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The Dodd-Frank Wall Street Reform and Consumer Protection Act provides that a swap or security-based swap (collectively, “Swaps”) otherwise subject to mandatory clearing is not required to be cleared if one party to such Swap (1) is not a financial entity, (2) is using such Swap to hedge and or mitigate commercial risks, and (3) notifies the Commodity Futures Trading Commission (the “CFTC”) or Securities and Exchange Commission (the “SEC” and, together with the CFTC, the “Commissions”), as applicable, how it generally meets its financial obligations associated with entering into non-cleared Swaps (such exception, the “End-User Clearing Exception”).
The Commissions have each proposed new rules to specify requirements [click to continue…]
Pursuant to Section 731 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Commodity Futures Trading Commission (CFTC) adopted proposed rules to prescribe standards for the swap trading relationship documentation for swap dealers and major swap participants, which were published in the Federal Register on February 8, 2011. [click to continue…]
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have proposed rules to specify the process for a clearing agency’s submission for review of any swap or security-based swap, or any group, category, type or class of swaps, that the clearing agency plans to accept for clearing. The CFTC’s and the SEC’s proposed rules were published in the Federal Register on November 2, 2010 and December 30, 2010, respectively. [click to continue…]
Pursuant to Section 723 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Commodity Futures Trading Commission (CFTC) adopted an interim final rule to provide for the reporting of certain swap transactions entered into on or after July 21, 2010, the date of enactment of the Dodd-Frank Act, and prior to the effective date of swap data reporting rules implementing the Dodd-Frank Act. [click to continue…]
By Hyun K. Kim
The Commodity Futures Trading Commission (the “CFTC”) and the Securities Exchange Commission (the “SEC,” and together with the CFTC, the “Commissions”) held public meetings on December 1, 2010 and December 3, 2010, respectively, to consider, among other things, the much-anticipated further definition of “swap dealer,” “major swap participant,” “security-based swap dealer,” and “major security-based swap participant” under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). The proposed rule was passed by the CFTC in a 3-2 vote and was adopted by the SEC unanimously and was published in the Federal Register for comment on December 21, 2010. The public has until February 22, 2011 to comment.
A. Definition of “Swap Dealer” and “Security-Based Swap Dealer”
In discussing this definition, the Commissions noted certain distinguishing features of swap dealers and security-based swap dealers. For example, swap dealers and security-based swap dealers:
- tend to accommodate demand for swaps and security-based swaps from other parties;
- are generally available to enter into swaps or security-based swaps to facilitate other parties’ interest in entering into those instruments;
- tend to enter into swaps or security-based swaps on their own standard terms or on terms they arrange in response to other parties’ interest, rather than requesting that other parties propose the terms of those instruments;
- tend to be able to arrange customized terms for swaps or security-based swaps upon request or to create new types of swaps or security-based swaps on their own; and
- tend to enter into swaps or security-based swaps with more counterparties than do non-dealers. [click to continue…]
