Mr. David Stawick
Secretary
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, N.W.
Washington, DC 20581

Re: Treatment of Inter-affiliate Transactions

Dear Mr. Stawick:

The International Swaps and Derivatives Association, Inc. (“ISDA”) and the Securities Industry and Financial Markets Association (“SIFMA”)1 are writing regarding the treatment of transactions between members of an affiliated group. Specifically, for the reasons set forth in detail below, we believe that such transactions should be either excluded from the definition of swap or exempted generally as the Commodity Futures Trading Commission (“CFTC”) finalizes its rules implementing Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).

I. Introduction

Inter-affiliate swaps play a central role in effective, group-wide management of interest rate, foreign exchange, other market price risks, liquidity, capital and other risks inherent in the general business of majority-owned affiliated groups. This is true of groups in all industries. For consolidated financial institutions, inter-affiliate swaps are also used to facilitate transactions for customers, maximize hedging efficiencies and allow customers to transact with a single client-facing entity in the customer’s jurisdiction.

As we explain in this letter, ISDA and SIFMA believe that the distinctive characteristics of inter-affiliate swaps, the lack of systemic risk engendered by such trades, and the important systemic and private benefits of inter-affiliate swaps argue persuasively in favor of the Commission granting the exemptive relief requested below. In Section II, we set out the parameters of the exemptions requested. Section III discusses the policy rationale for providing the exemptions, and Section IV discusses the Commission’s authority to grant the requested relief.

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