Swap Market Participants: New CFTC Rules Go Into Effect April 10, 2013

“The Office of Financial Research (OFR) of the US Treasury Department … has been participating in a global effort to improve the infrastructure of the financial markets by creating a process for assigning every participant in financial transactions a … unique identification number that facilitates transactional recordkeeping and reporting for financial transactions and can also be used for risk management purposes.” (Katten Muchin Rosenman)

On April 10, 2013, important new Commodities Futures Trading Commission reporting and recordkeeping requirements go into effect for all swap market participants.

Part of the Dodd-Frank Act financial reforms, the new rules impose important new burdens on entities not previously subject to the Act. From attorneys at Skadden Arps:

“These impending requirements are notable in their breadth, with many of the requirements applying to U.S. swap counterparties that are not required to register with the CFTC as swap dealers or major swap participants (non-SD/MSPs). The new reporting requirements will in some instances make non-SD/MSPs responsible for reporting both new and certain pre-existing (even terminated or expired) swaps, FX forwards and FX swaps that are exempt from many other Dodd-Frank Act regulations, inter-affiliate swaps, and swaps entered into with foreign entities that are not registered with the CFTC, including certain foreign banks and financial institutions.”

What to do? Three things:

1. Register for CFTC Interim Compliant Identifier (CICI):

“… all swap counterparties, even those that are not swap dealers or major swap participants, and even those not required to report swap data, must obtain a CICI before April 10, 2013. In addition, each entity must maintain its own CICI after it is issued, keeping its reference data current and accurate, and re-certifying the record at appropriate intervals.” (Leonard, Street and Deinard)

2. Meet new reporting requirements:

“There also are recordkeeping requirements for Historical Swaps and New Swaps that will apply to swap market participants. The recordkeeping requirements for Historical Swaps require non-SD/MSPs to keep information and documents related to the terms of the historical swaps, which would include confirmations, master agreements and credit support annexes. For New Swaps, a non-SD/MSP will be required to keep ‘full, complete, and systematic records, together with all pertinent data and memoranda, with respect to each swap in which [it is] a counterparty, including, without limitation all records demonstrating that [it is] entitled, with respect to any swap, to elect the clearing requirement exception.’” (Skadden)

3. Mark your calendar for future deadlines:

“Also please note two other upcoming CFTC compliance dates. Beginning May 1, 2013, a commercial entity entering a swap contract with a swap dealer must agree to the ISDA August 2012 Dodd-Frank Protocol or similar contractual terms. Beginning September 9, 2013, mandatory clearing for certain interest rate swaps and credit default swaps begins for non-financial, commercial entities.” (Venable)

The updates:

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