On July 24, the Commodity Futures Trading Commission approved an implementation schedule to phase in compliance with the mandatory swap clearing requirements created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act). Under the Dodd-Frank Act, the path to mandatory clearing begins with the publication of a proposed clearing determination for a particular class of swaps, followed by a 30-day public comment period, and a final clearing requirement determination which, absent a stay of up to 90 days, must be made within 90 days of the publication of the proposed determination. The new CFTC rule provides that, when the CFTC deems it appropriate, market participants will have additional time to comply with any such clearing requirement determination.
As proposed, the final rule divides market participants into three categories and establishes a compliance schedule for each category. Category 1 includes swap dealers, security-based swap dealers, major swap participants, major security-based swap participants, and active funds. Pursuant to the CFTC’s schedule, Category 1 entities will have 90 days from the date that a final clearing requirement determination is published in the Federal Register to comply. Category 2 includes commodity pools, “private funds” (certain funds that are exempt from registration under the Investment Company Act of 1940) other than “active funds” (private funds that are not third-party subaccounts that execute 200 or more swaps per month), and a person predominately engaged in banking or financial activities (provided that the entity is not a third-party sub-account). Category 2 entities will have 180 days following the publication of a final clearing requirement determination in the Federal Register to comply. Category 3 entities, which include those involving third-party subaccounts, ERISA plans and other entities not exempt from the mandatory clearing requirement, will have 270 days following publication of a final clearing requirement determination in the Federal Register to comply.
The CFTC has reserved to itself the discretion to determine whether to apply the compliance schedule in connection with a particular clearing requirement determination.
The final rule is available here.