CFTC Proposed Rule: Business Conduct Standards for Swap Dealers and Major Swap Participants with Counterparties
|FINAL RULE: This page refers to the proposed rulemaking on business conduct standards for swap dealers and major swap participants. The CFTC final rule was issued at its January 11, 2012 open meeting.|
|Final Rule Issue||Effective Date||Compliance Date (Extended)|
|February 17, 2012||April 17, 2012||May 1, 2013|
On December 9, 2010, the CFTC held an open meeting on the Seventh Series of Proposed Rules under the Dodd-Frank Act. Among the topics at this meeting was a rule proposal regarding business conduct standards for swap dealers and major swap participants dealing with counterparties.<ref>Open Meeting on Seventh Series of Proposed Rules under the Dodd-Frank Act. CFTC. Retrieved on February 21, 2011.</ref>
Highlights of the Proposal:
- General prohibitions on fraud, record retention, supervision, confidentiality, and abusive practices such as the "front-running" of customer orders
- Counterparty responsibilities such as:
- disclosure of risks and potential conflicts of interest,
- daily mark-to-market, and the option to clear swap on a derivatives clearing organization (DCO),
- standards for execution, institutional suitability, and "fair and balanced" communication.
- Duties for any swap dealer acting as "advisor to a special entity" to ensure that the counterparty to the swap has a "responsible person" who understands the risks, the details of the swap, and acts as a fiduciary to the special entity.
Related Documents: Fact Sheet, Q&A, and Rule Proposal as it Appeared in the Federal Register