The US Commodity Futures Trading Commission’s (Commission) Division of Market Oversight and Division of Clearing and Risk has issued a letter providing the divisions’ view that the use of a “firm or forced trades” process by a derivatives clearing organisation (DCO) to determine the price of certain swaps for which public market prices are not available will not by itself require a DCO to register as a swap execution facility.

The interpretation also states that a swap generated as a result of such a process would not be subject to the clearing and trade execution requirements of the Commodity Exchange Act. Finally, the interpretation states that the DCO should be the reporting counterparty for swaps created by the firm or forced trades process for purposes of Part 45 of the Commission’s regulations.
 
The Division of Market Oversight has previously issued time-limited no-action relief from certain requirements as applied to a firm or forced trades context, most recently in No-Action Letter 14-119, issued on 29 September, 2014.