The Commodity Futures Trading Commission introduced one interim final rule and two proposed rules on Oct. 1, 2010. These rules are the first series of proposed rules coming out of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules include ones to bring regulation to swaps and other derivatives.
The interim final rule deals with pre-enacted unexpired swaps that were entered into prior to the enactment of Dodd-Frank. According to the interim rule, swaps that were already entered into will have need to report to a registered swaps data repository or the CFTC within 60 days of the registration of the appropriate swap data repository. Further, counterparties will need to keep certain data on file pertaining to the swap. As an interim final rule, there is a 30 day comment period.
CFTC interim final rule Q&A
The two proposed rules revolve around derivatives clearing organizations (DCOs). The first of the proposed rules sets financial requirements the DCOs will need to meet to be in compliance with the CFTC. This includes keeping capital sufficient enough to cover operating costs for one year. Included in this proposed rule are requirements for what capital and in what amounts the DCOs may count to meet this requirement. This rule also includes DCOs that are determined to be systemically important (SIDCO).
CFTC DCO proposed rule Q&A
The second proposed rule creates governance rules for a number of exchanges and clearinghouses intended to limit conflict of interests. Among the market participants the rule affects are DCOs, swap execution facilities (SEFs) and designated contract markets (DCMs). To do this the CFTC is taking a two prong approach by creating structural governance requirements and limits on the ownership of voting equity and the exercise of voting power.
CFTC governance proposed rule Q&A
The next step for the two proposed rules is a comment period. “Public comment is critical. Final rules will be similar, but those comments will affect the final rules,” Gary Gensler, chairman of the CFTC, said in opening the meeting.
