CFTC Issues Blanket No-Action Letter on Event Contracts

The U.S. Commodity Futures Trading Commission's Division of Market Oversight and Division of Clearing and Risk issued a blanket no-action letter on Wednesday, providing relief from certain swap data reporting and recordkeeping requirements for designated contract markets and derivatives clearing organizations that list and clear fully collateralized event contracts.

The letter states that the divisions will not recommend enforcement actions against these entities or their participants for failing to report event contract transactions to swap data repositories or to comply with related swap recordkeeping rules. Event contracts, which are based on binary outcomes from real-world events such as elections or economic indicators, may meet the legal definition of swaps. However, when listed on designated contract markets, they share characteristics with futures and options on futures, including standardized terms, exchange-trading protocols and the ability to offset positions. The relief allows such contracts to be reported directly to the CFTC in a format similar to that used for futures.

This position responds to numerous requests from designated contract markets and derivatives...