Dodd-Frank Update on Swap Trading Documentation
6 September 2012
On 27 August 2012, the US Commodity Futures Trading Commission (CFTC) issued the final rules establishing swap dealer and major swap participant requirements for swap trading relationship documentation. Under the new rules – which sit within the Dodd-Frank Act and are designed to comply with G-20 recommendations to reduce systemic risk in OTC derivatives trading – non-US banks trading with US counterparties will have to register in the US as swap dealers and abide by CFTC rules on capital requirements and risk management. There is international concern from Australian, EU, Hong Kong, Japanese, Singapore and UK regulators with regards to the new US swaps regulation and have requested deferral of implementation until there is an international consensus on how cross-border transactions should be regulated. Many firms from the aforementioned jurisdictions could face permanent legal uncertainty if this issue is not resolved.