CFTC’s “Swap” Definition Triggers Domino of Complaince Dates

The U.S. Commodity Futures Trading Commission (“CFTC”) voted today on a number of key rules.  Chief among them is the rule defining a “swap,” which will be used to determine which financial products will be interpreted as swaps and thus be swept in under the registration and reporting requirements under Dodd-Frank.  The rule defining a swap was passed 4-1.

The definition not only sheds light on what financial products can be expected to fall within regulatory oversight, but also triggers a domino of compliance dates on roughly a dozen new swap rules.

“Although the product definitions are important in their own right, they are even more significant because so many other aspects of the Dodd-Frank regime depend on them,” CFTC Commissioner Mark Wetjen said at the meeting.

Notably, the swap definition includes a number of exemptions for insurance and retail transactions.  Life, property, and casualty insurance were among those products said to be exempt.  Interest rate caps on consumer mortgages and home heating oil agreements were also said to be exempt.

Within two months of the definition’s publication, swap dealers and major swap participants must register themselves as such.  The CFTC estimates that approximately 125 companies will be required to go through this process.

The CFTC also voted 5-0 to pass the further refined “end-user exemption,” which will allow certain companies, primarily non-financial firms, to claim an exemption from certain Dodd-Frank requirements such as central clearing.  The final rule will now allow certain financial institutions, such as banks, with $10 billion or less in assets to be considered end-users.  The CFTC estimates that approximately 30,000 entities might take advantage of the exemption.

CFTC Chairman Gary Gensler said that the rules would be published shortly.

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Photo Credit: barryskeates

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