US derivatives regulator the Commodity and Futures Trading Commission (CFTC) has voted to delay the effective date of new US derivatives rules introduced by the Dodd-Frank Act until 31 December 2011.
The CFTC is currently writing rules for the exchange trading and central clearing of OTC derivatives. The general effective date for certain provisions of title VII of the Dodd-Frank Act had been set at 360 days after enactment, 16 July 2010.
But the CFTC has said that final rules defining certain terms – including swap, security-based swap, and security-based swap agreement – will not be in place in time, leading to concerns about the impact on swaps market between 16 July 2011 and the completion of the rulemaking process.
To provide clarity to market participants about the general effective date of the Dodd-Frank Act, the CFTC has proposed to temporarily exempt firms with respect to provisions of the Commodity Exchange Act (CEA) that are affected by the Dodd-Frank Act if they include the terms that require further definition.
The CFTC has also proposed granting relief from provisions of the CEA that apply to agreements, contracts, and transactions in exempt or excluded commodities as a result of the repeal of various CEA exemptions and exclusions as of 16 July 2011. The proposed temporary relief will expire either upon the effective date of the applicable final rule further defining a relevant term or 31 December, 2011.
Earlier this month, US trade body the Securities Industry and Financial Markets Association (SIFMA) warned that Dodd-Frank would subject security-based swaps to old securities laws, potentially introducing new additional compliance requirements that could pose a problem for banks unsure of the exact rules. The letter requested a delay of six months on the July deadline.
Additionally, the Financial Services Committee of the US House of Representatives voted through a bill on the 25 May 2011 which extended the deadline for implementing Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act to 30 September 2012, with the exception of regulatory reporting rules and the definition of the certain terms mentioned above.
A version of the bill, which delayed the deadline for compliance with new derivatives rules to the end of December 2012 had already been approved by the House Agricultural Committee on 4 May.
A public comment period is open on the CFTC's decision, until 28 June 2011.