Key Takeaways

  • On December 9, 2025, the Market Participants Division, Division of Clearing and Risk, and Division of Market Oversight of the CFTC (the “Divisions”) issued no-action relief permitting flexibility to market participants in applying the three separate definitions of “U.S. person” and “guarantee” set forth in the CFTC regulations in the context of the cross-border application of certain Dodd-Frank Act swap regulations. Through the no-action relief granted in CFTC Staff Letter No. 25-42 (the “Letter”), the Divisions are favoring the definitions of “U.S. person” and “guarantee” set forth in the 2020 Swap Dealer Cross-Border Rule (defined below), and in doing so, are aligning the CFTC’s definitions with those used by other U.S. regulators.
  • For the purposes of the swap clearing requirement, trade execution requirement, real-time reporting, or swap data reporting requirements and CFTC margin requirements for uncleared swaps, market participants may rely on the definition of “U.S. person” and “guarantee” set forth in the CFTC Regulation 23.23 (i.e., the “2020 Swap Dealer Cross Border Rule”). For funds, this is a domicile and principal place of business test.
  • For the purposes of determining the applicability of the Group B requirements and Group C requirements (defined below), market participants may rely on representations made under the CFTC Regulation 23.160 (i.e., the “2016 Cross-Border Uncleared Margin Rule”) or the 2013 Guidance, provided that those representations were initially made before November 13, 2020 (the effective date of the 2020 Swap Dealer Cross Border Rule).

Background on CFTC Extraterritorial Swaps Jurisdiction

Subject to certain exceptions, Section 2(a)(1)(a) of the Commodity Exchange Act (“CEA”) provides the CFTC with jurisdiction over swaps activity. But with respect to swaps activity occurring “outside the Unites States,” Section 2(i) of the CEA disapplies the CFTC’s jurisdiction except where those activities contravene CFTC regulations or where those activities “have a direct and significant connection with activities in, or effect on, commerce of the United States.” The CFTC’s authority to regulate swaps activities “outside the United States” therefore generally depends on whether a counterparty to the swap is a “U.S. person” or “guaranteed by a U.S. person.”

 CFTC Definitions of U.S. Person and Guarantee

In implementing its authority to regulate swaps over a period of years following the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the CFTC set forth three different definitions of “U.S. person” and “guarantee”:

  • In 2013, the CFTC issued its Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations (the “2013 Guidance”).1
  • In 2016, the CFTC adopted Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants-Cross-Border Application of the Margin Requirements (the “2016 Cross-Border Uncleared Margin Rule”).2
  • In 2020, the CFTC adopted the Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants (the “2020 Swap Dealer Cross-Border Rule”).3

Each “U.S. person” definition includes, among others, any entity that is organized or incorporated under the laws of a state or other jurisdiction in the United States and any entity having its principal place of business in the United States.”4 A key difference across the “U.S. person” definitions is that the definition under the 2013 Guidance also includes non-U.S. commodity pools that are majority owned by U.S. persons, and gives special classification to non-U.S. publicly-offered pools.5

Because the CFTC also had a concern about losses incurred by swap counterparties whose trades are guaranteed by U.S. persons, the 2013 Guidance also defined “guarantee” broadly to include arrangements “under which a person commits to provide a financial backstop or funding against potential losses” that may be incurred in connection with a swap. Each of the 2016 Cross-Border Uncleared Margin Rule6 and the 2020 Swap Dealer Cross-Border Rule7 includes a narrower definition of “guarantee” to arrangements pursuant to which a party to the uncleared swap “has rights of recourse against a guarantor.”

A comparison chart detailing the three “U.S. person” and “guarantee” definitions may be found in the Appendix hereto.

Applicable Provisions

The 2013 Guidance as of the date of the Letter addressed the extraterritorial application of the registration and regulation of swap dealers and major swap participants, swap clearing requirements, trade execution requirements, real-time reporting requirements, and swap data reporting requirements.

The 2016 Cross-Border Uncleared Margin Rule addresses margin cross-border application of the CFTC’s margin requirements for uncleared swaps entered into by swap dealers and major swap participants for which there is not a prudential regulator (that is, for non-banks).

