Consistent Definitions, Less Confusion: CFTC Divisions Streamline And Harmonize Cross-Border Swap Compliance

The US Commodity Futures Trading Commission (CFTC or Commission) has taken a significant step toward regulatory clarity and harmonization in the cross-border swaps market. The CFTC's Market Participants Division (MPD), Division of Clearing and Risk (DCR) and Division of Market Oversight (DMO, collectively with MPD and DCR, the Divisions) jointly issued No-Action Letter 25-42 (Letter 25-42) on December 9, which addresses longstanding inconsistencies in the definitions of "U.S. person" and "Guarantee" under the CFTC's Dodd-Frank Wall Street Reform and Consumer Protection Act's (the Dodd-Frank Act) cross-border swap framework.

The relief in Letter 25-42 was requested by three major industry associations: the Institute of International Bankers (IIB), the International Swaps and Derivatives Association (ISDA), and the Securities Industry and Financial Markets Association (SIFMA) (collectively, IIB, ISDA and SIFMA are the Associations). The Associations argued that the