There has been lots of activity coming out of the CFTC in the last few days surrounding derivatives end-users, providing end-users some answers but still leaving many questions. The activity makes sense as the National Association of Manufacturers (NAM), many of our member companies and the Coalition for Derivatives End-Users had been pleading the case for months for a no-action ruling for end-users from reporting rules for inter-affiliate trades which were set to take effect beginning yesterday.
Late Friday night that relief came in the form of an announcement from the CFTC’s Division of Market Oversight and Division of Clearing and Risk issued a Joint No-Action Relief for swaps between affiliated counterparties from certain swap reporting requirements, “which granted relief from certain reporting requirements and the end-user exemption to mandatory clearing for intra-group swaps involving wholly-owned subsidiaries.”
This no-action ruling provides some end-users with more time to comply with the reporting requirements and others are exempt entirely. Of course while we are very pleased that the no-action relief came, we would have liked to have received it more than a mere three business days before the requirement kicked in.
In the days leading up to the no-action relief being announced, the NAM was one of a handful of participants in a press call with Commissioner Chilton who called for the creation of “The End-User Bill of Rights” which would guaranty certain rights including the “right to reasonable implementation”, a “right to legal certainty”, a “right to clear (or not to clear)” and critically, a “right to margin flexibility and reasonable capital rules.” The NAM thanked Commissioner Chilton for his leadership and attention to end-user concerns and for the attention the whole CFTC has paid to manufacturers who did not contribute to the financial crisis that led to the writing and enactment of Dodd-Frank but who have been affected nonetheless. (continue reading…)