On October 1, 2010, the Commodity Futures Trading Commission 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. 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 information regarding pre-enactment swaps must be preserved in preparation for filing with either the CFTC or a swap data 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 only become clear with the issuance of a proposed final rule on this subject later this year. In the meantime, 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.
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