CFTC no-action letter on cross border derivatives - What the buy-side needs to know

In December 2025, the Commodity Futures Trading Commission (CFTC) issued No-Action Letter 25-42 (No-Action Letter) in response to requests from the Institute of International Bankers, ISDA, and SIFMA. The No-Action Letter simplifies the rules governing the cross-border application of CFTC derivatives regulation, streamlining interactions between CFTC-regulated swap dealers (SDs) and major swap participants (MSPs) and their counterparties.

What has changed?

SDs and MSPs may now rely exclusively on the definition of "US person" from the CFTC's 2020 final rule on the cross-border application of the swaps regulatory regime under the Commodity Exchange Act (2020 Rule) to classify counterparties for the purposes of all CFTC derivatives requirements. Under the 2020 Rule, a US person is defined as:

• a natural person resident in the United States;
• a partnership, corporation, trust, investment vehicle, or other legal person organised, incorporated, or established under the laws of the United States or having its principal place of business in the United States;
• an account (whether discretionary or non-discretionary) of a US person; or
• an estate of a decedent who was a resident of the United States at the time of death.

Prior to the No-Action Letter, CFTC derivatives regulation comprised a patchwork of overlapping rulesets, including the 2020 Rule, the Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations (2013 Guidance), and CFTC Rule 23.160 (Cross-Border Uncleared Swaps Margin Rule). Different CFTC derivatives requirements were governed by different rulesets. For example, the 2020 Rule did not cover swap clearing, trade execution, real-time reporting, or swap data reporting requirements, which remained subject to the 2013 Guidance. Additionally, each ruleset also used slightly different variations of the "US person" definition such as the 2013 Guidance including collective investment schemes majority-owned by US persons.

As a result, SDs and MSPs were required to seek three separate sets of representations from counterparties to address the 2020 Rule, 2013 Guidance, and Cross-Border Uncleared Swaps Margin Rule respectively. Following the No-Action Letter, SDs and MSPs may instead rely on a single representation using the 2020 Rule definition of US person set out above. 

The No-Action letter also brings the CFTC framework in line with the US person definition used by the Securities and Exchange Commission for its regulation of security-based swaps. 

What does this mean for the buy-side?

Market participants who regularly interact with SDs and MSPs can expect simpler onboarding as SDs and MSPs update their processes and standard self-disclosure questionnaires are revised to reflect the No-Action Letter.

In the interim, however, market participants should expect some degree of inconsistency and confusion. For example, we have seen several SDs and MSPs respond to the No-Action Letter by asking counterparties to represent that they are not US persons for the purposes of the 2013 Guidance or the Cross-Border Uncleared Swaps Margin Rule, even where such a representation would be inaccurate. The No-Action Letter only alters the regulatory position of SDs and MSPs. It does not relieve their counterparties of the obligation to ensure that any representation made in onboarding documentation is accurate.

Please speak to your usual Macfarlanes contact if you have any questions.