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The no-action letter provides relief from required clearing for treasury affiliates entering into swaps on behalf of non-financial affiliates, subject to a number of requirements. In particular, the treasury affiliate must be an “eligible treasury affiliate", meaning, among other things, that it is wholly-owned by a non-financial parent company and is a “financial entity” under section 2(h)(7)(C)(i)(VIII) of the CEA solely because of the activities it undertakes on behalf of its non-financial affiliates.
Among other requirements, the eligible treasury affiliate must be part of a non-financial corporate group, and cannot be affiliated with, among other things, a swap dealer, a major swap participant, or an entity designated as systemically important by the Financial Stability Oversight Council.
In order for an eligible treasury affiliate to elect the relief from required clearing the swap activity must meet several conditions, including, among other things, that the eligible treasury affiliate enters into the swaps for the sole purpose of hedging or mitigating the commercial risk of one or more non-financial affiliates.
In addition, an eligible treasury affiliate electing the relief described in the no-action letter must report certain information to a registered swap data repository (SDR) (or to the CFTC if no SDR is available to receive the information). In order to provide sufficient time to prepare for the reporting of this information, the Division is not requiring the reporting of the election of this relief until September 9, 2013.