The Commodity Futures Trading Commission (the “Commission”) today adopted interim final rules that defer the dates by which swap dealers (“SDs”) and major swap participants (“MSPs”) are required to comply with many provisions of the Commission’s external business conduct rules and with certain internal business conduct rules that require agreements or the exchange of information with counterparties.
Specifically, the interim final rules extend until May 1, 2013 the compliance date for Subpart H of Part 23 of Commission regulations (other than regulations 23.410(a) and (b), 23.431(d), 23.433, 23.434(a)(1) and 23.451). The deferred rules include disclosures of material risks, characteristics and incentives, including disclosure of the pre-trade mid-market mark, scenario analysis, clearing disclosures, the requirement to make counterparty suitability determinations with respect to a recommended swap or swap trading strategy and the provisions relating to Special Entities (other than those relating to political contributions). The May 1, 2013 compliance date also applies to Commission Rules 23.505 (SD and MSP documentation of end-user clearing exemption) and 23.201(b)(3)(ii) (records indicating that the SD or MSP has notified its counterparty of an address to which complaints may be directed). The current compliance dates continue to apply to provisions of the external business conduct rules relating to (i) prohibitions on fraud, manipulation and abusive practices, (ii) disclosure of a daily mark, (iii) fair dealings in communications, and (iv) reasonable diligence to understand the potential risks and rewards associated with a recommended swap or trading strategy.
In addition, the interim final rules extend until July 1, 2013 the compliance dates for Commission regulations 23.502 (portfolio reconciliation) and 23.504 (swap trading relationship documentation). The comment period on the interim final rules will end 30 days after their publication in the Federal Register.
The interim final rules respond to requests for rulemaking from the International Swaps and Derivatives Association, Inc. The requests stated that the deferrals were necessary to facilitate a smooth transition to the new regulatory regime and avoid market disruptions and reduced liquidity.