Dodd-Frank rules approaching quickly

Scott O’Malia

The holiday season and new year are fast approaching, as are several Dodd-Frank provisions set to take effect in 2013.

Beginning Jan. 1, all swap dealers, including international banks serving U.S. customers, with $8 billion or more in gross notional swaps are required to meet registration requirements established under the 2010 Dodd-Frank Act. The Commodity Futures Trading Commission adopted a clearing determination rule last month that requires swap dealers to clear their trades beginning in March, while other entities have until June and September.

The financial industry has pushed back against the new rules, requesting exemptions from and the delay of rules scheduled to take effect next year.

Scott O’Malia, a Republican commissioner on the CFTC, said during a speech at a Securities Industry and Financial Markets Association conference that commission has essentially, “been forced to set up a parallel exemptive process to provide relief from [pending] rules.”

“Having been bombarded by market participants with petitions and appeals to delay entire rules or specific elements of the rules, the Commission issued 18 no-action letters, staff interpretations and FAQs to clarify or delay compliance,” O’Malia said. “Since then, there has been a steady stream of Commission press releases announcing various exemptions over various time periods, making our rule-making resemble Swiss cheese.”

O’Malia itemized his holiday wish list with, beginning with a call for quick decisions on which new rules would receive exemptions.

“The first item on my list is that any relief that the Commission is planning to provide from the December 31 implementation date should be issued by December 14, to give certainty to the market as soon as possible,” O’Malia said, according to Automated Trader.

O’Malia also said that he wanted a flexible swap execution facility rule, as well as fair transaction rules that allow the industry to make decisions on the products they decide to trade and the venues on which they transact the trades.

“After that, I want capital and margin rules that are sufficiently mindful of the costs imposed on market participants, particularly commercial end users,” O’Malia said, Automated Trader reports. “And finally, I want Congress to review and provide feedback on a few areas of the Commission’s work that need further clarity and guidance.”

O’Malia indicated that a vote on the SEF rule, SEF block rule, Core Principal 9 and Made Available for Trade Determination may come soon, adding that action may be taken on cross-border rules but that it will likely come in the form of delay rather than finalization.

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