In short
On December 9, 2025, the Commodity Futures Buying and selling Fee (CFTC) issued No-Motion Letter 25‑42, offering vital reduction and clarification for market contributors navigating cross-border swap necessities. This no-action letter (NAL) addresses longstanding inconsistencies within the definitions of “US particular person” and “assure” throughout totally different regulatory necessities and presents sensible compliance flexibility. Under is a abstract of the important thing factors and why they matter.
- Unified definitions of “US particular person” and “assure” – The CFTC’s Market Individuals Division, Division of Clearing and Danger, and Division of Market Oversight won’t suggest enforcement motion when market contributors classify counterparties utilizing the “US particular person” and “assure” definitions within the 2020 Cross-Border Rule1, even when competing definitions exist beneath prior 2013 Steerage2 or the Cross-Border Uncleared Margin Rule3.
- Backward reliance on prior representations permitted – For regulatory necessities lined by the 2020 Cross-Border Rule (the “Group B” and “Group C” necessities), counterparties who made classifications and representations beneath the 2013 Steerage or the Cross-Border Uncleared Margin Rule earlier than November 13, 2020 are nonetheless thought-about legitimate — even past the December 31, 2027 expiration restrict initially established by the 2020 Cross-Border Rule.
- Conduit affiliate evaluation not related – Willpower of whether or not a non-US particular person counterparty qualifies as a “conduit affiliate,” as such time period was interpreted within the 2013 Steerage, is just not crucial.
- Supersession of conflicting No-Motion Letters – This new NAL supersedes earlier workers letters to the extent they relied on definitions or frameworks inconsistent with this harmonized strategy.
- Eliminates cross-definition confusion – Entities have traditionally struggled with three competing definitions of “US particular person” and “assure,” relying on which cross-border regime utilized. This NAL rationalizes the remedy, decreasing inconsistent utility and uncertainty.
- Prolonged reliance interval – Whereas the 2020 Cross-Border Rule initially sundown cross-reliance post-December 2027, the CFTC now pledges to not implement primarily based on outdated classifications for legacy counterparties previous that date, easing compliance burdens.
- Harmonization with SEC requirements – The 2020 definition aligns extra intently with the SEC’s strategy, enhancing regulatory coherence throughout US markets. This NAL helps keep away from re-determination of US particular person standing solely resulting from definitional mismatch.
- Operational simplification – Swap sellers and different regulated entities can now streamline entity onboarding and monitoring: they could undertake the 2020 definitions with out altering historic documentation or conducting re-certifications for current counterparties.
- Enforcement safety assurance – By formally committing to not use evolution in definitions as a foundation for enforcement, the CFTC offers contributors confidence of their compliance posture — even in evolving rule landscapes.
- Use the 2020 Cross-Border Rule’s definitions of “US particular person” and “assure” as the first normal.
- Keep prior representations for legacy relationships (beneath the 2013 Steerage or the Cross-Border Uncleared Margin Rule) by means of 2027 and past without having updates.
- Don’t apply “conduit affiliate” evaluation to non-US particular person counterparties.
- Deem earlier, inconsistent workers no-action letters outdated, eliminating overlapping reduction.
- Customise strategy to every authorized regime — though classifications can align beneath the 2020 definitions, different rule-specific obligations should still want regime-specific evaluation.
For swap sellers
- Reassess present classification insurance policies to make sure alignment with the 2020 definitions.
- Affirm which counterparties had been onboarded beneath pre-2020 definitions and confirm that no pointless reclassification actions are triggered post-2027.
- Replace inside compliance manuals and onboarding questionnaires to replicate the finalized harmonization.
- Practice relationship groups and compliance workers on the unified framework to bolster consistency throughout swaps, uncleared margin, clearing, and reporting obligations.
For buy-side market contributors
- Validate present representations supplied to swap sellers and make sure no rapid updates are required.
- Monitor vendor communications for any adjustments in onboarding or documentation requests.
- Evaluation inside compliance documentation to make sure consciousness of the prolonged reliance interval.
- Take into account updating inside insurance policies to reference the 2020 definitions for future transactions.
Briefly, this much-welcomed no-action reduction gives readability and suppleness, decreasing compliance uncertainty and aligning cross-border requirements for the long run.
When you’ve got any questions on how this no-action reduction impacts your compliance obligations or operational processes, please contact Matthew Smith. We’re right here that can assist you navigate these adjustments.
1 17 CFR 23.23 (the “2020 Cross-Border Rule”). See additionally Cross-Border Utility of the Registration Thresholds and Sure Necessities Relevant to Swap Sellers and Main Swap Individuals, 85 FR 56924 (Sep. 14, 2020).
2 Interpretive Steerage and Coverage Assertion Concerning Compliance With Sure Swap Laws (the “2013 Steerage”), 78 FR 45292 (July 26, 2013).
3 17 CFR 23.160 (the “Cross-Border Uncleared Margin Rule”). See additionally Margin Necessities for Uncleared Swaps for Swap Sellers and Main Swap Individuals—Cross-Border Utility of the Margin Necessities, 81 FR 34818 (Could 31, 2016).