The 2020 Swap Dealer Cross-Border Rule superseded the 2013 Guidance other than with respect to the swap clearing requirement, trade execution requirement, real-time reporting, or swap data reporting requirements. However, importantly for buy-side market swap participants, the 2020 Swap Dealer Cross-Border Rule left in place the need to assess majority U.S. beneficial ownership of non-U.S. commodity pools when assessing whether a non-U.S. fund needs to clear and exchange-trade its swaps, and comply with the reporting requirements, even when the fund would be trading with a non-U.S. person counterparty.8

The 2020 Swap Dealer Cross-Border Rule codified time-limited relief for those counterparties for whom a person had already obtained U.S. person-related representations under the 2016 Cross-Border Uncleared Margin Rule or the 2013 Guidance. Specifically, until December 31, 2027, the 2020 Swap Dealer Cross-Border Rule provided that a person may continue to classify counterparties based on: (a) representations pursuant to the U.S. person or guarantee definitions in the 2016 Cross-Border Uncleared Margin Rule made prior to November 13, 2020; or (b) representations pursuant to the U.S. person or guarantee definitions in the 2013 Guidance made prior to November 13, 2020.9 That relief was welcome, but did not solve for the fact that the 2013 Guidance U.S. person definition is broader than any subsequent Dodd-Frank Act-related U.S. person definition (including those used by the U.S. prudential regulators and the U.S. Securities and Exchange Commission) and has remained in effect for the application of certain burdensome regulatory requirements.

The current application of these definitions is summarized in the following chart:

US Person Definition Relevant Provisions

2013 Guidance

Mandatory clearing, trade execution requirement, real-time public reporting, swap data repository reporting, large trader reporting

2016 Cross-Border Uncleared Margin Rule (CFTC Regulation 23.160(a)(10))

Cross-border application of margin requirements for uncleared swaps entered into by swap dealers and major swap participants for which there is not a prudential regulator

2020 Swap Dealer Cross-Border Rule

(CFTC Regulation 23.23(a)(23))

Cross-border application of the registration thresholds applicable to swap dealers and major swap participants for which there is not a prudential regulator

CFTC Staff Letter No. 25-42

On December 9, 2025, the Market Participants Division (“MPD”), the Division of Clearing and Risk (“DCR”), and the Division of Market Oversight (“DMO,” and together with MPD and DCR, the “Divisions”) issued the Letter to the Institute of International Bankers, the International Swaps and Derivatives Association, and the Securities Industry and Financial Markets Association (the “Associations”) pursuant to CFTC Regulation 140.99 regarding the conflicting definitions of “U.S. Person” and “Guarantee” across the 2013 Guidance, the 2016 Cross-Border Uncleared Margin Rule and the 2020 Swap Dealer Cross-Border Rule.

In requesting the relief, the Associations provided the following reasons:

  • There is “no clear rationale” for the differences across the 2013 Guidance, the 2016 Cross-Border Uncleared Margin Rule and the 2020 Swap Dealer Cross-Border Rule.
  • The “multiplicity of overlapping, slightly differing cross-border definitions...results in undue paperwork and other burdens for market participants.”
  • When the time-limited relief set forth in the 2020 Swap Dealer Cross-Border Rule expires, sell-side swap market participants, especially non-U.S. entities, will be forced to re-collect representations from counterparties in order to determine if they need to register as swap dealers.10

Pursuant to the Letter, the Divisions will not recommend that the Commission commence enforcement action against any person solely as a result of the person doing any of the following:

  • For purposes of determining applicability of the swap clearing requirement, trade execution requirement, real-time reporting, or swap data reporting requirements (i.e., the requirement for which the 2013 Guidance is still applicable, or the “Unaddressed Requirements”) and CFTC margin requirements for uncleared swaps, the person elects to classify a counterparty based on the definitions of “U.S. person” and “guarantee” set forth the 2020 Swap Dealer Cross Border Rule;
  • For purposes of determining the applicability of the Group B requirements and Group C requirements (each as defined by the 2020 Swap Dealer Cross-Border Rule)11, the person elects to classify a counterparty based on:
    • Representations made pursuant to the “U.S. person” and “guarantee” definitions in the 2016 Cross-Border Uncleared Margin Rule [CFTC Regulation 23.160] if the counterparty initially made the representation prior to the November 13, 2020 (the effective date of the 2020 Swap Dealer Cross Border Rule); or
    • Representations made pursuant to the interpretations of the terms “U.S. person” and “guarantee” in the 2013 Guidance if the counterparty initially made the representation prior to November 13, 2020 (the effective date of the 2020 Swap Dealer Cross Border Rule); or
  • For purposes of determining applicability of the Unaddressed Requirements, the person does not include non-U.S. person counterparties that are conduit affiliates, as such term was interpreted in the 2013 Guidance.12

