When does an airline have bragging rights about a delay? When it is a delay in real-time reporting.
On November 6th, the Division of Market Oversight (the “Division”) of the Commodity Futures Trading Commission (“CFTC”) granted time-limited no-action relief to Southwest Airlines (“Southwest”) and its counterparties to allow additional time to comply with the real-time reporting requirements of Part 43 of the CFTC’s rules. The relief is noteworthy for two reasons:
- First, it is one of the first no-action letters to provide relief to a single commercial end-user; and
- Second, it can be viewed as representing tangible proof of the CFTC’s commitment to work with end-users to address legitimate issues that they are facing in connection with the implementation of Dodd-Frank related rule changes.
Accordingly, all market participants may want to take note of the relief and the conditions upon which it was granted, which are summarized in the remainder of this posting.
Summary of CFTC Letter 14-134 – Southwest Airlines Real-Time Public Reporting, Part 43 Delayed Reporting
The relief only applies to Brent and WTI swap and swaption contracts (the “Oil Contracts”), subject to the following conditions:
- Non-Cleared – The Oil Contracts executed by or with Southwest are not part of an asset class that is subject to the mandatory clearing requirement;
- Long-Dated – The expiration dates of the Oil Contracts must be at least two years out; and
- Reported Within 15 Days – The Oil Contracts must be reported to a swap data repository no later than 15 calendar days after the trades have been executed by Southwest or its counterparties.
In issuing the relief the Division specifically noted that it “understands that Brent and WTI crude oil swap and swaption market with trading tenors 2 years or longer has few transactions and/or few market participants.” The relief expires upon the CFTC’s determination that the Oil Contracts are subject to the mandatory clearing requirement and/or upon the Division’s determination that there is sufficient liquidity in the Oil Contracts to warrant a shorter time period for the real-time reporting of Oil Contracts executed by or with Southwest.
As a final reminder, CFTC no-action letters can not be relied upon by third parties. As explained at the CFTC’s website,
A no-action letter is a written statement by the staff of a Division of the Commission or its Office of the General Counsel that such staff will not recommend that the Commission commence enforcement action for failure to comply with a specific provision of the Act or Commission regulations. It binds only the staff of the Division that issued it or the Office of the General Counsel with respect to the specific fact situation and persons addressed by the letter, and third parties may not rely upon it.
CFTC Letter 14-134 is available here.
Good day. Good delay. DR2