Unless an exemption applies, commencing from June 10, 2013, all commodity pools, private funds and persons predominantly engaged in activities that are in the business of banking, or in activities that are financial in nature under section 4(k) of the Bank Holding Company Act, other than third-party subaccounts (collectively, “Category 2 Entities”), must start clearing all of their interest rate swaps and index credit default swaps, entered into with other Category 2 Entities, or with swap dealers, major swap participants or active funds, that are subject to the mandatory clearing requirement.1
Today, the Division of Clearing and Risk of the Commodity Futures Trading Commission (the “CFTC”) issued a notice2 advising swap market-participants that the effective date of the final rule adopting the “Clearing Exemption for Swaps Between Certain Affiliated Entities”3 has been automatically extended by operation of law from June 10, 2013, to June 18, 2013, due to certain requirements provided by the Congressional Review Act.
Accordingly, to ensure that the parties wishing to benefit from the exemption set forth in the “Clearing Exemption for Swaps Between Certain Affiliated Entities” will not be subject to the clearing requirement from June 10 to June 18, the notice specifies that the effective date of the clearing requirement is also extended until June 18, 2013, with respect to a swap executed between affiliated counterparties that have the status of eligible affiliated counterparties as defined in section 50.52(a) of the CFTC regulations, and elect not to clear such swap.
Please note that this extension of the clearing requirement is only limited to the specific situation described in this advisory notice and does not apply with respect to any other swap activities otherwise subject to clearing (e.g., swaps with unaffiliated parties).
Click here to see appendices.