Initial Swap Trading Requirements Come into Effect—Limited Relief for Packaged Trades and Some EU Facilities

The Commodity Futures Trading Commission has imposed for the first time a requirement that certain swaps be traded on a regulated market. Beginning February 15, 2014, certain cleared interest rate swaps and index credit default swaps will have to be executed on a swap execution facility or designated contract market, or, in certain cases, on an EU multilateral trading facility.

Overview -

As a result of a series of actions by the Commodity Futures Trading Commission (CFTC), certain cleared interest rate swaps and index credit default swaps will have to be executed through an order book or a request for quote system on a registered swap execution facility (SEF) or designated contract market (DCM), or, in certain cases, on a qualifying EU-regulated multilateral trading facility (MTF). In connection with this requirement, the CFTC has provided temporary no-action relief from the mandatory trading requirement for so-called “package transactions” that include a swap that would otherwise be subject to mandatory trading, and has clarified certain reporting issues with respect to swaps traded on a SEF or DCM.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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