CFTC Adopts Final Cross Border Swaps Guidance

by Ropes & Gray LLP
Contact

On Friday, the U.S. Commodity Futures Trading Commission (the “CFTC”) adopted final guidance regarding the cross border application of the new derivatives requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), as well as an interim final exemptive order that phases in the relevant requirements. This adoption was welcome news for market participants, who were facing substantial uncertainty since the CFTC’s existing temporary cross border guidance was scheduled to expire.

The final text of the guidance and the exemptive order is not yet available. However, below are some highlights of the guidance and the exemptive order for funds and investment advisers, based on the discussion at the CFTC meeting and the materials released so far:

  • Parties can continue to rely on the existing temporary cross border guidance (the CFTC order effective December 21, 2012) until 75 days after the final guidance is published in the Federal Register.
  • Under the temporary cross border guidance, a collective investment vehicle is only a “US person” if it is organized in the United States. Under the final guidance, a collective investment vehicle will also be a “US person” if (i) a majority of its interests are owned by US persons (unless interests in the fund are publicly offered, but are not offered in the United States); or (ii) the fund’s principal place of business is in the United States. The test for determining the location of a fund’s principal place of business will depend principally on the location of the fund’s investment managers, fund sponsors and promoters, and the sales and trading desk used by the fund. As a result of this expanded definition, many transactions between offshore funds advised by US investment advisers and non-US swap dealers will become subject to the Dodd-Frank requirements.
  • US swap dealers will be required to comply with the Dodd-Frank transaction-level requirements (such as clearing, margin, swap execution facility trading, real-time reporting and external business conduct standards) with respect to transactions with all counterparties.
  • Non-US branches of US swap dealers will also be required to comply with these requirements, but with respect to transactions with non-US persons, can generally satisfy the requirements through “substituted compliance” (compliance with the comparable requirements of another jurisdiction) if the transaction has a “bona fide” connection to the non-US branch. The CFTC will determine whether a particular category of requirements of another jurisdiction are comparable to the Dodd-Frank requirements, using an “outcomes-based approach.” The CFTC issued a no-action letter yesterday indicating that certain risk mitigation requirements of the European Market Infrastructure Regulation (EMIR) (confirmation, portfolio compression, portfolio risk valuation, and portfolio compression requirements) are “substantially identical” to the Dodd-Frank requirements.
  • Non-US swap dealers will be required to comply with the transaction-level requirements with respect to transactions with US persons and with non-US affiliates guaranteed by a US person, but will be able to satisfy the requirements with respect to transactions with non-US affiliates guaranteed by a US person through “substituted compliance.”
  • The Dodd-Frank requirements are generally becoming effective earlier than the corresponding requirements in other jurisdictions. Therefore, in order to provide time for comparable requirements in other jurisdictions to become effective, a non-US swap dealer or non-US branch of a US swap dealer located in Australia, Canada, the European Union, Hong Kong, Japan or Switzerland only needs to comply with the requirements in effect in its jurisdiction for any requirement for which “substituted compliance” is possible until the earlier of (i) December 21, 2013, or (ii) 30 days following the issuance of a substituted compliance determination for the relevant requirement.

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.

© Ropes & Gray LLP | Attorney Advertising

Written by:

Ropes & Gray LLP
Contact
more
less

Ropes & Gray LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.