On June 7 2013 a number of Canadian mutual funds obtained exemptive relief under National Instrument (NI) 81-102 – Mutual Funds to permit them to enter into cleared swaps in accordance with the clearing mandates issued by the US Commodity Futures Trading Commission (CFTC) under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The relief allows these mutual funds to enter into cleared swaps without having to comply with:

  • the counterparty designated rating requirement;
  • the 10% mark-to-market exposure limitation; and
  • certain of the custodial requirements in NI 81-102.

On November 28 2012 the CFTC issued its first mandatory clearing determination pursuant to the act. These final rules require that certain types of swap between specified categories of market participant be cleared. Generally, where one party to a swap is a 'US person' (as defined by the CFTC) and the other party is, among others, a mutual fund, that swap must be cleared, in the absence of an available exception. The CFTC has adopted final rules that create a phased-in implementation schedule for compliance with these mandatory clearing determinations. For certain types of swap (eg, fixed-to-floating interest rate swaps, basis swaps and untranched credit default swaps on certain North American indices), the clearing mandate was effective for mutual funds and other market participants on June 10 2013. For iTraxx credit default swap indices, the compliance date for clearing was July 25 2013.

For further information on this topic please contact Carol E Derk at Borden Ladner Gervais LLP by telephone (+1 416 367 6000), fax (+1 416 367 6749) or email (cderk@blg.com).

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