CFTC Issues Final Rules Establishing Swap Dealer and Major Swap Participant Requirements for Swap Trading Relationship Documentation, Swap Confirmation, Reconciliation and Compression of Swap Portfolios
Washington, DC – The Commodity Futures Trading Commission (CFTC) today approved final rules to improve the risk management procedures of swap dealers and major swap participants. The CFTC voted 5 to 0 via seriatim to approve the final rules, which will become effective 60 days after publication in the Federal Register.
The Dodd-Frank Wall Street Reform and Consumer Protection Act directed the Commission to adopt rules on the timely and accurate confirmation, processing, netting, documentation, and valuation of all swaps, as well as the reconciliation and compression of swap portfolios. These rules fulfill this congressional direction.
Proper documentation of swaps is critical to reducing risk in the bilaterally-traded swaps market and has been the focus of significant domestic and international attention in recent years. Confirmation, portfolio reconciliation, and portfolio compression have been recognized as essential post-trade processing mechanisms for reducing risk and improving operational efficiency. These rules also will help highlight risk management concerns for swap dealer and major swap participant senior management and regulators at an earlier stage.