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CFTC expands additional LIBOR transition relief for market participants

October 12, 2020
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    Matt Hoffman

    Regulatory Advisory

    Real Estate | Kennett Square, PA


The CFTC issued three no-action letters, targeting specific regulatory requirements, to provide relief for U.S. market participants as they transition existing derivatives away from LIBOR.

On August 31, 2020, the Commodity Futures Trading Commission (CFTC) issued three no-action letters to clarify and expand the relief available to U.S. market participants as they transition away from using LIBOR in existing derivatives. The Alternative Reference Rates Committee (ARRC) requested new letters to replace earlier no-action letters on the LIBOR transition previously issued by the CFTC in 2019. It is important to note upfront that the no-action letters do not cover Dodd-Frank reporting. Dodd-Frank still requires market participants to report a change in index as a life-cycle event.

How the no-action letters provide relief

Like the earlier letters from 2019, this new relief covers select regulatory requirements that would otherwise be triggered when market participants amend their existing derivatives. The CFTC knows that, over the next year, many market participants will either seek to amend the fallback definitions in their existing derivatives or amend the choice of underlying rate itself.

Letter 20-23 — Exemption of Dodd-Frank compliance obligations

To encourage the transition away from LIBOR, with Letter 20-23, CFTC’s Division of Swap Dealer and Intermediary Oversight provides targeted relief to swap dealers and, consequently, other market participants. Specifically, amendments to legacy and pre-transition derivatives, solely to address the LIBOR transition, are exempted from complying with business conduct standards, swap trading relationship documentation, margin requirements for uncleared swaps, portfolio reconciliation, and verification of eligible contract participant status. These amendments are also exempted from a swap dealer’s de minimis threshold calculations.

Letter 20-24 — The trade execution requirement

With Letter 20-24, CFTC’s Division of Market Oversight provides targeted relief from the trade execution requirement. This relief should be of limited importance to most end users since they are not subject to the trade execution requirement, as the trade execution requirement mandates that a subset of swaps subject to the clearing requirement be executed on a trading platform.

Letter 20-25 — Clearing requirements

With Letter 20-25, CFTC’s Division of Clearing and Risk provides targeted relief from clearing requirements for swaps that are amended to transition away from LIBOR. Specifically, the CFTC clarified that an end user amending its commercial loan documentation for the sole purpose of including new fallbacks published by the ARRC or accommodating the replacement of LIBOR would still be considered to be in compliance with the hedging or mitigating risk prong of the end user exception.

How to benefit from relief

To benefit from this relief, market participants must meet the conditions listed by the CFTC in each letter. Notably among them, the newly issued CFTC letters have clarified the kinds of changes that may be made to existing derivatives to move away from LIBOR while still benefiting from relief. Besides changing the rate, market participants may make certain other ancillary changes and minor changes to the notional amount and maturity only if necessary to accommodate the change in rate, and subject to specified conditions.

Speak to a Chatham expert

Please reach out to the Chatham team if you have questions around how the USD LIBOR transition may affect your existing derivatives.

About the author

  • Matt Hoffman

    Regulatory Advisory

    Real Estate | Kennett Square, PA

    Matt is a Director on Chatham’s Real Estate team. He works with clients, industry partners, and policymakers, using Chatham’s unique experience and expertise to benefit individual clients and the industry.


Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit

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