The positions in the Letter supersede any prior no-action letters issued by any of the Divisions to the extent that those prior letters cross-referenced the 2013 Guidance or the 2016 Cross-Border Uncleared Margin Rule in ways that would be inconsistent with the no-action positions set forth in the Letter.

Applicability of the Letter

The Divisions issued the Letter as a “no-action letter” without an expiration date. Under CFTC Regulation 140.99(a)(2), a “no-action letter binds only the issuing Division or the Office of the General Counsel, as applicable, and not the Commission or other Commission staff. Only the Beneficiary may rely upon the no-action letter.” As joint issuers of the Letter, each of the Market Participants Division, Division of Clearing and Risk, and Division of Market Oversight is bound by the position.

Although framed as a no-action letter (rather than an interpretative letter that may be relied on by persons other than a “Beneficiary”), in practice, trade associations engage with the Divisions on behalf their members. Therefore, it is reasonable to interpret the relief granted in the Letter as intended to be available to be relied on by any person.

Summary

The Letter provides directionality to the market to use the 2020 Swap Dealer Cross-Border Rule U.S. person definitions while retaining flexibility for funds and investment advisers in making U.S. person representations. It also provides relief to funds needing to assess the majority beneficial ownership of non-U.S. funds whose primary investment advisers are also non-U.S. persons and potentially facing situations where clearing, exchange-trading and reporting requirements could become applicable to a fund over time if the fund’s U.S. beneficial ownership crests over fifty percent, and removes the need to update representations that were made previously to existing counterparties upon the expiration of the 2020 Swap Dealer Cross-Border Rule time-limited relief. The benefit of aligning the U.S. person definitions (using the 2020 Swap Dealer Cross-Border Rule definitions as the controlling approach) also allows investment advisers to use the same U.S. person definition when determining whether the U.S. clearing, exchange-trading and reporting rules apply to a fund as the adviser does for determining if the CFTC uncleared swap margin rules apply to fund. The Letter’s flexibility in the application of the definition of “guarantee” is also helpful, allowing market participants to use the narrower 2020 Swap Dealer Cross-Border Rule.

Appendix: Definitions of “U.S. person” and “guarantee”

 

2013 Guidance13

2016 Cross-Border Uncleared Margin Rule

2020 Swap Dealer Cross-Border Rule

U.S. person

“(i)    Any natural person who is a resident of the United States;

 

(ii)    Any estate of a decedent who was a resident of the United States at the time of death;

 

(iii)    Any corporation, partnership, limited liability company, business or other trust, association, joint-stock company, fund or any form of enterprise similar to any of the foregoing (other than an entity described in prongs (iv) or (v), below) (a “legal entity”), in each case that is organized or incorporated under the laws of a state or other jurisdiction in the United States or having its principal place of business in the United States;

 

(iv)    Any pension plan for the employees, officers or principals of a legal entity described in prong (iii), unless the pension plan is primarily for foreign employees of such entity;

 

(v)    Any trust governed by the laws of a state or other jurisdiction in the United States, if a court within the United States is able to exercise primary supervision over the administration of the trust;

 

(vi)    Any commodity pool, pooled account, investment fund, or other collective investment vehicle that is not described in prong (iii) and that is majority-owned by one or more persons described in prong (i), (ii), (iii), (iv), or (v), except any commodity pool, pooled account, investment fund, or other collective investment vehicle that is publicly offered only to non-U.S. persons and not offered to U.S. persons;

 

(vii)    Any legal entity (other than a limited liability company, limited liability partnership or similar entity where all of the owners of the entity have limited liability) that is directly or indirectly majority-owned by one or more persons described in prong (i), (ii), (iii), (iv), or (v) and in which such person(s) bears unlimited responsibility for the obligations and liabilities of the legal entity; and

 

(viii)    Any individual account or joint account (discretionary or not) where the beneficial owner (or one of the beneficial owners in the case of a joint account) is a person described in prong (i), (ii), (iii), (iv), (v), (vi), or (vii).”

