CFTC Pushes Ahead with Dodd-Frank Act Revisions

The Commodity Futures Trading Commission (CFTC) continues to move forward with regulatory changes mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

For your reference, here’s a roundup of recent rules and revisions from the CFTC:

Final Rules Defining Swap Dealers and Major Swap Participants

CFTC and SEC Define “Swap Dealer” and “Major Swap Participant” (Sutherland Asbill & Brennan LLP)

“The Commodity Futures Trading Commission and the Securities and Exchange Commission adopted highly anticipated final rules to further define the terms ‘swap dealer,’ ‘security-based swap dealer,’ ‘major swap participant,’ ‘major security-based swap participant’ and ‘eligible contract participant’ (Final Entity Rules). The Final Entity Rules are significant because entities that meet one of the aforementioned dealer or major participant definitions will be required to register with the CFTC or SEC and comply with a myriad of substantive regulatory requirements.” Read the full update>>

CFTC Adopts Final Rules Defining Swap Dealer, Major Swap Participant, and Eligible Contract Participant (Katten Muchin Rosenman LLP)

“The rule excludes persons that enter into swaps for their own account but not as a part of a regular business, insured depository institutions to the extent that they offer to enter into swaps with a customer in connection with originating a loan with that customer, certain hedging swaps, and swaps between majority-owned affiliates. The rules also provide a de minimis exemption for persons who have over the past 12 months entered into swaps and security-based swaps that are credit default swaps with a notional value of less than $3 billion and swaps with ‘special entities,’ as defined in the Commodity Exchange Act, with a notional value of less than $25 million.” Read the full update>>

CFTC Final Rulemaking Defining Swap Dealer MSP and ECP (White & Case LLP)

“Under Dodd-Frank, a major swap participant is (i) any person who maintains a ‘substantial position’ in any of the major swap categories, excluding positions held for hedging or mitigating commercial risk and positions maintained by certain employee benefit plans, (ii) any person whose outstanding swaps create ‘substantial counterparty exposure that could have serious adverse effects on the financial stability of the United States banking system or financial markets,’ or (iii) any ‘financial entity’ that is ‘highly leveraged relative to the amount of capital such entity holds and that is not subject to capital requirements established by an appropriate Federal banking agency’ and that maintains a ‘substantial position’ in any of the major swap categories.” Read the full update>>

Final Clearing Rules for Derivatives

CFTC Approves Final Rule on Customer Clearing Documentation, Timing of Acceptance for Clearing, and Clearing Member Risk Management (Katten Muchin Rosenman LLP)

“On March 20, the Commodity Futures Trading Commission approved a final rule under the Dodd-Frank Wall Street Reform and Consumer Protection Act by a vote of four to one (Commissioner O’Malia, dissenting). The final rule, which was originally proposed through four separate rule filings, addresses three areas: customer clearing documentation, time frames for submission and acceptance for clearing, and clearing member risk management for swap transactions.” Read the full update>>

CFTC Finalizes Dodd-Frank Rulemaking on Customer Clearing Documentation, Timing for Acceptance of Clearing, and Clearing Member Risk Management (Sutherland Asbill & Brennan LLP)

“The Final Rule is based on four separate proposed rules: (1) customer clearing documentation; (2) timing of acceptance of swaps for clearing; (3) allocation of bunched orders; and (4) clearing member risk management. Except for the addition of clarifying language in several instances, the Final Rule is substantially similar to the rules as they were initially proposed.” Read the full update>>

CFTC Issues Final Clearing Rules for Derivatives (Proskauer Rose LLP)

“The Final Rules become effective on October 1, 2012 for [futures commission merchants], [designated contract markets] and [derivatives clearing organizations]. For swap dealers and major swap participants, the rules become effective on the later of October 1, 2012 or the date that the Dodd-Frank registration rules for swap dealers and major swap participants become effective. For [Swap execution facilities], the rules become effective on the later of October 1, 2012 or the date that Dodd-Frank rules implementing the core principles for SEFs take effect.” Read the full update>>

Other Developments

CFTC Approves Final Rule Related to Recordkeeping and Reporting, Conflicts of Interest and Chief Compliance Officer Designation (Katten Muchin Rosenman LLP)

“On April 3, the Commodity Futures Trading Commission’s final rules relating to Swap Dealer (SD) and Major Swap Participant (MSP) Recordkeeping, Reporting, and Duties; Futures Commission Merchant (FCM) and Introducing Broker Conflicts of Interest; and Chief Compliance Officer Rules for SDs, MSPs and FCMs were published in the Federal Register. The final rules were promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act and approved by the Commission by a vote of 3-2 with Commissioners O’Malia and Sommers dissenting.” Read the full update>>

CFTC Issues No-Action Letter to Provide Temporary and Conditional Relief for Large Trader Reporting (Katten Muchin Rosenman LLP)

“On March 20, the Commodity Futures Trading Commission’s Division of Market Oversight issued a no-action letter providing temporary and conditional relief for clearing organizations and clearing members that fail to submit fully compliant reports under the CFTC’s large trader reporting system for swaps and swaptions. In order to qualify for relief, reporting parties must make a good-faith effort to comply with the large trader reporting requirements and clearing organizations and reporting entities must provide open interest data for positions during the entire relief period no later than the fifteenth day of the following month.” Read the full update>>

SEC and CFTC Propose Identity Theft Red Flag Rules (K&L Gates LLP)
“On March 6, 2012, the SEC and CFTC jointly proposed rules that would require registered broker-dealers, investment companies, investment advisers, commodity trading advisors, commodity pool operators and introducing brokers to develop and implement a written identity theft prevention program that is designed to detect, prevent and mitigate identity theft in connection with certain existing accounts or the opening of new accounts.” Read the full update>>

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