In brief
On December 9, 2025, the Commodity Futures Trading Commission (CFTC) issued No-Action Letter 25‑42, providing important relief and clarification for market participants navigating cross-border swap requirements. This no-action letter (NAL) addresses longstanding inconsistencies in the definitions of “US person” and “guarantee” across different regulatory requirements and offers practical compliance flexibility. Below is a summary of the key points and why they matter.
Unified definitions of “US person” and “guarantee” – The CFTC’s Market Participants Division, Division of Clearing and Risk, and Division of Market Oversight will not recommend enforcement action when market participants classify counterparties using the “US person” and “guarantee” definitions in the 2020 Cross-Border Rule1, even if competing definitions exist under prior 2013 Guidance2 or the Cross-Border Uncleared Margin Rule3.
Backward reliance on prior representations permitted – For regulatory requirements covered by the 2020 Cross-Border Rule (the “Group B” and “Group C” requirements), counterparties who made classifications and representations under the 2013 Guidance or the Cross-Border Uncleared Margin Rule before November 13, 2020 are still considered valid — even beyond the December 31, 2027 expiration limit originally established by the 2020 Cross-Border Rule.
Conduit affiliate analysis not relevant – Determination of whether a non-US person counterparty qualifies as a “conduit affiliate,” as such term was interpreted in the 2013 Guidance, is not necessary.
Supersession of conflicting No-Action Letters – This new NAL supersedes earlier staff letters to the extent they relied on definitions or frameworks inconsistent with this harmonized approach.
Eliminates cross-definition confusion – Entities have historically struggled with three competing definitions of “US person” and “guarantee,” depending on which cross-border regime applied. This NAL rationalizes the treatment, reducing inconsistent application and uncertainty.
Extended reliance period – While the 2020 Cross-Border Rule originally sunset cross-reliance post-December 2027, the CFTC now pledges not to enforce based on old classifications for legacy counterparties past that date, easing compliance burdens.
Harmonization with SEC standards – The 2020 definition aligns more closely with the SEC’s approach, enhancing regulatory coherence across US markets. This NAL helps avoid re-determination of US person status solely due to definitional mismatch.
Operational simplification – Swap dealers and other regulated entities can now streamline entity onboarding and monitoring: they may adopt the 2020 definitions without altering historical documentation or conducting re-certifications for existing counterparties.
Enforcement protection assurance – By formally committing not to use evolution in definitions as a basis for enforcement, the CFTC gives participants confidence in their compliance posture — even in evolving rule landscapes.
Use the 2020 Cross-Border Rule’s definitions of “US person” and “guarantee” as the primary standard.
Maintain prior representations for legacy relationships (under the 2013 Guidance or the Cross-Border Uncleared Margin Rule) through 2027 and beyond without needing updates.
Do not apply “conduit affiliate” analysis to non-US person counterparties.
Deem earlier, inconsistent staff no-action letters superseded, eliminating overlapping relief.
Customize approach to each legal regime — although classifications can align under the 2020 definitions, other rule-specific obligations may still need regime-specific analysis.
For swap dealers
Reassess current classification policies to ensure alignment with the 2020 definitions.
Confirm which counterparties were onboarded under pre-2020 definitions and verify that no unnecessary reclassification actions are triggered post-2027.
Update internal compliance manuals and onboarding questionnaires to reflect the finalized harmonization.
Train relationship teams and compliance staff on the unified framework to reinforce consistency across swaps, uncleared margin, clearing, and reporting obligations.
For buy-side market participants
Validate current representations provided to swap dealers and confirm no immediate updates are required.
Monitor dealer communications for any changes in onboarding or documentation requests.
Review internal compliance documentation to ensure awareness of the extended reliance period.
Consider updating internal policies to reference the 2020 definitions for future transactions.
In short, this much-welcomed no-action relief provides clarity and flexibility, reducing compliance uncertainty and aligning cross-border standards for the long term.
If you have any questions about how this no-action relief impacts your compliance obligations or operational processes, please contact Matthew Smith. We are here to help you navigate these changes.
1 17 CFR 23.23 (the “2020 Cross-Border Rule”). See also Cross-Border Application of the Registration Thresholds and Certain Requirements Applicable to Swap Dealers and Major Swap Participants, 85 FR 56924 (Sep. 14, 2020).
2 Interpretive Guidance and Policy Statement Regarding Compliance With Certain Swap Regulations (the “2013 Guidance”), 78 FR 45292 (July 26, 2013).
3 17 CFR 23.160 (the “Cross-Border Uncleared Margin Rule”). See also Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants—Cross-Border Application of the Margin Requirements, 81 FR 34818 (May 31, 2016).