In short
On December 9, 2025, the Commodity Futures Buying and selling Fee (CFTC) issued No-Motion Letter 25‑42, offering vital reduction and clarification for market contributors navigating cross-border swap necessities. This no-action letter (NAL) addresses longstanding inconsistencies within the definitions of “US particular person” and “assure” throughout totally different regulatory necessities and presents sensible compliance flexibility. Under is a abstract of the important thing factors and why they matter.
- Unified definitions of “US particular person” and “assure” – The CFTC’s Market Individuals Division, Division of Clearing and Danger, and Division of Market Oversight won’t suggest enforcement motion when market contributors classify counterparties utilizing the “US particular person” and “assure” definitions within the 2020 Cross-Border Rule1, even when competing definitions exist beneath prior 2013 Steerage2 or the Cross-Border Uncleared Margin Rule3.
- Backward reliance on prior representations permitted – For regulatory necessities lined by the 2020 Cross-Border Rule (the “Group B” and “Group C” necessities), counterparties who made classifications and representations beneath the 2013 Steerage or the Cross-Border Uncleared Margin Rule earlier than November 13, 2020 are nonetheless thought-about legitimate — even past the December 31, 2027 expiration restrict initially established by the 2020 Cross-Border Rule.
- Conduit affiliate evaluation not related – Willpower of whether or not a non-US particular person counterparty qualifies as a “conduit affiliate,” as such time period was interpreted within the 2013 Steerage, is just not crucial.
- Supersession of conflicting No-Motion Letters – This new NAL supersedes earlier workers letters to the extent they relied on definitions or frameworks inconsistent with this harmonized strategy.
- Eliminates cross-definition confusion – Entities have traditionally struggled with three competing definitions of “US particular person” and “assure,” relying on which cross-border regime utilized. This NAL rationalizes the remedy, decreasing inconsistent utility and uncertainty.
- Prolonged reliance interval – Whereas the 2020 Cross-Border Rule initially sundown cross-reliance post-December 2027, the CFTC now pledges to not implement primarily based on outdated classifications for legacy counterparties previous that date, easing compliance burdens.
- Harmonization with SEC requirements – The 2020 definition aligns extra intently with the SEC’s strategy, enhancing regulatory coherence throughout US markets. This NAL helps keep away from re-determination of US particular person standing solely resulting from definitional mismatch.
- Operational simplification – Swap sellers and different regulated entities can now streamline entity onboarding and monitoring: they could undertake the 2020 definitions with out altering historic documentation or conducting re-certifications for current counterparties.
- Enforcement safety assurance – By formally committing to not use evolution in definitions as a foundation for enforcement, the CFTC offers contributors confidence of their compliance posture — even in evolving rule landscapes.
- Use the 2020 Cross-Border Rule’s definitions of “US particular person” and “assure” as the first normal.
- Keep prior representations for legacy relationships (beneath the 2013 Steerage or the Cross-Border Uncleared Margin Rule) by means of 2027 and past without having updates.
- Don’t apply “conduit affiliate” evaluation to non-US particular person counterparties.
- Deem earlier, inconsistent workers no-action letters outdated, eliminating overlapping reduction.
- Customise strategy to every authorized regime — though classifications can align beneath the 2020 definitions, different rule-specific obligations should still want regime-specific evaluation.
For swap sellers
- Reassess present classification insurance policies to make sure alignment with the 2020 definitions.
- Affirm which counterparties had been onboarded beneath pre-2020 definitions and confirm that no pointless reclassification actions are triggered post-2027.
- Replace inside compliance manuals and onboarding questionnaires to replicate the finalized harmonization.
- Practice relationship groups and compliance workers on the unified framework to bolster consistency throughout swaps, uncleared margin, clearing, and reporting obligations.
For buy-side market contributors
- Validate present representations supplied to swap sellers and make sure no rapid updates are required.
- Monitor vendor communications for any adjustments in onboarding or documentation requests.
- Evaluation inside compliance documentation to make sure consciousness of the prolonged reliance interval.
- Take into account updating inside insurance policies to reference the 2020 definitions for future transactions.
Briefly, this much-welcomed no-action reduction gives readability and suppleness, decreasing compliance uncertainty and aligning cross-border requirements for the long run.
When you’ve got any questions on how this no-action reduction impacts your compliance obligations or operational processes, please contact Matthew Smith. We’re right here that can assist you navigate these adjustments.
1 17 CFR 23.23 (the “2020 Cross-Border Rule”). See additionally Cross-Border Utility of the Registration Thresholds and Sure Necessities Relevant to Swap Sellers and Main Swap Individuals, 85 FR 56924 (Sep. 14, 2020).
2 Interpretive Steerage and Coverage Assertion Concerning Compliance With Sure Swap Laws (the “2013 Steerage”), 78 FR 45292 (July 26, 2013).
3 17 CFR 23.160 (the “Cross-Border Uncleared Margin Rule”). See additionally Margin Necessities for Uncleared Swaps for Swap Sellers and Main Swap Individuals—Cross-Border Utility of the Margin Necessities, 81 FR 34818 (Could 31, 2016).
