The CFTC and Prudential Regulators Grant Relief in Preparation for Brexit

On March 15, 2019, the Prudential Regulators adopted interim final rules permitting the transfer of qualifying uncleared swaps and security-based swaps out of the United Kingdom to the European Union or the United States in the event of a non-negotiated withdrawal of the UK from the EU without triggering Prudential Regulator uncleared swap and security-based swap margin requirements.

On March 25, 2019, the Commodity Futures Trading Commission (the “CFTC”) adopted parallel interim final rules (“CFTC Final Rules”, and together with Bank Final Rules, the “Final Rules”), similarly permitting transfers of qualifying uncleared swaps in the event of a No-Deal Brexit without triggering CFTC uncleared swap margin requirements.

On April 5, 2019, the Division of Swap Dealer and Intermediary Oversight (“DSIO”), Division of Market Oversight (“DMO”), and Division of Clearing and Risk (“DCR”) of the CFTC issued two joint staff letters, CFTC Letter 19-086 (“No-Action Letter 19-08”) and CFTC Letter 19-097 (“No-Action Letter 19-09,” and together with No-Action Letter 19-08, the “No-Action Letters”), to extend currently applicable no-action relief and comparability determinations to UK entities that would otherwise cease to apply following the withdrawal of the UK from the EU.

The effective date of the Bank Final Rules is March 19, 2019, and comments on the rules must be received on or before April 18, 2019. The effective date of the CFTC Final Rules is April 1, 2019, and comments on the rules must be received on or before May 31, 2019. The effective date of the No-Action Letters is the date of the UK’s withdrawal from the EU, which is currently scheduled for October 31, 2019 as of the publication date of this Memorandum. The following Memorandum provides a brief overview of the Final Rules and the No-Action Letters.