CFTC Rule Proposal: Customer Clearing Documentation and Timing of Acceptance for Clearing

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Gavel.png FINAL RULE: This page refers to the proposed rule on clearing documentation and the timing of acceptance for clearing. A final rule was approved at the CFTC Open Meeting, March 20, 2012
Dodd-Frank Timeline, Customer Clearing Documentation and Timing of Acceptance for Clearing
Final Rule Issue Effective Date Compliance Date, FCMs, DCMs, DCOs Compliance Date, SEFs
April 9, 2012 October 1, 2012 October 1, 2012 TBA

On July 19, 2011, the CFTC held an open meeting to consider two proposed and three final rules related to the Dodd-Frank Act. One of the proposed rules concerned customer clearing documentation and the timing of acceptance for clearing of swaps by registered swap entities.[1]

Under the proposal, certain swap entities - futures commission merchants, swap dealers and major swap participants - would be prohibited from entering into an arrangement with their customers that would disclose the identity of a customer’s original executing counterparty. The entities would be prohibited from:

  • limiting the number of counterparties with whom a customer may enter into a trade;
  • restricting the size of the position a customer may take with any individual counterparty, apart from an overall credit limit for all positions held by the customer;
  • impairing a customer’s access to execution of a trade on terms that have a reasonable relationship to the best terms available; and
  • preventing compliance with specified time frames for acceptance of trades into clearing.

The proposal would require a clearing member, or the derivatives clearing organization acting on its behalf, to accept or reject each trade submitted for clearing "as quickly as would be technologically practicable" if fully automated systems were used. At the open meeting, Chairman Gary Gensler suggested that this proposal could act as a gateway to a straight-through processing (STP) proposal.

Related Documents: Fact Sheet, Q&A, Federal Register Document

References

  1. Open Meeting on Three Final Rule Proposals and Two Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on July 19, 2011.

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