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CFTC Proposes No-Action Relief for Certain Dodd-Frank Requirements

The staff of the Commodity Futures Trading Commission (CFTC) has prepared a draft no-action letter that could supplement the agency's recently proposed "exemptive relief" that postpones compliance with parts of the new derivatives law for at least six months until the end of the year.

The draft no-action combined with the CFTC's proposed exemptive relief would provide greater clarity for swap dealers and major swap participants during the transition to the new regulatory framework for swaps under the Dodd-Frank Wall Street Reform Act. Derivative reforms under Title VII of Dodd-Frank were to be implemented this month -- one year after Dodd-Frank was passed by Congress and sent to the White House -- but the CFTC is far behind schedule (see Daily GPI, July 16, 2010). The proposed exemptive relief, which the CFTC adopted in mid-June (see Daily GPI, June 15), delays compliance with parts of Dodd-Frank until Dec. 31.

The Commission's June 15 order provided "exemptive relief" from the provisions of Dodd-Frank that are "self-effectuating," or those that take effect without rulemaking, on July 16. In explaining the reason for the draft no-action letter, the staff said "although the Commission's...order provides temporary relief from many of the self-effectuating provisions of the Dodd-Frank Act and the CEA [Commodities Exchange Act]," it "may not extend to certain self-effectuating provisions of the Dodd-Frank Act and the CEA as amended."

According to the draft no-action letter, the CFTC's Division of Market Oversight and Division of Clearing and Intermediary Oversight would not recommend that the agency initiate an enforcement action against any market participant for failing to comply with sections of the CEA that:

The proposed no-action letter would not limit the CFTC's antifraud and antimanipulation authority, the agency said. Under the terms of the draft no-action letter, relief would automatically expire no later than Dec. 31.

The CFTC's proposed "exemptive relief" order provides temporary relief under Dodd-Frank for derivative transactions involving primarily financial commodities, energy commodities and excluded metals. The exemptive relief also extends to Dodd-Frank provisions that do not require rulemaking but reference "swap," "swap dealer," "major swap participant," or "eligible contract participant," which the CFTC has not yet defined. These persons or entities would be temporarily exempted from complying with Dodd-Frank until Dec. 31 or whenever the terms are defined, whichever is earlier.

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