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CFTC Addresses Reporting of Pre-Enactment Swaps.



On October 1, 2010, the Commodity Futures Trading Commission The Commodity Futures Trading Commission (CFTC), the federal regulatory agency for futures trading, was established by the Commodity Futures Trading Commission Act of 1974 (88 Stat. 1389; 7 U.S.C.A. 4a), approved October 23, 1974.  conducted a public meeting at which it discussed and unanimously approved the issuance of an Interim Final Rule regarding the reporting of "pre-enactment" swaps (swaps that remained outstanding on July 21, 2010, the date of enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act). The reporting of pre-enactment swaps is required by Section 729 of Title VII of Dodd-Frank; however, the Interim Final Rule does not require any specific reporting as yet. The stated goal of the Interim Final Rule is to provide for retention of certain swap data until such time as permanent reporting rules are established by the CFTC CFTC

See: Commodity Futures Trading Commission


CFTC

See Commodity Futures Trading Commission (CFTC).
. The Interim Final Rule is effective immediately, and the CFTC will accept comments for a 30 day period before the Interim Final Rule takes its final form, to then be effective until the issuance of a permanent final rule to be proposed later this year.

The Interim Final Rule provides details as to the reporting requirements for pre-enactment swaps that are expected to come with the issuance of a final rule. Specifically, the Interim Final Rule details the type of information regarding pre-enactment swaps that swap participants should be sure to retain in the event they are captured by the final rule on reporting. The appropriate counterparties responsible for that reporting are also identified in the Interim Final Rule.

Because important definitions including that of "swap" remain undetermined under Dodd-Frank, the full scope of the reporting requirements for pre-enactment swaps remains unknown. However, the CFTC has stated that it must mandate such reporting no later than 180 days after the effective date of Title VII, which effective date is 360 days from July 21, 2010. Thus, actual reporting of pre-enactment swaps is required no later than early 2012. The CFTC was also required by Dodd-Frank to adopt the Interim Final Rule no later than October 18, 2010.

Under the Interim Final Rule, certain enumerated This term is often used in law as equivalent to mentioned specifically, designated, or expressly named or granted; as in speaking of enumerated governmental powers, items of property, or articles in a tariff schedule.  information regarding pre-enactment swaps must be preserved in preparation for filing with either the CFTC or a swap data repository See repository.  within 60 days of the registration of the appropriate swap data repository (none of which have yet been registered), or by the compliance date to be established in the final rulemaking, whichever occurs first.

The Interim Final Rule includes a new note to Part 44 of the CFTC's regulations advising counterparties to pre-enactment swaps to retain, in anticipation of reporting under a coming final rule, the following information:

anything necessary to identify and value the transaction;

time and date of execution;

price information;

whether the transaction was accepted for clearing and identity of clearing organization;

any modifications to the transaction; and

the final confirmation.

The Interim Final Rule also provides guidance as to which counterparties will be responsible for reporting pre-enactment swaps once reporting rules are in place. With respect to a swap in which only one counterparty is a Swap Dealer or Major Swap Participant (as those terms will be defined by the CFTC and SEC in a separate rulemaking), that entity will be responsible for reporting the pre-enactment swap. Where one counterparty is a Swap Dealer and the other is a Major Swap Participant, the Swap Dealer is responsible for reporting the pre-enactment swap. Finally, with respect to any other swap, the counterparties must select one of them to carry out the reporting obligations under the final rule.

The Interim Final Rule provides some additional details as to the responsibility for reporting pre-enactment swaps under Dodd-Frank, as well as the information likely to be captured by the final reporting requirements. However, the full contours of the pre-enactment swap reporting requirements remain to be seen, and will presumably pre·sum·a·ble  
adj.
That can be presumed or taken for granted; reasonable as a supposition: presumable causes of the disaster.
 only become clear with the issuance of a proposed final rule on this subject later this year. In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified"
meantime, meanwhile
, entities that were or remain parties to swaps that remained in effect on July 21, 2010 should ensure that they are retaining the information enumerated by the Interim Final Rule and making appropriate preparations to report those pre-enactment swaps, in anticipation of the issuance of a final rule.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mr David Perlman

Bracewell & Giuliani LLP LLP - Lower Layer Protocol  

711 Louisiana Street

Houston

Texas

UNITED STATES United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area.  

E-mail: Michelle.mccormick@bgllp.com

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Publication:Mondaq Business Briefing
Date:Oct 6, 2010
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