Clearing Exemption for Swaps Between Affiliated Entities
Summary
SIFMA and the International Swaps and Derivatives Association, Inc. (ISDA) provide comments to the Commodity Futures Trading Commission (CFTC) on a notice of proposed rulemaking for a clearing exemption for swaps between certain affiliated entities, RIN 3038-AD47. The groups respond to questions posed by the CFTC regarding its Proposed Exemption, explain their views regarding why an interaffiliate clearing exemption is an appropriate and necessary exercise of the CFTC’s exemptive authority, and make certain recommendations regarding the Proposed Exemption.
Excerpt
Mr. David Stawick
Secretary
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, DC 20581
Re: Notice of Proposed Rulemaking – Clearing Exemption for Swaps between Certain Affiliated Entities (RIN 3038-AD47)
The International Swaps and Derivatives Association, Inc. (“ISDA”)1 and the Securities Industry and Financial Markets Association (“SIFMA”)2 appreciate the opportunity to provide
the Commodity Futures Trading Commission (the “Commission”) with comments and recommendations regarding the proposed rulemaking (the “Proposed Exemption”)3 described
above.
ISDA and SIFMA are grateful for the Commission’s consideration of the views expressed in our letter, dated May 14, 2012, on the desirability of an exemption from the clearing and trading requirements for interaffiliate swaps. In the present letter, we respond to questions posed by the Commission regarding its Proposed Exemption, explain our views regarding why an interaffiliate clearing exemption is an appropriate and necessary exercise of the Commission’s exemptive authority and make certain recommendations regarding the Proposed Exemption.
Specifically, we recommend that:
- The proposed conditions relating to the collection of variation margin and the extraterritorial clearing of swaps related to interaffiliate swaps should be eliminated.
- In the event that the Commission decides to retain the variation margin condition, it should make certain changes and clarifications to the proposed rule text, including the elimination of the “common guarantor” requirement from its proposed exception to the variation margin condition.
- In the event that the Commission decides to retain the extraterritorial clearing condition, it should provide for an appropriate transition period to allow foreign jurisdictions time to implement their G-20 clearing mandates and should make certain other changes and clarifications.
- The trade execution requirement should not apply to interaffiliate swaps, regardless of whether the conditions for the interaffiliate clearing exemption are met.
- The Commission should adopt a more flexible formulation of the proposed documentation requirement.