CFTC DMO Grants Supplemental Relief For Correcting Swap Error Trades

The CFTC Division of Market Oversight ("DMO") granted supplemental relief to help swap execution facilities ("SEFs") and designated contract markets ("DCMs") more efficiently correct certain trading errors.

As previously covered, the CFTC Divisions of Market Oversight and of Clearing and Risk extended no-action relief in CFTC Letter 17-27, permitting SEFs and DCMs to continue correcting trades that were rejected for clearing due to operational and clerical errors, as well as trades in which errors were discovered after swaps had been cleared.

CFTC Letter 20-01 supplements the relief provided in CFTC Letter 17-27 to provide SEFs and DCMs with an alternative means for correcting such errors. The CFTC stated that the errors are corrected by engaging in an ex post facto review of corrected error swap trades where counterparties determined that such errors had occurred. Specifically, the DMO stated that it will not recommend enforcement action against an SEF or DCM for