Difference between revisions of "CFTC Final Rule: Amendments to the Definition of ‘‘Material Terms’’ for Purposes of Swap Portfolio Reconciliation"

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Revision as of 18:39, 2 May 2016

Timeline, Amendments to the Definition of ‘‘Material Terms’’ for Purposes of Swap Portfolio Reconciliation
Proposal Date Comment Deadline Effective Date
September 22, 2015 November 23, 2015 May 6, 2016
Dodd-Frank Timeline, Confirmation, Reconciliation, and Compression, Swap Dealers and Major Swap Participants
Proposal Date Final Rule Issue Effective Date
December 28, 2010 September 11, 2012 November 13, 2012
Gavel.png FINAL RULE: The final rule was approved May 2, 2016.

On May 2, 2016, the CFTC approved a a final rule to amend a requirement that swap dealers (SD) and major swap participants (MSP) exchange the terms of swaps with their counterparties for portfolio reconciliation so that SDs and MSPs need only exchange the “material terms” of swaps.<ref>CFTC Approves Final Rule on Amendments to the Swap Portfolio Reconciliation Requirement. CFTC. Retrieved on May 2, 2016.</ref>

Background[edit]

On August 27, 2012, the CFTC issued its second round of final rulemakings related to internal business conduct standards for swap dealers and major swap participants (SD/MSPs), which included a final rule on requirements for confirmation, portfolio reconciliation and portfolio compression Requirements for swap dealers and major swap participants. The rule appeared in the Federal Register on September 11, 2012, and will become effective on November 13, 2012.

In 2013, the International Swaps and Derivatives Association, Inc. (‘‘ISDA’’) requested interpretive guidance from commission staff that would permit certain swap data elements to be excluded from portfolio reconciliation as required under the final rule. Specifically, ISDA requested that ‘‘the terms’’ of a swap that counterparties must exchange during portfolio reconciliation exercises be limited to the ‘‘material terms’’ of a swap, and that certain data fields be exempt from the definition of "material terms."

On June 27, 2013, after considering ISDA's request, the CFTC Division of Swap Dealer and Intermediary Oversight (DSIO) issued a no-action letter relating to the terms that are included in portfolio reconciliations.

On September 15, 2015, the CFTC approved a proposed rule that would amend the regulatory definition of “material terms” for purposes of swap portfolio reconciliation under Commission regulation 23.502.<ref>CFTC Announces Proposal to Amend the Definition of “Material Terms” for Purposes of Swap Portfolio Reconciliation. CFTC. Retrieved on October 1, 2015.</ref> The rule appeared in the Federal Register on September 22, 2015, and the deadline for public comment was November 23, 2015.


Summary of the Final Rule[edit]

The final rule mirrors the proposed rule with a few exceptions, chiefly:

The final rule changes Part 23.500 to exclude these 24 data fields from the definition of "primary economic terms:"

(1) An indication of whether the reporting counterparty is a swap dealer with respect to the swap;
(2) An indication of whether the reporting party is a major swap participant with respect to the swap;
(3) If the reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the reporting counterparty is a financial entity as defined in section 2(h)(7)(c) of the Act;
(4) An indication of whether the reporting counterparty is a U.S. person;
(5) An indication that the swap will be allocated;
(6) If the swap will be allocated, or is a post-allocation swap, the legal entity identifier of the agent;
(7) An indication of whether the swap is a post-allocation swap;
(8) If the swap is a post-allocation swap, the unique swap identifier of the original transaction between the reporting counterparty and the agent;
(9) An indication of whether the non-reporting counterparty is a swap dealer with respect to the swap;
(10) An indication of whether the non-reporting counterparty is a major swap participant with respect to the swap;
(11) If the non-reporting counterparty is not a swap dealer or a major swap participant with respect to the swap, an indication of whether the reporting counterparty is a financial entity as defined in section 2(h)(7)(c) of the Act; (12) An indication of whether the non-reporting counterparty is a U.S. person;
(13) An indication that the swap is a multi-asset swap;
(14) For a multi-asset swap, an indication of the primary asset class;
(15) For a multi-asset swap, an indication of the secondary asset class(es);
(16) An indication that the swap is a mixed swap;
(17) For a mixed swap reported to two non-dually-registered swap data repositories, the identity of the other swap data repository (if any to which the swap is or will be reported;
(18) Block trade indicator;
(19) Execution timestamp;
(20) Timestamp for submission to swap data repository;
(21) Clearing indicator;
(22) Clearing venue;
(23) If the swap will not be cleared, an indication of whether the clearing requirement exception in section 2(h)(7) of the Act was elected; and
(24) The identity of the counterparty electing the clearing requirement exception in section 2(h)(7) of the Act.


Related Document: Federal Register Entry, September 22, 2015[edit]

References[edit]

<references/>

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