Earlier today, the Commodity Futures Trading Commission (CFTC) issued a proposed order to temporarily exempt swap market participants from certain provisions of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) that will become effective on July 16, 2011.1 The proposed order, which will be open for public comment for 14 days following its publication in the Federal Register, will provide relief from sections of Title VII that become effective on July 16 and either (a) reference the terms “swap,” “swap dealer,” “major swap participant,” or “eligible contract participant,” or (b) repeal existing Commodity Exchange Act (CEA) exemptions for certain transactions in exempt or excluded commodities (namely Sections 2(d), 2(e), 2(g), 2(h) and 5d of the CEA).

The following discussion is based on comments made by CFTC Commissioners and staff at today’s meeting as well as a fact sheet and Q&A posted on the CFTC’s website, both of which, along with an archived webcast of today’s meeting and a prepublication copy of the proposed order, are available here.

Temporary Relief from Certain Provisions of the Dodd-Frank Act

The general effective date for Title VII of the Dodd-Frank Act is July 16, 2011, 360 days after its enactment.2 However, to the extent that a provision of Title VII requires a rulemaking (by the CFTC or another regulator), such provision shall become effective not less than 60 days after publication of a final rule. Although the CFTC was charged with completing its final rules by July 16, CFTC Chairman Gary Gensler has acknowledged that the CFTC will fail to meet this deadline. As a result, certain provisions of the Dodd-Frank Act that require a CFTC rulemaking may not become effective until early next year, at the earliest, while other provisions that do not require a rulemaking will become effective on July 16, 2011. In some cases, although a provision may not require a rulemaking, it may be interrelated with provisions (including some key definitions) that do require a rulemaking. The proposed order is intended to address the uncertainty that has arisen as a result of the foregoing.