On September 28 2016 the Commodity Futures Trading Commission (CFTC) expanded the existing clearing requirement to interest rate swaps through an amendment to Regulation 50.4(a), requiring that market participants submit a covered swap for clearing by a derivatives clearing organisation.(1)

The amendment expanded four interest rate swap classes to require clearing by a derivatives clearing organisation:

  • fixed-to-floating interest rate swaps denominated by the Australian dollar, Canadian dollar, Hong Kong dollar, Mexican peso, Norwegian krone, Polish zloty, Singapore dollar, Swedish krona or Swiss franc;
  • basis swaps denominated in Australian dollars;
  • forward rate agreements denominated in Norwegian krone, Polish zloty or Swedish krona; and
  • overnight index swaps (OIS) denominated in Australian or Canadian dollars, as well as US dollar, euro and sterling-denominated OIS with termination dates up to three years.

Unlike the proposed rulemaking, Australian dollar-denominated forward rate agreements were not included in the final rule. Compliance with the final rule will be phased in over a two-year period according to an implementation schedule based on when analogous clearing requirements will take effect in other jurisdictions.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact Donna M Parisi, Geoffrey B Goldman or Azam H Aziz at Shearman & Sterling LLP by telephone (+1 212 848 4000) or email (dparisi@shearman.com, geoffrey.goldman@shearman.com or aaziz@shearman.com). The Shearman & Sterling website can be accessed at www.shearman.com.

Endnotes

(1) The final rule is available at www.cftc.gov/idc/groups/public/@newsroom/documents/file/federalregister092816.pdf, the question and answer document is available at www.cftc.gov/idc/groups/public/@newsroom/documents/file/irsclearing_qa092816.pdf.