Asset Managers in Asia Prepare for New Swaps Rules

Asset managers in Asia are gearing up in anticipation of compliance obligations stemming from the US, where a wave of new regulations will come into effect after a key announcement made by the US Commodity Futures Trading Commission (“CFTC”) last week.

Last week, the CFTC approved the definition of the term “swap,” a move which triggered the compliance dates of a host of new regulations concerning the swaps market and its participants.

The new rules will have a “huge impact” on asset managers in Asia, as compliance will be “very burdensome,” warned some lawyers.

Karl Egbert, a Hong Kong based partner at law firm Dechert, warns asset managers in Asia not to take the new regulations lightly.  As Egbert explains, “[t]he rule has two main effects – one is direct and obvious, and the other is indirect but will ultimately have a huge impact on asset managers in Asia.”

The direct and obvious consequence of the new rules is that certain entities that transact in US swaps will have to register as swap dealers and major swap participants.

The other, more indirect, consequence is that many hedge funds will now have to register with the CFTC, a process that entails fingerprinting and periodic examinations.

Rory Gallaher, a Hong Based partner at law firm Deacons, believes asset managers in Asia are unaware of how serious the impact of the new rules could be.

“Personally, I have a concern that the developments in the US concerning the regulation of the commodities and derivatives markets are potentially the elephant in the room as far as Asian managers are concerned,” Gallaher says. hanspoldoja

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Photo credit: hanspoldoja

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