Swap Transaction Compliance and Implementation Schedule - Clearing and Trade Execution Requirements
|FINAL RULE: Implementation Schedule for Clearing approved July 24, 2012.|
|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|
|Final Rule Issue||First MAT Determination||First Compliance Date|
|June 4, 2013||January 16, 2014||February 15, 2014|
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. On July 24, 2012, the commission made its first proposed determination for clearing of credit default swaps and interest rate swaps. 
On May 16, 2013, the CFTC approved its final swap execution rules, which included a final rule on the process by which a swap is "made available to trade." The rule entered the Federal Register on June 4, 2013; its effective date is August 5, 2013.
According to the compliance schedule, market participants must comply by later of:
- the date as determined by the clearing and trade execution compliance schedule, July 2012, or
- 30 days after a swap is deemed "available to trade."
As swaps are added to the list of those available to trade, the CFTC will post the specifications to its web site.
Among the provisions of Title VII of the Dodd-Frank Act are changes to the Commodity Exchange Act to:
- prevent any person from engaging in a swap that is required to be cleared unless that person submits the swap for clearing to a derivatives clearing organization (DCO); and
- require all clearable swaps to trade on either a designated contract market or a swap execution facility, a new type of entity created by the act.
The CFTC has been mandated by Dodd-Frank to create, implement and enforce rules regarding the trading and clearing of swaps. These rules include comprehensive regulation of swap dealers and major swap participants.
On September 8, 2011, the Commodity Futures Trading Commission (CFTC) held an open meeting to consider the issuance of proposed rulemakings under the Dodd-Frank Act. One of the agenda items was a proposed rule regarding the implementation timeline for trading and execution requirements for swap participants.
The final rules mirror those of the proposed rules, with the exception of employee benefit plans, which move from Category 2 to Category 3.
Summary of the Final Rules
The commission plans require compliance in three phases, depending on a swap entity's level of activity and sophistication:
- Phase 1 - 90 days after a final ruling involves "Category 1" entities, which include swap dealers and major swap participants, security-based swap dealers and major swap participants, and active funds.
- Phase 2 - 180 days after a final ruling involves "Category 2" entities, which will include commodity pool operators, private funds, persons predominantly involved in the business of banking or financial activity, provided that the entity is not a third-party subaccount.
- Phase 3 - 270 days after a final ruling will include "Category 3" entities, which encompasses "Category 2" entities which are third-party subaccounts, employee benefit plans, plus all other swaps.
Note: In the proposed rules, employee benefit plans were included in Category 2; in the final rulemaking, it was decided to give such plans additional time to comply, and thus moved them to Category 3.
The rulemaking appeared in the Federal Register on July 30, 2012, and its effective date is September 28, 2012
Related Documents: Fact Sheet, Q&A, Federal Register Entry from Proposed and Final Rules
- CFTC Approves Regulations to Phase in Compliance with Clearing Requirements of the Dodd-Frank Act. CFTC. Retrieved on July 24, 2012.
- Open Meeting on Two Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on September 8, 2011.