Exemption for cooperatives. Exempt cooperatives may elect not to clear certain swaps identified in paragraph (b) of this section that are otherwise subject to the clearing requirement of section 2(h)(1)(A) of the Act if the following requirements are satisfied.

For the purposes of this paragraph, an exempt cooperative means a cooperative:

Formed and existing pursuant to Federal or state law as a cooperative;

That is a “financial entity,” as defined in section 2(h)(7)(C)(i) of the Act, solely because of section 2(h)(7)(C)(i)(VIII) of the Act; and

Each member of which is not a “financial entity,” as defined in section 2(h)(7)(C)(i) of the Act, or if any member is a financial entity solely because of section 2(h)(7)(C)(i)(VIII) of the Act, such member is:

Exempt from the definition of “financial entity” pursuant to § 50.50(d); or

A cooperative formed under Federal or state law as a cooperative and each member thereof is either not a “financial entity,” as defined in section 2(h)(7)(C)(i) of the Act, or is exempt from the definition of “financial entity” pursuant to § 50.50(d).

An exempt cooperative may elect not to clear a swap that is subject to the clearing requirement of section 2(h)(1)(A) of the Act if the swap:

Is entered into with a member of the exempt cooperative in connection with originating loan or loans for the member, which means the requirements of paragraphs (5)(i), (ii), and (iii) of the definition of swap dealer in § 1.3 of this chapter are satisfied; provided that, for this purpose, the term “insured depository institution” as used in those paragraphs is replaced with the term “exempt cooperative” and the word “customer” is replaced with the word “member”; or

Hedges or mitigates commercial risk, in accordance with § 50.50(c), related to loans to members or arising from a swap or swaps that meet the requirements of paragraph (b)(1) of this section.

An exempt cooperative that elects the exemption provided in this section shall comply with the requirements of § 50.50(b). For this purpose, the exempt cooperative shall be the “electing counterparty,” as such term is used in § 50.50(b), and for purposes of § 50.50(b)(1)(iii)(A), the reporting counterparty, as determined pursuant to § 45.8, shall report that an exemption is being elected in accordance with this section.