[Federal Register Volume 82, Number 112 (Tuesday, June 13, 2017)]
[Notices]
[Pages 27044-27045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12141]


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COMMODITY FUTURES TRADING COMMISSION


Commission Statement Concerning a Request for an Interpretation 
as to Whether a Particular Agreement Is a Swap, Security-Based Swap, or 
Mixed Swap

AGENCY: Commodity Futures Trading Commission.

ACTION: Commission statement.

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SUMMARY: The Commodity Futures Trading Commission (the ``Commission'') 
is publishing this statement concerning a request for an interpretation 
as to whether a particular agreement is a swap, security-based swap, or 
mixed swap.

FOR FURTHER INFORMATION CONTACT: Eileen T. Flaherty, Director, (202) 
418-5326, [email protected]; Frank Fisanich, Chief Counsel, (202) 418-
5949, [email protected]; or Jacob Chachkin, Special Counsel, (202) 
418-5496, [email protected], Division of Swap Dealer and Intermediary 
Oversight, Commodity Futures Trading Commission, 1155 21st Street NW., 
Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Statement

    On February 7, 2017, Commission staff received a letter from 
Breakaway Courier Corporation (``Breakaway''), through its counsel, 
requesting a joint interpretation from the Commission and the 
Securities and Exchange Commission (``SEC'', and, together with the 
Commission, the ``Commissions'') pursuant to Commission regulation 1.8 
as to whether a particular agreement is a swap, security-based swap, or 
mixed swap.\1\ Breakaway's request relates to a contract labeled as a 
Reinsurance Participation Agreement (``RPA''), which it has previously 
executed with Applied Underwriters Captive Risk Assurance Company, Inc. 
(``AUCRA'').\2\ According to Breakaway's submission, it entered into 
two RPAs with AUCRA, one of which has a stated effective date of July 
1, 2009, and the other of July 1, 2012.
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    \1\ See 17 CFR 1.8.
    \2\ A copy of Breakaway's submission may be found at: http://www.cftc.gov/LawRegulation/DoddFrankAct/Dodd-FrankFinalRules/index.htm.
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    The Commission and the SEC jointly adopted Commission regulation 
1.8 and Securities Exchange Act of 1934 (``Exchange Act'') \3\ Rule 
3a68-2 in 2012 \4\ pursuant to Section 712(d)(4) of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (``Dodd-Frank Act'').\5\ The 
rules established a process for parties to request a joint 
interpretation as to whether a particular agreement, contract, or 
transaction (or class thereof) is a swap, security-based swap, or mixed 
swap. Among other things, the rules set forth the information required 
to be included in a request and a process for withdrawing a request. 
Commission regulation 1.8 also includes requirements governing the 
manner and timing by which the two agencies must act after the receipt 
of a complete submission under the rule, if they determine to issue 
such joint interpretation. In addition, paragraph (e)(5) of Commission 
regulation 1.8 provides that ``[i]f the Commission and the [SEC] do not 
issue a joint interpretation within the time period described in 
paragraph (e)(1) or (e)(3) [of the rule], each of the Commission and 
the [SEC] shall publicly provide the reasons for not issuing such a 
joint interpretation within the applicable timeframes.'' \6\
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    \3\ 15 U.S.C. 78 et seq.
    \4\ See Further Definition of ``Swap,'' ``Security-Based Swap,'' 
and ``Security-Based Swap Agreement''; Mixed Swaps; Security-Based 
Swap Agreement Recordkeeping, 77 FR 48207 (Aug. 13, 2012) (``Product 
Definitions Adopting Release'').
    \5\ See Dodd-Frank Act, Public Law 111-203, 124 Stat. 1376 
(2010). All references to ``Title VII'' in this statement shall 
refer to Title VII of the Dodd-Frank Act, which established a 
comprehensive new regulatory framework for swaps and security-based 
swaps.
    \6\ Paragraph (e)(5) of SEC Rule 3a68-2 contains identical 
language (other than reversing the references to the two 
commissions). See 17 CFR 240.3a68-2.
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    Pursuant to paragraph (e)(5) of Commission regulation 1.8, the 
Commission is declining to issue a joint interpretation with the SEC in 
connection with Breakaway's request.\7\ The Commission understands that 
the status of the RPAs is already subject to ongoing private litigation 
and that the petitioners' request may bear directly on that litigation. 
We believe that the Commission regulation 1.8 process is not an 
appropriate vehicle for litigants such as Breakaway to obtain the views 
of the Commission in connection with issues in ongoing litigation, and 
we therefore decline Breakaway's request that we state an interpretive 
position as to the proper characterization of the RPAs.\8\
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    \7\ Commission staff has consulted and coordinated with SEC 
staff and understands that the SEC will be issuing a separate 
statement on this matter.
    \8\ As we and the SEC explained when we jointly adopted 
Commission regulation 1.8 in 2012 (as well as the corresponding rule 
under the Exchange Act), the purpose of Commission regulation 1.8 is 
to ``afford market participants with the opportunity to obtain 
greater certainty from the Commissions regarding the regulatory 
status of particular Title VII instruments under the Dodd-Frank Act. 
This provision should decrease the possibility that market 
participants inadvertently might fail to meet the regulatory 
requirements applicable to a particular Title VII instrument.'' See 
Product Definitions Adopting Release, 77 FR at 48295. We and the SEC 
also noted our belief that ``it is essential that the 
characterization of an instrument be established prior to any party 
engaging in the transactions so that the appropriate regulatory 
schemes apply.'' See Product Definitions Adopting Release, 77 FR at 
48297.

    Issued in Washington, DC, on June 7, 2017, by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.


[[Page 27045]]



Appendix to Commission Statement Concerning a Request Made Pursuant to 
Commission Regulation 1.8--Commission Voting Summary

    On this matter, Acting Chairman Giancarlo and Commissioner Bowen 
voted in the affirmative. No Commissioner voted in the negative.

[FR Doc. 2017-12141 Filed 6-12-17; 8:45 am]
 BILLING CODE 6351-01-P