Regulatory Developments: ISDA requests no-action relief with respect to Rules 23.502 and 23.504

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On November 20, 2012, the International Swaps and Derivatives Association ("ISDA") requested no-action relief from CFTC Rules 23.502 and 23.504 on behalf of its members that have obligations under such rules. In its request ISDA seeks confirmation that the CFTC's Division of Swap Dealer and Intermediary Oversight will not recommend enforcement action against swap dealers ("SDs") or major swap participants ("MSPs") for failure to comply with Rule 23.502 or Rule 23.504 prior to July 1, 2013. Rule 23.502 contains swap confirmation, portfolio reconciliation, and portfolio compression requirements for SDs and MSPs. Specifically, the portfolio reconciliation requirements of the rule become effective in two stages: upon registration for SDs and MSPs and mid-March 2013 for others.

Rule 23.504 requires SDs and MSPs to enter into Swap Trading Relationship Documentation ("STRD") with provisions governing, among other things, valuation and dispute resolution and to put in place policies and procedures to ensure the SD/MSP enters into STRD prior to or contemporaneously with the entering into of a swap. The STRD requirement is mandatory for swaps among SDs and MSPs and swaps between SDs/MSPs and financial entities; other counterparties may request such documentation from SDs and MSPs. The current STRD compliance dates are January 1, 2013, April 1, 2013, and July 1, 2013 depending on the counterparty that the SD or MSP faces.

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