The Commodity Futures Trading Commission voted 5-0 on Wednesday to issue rules that would require certain credit default swaps and interest rate swaps to be cleared by clearinghouses known as derivatives clearing organizations.
The rules are the first set of clearing mandates established under the 2010 Dodd-Frank Act and require market participants to submit swaps identified by the rules for clearing by a DCO as soon as possible and no later than the day of the trade.
Additionally, Dodd-Frank requires the CFTC to determine whether a swap requires clearance by either an agency-initiated review or submission from a DCO for review of a certain swap of class of swaps.
The rules also organize provisions clarifying that swaps entered into before the enactment of Dodd-Frank or before the effective date of the clearing requirement are not required to be processed through DCOs. The requirement does not apply to individuals eligible to choose a clearing exemption.
The CFTC added that it also plans to issue a rule that would prevent circumvention of the clearing requirement and its related statutes.
Under the new clearing requirements, a DCO is required to list on its website all swaps that will be accepted for clearing and to clearly designate which swaps the CFTC has determined are required to be cleared.