Alert September 04, 2012

CFTC Approves Final Rule Imposing Standards for Swap Dealers and Major Swap Participants

The CFTC approved a final rule that, among other things, (1) prescribes standards for swap dealers and major swap participants related to the timely and accurate confirmation of swaps, (2) requires the reconciliation and compression of swap portfolios, (3) requires timely resolutions of valuation disputes, and (4) sets forth requirements for documenting the trading relationship between swap dealers, major swap participants, and their counterparties.  The final rules release addressed elements of three different rule proposals.  In response to comments on the proposals, the final rule mandates compliance only with respect to swaps entered into after the relevant compliance dates. 

The rule also defers from October 15, 2012 to January 1, 2013 the compliance dates for some (but not all) of the rules regarding business conduct standards applicable to swap dealers and major swap participants.  The rules for which compliance is so delayed include: (a) the requirement to establish certain general policies and procedures to ensure compliance; (b) “know your counterparty” rules; (c) rules requiring the verification of certain counterparty information; (d) certain notification and disclosure requirements; and (e) requirements for swap dealers acting as advisors or counterparties to “special entities.”

The final rule will become effective 60 days after its forthcoming publication in the Federal Register.