CFTC Reduces Reporting and Recordkeeping Requirements on Trade Options (Fed. Reg.)

The CFTC's final rule on trade options was published in the Federal Register. The rule amends the limited trade options exemption in the CFTC Regulations in order to substantially reduce and/or eliminate certain reporting and recordkeeping requirements for end users that enter into trade options. The CFTC confirmed that it does not intend to impose position limits on trade options when it finalizes its proposed position limits rule on futures and swaps.

The final rule includes the following amendments:

• Commercial parties that are neither swap dealers ("SDs") nor major swap participants ("MSPs") (collectively, "Non-SDs/MSPs") are under no obligation to report trade options to a swap data repository.

• Non-SDs/MSPs no longer will be required to report their trade option activities on the "Form TO," which the CFTC has eliminated.

• Non-SDs/MSPs no longer will be required to provide notice to the CFTC of trade option activities that have a value of more than $1 billion in any calendar year.

• Non-SDs/MSPs no longer will be required to comply with swap-related recordkeeping requirements for their trade option activities. However, such parties still must maintain records of such activities "in the ordinary course of business" and, when entering into a trade option opposite an SD/MSP, must comply with the requirement that they obtain a legal entity identifier and provide it to their SD/MSP counterparties.

• In general, the trade option rules remain in place for counterparties that are SDs/MSPs.

• Trade options also are still subject to the CFTC's antifraud and anti-manipulation authority.

A summary and analysis of the CFTC's final rule is provided in the Cadwalader Energy Group's memorandum on the subject (see "Related Links").

The final rule became effective on March 21, 2016.