CFTC Eliminates PTMMM Disclosure Requirements for Swap Entities

On April 4, 2025, the CFTC's Division of Market Participants issued No-Action Letter 25-09 regarding the controversial Pre-Trade Mid-Market Mark ("PTMMM") requirements in CFTC Regulation 23.431, effectively eliminating the PTMMM disclosure requirements for swap dealers and major swap participants (collectively, "swap entities"). This is particularly notable because since the PTMMM disclosure requirements were initially adopted in 2012, the CFTC brought and settled 12 enforcement actions against swap dealers for failure to comply with the PTMMM disclosure requirements for a total of $117 million, in addition to imposing onerous remedial undertakings.

The enforcement actions were significant in number as well as by the monetary penalties imposed. For example, in September 2021, the CFTC imposed a $1.5 million monetary penalty against a swap dealer for, among other things, failure to comply with the PTMMM disclosure requirement, and in April 2023 the CFTC imposed a $15 million monetary penalty against a swap dealer for failing to provide an accurate PTMMM for certain "same-day" swaps. In 2020, as part of a settlement with the CFTC, a swap dealer was required to retain a three-year independent monitor to supervise their remediation efforts after they settled allegations that the swap dealer provided counterparties with PTMMMs that were inaccurate, untimely, or failed to provide a PTMMM entirely, affecting tens of thousands of swaps.

Market participants have had difficulty in complying with the requirements and were able to achieve the rule's stated purpose through alternative measures, which brought significant criticism to the disclosure requirements. Due to criticism of the requirements, CFTC Staff previously issued nine separate no-action letters to provide relief from the PTMMM disclosure requirements in a variety of contexts where market participants had shown that the PTMMM requirement was unnecessary or unworkable.

No Action Letter 25-09

No Action Letter 25-09 was provided in response to a request for no-action relief from the International Swaps and Derivatives Association, Inc. ("ISDA"), the Institute of International Bankers ("IIB"), and the Securities Industry and Financial Markets Association ("SIFMA") (collectively, "the Associations"). In their letter that was submitted to the CFTC on March 26, 2025, the Associations stated that while well-intentioned, the PTMMM disclosure requirements had not achieved their intended purpose and that there was no empirical evidence demonstrating that the requirements meaningfully reduced any perceived information asymmetry or facilitated negotiations. The Associations argued that given that swap entitiesare generally sophisticated market participants and already have access to a wide range of pricing data and extremely advanced modeling tools, the PTMMM disclosures offered little value, "so much so that buy-side market participants have advocated for its removal." Finally, the Associations noted that removing the PTMMM would harmonize the Commission's requirements with the SEC's rules for security-based swaps which do not require a PTMMM.

In response, CFTC Staff determined that a reconsideration of the usefulness and effectiveness of the PTMMM requirement should be undertaken, and, thus, a no-action position was warranted until such time that such reconsideration is completed. Accordingly, CFTC Staff will not recommend that the Commission commence an enforcement action against a swap entity for failure to satisfy the PTMMM requirement for its non-swap entity counterparties. However, this no-action position applies only to the PTMMM requirement and does not affect any obligation to provide a daily mark pursuant to CFTC Regulation 23.431(d) or any obligation to report a transaction or information concerning a transaction under part 43 or part 45 of the Commission's Regulations. This no-action position will continue until the adoption by the Commission of a regulation addressing the PTMMM disclosure requirements.

Takeaway

It is expected that eliminating the PTMMM disclosure requirements may create efficiencies in swaps trading without detriment to a swap entity's counterparties while reducing the overall compliance burden on firms complying with the PTMMM requirement; however, this no-action relief does not affect any obligations to provide a daily mark. If you have any questions about the PTMMM requirements or No-Action Letter 25-09, please reach out to DWT's commodities team.