On November 28, 2012, the CFTC issued its final clearing determination requiring certain credit default swaps and interest rate swaps be cleared by registered derivatives clearing organizations (DCOs). This is the CFTC’s first clearing determination under the Dodd-Frank Act and will become effective upon publication in the Federal Register. Under the rules, market participants must submit a swap that is identified in the rule for clearing by a DCO as soon as technologically practicable and no later than the end of the day of execution. A DCO is required to post on its website a list of all swaps that it will accept for clearing and clearly indicate which of those swaps the CFTC has determined must be cleared. The CFTC will also post on its website a list of the swap classes required to be cleared.
The clearing requirement determination applies only to swaps currently cleared by four DCOs: CME, ICE Clear Credit, ICE Clear Europe, and LCH. Clearnet Ltd. Any swaps entered into prior to the enactment of the Dodd-Frank Act or prior to the application of the clearing requirement are not required to be cleared. The determination does not apply to those persons who are eligible to elect an exception from clearing, such as non-financial entities hedging commercial risk who satisfy the applicable requirements.
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