On August 27, 2012, the Commodity Futures Trading Commission (the “CFTC”) unanimously approved final rules (the “Final Rules”) that establish requirements for the (i) documenting of swap trading relationships between swap dealers (“SD”) or major swap participants (“MSP”) and their counterparties, (ii) timely and accurate confirmation of swaps and (iii) reconciliation and compression of swap portfolios. The Final Rules also set out the documentation requirements for swaps with respect to which an end-user has elected to avail itself of the exception from mandatory clearing and delay, until January 1, 2013, compliance with certain requirements of the external business conduct rules.1 The Final Rules adopt, with amendments, three separate notices of proposed rulemaking2 (each separate proposed rulemaking is, and the proposed rules collectively are, referred to herein as the “Proposed Rules”) and build upon the Federal Reserve Bank of New York’s efforts to improve back office standards of large financial institutions dealing in swaps. The CFTC perceives swap documentation as a critical aspect of the bilaterally-traded, over-the-counter derivatives market, and swap confirmation, portfolio reconciliation and portfolio compression as important post-trade mechanisms for reducing risk and improving operational efficiency.

The Final Rules do not apply retrospectively to swaps entered into prior to the date upon which compliance with the rules is required. The compliance dates for documentation, confirmation, portfolio compression and portfolio reconciliation are addressed in each relevant section below and in some instances are phased in.

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