SEC Adopts Business Conduct Standards for Security-Based Swap Dealers and Major Security-Based Swap Participants

On April 15, 2016, the Securities and Exchange Commission adopted final rules modifying regulations “for security-based swap dealers and major security-based swap participants (security-based swap entities).”  The final rules address conduct and compliance officer issues. Release.

CFTC Approves Guidance Relating to Appropriate Treatment of Electric Power and Natural Gas Contracts

On April 4, 2016, the U.S. Commodity Futures Trading Commission (the “CFTC”) approved guidance relating to the appropriate treatment of certain electric power and natural gas contracts.  The guidance provides that certain capacity contracts in electric power markets and certain natural gas contracts should not be considered “swaps” under the Commodity Exchange Act.  Release.

OCC Proposes Rule on Margin and Capital Requirements for Covered Swap Entities

October 6, the OCC released a notice of proposed rulemaking to establish minimum requirements for the exchange of initial and variation margin between registered swap dealers, major swap participants, security-based swap dealers and major security-based swap participants (covered swap entities) and their counterparties to non-cleared swaps and non-cleared security-based swaps. Comments should be received on or before November 24. Press Release. NPR.

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.