Orrick's Derivatives in Review - June 11,2013

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Central Clearing and Securitization SPEs

A fundamental component of the Dodd-Frank Act is to require central clearing of standard swaps in order to decrease systemic risk.  The securitization industry has been seeking clarity as to whether certain interest rate swaps entered into between securitization SPEs that constitute “financial entities” and swap dealers are required to be cleared beginning June 10.
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March 2013 Dodd-Frank Protocol – Protocol 2.0

The second and latest ISDA Dodd-Frank Protocol opened for adherence on March 22.  Known as “Dodd-Frank Protocol 2.0,” this Protocol is intended to address requirements related to certain business conduct standards, including end-user exception documentation, documentation of swap trading relationships and portfolio reconciliation, which generally will become effective on July 1.
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Financial Transaction Tax Developments

The governments of Europe continue to consider and debate the application of a financial transaction tax on bond, equity and derivatives transactions for purposes of generating revenue and discouraging excessive risk-taking.  On February 14, the European Commission published a revised directive proposing minimum financial transaction taxes to be assessed by eleven participating member-states.  
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The New CFTC Regulatory Regime for Private Fund Managers; First Quarter 2013 Update

The enactment of Title VII of the Dodd-Frank Act and its implementation by the CFTC has ushered in a new era of regulation of managers of “private funds.”  This White Paper (i) provides a survey of some of the most significant aspects of the new swaps regulatory regime mandated by the Dodd-Frank Act that directly impact private fund managers, and (ii) focuses on the regulatory actions of the CFTC, many of which have been taken in close coordination with the SEC.
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Bloomberg Case Against CFTC Dismissed

On June 7, a federal district court dismissed a lawsuit brought by Bloomberg L.P. against the CFTC challenging the recent adoption of a rule establishing minimum initial margin requirements to be assessed by derivatives clearing organizations on customers.  The court ruled that Bloomberg lacked standing because it had failed to demonstrate an actual or imminent injury-in-fact caused by the Rule that the court could redress.  The court also stated that Bloomberg, apart from its lack of standing, could not satisfy the “high standard for irreparable injury” required for a preliminary injunction.
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