On August 31, 2020, in response to requests by the Alternative Reference Rates Committee (ARRC), the US Commodities Futures Trading Commission (CFTC) issued revised no-action letters to swap dealers and other market participants relating to the transition from use of the London Interbank Offered Rate (LIBOR) as a reference rates in transactions. These letters supersede similar letters issued in 2019 in response to requests by the ARRC.
Subject to certain conditions, in connection with the amendment or creation of swaps solely to accommodate the transition from LIBOR to another reference rate, three different CFTC divisions provided the following relief:
Division of Swap Dealer and Intermediary Oversight (DSIO); CFTC Staff Letter No. 20-23 provides relief to swap dealers from several compliance rules, including registration de minimis requirements, uncleared swap margin rules, business conduct requirements, confirmation, documentation, and certain other eligibility requirements;
Division of Market Oversight (DMO): CFTC Staff Letter No. 20-24 provides relief until December 31, 2021, for persons that fail to comply with the Commodity Exchange Act’s trade execution requirement; and
Division of Clearing and Risk (DCR): CFTC Staff Letter 20-25 provides time-related relief from the swap clearing requirement and related exceptions and exemptions in connection with amendments to certain legacy interest rate swaps and swaptions.
“The LIBOR Transition” is a periodic series of updates discussing reference interbank offering rates, such as LIBOR, and the challenges involved in navigating a successful transition from their use as reference rates of choice in the market. Norton Rose Fulbright has assembled a group of its lawyers from around the globe to stay on top of these issues and assist clients in the transition to new reference rates. More information can be found on our Norton Rose Fulbright web site.