“(i) A natural person who is a resident of the United States;

 

(ii) An estate of a decedent who was a resident of the United States at the time of death;

 

(iii) A corporation, partnership, limited liability company, business or other trust, association, joint-stock company, fund or any form of entity similar to any of the foregoing (other than an entity described in paragraph (a)(10)(iv) or (v) of this section) (a ‘legal entity’), in each case that is organized or incorporated under the laws of the United States or that has its principal place of business in the United States, including any branch of such legal entity;

 

(iv) A pension plan for the employees, officers or principals of a legal entity described in paragraph (a)(10)(iii) of this section, unless the pension plan is primarily for foreign employees of such entity;

 

(v) A trust governed by the laws of a state or other jurisdiction in the United States, if a court within the United States is able to exercise primary supervision over the administration of the trust;

 

(vi) A legal entity (other than a limited liability company, limited liability partnership or similar entity where all of the owners of the entity have limited liability) that is owned by one or more persons described in paragraphs (a)(10)(i) through (v) of this section and for which such person(s) bears unlimited responsibility for the obligations and liabilities of the legal entity, including any branch of the legal entity; or

 

(vii) An individual account or joint account (discretionary or not) where the beneficial owner (or one of the beneficial owners in the case of a joint account) is a person described in paragraphs (a)(10)(i) through (vi) of this section.”14

“(i) Except as provided in paragraph (a)(23)(iii) of this section, U.S. person means any person that is:

 

(A) A natural person resident in the United States;

 

(B) A partnership, corporation, trust, investment vehicle, or other legal person organized, incorporated, or established under the laws of the United States or having its principal place of business in the United States;

 

(C) An account (whether discretionary or non-discretionary) of a U.S. person; or

 

(D) An estate of a decedent who was a resident of the United States at the time of death.

 

(ii) For purposes of this section, principal place of business means the location from which the officers, partners, or managers of the legal person primarily direct, control, and coordinate the activities of the legal person. With respect to an externally managed investment vehicle, this location is the office from which the manager of the vehicle primarily directs, controls, and coordinates the investment activities of the vehicle.

 

(iii) The term U.S. person does not include the International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies and pension plans, and any other similar international organizations, and their agencies and pension plans.

 

(iv) Notwithstanding paragraph (a)(23)(i) of this section, until December 31, 2027, a person may continue to classify counterparties as U.S. persons based on:

 

(A) Representations made pursuant to the ‘U.S. person’ definition in § 23.160(a)(10) prior to the effective date of this section; or

 

(B) Representations made pursuant to the interpretation of the term ‘U.S. person’ in the [2013 Guidance], prior to the effective date of this section.”

Guarantee

“[F]or purposes of this Guidance, the Commission would interpret the term ‘guarantee’ generally to include not only traditional guarantees of payment or performance of the related swaps, but also other formal arrangements that, in view of all the facts and circumstances, support the non-U.S. person’s ability to pay or perform its swap obligation with respect to its swaps.”15

“[A]n arrangement pursuant to which one party to an uncleared swap has rights of recourse against a guarantor, with respect to its counterparty's obligations under the uncleared swap. For these purposes, a party to an uncleared swap has rights of recourse against a guarantor if the party has a conditional or unconditional legally enforceable right to receive or otherwise collect, in whole or in part, payments from the guarantor with respect to its counterparty's obligations under the uncleared swap. In addition, in the case of any arrangement pursuant to which the guarantor has a conditional or unconditional legally enforceable right to receive or otherwise collect, in whole or in part, payments from any other guarantor with respect to the counterparty's obligations under the uncleared swap, such arrangement will be deemed a guarantee of the counterparty's obligations under the uncleared swap by the other guarantor.”16

