Gary Gensler, the chairman of the Commodity Futures Trading Commission, said on Tuesday that many firms will not need to immediately comply with swaps clearing rules, thereby clarifying a confusing issue that concerned many companies.
The 2010 Dodd-Frank Act mandates that, beginning in 2013, the $300 trillion swaps market come into compliance with clearing requirements, which require the processing of swaps through central clearinghouses, a mechanism intended to reduce risk in the market. The CFTC said earlier this year that, based on the type of firm, companies would have 90-, 180- or 270-day deadlines by which swaps must be cleared, according to the Wall Street Journal.
A CFTC staffer, however, said in an email to lawyers at Davis Polk & Wardwell LLP that all swaps conducted between the finalization of the clearing rules this year and the future compliance deadline would also have to be cleared.
Gensler said that one line in the 17,000 words of regulation “could be read in two different ways,” adding that a grace period for the swaps industry was intended all along, though the ambiguous line could suggest otherwise, according to CFTC Law.
Additionally, Gensler said during SIFMA’s annual meeting that swaps conducted during that interim would not have to be cleared.
“Market participants will be required only to clear swaps executed on and after their applicable compliance date, thus providing time to comply with the clearing requirement,” Gensler said, the Wall Street Journal reports.