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On December 22, 2021, in response to a request from the Alternative Reference Rate Committee (ARRC) and another request from the Futures Industry Association (FIA), the United States Commodity Futures Trading Commission (CFTC) issued five letters non-action techniques. provide existing, time-limited, action-free additional and extended relief and advice for certain London Interbank Offered Rate (LIBOR) transition issues.

End user exception

In CFTC Staff Letter 21-26, CFTC Market Participants Division (MPD) amends and reiterates CFTC Staff Letter 20-23 to change its discussion on the end-user exception to be consistent with a UK Financial Conduct Authority (FCA) statement. , which regulates ICE Benchmark Administration Limited, the administrator of ICE LIBOR. On March 5, 2021, the FCA confirmed that all LIBOR parameters will cease to be provided by an administrator or will no longer be representative of (i) all LIBOR parameters in pounds sterling, euros, Swiss francs and Japanese yen and this one. USD LIBOR settings on week and two months immediately after December 31, 2021; and (ii) for all other USD LIBOR parameters immediately after June 30, 2023.

Transition exchange

In CFTC Staff Letter 21-27, CFTC Division of Market Oversight (DMO) extends and reaffirms CFTC Staff Letter 20-24 and clarifies the application of the trade execution requirement under Article 2 (h) (8) of the Commodity Exchange Act (CEA) to support the industry-wide initiative associated with the transition of swaps that reference LIBOR and to other interbank offered rates (collectively, with LIBOR, “IBOR”) to swaps that reference alternative benchmarks, including risk-free rates (collectively, with alternative benchmarks, “RFR”).

Uncompensated interest rate swaps

In letter 21-28 from CFTC staff, the Compensation and Risk Division (DCR) of the CFTC amends and reworded Letter 20-25 from CFTC staff and grants a waiver of non-action in case of failure to comply with certain provisions of the swap netting requirement promulgated in accordance with Article 2 (h) (1) (A) of the CEA for uncompensated interest rate swaps (IRS) that have been executed before a date of compliance with the applicable netting requirement and for which the swap counterparties subsequently modify certain conditions only as part of an industry-wide initiative to modify swaps that reference IBORs to RFRs .

Separate accounts by term commission merchants

In CFTC staff letter 21-29, DCR and CFTC MPD extend notice and no action waiver in CFTC staff letters 19-17 and 20-28 regarding account handling separated by futures traders.

Exchange data report

Finally, in CFTC Staff Letter 21-30, the CFTC Data Division (DOD) takes a no-action position with respect to certain requirements of the interchange data reporting rules set out in Parts 43 and 45 of the CFTC regulations. Letter states that the DOD will not recommend that the CFTC take enforcement action against an entity for failure to timely report under Part 45 of the floating rate change of a swap made under the ISDA fallback provisions. LIBOR of any Swiss Franc, Euro, British Pound Sterling or Japanese Yen content LIBOR at the applicable RFR. This action is conditional on the entity doing its best to report the change within the applicable time frame in part 45 and in no case reporting the required information more than five working days from December 31, 2021, but excluded. The letter also states that the DOD will not recommend that the CFTC take enforcement action against an entity for failure to report under Part 43 of the Variable Rate Change for a Swap Amended After Execution to incorporate the ISDA LIBOR fallback provisions. to switch from benchmark to any content in Swiss Francs, Euro LIBOR, Pound Sterling and Japanese Yen to benchmark an RFR.

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This article by Mayer Brown provides information and commentary on legal issues and developments of interest. The foregoing does not constitute a complete treatment of the matter at hand and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action on the matters discussed in this document.

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