The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) published final rules on August 13th in the Federal Register defining a “swap.” We now know that swap exposure at major institutions like Lehman Brothers and AIG were a major factor in the 2007-2009 financial crisis. The CFTC’s defining what a swap is, and more importantly what is excluded from that definition, starts the countdown to the effective dates and compliance dates of the Final Rules for Dodd-Frank. For the most part, the effective and compliance dates will be 60 days from the definition publication with two exceptions that will take effect 180 days from publication.
Now that the definition is final, the CFTC must implement a swaps clearinghouse. End users, with certain exceptions, are required to route their trades through independent clearinghouses. A clearinghouse creates a transparent trail for a trade and is backed by a default fund so that a transaction is completed even if one part of a deal goes under. This transparency should give more stability to the market. If you need more information on this matter, contact Scarlette Tuley at 800-898-2034 or by email at Scarlette.Tuley@beasleyallen.com.
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