“[A]n arrangement pursuant to which one party to a swap has rights of recourse against a guarantor, with respect to its counterparty's obligations under the swap. For these purposes, a party to a swap has rights of recourse against a guarantor if the party has a conditional or unconditional legally enforceable right to receive or otherwise collect, in whole or in part, payments from the guarantor with respect to its counterparty's obligations under the swap. In addition, in the case of any arrangement pursuant to which the guarantor has a conditional or unconditional legally enforceable right to receive or otherwise collect, in whole or in part, payments from any other guarantor with respect to the counterparty's obligations under the swap, such arrangement will be deemed a guarantee of the counterparty's obligations under the swap by the other guarantor. Notwithstanding the foregoing, until December 31, 2027, a person may continue to classify counterparties based on:

(i) Representations that were made pursuant to the “guarantee” definition in § 23.160(a)(2) prior to the effective date of this section; or

(ii) Representations made pursuant to the interpretation of the term “guarantee” in the [2013 Guidance], prior to the effective date of this section.”17

Contributors

The authors would like to thank Jessa Goldman and Kaley Furumo for their contributions to this OnPoint.

Footnotes

  1. Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations, 78 Fed. Reg. 45292 (Jul. 26, 2013).
  2. Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants—Cross-Border Application of the Margin Requirements, 81 Fed. Reg. 34818 (May 31, 2016).
  3. Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants, 85 Fed. Reg. 56924 (Sept. 14, 2020).
  4. 2013 Guidance, 78 Fed. Reg. at 45316.
  5. Under the 2013 Guidance, a fund that is publicly-offered exclusively to non-U.S. persons is not a U.S. person even if its primary investment adviser is a U.S. person.  This portion of the definition has not caused compliance issues for the buy-side and is not discussed in detail in this Dechert OnPoint.
  6. CFTC Regulation 23.160(a)(9).
  7. CFTC Regulation 23.23(a)(9).
  8. Where a U.S. person trades swaps with a counterparty that is not a swap dealer, major swap participant, or derivatives clearing organization and is itself not a U.S. person, the swap reporting requirements are the regulatory obligation of the U.S. person. See CFTC Regulation 45.8(e). Funds finding themselves in such a position oftentimes face operational issues with setting up the reporting.
  9. See CFTC Regulation 23.23(a)(iv).
  10. Under the definition of a “swap dealer” in CFTC Regulation 1.3, an entity that deals in swaps under a de minimis threshold of $8 billion is not required to register with the CFTC as a swap dealer. Entities engaged in dealing activity that are not themselves U.S. persons do not need to count swaps traded with other non-U.S. persons towards the $8 billion threshold. Hence the importance of the 2020 Swap Dealer Cross-Border Rule U.S. person definition to the sell-side.  The 2020 Swap Dealer Cross-Border Rule U.S. person definition does not provide much in the way of reducing the buy-side’s burdens of Dodd-Frank Act regulatory compliance, but since the requirement to comply is imposed directly on the sell-side, the harmonization effort should still be helpful for the market as a whole.
  11. Group B requirements are: (1) swap trading relationship documentation; (2) portfolio reconciliation and compression; (3) trade confirmation; and (4) daily trading records. CFTC Regulation 23.23(a)(7) (defining “Group B requirements” to mean the requirements set forth in CFTC Regulation 23.202 and CFTC Regulations 23.501 through 23.504). Group C requirements are external business conduct rules, which establish certain additional business conduct standards governing the conduct of SDs and MSPs in dealing with their swap counterparties. CFTC Regulation 23.23.(a)(8) (defining “Group C requirements” to mean the requirements set forth in CFTC Regulation 23.400 through 23.451 and CFTC Regulations 23.700 through 23.704).
  12. This Dechert OnPoint does not examine the portion of the no-action letter addressing conduit affiliates in any greater detail as buy-side market participants are not and do not generally have conduit affiliates, which are used more typically in sell-side structures where specific entities are assigned the task of hedging risks of a U.S. affiliate.
  13. Language not included in the 2016 Cross-Border Uncleared Margin Rule appears in bold, underlined, and italicized text.
  14. CFTC Regulation 23.160(a)(2).
  15. 2013 Guidance at 45320.
  16. CFTC Regulation 23.160(a)(2).
  17. CFTC Regulation 23.23(a)(9).