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CFTC Staff clarifies registration relief for non US CPOs & CTAs

First Published 10th March 2016

No-action relief confirms an exemption from CFTC registration for non-US asset managers when trading uncleared swaps in the United States for non US clients.

The U.S. Commodity Futures Trading Commission Division of Swap Dealer and Intermediary Oversight provided no-action relief on February 12, 2016 to commodity pool operators and commodity trading advisors located outside of the United States (Foreign Intermediaries) that trade uncleared swaps on behalf of persons located outside of the United States.

The relief will expand the number of Foreign Intermediaries able to rely on a registration exemption under CFTC Regulation 3.10(c)(3)(i) (Rule) when their commodity interest trading involves U.S. markets.

The relief addresses an aspect of the registration exemption that had effectively subjected CPOs and CTAs that otherwise met the conditions under the Rule to CFTC registration if they traded uncleared swaps, whereas if those same CPOs and CTAs traded solely in cleared commodity interests, they would qualify for the exemption. CFTC registration for CPOs and CTAs is a complex and sometimes costly process that involves registering the firm and some individuals with the National Futures Association (NFA), meeting on-going compliance requirements, making periodic reports to the CFTC and NFA, and being subject to onsite NFA audits. ( Dechert )

The Derivatives and Repo Report sums it up:

An intermediary located outside of the United States (a Foreign Intermediary) will not need to register as commodity pool operator (CPO), a commodity trading advisor (CTA), or an introducing broker (IB), as long as the following conditions are met:

  • The Foreign Intermediary is located outside the United States;
  • The Foreign Intermediary acts only on behalf of persons located outside the United States; and
  • The commodity interest transaction is submitted for clearing through a registered futures commission merchant (FCM).

Please click here for the complete posting from The Derivatives and Repo Report.

Here for this and other postings from Dechert.

And here for the original CFTC letter.