Dodd-frank Title VII swap rules finalization – extended again!

Contributor: Nathan Yeager

On April 10^th, the CFTC approved a proposal to further extend the temporary exemptive relief provided in the July 14, 2011 order from July 16, 2012 to December 31, 2012. 

This grants energy market participants relief from two primary categories of regulation:

1. Those that require no rulemaking, but are dependent on a definition that does – i.e. “swap”, and;
2. Those that remove prior exemptions from regulation such as agricultural commodities.

Market participants should not expect relief from compliance dates for those rules already finalized with no further dependencies.  For example, the Large Trader Reporting for Physical Commodity Swaps rule has already been finalized and is not dependent on any further definitions.  As such, market participants should continue their efforts to meet established compliance dates.

However, SunGard Global Services believes that other rules may be indirectly impacted.  For example, Position Limits for Futures and Swaps, Real-Time Public Reporting of Swap Transaction Data, and Swap Data Recordkeeping and Reporting Requirements are dependent on the final definition of “swap”.  Additionally, at a recent conference Commissioner O’Malia hinted that there will be rule clarifications critical to the energy industry, such as Position Limit Aggregation, RTO/ISO Proposed Oder, End-User Exemptions and Clearing and Margining rules.

The extension of effective dates for regulations that don’t require a ruling, but are dependent on the definition of “swap” may infer that there will likely be a delay in the definition of “swap”.  While the framework for compliance dates for these rules does not change, this is an indication that we will see the actual compliance dates for each of these rules extend beyond July 16, 2012.

Additionally, the industry may take this as an indication that the CFTC does not anticipate completing their rulemaking process for the outstanding rules until year-end, and likely beyond as Commissioner O’Malia warns.

I welcome your comments and thoughts.

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