According to people with knowledge of the matter, the Commodity Futures Trading Commission (CFTC) is expected to publish its recently finalized rule defining swaps on August 2. Because the rule defines the compliance date as falling 60 days after the publication date, market participants will be required to comply with all rules connected to the swap definition by October 1.
Among other implications, firms will have to determine whether they must register as swap dealers or major swap participants, comply with position limit rules, and implement electronic systems to record swaps and report them to swap data repositories (SDRs).
After the existing rules go into effect, the CFTC is expected to confront the task of requiring all OTC swaps except those that are especially customized and illiquid to be traded through swap execution facilities (SEFs). In line with the goals of the 2010 Dodd-Frank Act, the move is intended to promote market transparency and price discovery in order to prevent a crisis similar to the 2008 financial collapse.
According to Jack Callahan, CME Group Executive Director and OTC Product Specialist, the new rules’ impact has already been felt. “We’ve seen a definite increase in new customer activity since the swap definitions were finalized, as many buy side firms are progressing towards clearing their first trades and completing their final stages of testing and internal readiness. We’ve already cleared trades across a variety of market participants including asset managers, insurance companies, hedge funds, and banks.”