Authored by Andrew Cross and Kari Larsen

The U.S. Commodity Futures Trading Commission (CFTC) yesterday announced that its Division of Market Oversight (DMO) has granted temporary no-action relief to designated contract markets (DCMs) and swap execution facilities (SEFs).

In a related press release, CFTC Chairman Heath P. Tarbert stated that, “These prudent, targeted, and temporary actions will help facilitate orderly trading and liquidity in our derivatives markets. The CFTC remains squarely focused on promoting their integrity, resilience, and vibrancy through sound regulation.”

This post summarizes this no-action relief.

In addition, we have prepared the attached Overview of COVID-19 Relief Provided by the CFTC to SEFs and DCMs to supplement the information presented in this post.

DMO yesterday published the following no-action letters that grant temporary, targeted no-action relief to DCMs and SEFs:

  • CFTC Letter 20-07 and CFTC Letter 20-08, both of which apply to SEFs; and
  • CFTC Letter 20-09, which applies to DCMs.

These letters were issued shortly after the Division of Swap Dealer and Intermediary Oversight (DSIO) issued related relief to floor brokers and other CFTC registrants, and unregistered members of DCMs and SEFs (collectively, all such registrants and unregistered market participants, the “Affected Market Participants”).  For additional information about the DSIO’s relief, please see yesterday’s post entitled, CFTC Provides COVID-19 No-Action Relief to FCMs, IBs, SDs, RFEDs, FBs, and Members of DCMs and SEFs.

In sum, these letters afford relief from the following requirements:

  • Recording of Oral Communications – Relief for SEFs until June 30, 2020, from various requirements to record oral communications related to voice trading and other telephonic communications, to the extent that non-compliance arises from the inability of a SEF to record voice communications as a result of the displacement of voice trading personnel from their normal business sites in connection with the COVID-19 pandemic response;
  • Submission of Annual Compliance Reports (ACRs) and Q4 Financial Reports (Q4FRs) – Relief for any SEF and its chief compliance officer (CCO) from the requirement to submit an ACR or a Q4FR within the 60-day period prescribed in CFTC Regulation 37.1501(f)(2) or 37.1306(d); and
  • Audit Trail and Related Requirements – No-action relief for DCMs until June 30, 2020, if any DCM fails to comply with audit trail and related requirements pursuant to Commodity Exchange Act sections 5(d)(4) and (10), and related CFTC regulations (e.g., DCM Core Principles (4) and (10)), to the extent that non-compliance relates to the displacement, in connection with the COVID-19 pandemic response, of Affected Market Participants from an exchange’s trading floor and/or other designated premises from which customer orders may be placed.

The relief provided by DMO is subject to the conditions enumerated in the attached Overview of COVID-19 Relief Provided by the CFTC to SEFs and DCMs, which we have prepared to supplement the information presented in this post.

It should be noted that DMO specifically stated that, “Registrants relying on the no-action relief are expected to establish and maintain a supervisory system that is reasonably designed to supervise the activities of personnel while acting from an alternative or remote located during the COVID-19 pandemic.”

Each DMO no-action letter is available here.

Good day.  Good regulatory relief, notwithstanding that we all STILL wished that we never needed it. DR2