Alert December 28, 2010

CFTC OTC Derivatives Rulemaking – Business Conduct Standards for Swap Dealers and Major Swap Participants

The CFTC issued a release proposing rules related to external business standards for swap dealers and major swap participants with counterparties.  Among other things, the proposed regulations contain provisions (a) prohibiting “swap dealers” and “major swap participants” from engaging in fraud, manipulation and other abusive practices, (b) requiring verification of counterparty eligibility, (c) requiring disclosure of material risks, characteristics, material incentives and conflicts of interest regarding a swap, and (d) special provisions related to conduct of “swap dealers” and “major swap participants” when dealing with “special entities.” 

Comments on the proposals are due by February 22, 2011.