CFTC Confirms Morgan Stanley Legacy Swaps Retain Exemption Status Following Internal Merger

The Commodity Futures Trading Commission’s Market Participants Division and Division of Clearing and Risk have issued a joint interpretive letter addressing the regulatory treatment of legacy swaps following an internal corporate reorganization at Morgan Stanley. The inquiry examined the implications of an internal merger conducted by Morgan Stanley, which operates as a CFTC-registered swap dealer, and whether the restructuring would impact the regulatory standing of its existing swap portfolio. Following a review of the facts and circumstances surrounding the transaction, staff from both divisions concluded that the swaps in question retain their legacy swap status under the CFTC's uncleared swap margin and swap clearing requirements. Specifically, the Market Participants Division determined that the firm's legacy swaps will keep their legacy classification for counterparties subject to uncleared swap margin rules, thereby preserving their exempt status. Simultaneously, the Division of Clearing and Risk confirmed that the corporate merger will not trigger swap clearing mandates for the legacy transactions.