Memo #

CFTC Mandates Clearing of Additional Interest Rate Swaps

October 3, 2016 | Print

[30288]

October 3, 2016

TO: CLOSED-END INVESTMENT COMPANY MEMBERS No. 18-16
DERIVATIVES MARKETS ADVISORY COMMITTEE No. 50-16
EQUITY MARKETS ADVISORY COMMITTEE No. 38-16
INVESTMENT ADVISER MEMBERS No. 19-16
ICI GLOBAL TRADING & MARKETS COMMITTEE No. 46-16
SEC RULES MEMBERS No. 55-16 RE: CFTC MANDATES CLEARING OF ADDITIONAL INTEREST RATE SWAPS

The Commodity Futures Trading Commission (“CFTC” or “Commission”) has extended the clearing requirement to certain additional interest rate swaps.[1] Specifically, the new clearing requirement determination requires market participants to submit a swap that is identified in expanded regulation 50.4(a) for clearing by a derivatives clearing organization (“DCO”) that is registered with the Commission or has been exempted from registration under the Commodity Exchange Act.

The determination requires the clearing of the following interest rate swap classes:

fixed-to-floating interest rate swaps denominated in Australian dollar (“AUD”), Canadian dollar (“CAD”), Hong Kong dollar (“HKD”), Mexican peso (“MXN”), Norwegian krone (“NOK”), Polish zloty (“PLN”), Singapore dollar (“SGD”), Swedish krona (“SEK”), and Swiss franc (“CHF”);
basis swaps denominated in AUD;
forward rate agreements (“FRAs”) denominated in NOK, PLN, and SEK;[2] and
overnight index swaps (“OIS”) denominated in AUD and CAD as well as US dollar-, euro-, and sterling-denominated OIS with termination dates up to three years.

The Commission decided to adopt a phase-in implementation schedule not by market participant type but according to when analogous clearing requirements have taken, or will take, effect in non-US jurisdictions.

The compliance date for each interest rate swap product covered by the determination will be the earlier of: (i) the first date that US markets are open 60 calendar days after any person is first required to comply with an analogous clearing requirement that has been adopted by a regulator in a non-US jurisdiction, provided that any such date for any swap covered by the final rule shall not be earlier than the date which is 60 calendar days after the Commission’s final rule is published, or (ii) the first date US markets are open two years after the Commission’s final rule is published in the Federal Register. If the compliance date falls on a Saturday, Sunday, or US federal public holiday, the compliance date will be the next available business day.

The CFTC provided a chart identifying the projected compliance date for each of the products subject to the determination. A copy of the chart is below.

Product

First Clearing Requirement Compliance Date in a Non-U.S. Jurisdiction175

CFTC Clearing Requirement Compliance Date

AUD-denominated