Swap Documentation Must Conform to Three Final CFTC Rules by July 1, 2013

For market participants to comply with three new U.S. Commodity Futures Trading Commission ("CFTC") rules, a new process must be completed by no later than July 1, 2013. These are the practical recommendations relating to this new development:

  • Inventory over-the-counter (OTC) derivatives ("Swaps") trading with counterparties, as well as the documentation evidencing Swaps to determine, now and going forward, to what extent the final CFTC rules apply to existing and future Swaps;
  • With respect to those Swaps within the CFTC's jurisdiction, which will again be clarified by that regulator in coming weeks: (a) "adhere" to the ISDA March 2013 DF Protocol; (b) adhere and then adjust your Swap documentation to fit your needs accordingly; or (c) negotiate Swap documentation to incorporate the rights and responsibilities of three CFTC rules by July 1, 2013; and
  • Confer with Swap counterparties to come within portfolio reconciliation requirements, put in place specific dispute resolution programs to resolve valuation and other disputes that may surface and proactively undertake other measures to make the three final CFTC rules meaningful before, or as soon after July 1, 2013, as possible.

To learn more about these CFTC Rules, please click here.

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