In a no-action letter issued on October 12, 2012 (the
"No-Action Letter"), the Office of the General Counsel ("OGC") of the Commodity
Futures Trading Commission (the "CFTC") clarified a number of matters relating
to the parties and guarantors that will qualify for treatment as "Eligible
Contract Participants" under Title VII of the Dodd-Frank Wall Street Reform and
Consumer Protection Act ("Dodd-Frank"). Dodd-Frank both amended the definition
of "Eligible Contract Participant" (hereinafter, "ECP") contained in the CEA
and made it unlawful for a party that is not an ECP to enter into a swap except
on, or subject to the rules of, a designated contract market (a "DCM"). The
No-Action Letter, one of more than a dozen interpretive letters that the CFTC
issued last week, should significantly aid market participants in understanding
which counterparties and which guarantee arrangements are permissible under
In the No-Action Letter, as set out in greater detail in
Part I below, the OGC gives interpretive guidance that:
In addition, as detailed in Part II below, the OGC
provides no-action relief with respect to:
Finally, the No-Action Letter grants temporary relief
relating to certain situations in which a counterparty or a guarantor fails to
qualify as an ECP, as set out in Part III below.
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Morrison & Foerster LLP. Because
of the generality of this update, the information provided herein may not be
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