“LCH has represented that it will use the extension period to install, and to perform full regression and performance testing of” its systems “to accept or reject trades within 60 seconds after submission,” the CFTC said in a Nov. 21 letter granting the extension to London-based LCH.Clearnet. Rules passed in March required clearinghouses to have the systems in place by Oct. 1.
Nina Truman, a spokeswoman for LCH.Clearnet, confirmed that the company had been given until March 31 to meet the clearing- time requirement.
The CFTC is among several agencies writing and implementing rules mandated by Dodd Frank, which overhauled U.S. financial regulation in the wake of the 2008 financial crisis. The act required U.S. regulators to oversee the over-the-counter swaps market for the first time.
The rule passed in March for how much time banks and clearinghouses had to accept or reject swaps said only that transactions had to be completed as soon as technologically possible if fully automated systems were used, leaving regulators confused and market participants struggling to comply. Radhakrishnan clarified the CFTC’s requirement in separate e-mails in August and September to bank and clearinghouse executives that they had two minutes and one minute, respectively, to accept or reject trades.