swap Post-Trade Risk Reduction Services

WASHINGTON - The Commodity Futures Trading Commission's Division of Clearing and Risk, Division of Market Oversight, and Market Participants Division today announced they have taken no-action positions related to a request from three service providers, Capitolis Partners LLC, Quantile Technologies Limited (as part of the London Stock Exchange Group plc), and TriOptima AB (as part of OSTTRA) that offer post-trade risk reduction services (PTRRS) for swaps in the form of portfolio rebalancing and basis risk mitigation.

The letter provides a no-action position to the service providers for failure to register as swap execution facilities and notes they have registered with the CFTC as introducing brokers subject to compliance with CFTC regulations and National Futures Association rules.

The no-action letter also benefits any person who engages in portfolio rebalancing and basis risk mitigation services for: failure to enter into a swap or swaps on a designated contract market; swap execution facility; or a swap execution facility that is exempt from registration under the trade execution requirement in section 2(h)(8) of the Commodity Exchange Act; and failure to submit a swap or swaps that are required to be cleared to a derivatives clearing organization under CEA Section 2(h)(1) and part 50 of CFTC regulations.

The no-action letter reiterates the discussion of risk reduction services in the Commission's 2020 part 43 final rule and clarifies that if PTRRS meet the description in that adopting release then those services do not meet the definition of a publicly reportable swap transaction and are not subject to the real-time public reporting and dissemination requirements in part 43.

The no-action letter is time-limited and subject to the terms and conditions in the letter