On the eve of a critical December 31, 2012 deadline for many market participants in the global over-the-counter ("OTC") derivatives market, the US Commodity Futures Trading Commission ("CFTC") approved interim final rules (the "Rules") for the largest participants in the OTC derivatives market, Swap Dealers and Major Swap Participants, thereby affecting others in the international OTC derivatives market so long as they face Swap Dealers, Major Swap Participants and in some cases their affiliates and divisions or other offices or branches of these large firms. The Commission voted 5-0 via seriatim to approve the Rules, which will become effective immediately upon their publication in the Federal Register.

This important regulatory development has two primary effects, namely, the Rules:

  • Defer until May 1, 2013 the compliance date for external business conduct rules which are a primary subject of the ISDA August Dodd Frank Protocol (CFTC Regulations 23.201(b)(3)(ii); 23.402; 23.410(c); 23.430; 23.431(a)-(c); 23.432; 23.434(a)(2), (b), and (c); 23.440; 23.450; and 23.505), thereby relieving many market participants from having to adhere to this protocol by December 31, 2012; and
  • Postpone until July 1, 2013 the compliance dates relating to swap trading relationship and portfolio reconciliation (CFTC Regulations 23.502 and 23.504). The Rules apply to all market participants in the global OTC derivatives market involved in trading with U.S. and other registered Swap Dealer and Major Swap Participants. The compliance dates for all other provisions of subpart F, subpart H, and subpart I of Part 23 of the CFTC’s rules remain unchanged.

The Commission requests written comments on the Rules within 30 days after their publication in the Federal Register, upon which time the CFTC will consider any comments received and will make changes to the interim final rules, if necessary.