On September 28, 2016, the Commodity Futures Trading Commission (the “CFTC”) unanimously approved the expansion of currencies of interest rate swaps subject to mandatory clearing under the U.S. Commodity Exchange Act (the “Act”). Subjecting standardized swaps to central clearing is intended to decrease risk in the financial system and has been a primary goal of global regulators for several years.
Section 2(h) of the Act makes it unlawful for any person to engage in a swap that is required to be centrally cleared unless that swap is submitted to a derivatives clearing organization (a “DCO”) that is either registered under the Act or exempt from registration under the Act. This same section of the Act sets forth the process through which the CFTC is to make determinations of whether a swap, or group, category, type or class of swaps should be subject to mandatory clearing. READ MORE
In September 2016, the International Swaps and Derivatives Association, Inc. (“ISDA”) published a wide-ranging white paper entitled “The Future of Derivatives Processing and Market Infrastructure.” The white paper proposes a “path forward” from the new regulatory ecosystem created in response to the financial crisis and the resulting compliance burden on market participants.
As described in the white paper, tight time frames for complying with regulatory requirements prevented market participants in various jurisdictions from making necessary changes to compliance, operational risk management, and other processes in an optimal manner. The resulting complex workflows have created challenges. The white paper’s proposals are intended to foster a “standardized, efficient, robust and compliant ecosystem that supports the needs of an array of market participants.” In particular, the white paper identifies three key areas for improvement: (i) standardization; (ii) collaboration; and (iii) technology. READ MORE