Today, the CFTC deferred the compliance date for many of the Dodd-Frank's external business conduct standards from December 31, 2012 to May 1, 2013. The press release and related Interim Final Rules ("IFRs") are available here.
The CFTC based the issuance of the IFRs and related compliance date extension, to a large extent, on representations made to the regulator by the International Swaps and Derivatives Association ("ISDA") regarding the lack of preparedness of the vast majority of derivatives market participants to adhere to the ISDA Dodd-Frank Protocol.
ISDA has represented to the [CFTC that, despite an extensive counterparty outreach and education effort by its members, only 17.5% of counterparties to prospective [Swap Dealers or "SDs"] and [Major Swap Participants or "MSPs"] have submitted an adherence letter for its first Dodd-Frank protocol and less than 1% have submitted the completed questionnaires necessary for SDs and MSPs to make use of the protocol and integrate necessary counterparty information into their compliance systems. ISDA has represented that more time is needed for these counterparties to understand the CFTC's requirements, to understand the legal consequences of adhering to the protocol, and to gather the information needed to complete the questionnaire from principals and beneficial owners.
In other words, the implementation state for the Dodd-Frank Protocol may accurately be described as "Ready-Set-WHOA!" Based upon the IFRs and related preamble issued by the CFTC, it appears that May Day (May 1, 2013) is the "new" New Years Eve (December 31, 2012), at least for for purposes of the Dodd-Frank Protocol adherence deadline.
As part of the issuance of the IFRs, the CFTC also:
- Extended the compliance dates for two other rules until July 1, 2013: the Portfolio Reconciliation Rule (Rule 23.502) and the Swap Trading Relationship Documentation Rule (Rule 23.504); and
Declined to extend complianace dates for the following business conduct standards applicable to SDs and MSPs:
- Prohibitions on fraud, manipulation and abusive practices (Rule 23.410(a));
- Fair dealings in communications (Rule 23.433); and
- Reasonable diligence regarding recommended swaps (Rule 23.434(a)(1)).
As a result, the compliance date for these three business conduct standards was not affected by the deferral for Dodd-Frank Protocol related business conduct standards.