On December 16, 2014 the staff of the CFTC issued a no-action letter (CFTC Letter 14-147 or the “December Letter”) extending relief from certain oral record keeping requirements under Rule 1.35(a). As background, Rule 1.35(a) requires that registered CTAs that are members of swap execution facilities (SEFs) or designated contact markets (DCMs) are required to keep “all oral and written communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading, and prices that lead to the execution of a transaction in a commodity interest and related cash or forward transactions, whether communicated by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device, or other digital or electronic media.” The requirement became effective on December 21, 2013. However, the staff of the CFTC issued no-action relief for registered CTAs that are also a member of a SEF or DCM from the requirement to record oral communications in connection with the execution of swaps (See, CFTC Staff Letter No. 14-60, CFTC Staff Letter No. 13-77 and CFTC Staff Letter 14-33). The relief was set to expire on December 31, 2014.
The December Letter provides for the following:
- Extends the no-action relief provided in CFTC Staff Letter 14-60;
- Expands the relief to include all required oral communications under Rule 1.35(a) and not just oral communications that lead to the execution of swap transactions; and
- Expands the relief to the form and manner requirements of Rule 1.35(a) by providing relief for any market participant from the requirement that its records that lead to the execution of a transaction be linked to the particular transaction.
The relief is extended until the earlier of (i) December 31, 2015; or (ii) the effective date of CFTC action with respect to amendments to the record keeping requirements. In November 2014, the CFTC proposed an amendment to Rule 1.35(a) (Proposed Amendment) which would essentially codify the relief that the staff of the CFTC has been providing to CTAs that are members of SEFs or DCMs. The comment period of the proposed amendment expires on January 13, 2015.
CTAs that are not registered with the CFTC are exempt from the oral record keeping requirements by the express terms of Rule 1.35(a). However, they are still subject written record keeping requirements. Note in this regard the staff of the CFTC has provided relief from the requirement to retain text messages and from certain of the form and manner requirements for maintaining records (See, CFTC Letter 14-72). This relief is also the subject of the Proposed Amendment.
Good Day. Good Extension. DR2.