Tag Archives: Swaps

CFTC Proposes Clearing Exemption for Inter-Affiliate Swaps — The Harvard Law School Forum on Corporate Governance

Small business of-interest, need-to-know and news-to-watch

Excerpt:  On August 16, 2012, the CFTC proposed rules that would permit affiliated swap counterparties to elect an exemption from mandatory swaps clearing, subject to various conditions. These conditions include reporting, documentation, risk management and other obligations, and, for swaps between financial entities, a requirement to provide variation margin. [1]

The Commodity Exchange Act requires swaps that have been designated by the CFTC as subject to mandatory clearing to be submitted for clearing to a designated clearing organization – unless a counterparty qualifies for an exemption from the clearing requirement. In proposing the inter-affiliate exemption from the clearing requirement, the CFTC recognized the risk management benefits and efficiencies that uncleared inter-affiliate swaps may provide for large financial and other organizations, but also noted its concerns about the “systemic risk repercussions” of uncleared inter-affiliate swaps. These concerns are reflected in the proposed conditions that would apply to affiliated counterparties seeking to rely on the exemption.

The CFTC’s proposed requirements for the use of the exemption are highly controversial

Read full article via CFTC Proposes Clearing Exemption for Inter-Affiliate Swaps — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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Derivatives Rules under the Dodd-Frank Act Affecting End-Users — The Harvard Law School Forum on Corporate Governance

Small business of-interest and need-to-know.

Excerpt: Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provides for new Federal regulation of the swaps market, and, when fully implemented, is expected to make fundamental changes in the way the swaps market operates. Title VII seeks to reduce systemic risk, increase transparency and improve efficiency in the swaps market by requiring centralized clearing and exchange trading of swaps as well as real-time and regulatory reporting of swap transactions. Under the Dodd-Frank Act, the Commodity Futures Trading Commission (the “CFTC”) will regulate most swaps on interest rates, commodities and currencies and the Securities and Exchange Commission (the “SEC,” together with the CFTC, the “Commissions”) will regulate swaps, including equity and credit default swaps, on single securities and narrow-based securities indices. The term “swap” is defined broadly in the Dodd-Frank Act, and includes certain foreign exchange transactions, such as non-deliverable foreign currency forwards, that may not be characterized as swaps for other purposes.

Read full article via Derivatives Rules under the Dodd-Frank Act Affecting End-Users — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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CFTC Proposes Block Size Rules for Swaps — The Harvard Law School Forum on Corporate Governance

More updates on swaps and proposed changes introduced shortly after a prior adoption…….Small business need-to-know and news-to-watch.

Excerpt……….When adopting the Real-Time Reporting Rules, the Commission determined not to adopt the methodology for determining minimum block sizes it proposed in December of 2010. The Commission agreed with commenters that additional analysis of swap data was necessary in order to determine properly the appropriate minimum block sizes. On February 23, 2012, the Commission voted 3-2, with Commissioners Sommers and O’Malia dissenting, to promulgate the Proposed Rules. The Proposed Rules contain provisions in furtherance of the Real-Time Reporting Rules, including provisions that “(1) specify the criteria for determining swap categories and methodologies for determining the appropriate minimum block sizes for large notional off-facility swaps and block trades and (2) provide increased protections to the identities of swap counterparties to large swap transactions and certain other commodity swaps, which were not fully addressed in” the Real-Time Reporting Rules. The Proposing Release posed 108 questions, many of these questions with multiple parts, to prospective commenters, and included possible alternatives to the Proposed Rules and the methodologies contained therein.

Read full article………via CFTC Proposes Block Size Rules for Swaps — The Harvard Law School Forum on Corporate Governance and Financial Regulation.

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