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CFTC Issues a ‘No Action’ Letter that Exempts FX Prime Brokers from Certain Aspects of Dodd-Frank

Insight Robin Powers Robin Powers · May 01, 2013

The Commodity Futures Trading Commission (CFTC) has issued a time limited ‘No Action’ letter that exempts Prime Brokers from certain aspects of Dodd-Frank rules.

There had been widespread concern that Prime Brokers would be required to comply with the obligation to disclosure of the mid-market mark.

The CFTC No Action letter recognized that the prime broker would merely be reporting “mirror” trades that were not initiated by a market participant, but rather part of the process of the “give up” between executing dealer and prime brokerage customer.

The no action relief will apply in respect to:

  • External Business Conduct Standards as they relate to Covered Transactions executed under prime brokerage arrangements where the prime broker and the executing dealer are each swap dealers.
  • Exempt FX Transactions where there is significant participation by executing dealers that are not required to be registered as swap dealers, as they relate to Exempt FX Transactions executed under prime brokerage arrangements where the prime broker is a swap dealer, but the executing dealer is not a swap dealer.
  • Limited Relief: The swap dealer acting as prime broker is exempt from the obligation to disclosure of the mid-market mark of the Exempt FX Transaction, and the swap dealer provides its counterparty with a scenario analysis if requested.

Full transcript of the CFTC No Action Letter here.

Keywords

Dodd-Frank