04 Jan CFTC – CFTC Staff Grants Two Separate Temporary No-Action Relief to Derivatives Clearing Organizations (DCO) and Futures Commission Merchants (FCM)
January 4, 2021 – CFTC granted temporary no-action relief in two separate decisions, 21-01 and 21-02, for DCOs from amended daily reporting obligations and FCMs regarding certain SOFR-linked investments.
DCOs – Daily Reporting
Relief granted to DCOs from amended daily reporting requirements in 17 CFR 39.19. Revisions to daily reporting requirements recently approved in the final rule. The final rule added daily reporting on initial margin, variation margin, cash flow, and position information by individual customer account, and made other amendments. In the final rule, DCOs were given until January 27, 2021, to comply with amended regulations. Several DCO’s, along with FIA, requested no-action relief from certain requirements. The letter described certain operational, technical issues affecting DCOs’ ability to comply. No-action relief granted until Jan. 27, 2022, while CFTC considers the issues raised. DCOs still required to comply with daily reporting requirements prior to amendments.
FCMs – SOFR-Linked Investments
Permitted FCMs to invest customer funds in investments with adjustable interest rates that correlate closely to/determined solely by reference to, a SOFR benchmark. If investments otherwise qualify as permitted investments pursuant to 17 CFR 1.25. Under regulation 1.25, CFTC provided a list of rates based upon which the adjustable rate of interest on permitted investments must be benchmarked, SOFR not listed. With relief, permitted investments may have SOFR-based adjustable rates of interest. Relief recognized the increasing use of SOFR as an alternative reference rate to LIBOR. Consistent with prior CFTC relief to facilitate the transition away from LIBOR.
DCO daily reporting relief expires January 27, 2022 and FCM SOFR relief ends December 31, 2022.
For more information, visit www.CTFC.gov.