Rating Agency Developments

On November 8, Fitch updated its criteria for ABCP.  Fitch Report. 

On November 7, Moody’s updated its approach for incorporating GIC provider ratings in U.S. state revolving fund and pool programs.  Moody’s Report. 

On November 7, Moody’s updated its approach to incorporating GIC and swap provider ratings in HFA programs.  Moody’s Report. 

On November 7, S&P released its European CMBS methodology and assumptions.  S&P Report. 

On November 5, DBRS released its preferred share and hybrid criteria for corporate issuers (excluding financial institutions).  DBRS Report. 

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CFTC Time Extension for Pre-Trade Screening Requirements

On September 26, the CFTC announced an extension of time for compliance for market participants to coordinate on the communication of limits for give-ups and bunched orders for futures and swaps.  The extension is intended to provide sufficient time to transition to fully compliant pre-trade screening no later than June 1, 2013.  CFTC Release.

CFTC Proposed Clearing Exemption for Swaps Between Affiliates

On August 16, the CFTC proposed an exemption from clearing requirements under Section 723 of the Dodd-Frank Act for swaps between certain affiliated entities within a corporate group.  The proposed exemption would be limited to swaps between majority-owned affiliates and would require centralized risk management, swap trading relationship documentation, variation margin payments, and satisfaction of certain reporting requirements.  Comments on the proposed rule must be submitted within 30 days of publication in the Federal Register.  CFTC Release.  CFTC Proposed Rule.   

CFTC Approves Guidance on Cross-Border Application of Swaps Provisions of Dodd-Frank

On June 29, the CFTC approved for public comment proposed interpretive guidance on the cross-border application of the swaps provisions of Title VII of the Dodd-Frank Act. The proposed guidance interprets Section 2(i) of the Commodity Exchange Act (CEA), which states that the swaps provisions of the CEA shall not apply to activities outside the United States unless those activities have a direct and significant connection with activities in, or effect on, commerce of the United States. Comments must be submitted within 45 days after publication in the Federal Register. CFTC Release.

FSA Investigating Mis-selling of Swaps to SMEs

On 23 May 2012, the Treasury Select Committee published a press release on correspondence between its chairman, Andrew Tyrie, and Lord Turner, chair of the FSA, and Sir Nicholas Montagu, Financial Ombudsman Service (FOS) chairman, on the potential mis-selling of interest rate swap products to small businesses by major banks. In his letter, Lord Turner stated that the FSA is “doing more work to understand…the types of products that have been sold” and that if the FSA finds “widespread evidence” of breaches of its rules or mis-selling it “will take action”. Press Release and Correspondence.

CFTC Rule on Aggregation for Position Limits for Futures and Swaps

On May 18, the CFTC approved a proposed rule that would modify the aggregation provisions for limits on futures and swaps. The proposed rule would permit any person with greater than 10% ownership or equity interest in an entity to disaggregate the owned entity’s positions, provided that protections and firewalls are in place to ensure trading decisions are made independently from one another. CFTC Release.

CFTC Vote on Dodd-Frank Indemnification and Confidentiality Provisions

On May 1, the CFTC voted to issue a proposed interpretative statement to clarify that, in certain instances, foreign regulators are exempt from requirements under the Dodd-Frank Act to enter into confidentiality and indemnification agreements with Swap Data Repositories in connection with its access to swap data.  Comments may be submitted for 30 days from publication in the Federal Register.  CFTC Release.

 

Exemptions for Security-Based Swaps

On March 30, the SEC issued final rules adopting exemptions for certain security-based swaps under the Securities Act (other than the Section 17(a) anti-fraud provisions), the Securities Exchange Act, and the Trust Indenture Act.  Exempt security-based swaps must be issued by certain clearing agencies and satisfy certain conditions.  The final rules are effective April 16.  Final Rules.

Effective Date of Swaps Pushout Provision

On March 30, the FDIC, Fed, and OCC issued guidance clarifying that the effective date of Section 716 of the Dodd-Frank Act (known as the Swaps Pushout provision) is July 16, 2013. Section 716 prohibits the provision of Federal assistance to any entity defined under that section to be a swaps entity with respect to any swap, security-based swap, or other activity of the swaps entity.  Joint Release.  Guidance.