CFTC Final Rule: Clearing Exemption for Certain Swaps Entered Into by Cooperatives

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Gavel.png FINAL RULE: Issued August 13, 2013. Effective date: September 23, 2013
Timeline-Swap Clearing Exemption for Cooperatives, CFTC
Proposal Date Final Rule Issue Effective Date
July 17, 2012 August 13, 2013 September 23, 2013

On August 13, 2013, the CFTC issued a final rule exempting swaps entered into by certain cooperatives from mandatory clearing requirements under the Dodd-Frank Act. The rule entered the Federal Register on August 22, 2013. Its effective date is September 23, 2013.

Since a time-limited no-action relief letter was set to expire prior to the effective date, the commission issued an additional letter that will allow an orderly transition to the new rule.


Among the provisions of Title VII of the Dodd-Frank Act is a requirement that swap transactions shall be cleared through a derivatives clearing organization unless the swap:

  1. is not a financial entity;
  2. uses swaps to hedge or mitigate commercial risk; and
  3. notifies the commission as to how it generally meets its financial obligations when entering into uncleared swaps.

These criteria are referred to as the "end-user exception."

On July 17, 2012, a proposed rule entered the Federal Register that would allow cooperatives that would not otherwise qualify for the end-user exception, but whose members individually would qualify, to claim the exception. This would allow such cooperatives the ability to enter into swap transactions but retain the option of clearing through a derivatives clearing organization.

Key Points of the Rule[edit]

Members of a qualified cooperative that enter into swap agreements may elect to not clear such a swap, provided that the cooperative’s members are either non-financial entities or other cooperatives whose members are non-financial entities. In addition, the swap must be entered into in connection with originating loans to cooperative members or hedge or mitigate commercial risk related to loans to, or swaps with, members.

Also the rule requires the reporting counterparty to report the election of the cooperative exemption, as well as certain other information, similar to the information required by the election of the end-user exception or the inter-affiliate exemption, to a swap data repository (SDR) (or, if no SDR is available, to the commission).<ref>CFTC Approves Final Regulations for Exemption from Required Clearing for Swaps Entered into by Certain Cooperatives; Division of Clearing and Risk Issues Time-Limited No-Action Relief. CFTC. Retrieved on August 13, 2013.</ref>

Related Documents: Federal Register Entry and No-action Letter[edit]


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