swap

CFTC Issues No-Action Letter to Swap Dealers to Extend Collateral Rule Deadline due to Limitations with Custodial Accounts

 

On September 1, 2016, the U.S. Commodity Futures Trading Commission’s (“CFTC”) Division of Swap Dealer and Intermediary Oversight announced that it “issued a time-limited, no-action letter stating that it will not recommend an enforcement action against a swap dealer subject to the September 1, 2016 compliance date for the CFTC’s uncleared swap margin rules, subject to certain conditions, for failing to fully comply with the custodial arrangement requirements of CFTC regulation 23.157 prior to October 3, 2016.” Press release.

SEC Adopts Amendments Providing Authorities Access to Data Obtained by Security-Based Swap Data Repositories

 

On August 29, 2016, the Securities and Exchange Commission amended a rule designed to provide access for regulators to data in the security-based swap market.  The amendments were enacted to make the sharing of information more secure and efficient. Press release,

CFTC Announces Actions Addressing Application of the Dodd-Frank Act to Cross-Border Transactions

 

On August 4, 2016, the U.S. Commodity Futures Trading Commission (CFTC) announced two separate actions relating to the application of the Dodd-Frank Act to cross-border transactions. The CFTC issued a Final Response to District Court Remand Order in Securities Industry and Financial Markets Association, et al. v. United States Commodity Futures Trading Commission that explains the CFTC’s approach to application of swaps regulations internationally. The CFTC’s Divisions of Swap Dealer and Intermediary Oversight (DSIO), Clearing and Risk, and Market Oversight (Divisions) also issued a no-action letter that extends relief to swap dealers registered with the CFTC from certain transaction-level requirements under the Commodity Exchange Act. Press Release.

CFTC Approves Final Rule to Amend Swap Data Recordkeeping and Reporting Requirements for Cleared Swaps

The U.S. Commodity Futures Trading Commission (CFTC) issued a final rule that clarified reporting obligations for completed swap transactions, such as providing additional instruction relating to who must report the various aspects of the transaction. Release.

CFTC Amends Swap Portfolio Reconciliation Requirement

On May 2, 2016, the U.S. Commodity Futures Trading Commission approved a final rule to amend the swap portfolio reconciliation requirement.  Under CFTC Regulation 23.500(i), swap dealers and major swap participants were required to exchange all terms of swaps with their counterparties as part of the portfolio reconciliation exercise, but were only required to reconcile the material terms of swaps.  Amendments to the definitions of “portfolio reconciliation” and “material terms” now make it so that swap dealers and major swap participants need only exchange the material terms of swaps, so that the terms that are required to be exchanged are the same as those terms required to be reconciled.  Release.

Rating Agency Developments

On August 9, Fitch updated its UK mortgage loan assumptions.  Fitch Report. 

On August 9, Fitch updated its criteria for UK whole business securitizations.  Fitch Report.

On August 9, S&P updated its methodology for U.S. RMBS backed by pre-2009 collateral.  S&P Report. 

On August 8, Fitch updated its corporate rating methodology.  Fitch Report. 

On August 8, Fitch published its updated insurance-linked securities rating criteria.  Fitch Release.  Fitch Criteria.

On August 8, Fitch updated its criteria for automated valuation models in EMEA RMBS.  Fitch Release.  Fitch Report.

On August 8, Fitch updated its global rating criteria for corporate CDOs.   Fitch Release.  Fitch Report.

On August 8, Fitch updated its rating criteria for currency swap obligations of an SPV in structured finance transactions.  
Fitch Release.  Fitch Report.  

On August 8, Fitch updated its rating criteria for multiborrower U.S. CMBS.  Fitch Release.  Fitch Report.

On August 8, Fitch updated its global rating criteria for distressed debt exchanges.  Fitch Release.  Fitch Report.

On August 7, Fitch issued a special report on risk considerations for REO-to-Rental securitizations.   Fitch Release.  Fitch Report.

On August 7, Fitch updated its rating criteria for prepaid energy transactions.   Fitch Release.  Fitch Report.

On August 7, Fitch updated its mortgage loss assumptions for German RMBS and covered bonds.  Fitch Report.  

On August 3, Fitch updated its U.S. water and sewer revenue bond criteria.  Fitch Report.

On August 3, DBRS updated its methodology for capital call lending facilities.  DBRS Report. 

Note:  Free registration is required for rating agency releases and reports.

CFTC Final Regulations on Phase in Compliance with Clearing Requirements and Proposed Rule on Clearing Determination

On July 24, the CFTC approved final regulations establishing a schedule to phase in compliance with new clearing requirements under the Dodd-Frank Act. As amended by the Dodd-Frank Act, the Commodity Exchange Act provides that a person may not engage in a swap unless the swap is submitted for clearing to a derivatives clearing organization registered under the CEA, or is exempt from registration under the CEA. The regulations will phase in the clearing requirement based on the type of market participant entering into swaps subject to the clearing requirement. The compliance schedule identifies three categories of market participants, and allots a compliance timeframe for each based on level of activity, market experience, resources, and status as registrants with the CFTC or SEC. The CFTC also issued the first proposed clearing determination for credit default swaps and interest rate swaps. The compliance schedule will be triggered upon the final clearing determination. Final Rule Release. Final Rule. Proposed Rule Release. Proposed Rule.

SEC Rules for Derivative Regulation

The SEC, on July 6, and the CFTC, on July 10, approved rules and interpretations for key definitions of certain derivatives products. The SEC rules and interpretations further define the terms “swap” and “security-based swap” and whether a particular instrument is a “swap” regulated by the CFTC or a “security-based swap” regulated by the SEC. The action also addresses “mixed swaps,” which are regulated by both agencies, and “security-based swap agreements,” which are regulated by the CFTC but over which the SEC has antifraud and other authority. The rules will be effective 60 days after publication in the Federal Register. However, solely for the purposes of certain interim relief granted and exemptions adopted under the Securities Act of 1933, the Securities and Exchange Act of 1934, and the Trust Indenture Act of 1939, the compliance date for the final rules further defining the term “security-based swap” will be 180 days after the publication in the Federal Register. SEC Release. CFTC Meeting Notice.