The CFTC has adopted two proposed rules on what it calls “implementation phasing.” This relates to the timeline under which various market participants will bring their swap transactions into compliance with new regulatory requirements, including mandatory clearing and trading, as well as swap dealer documentation and margining requirements.
The first rule proposes a schedule for phasing in compliance with the swap clearing and trading mandates. Market participants would be required to comply with a CFTC-issued clearing mandate within three, six or nine months, depending on the swap’s counterparties. This timeline would begin after the effective date of a mandatory clearing determination (a mandatory clearing determination is a process in which a clearinghouse submits a swap to the CFTC to determine whether clearing is mandatory). In addition, the proposal states that no market participant would be required to comply with the clearing mandate before the CFTC finalizes certain key rules.
The second proposal is an implementation schedule for previously proposed rules on swap trading documentation requirements and margin requirements for uncleared swaps. The proposed compliance schedule would apply to swap dealers and major swap participants that are registered with the CFTC, and would allow for a three, six or nine-month compliance timeline, depending on a swap dealer’s counterparty.
CFTC Chairman Gensler, in his opening remarks, also addressed a tentative schedule for finalizing the Dodd-Frank rules. The time frame is summarized below:
Rules to be addressed during the remainder of 2011:
- Clearinghouse Rules
- Data Recordkeeping and Reporting
- End-User Exception
- Entity Definitions/Registration
- External Business Conduct
- Internal Business Conduct (Duties, Recordkeeping and Chief Compliance Officers)
- Position Limits
- Product Definitions/Commodity Options
- Real-Time Reporting
- Segregation for Cleared Swaps
- Trading – Designated Contract Markets and Foreign Boards of Trade
Rules to be addressed during the first quarter 2012:
- Capital and Margin
- Client Clearing Documentation and Risk Management
- Conforming Rules
- Disruptive Trading Practices
- Governance and Conflict of Interest
- Internal Business Conduct (Documentation)
- Investment of Customer Funds
- Swap Execution Facilities
- Segregation for Uncleared Swaps
- Straight-Through Trade Processing
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