CFTC reveals key rule-making milestones
The margin required for uncleared swaps in the US will be revealed early next year, according to a new Dodd-Frank Act implementation timeline released by the Commodity
Futures Trading Commission (CFTC).
In a speech to the Financial Markets
Law Committee Seminar at the Bank of England, CFTC chairman Gary Gensler said
the agency was collaborating with European and other international regulators
to coordinate a global approach for uncleared swaps margin.
As the G-20's January 2013 deadline for OTC derivatives reform nears, the CFTC has completed 39 of the 60 rules it was mandated to create. The
rules require swaps to be standardised, traded on newly created platforms and
Gensler said by the end of the month the CFTC could decide which instruments must initially be cleared. They are expected to include interest rate swaps in US dollars, euros,
British pounds and Japanese yen, as well as a number of CDS indices in Europe
would lead to required clearing by swap dealers and the largest hedge funds as
early as the end of January,” said Gensler. “Compliance would be phased in for
other market participants through the summer of 2013.”
is also finalising rules on minimum block sizes and swap execution facilities – a new type of market for cleared swaps, created by Dodd-Frank – which it expects
to complete this fall.
derivatives trade bodies, the Futures Industry Association and International
Swaps and Derivatives Association, have published a new version of the agreement
which underpins cleared swaps.
1.1 of the agreement, which ensures transactions are compliant with the CFTC’s
rules on clearing, became effective on 1 October. The new version includes a
deletion of optional tri-party annexes which permitted clearing members to set
credit limits for their customers. The amendment prevents clearing brokers from
discovering the identity of a customer’s original executing counterparty.
changes include additional language to clarify that clearing brokers must
accept trades as soon as technologically possible and clarity on the cut-off
times used to determine which counterparty is responsible for breakage costs.