CFTC Proposed Determination: Clearing Requirement for Credit Default Swaps and Interest Rate Swaps

From MarketsReformWiki
Jump to: navigation, search
DTCC logo large.gif


Gavel.png FINAL RULES: Implementation Schedule for Clearing approved July 24, 2012. Final rule on clearing determination for IRS, CDS approved November 28, 2012.
Clearing Requirement Determination for Interest Rate and Credit Default Swaps
Final Determination Effective Date Compliance Dates
December 13, 2012 February 11, 2013 Categories I,II,III phased in - March 11/June 10/Sep. 9, 2013

On July 24, 2012, the CFTC approved a final regulation that sets a schedule for phased compliance with new clearing requirements related to the Dodd-Frank Act. According to the final rules, once the commission makes a determination on the appropriateness of the timing of implementation for a certain category of transactions, the phased compliance schedule (below) is set into motion. The commission concurrently issued its first determination for clearing of credit default swaps and interest rate swaps. [1]

The proposal entered the Federal Register on August 7, 2012. The deadline for public comment is September 6, 2012.

Highlights of the proposal:

  • Interest rate swaps (IRS) for four currencies - the U.S. dollar, British pound, Japanese yen, and the euro - will face the clearing mandate. These four currencies account for over 90 percent of the notional and trading amounts of IRS.
  • Tranched CDS will not be subject to the clearing requirement.
  • Historical swaps, or swaps entered into prior to Dodd-Frank or to the enactment of the clearing requirement are not required to be cleared.
  • Compliance with the clearing requirement will be phased in per the implementation schedule approved on July 24, 2012.
  • Each derivatives clearing organization would be required to post on its website a list of all swaps it will accept for clearing and must indicate which swaps the Commission had determined are required to be cleared.

Summary of Swap Classes to be Cleared

Class Specifications
Fixed-to-Floating Swap U.S. Dollar LIBOR; Pound Sterling LIBOR; Yen LIBOR; Euro EURIBOR, with termination between 28 days to 50 years.
No optionality
No dual currencies
No conditional notional amounts
Basis Swaps U.S. Dollar LIBOR; Pound Sterling LIBOR; Yen LIBOR; Euro EURIBOR, with termination between 28 days to 50 years.
No optionality
No dual currencies
No conditional notional amounts
Forward Rate Agreements U.S. Dollar LIBOR, Pound Sterling LIBOR, Yen LIBOR Euro EURIBOR, with termination between 3 days to 3 years.
No optionality
No dual currencies
No conditional notional amounts
Overnight Index Swaps (OIS) U.S. Dollar (Fed Funds), Euro (EONIA), Sterling (SONIA), with termination between 7 days to 2 years.
No optionality
No dual currencies
No conditional notional amounts
North American Untranched CDS Indices CDX North America,both investment grade (CDX.NA.IG) and high yield (CDX.NA.HY)
IGs of the 3-year, 5-year, 7-year, and 10-year tenor; HYs of the 5-year tenor.
European Untranched CDS Indices iTraxx Europe, 5-year and 10-year tenors
iTraxx Europe Crossover 5-year tenor
iTraxx Europe HiVol 5-year tenor

Note: Specifications adapted from CFTC Federal Register document below

Related Documents: Q&A, Federal Register Entry from Proposed Rules

References

  1. CFTC Proposes Clearing Determination for Certain Credit Default Swaps and Interest Rate Swaps. CFTC. Retrieved on July 24, 2012.

[edit] MarketsReformWiki Sponsors

McGladrey ADM Investor Services DTCC Fidessa
Personal tools
Namespaces

Variants
Actions
Navigation
John Lothian News
Special Pages
Toolbox
Share