April 26, 2024
Volume XIV, Number 117
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CFTC Proposes Additional Interest Rate Swaps for Clearing Requirement
Friday, June 10, 2016

The Commodity Futures Trading Commission is proposing to add certain interest rate swaps in nine new currencies to the list of interest rate swaps and related products that are currently subject to mandatory clearing—so these additional swaps also will be subject to mandatory Swap Execution Facility (SEF) or Designated Contract Market (DCM) trading once they have been made available to trade. The nine new currencies are the Australian dollar (AUD), Canadian dollar (CAD), Hong Kong dollar (HKD), Mexican peso (MXN), Norwegian krone (NOK), Polish zloty (PLN), Singapore dollar (SGD), Swedish krona (SEK) and Swiss franc (CHF). The CFTC also is proposing to amend its original clearing determination to raise the maturity limit for clearing overnight index swaps from two to three years.

This rule is being proposed as a result of submissions from derivatives clearing organizations that offer the relevant swaps. In accordance with CFTC Regulation 39.5, there only will be a 30-day comment period for this proposal after it is published in the Federal Register. The CFTC believes that all these categories of swaps have been or soon will be subject to mandatory clearing in other jurisdictions.

The CFTC states in the proposal that the effective date for final clearing rules for these products will not be subject to a phase-in period. The CFTC is instead asking for comment on two alternate ways of implementing this additional clearing. The first alternative is that all the additional types of swaps will become subject to clearing 60 days after a final rule is published. The second alternative is to tie the implementation of clearing for each category of swap to the implementation of an analogous clearing requirement in any non-US jurisdiction. Under this alternative, US clearing will become effective for a product on the earlier of (1) 60 days after clearing for the same product is adopted by a foreign regulator; or (2) the date two years after a final CFTC rule is published.

The proposed rule is available here.

 

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