Swap-Clearing Rules Take Effect in 2013

     WASHINGTON (CN) – The first clearance requirements for swap transactions under the Dodd-Frank Wall Street Reform and Consumer Protection Act may come into effect in late October, with dealers having to comply by February 2013, under a new Commodities Futures Trading Commission rule.



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     Under the CFTC rule, compliance will be phased-in based on the type of entity that engaged the swap that must be cleared.
     Phase-in would minimize market disruption and ease the burden on firms that must comply with the requirements, according to the CFTC.
     Category 1 entities, including swap dealers, security-based swap dealers, major swap participants and active funds, must comply with the clearing requirements within 90 days of a CFTC determination that a swap must be cleared.
     Category 2 entities, including commodity pools and private funds, will have 180 days to comply with the clearing requirement. Compliance for all other swap transactions must meet clearing requirements within 270 days after the CFTC issues a clearing requirement.
     Last week, the CFTC proposed that four types of interest rate swaps and two kinds of credit default swaps be required to be cleared. After a 30 day public comment period, the CFTC has 90 days to approve the determinations, which means that the first clearance requirements under Dodd-Frank could come into effect in late October, with dealers having to comply by February 2013.

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