Alert November 01, 2011

CFTC Proposes to Extend Temporary Relief Under July 14 Order that Postponed Effectiveness of Various Elements of New Dodd-Frank Regulatory Framework for Swaps

The CFTC issued a notice proposing to amend its July 14, 2011 order providing temporary exemptive relief from certain requirements in the Commodity Exchange Act (the “CEA”) resulting from the Dodd-Frank Act that otherwise became effective on July 16, 2011 under the terms of the Act.  The relief contains two principal elements.  The first provides a temporary exemption from provisions that reference terms such as “swap,” “swap dealer,” “major swap participant,” or “eligible contract participant” that the Dodd-Frank Act requires the CFTC and SEC to “further define” (which the agencies had not done by July 16).  Under the proposal, this exemption would continue until the earlier of the effective date of final rules defining the relevant terms or July 16, 2012 (instead of December 31, 2011 under the order currently). 

The second element of the July 14 order temporarily exempts certain transactions (primarily in financial, energy and metals commodities) from certain CEA provisions that apply as a result of the repeal of various CEA exemptions and exclusions under the Dodd-Frank Act.  Under the proposal, this exemption would apply until the earlier of (i) July 16, 2012 (instead of December 31, 2011 under the order currently) or (ii) such other compliance date as the CFTC may determine.  (Under the current order, the relief under the second part of the exemption would expire on December 31, 2011.)  The CFTC’s proposed changes to the July 14 order would also broaden the second element of the exemption so that as of January 1, 2012 it would apply to any agreement that fully meets the conditions for exemptive relief under part 35 of the CFTC’s regulations at December 31, 2011. 

Comments on the CFTC’s proposal must be submitted on or before November 21, 2011.