Over the past year, the financial industry has seen a number of rule-makings by the CFTC, and industry participants are encouraged to take steps to ensure compliance with the new requirements.
The Minnesota-based Leonard, Street and Deinard said that firms should examine their swaps activities to determine which types of swap the firm engages in, who the swap counterparties are and the volume of swap transactions to ensure compliance.
Though the de minimis exemption threshold is high at $8 billion, phasing to $3 billion in the gross notional amount of swaps conducted over a 12-month period, the threshold for special entities is much lower at $25 million in general and $800 million plus notice requirement for utility companies under temporary no-action relief.
Additionally, under a CFTC rule effective Oct. 12, swap participants must provide written or electronic confirmation of an oral swap book-out within a commercially reasonable timeframe or risk forward contracts to be subject to reporting requirements.
All swap transactions must be reported to a swap data repository, but end users can avoid swap reporting if trading with swap dealer counterparties or on-exchange cleared swaps. Swaps end users will be required to obtain a legal entity identifier effective April 10.
Beginning April 10, all swap counterparties will also be subject to the CFTC’s stringent new swaps record-keeping requirements. Federal regulations require swap participants to keep the records “readily accessible” for five years following the termination of a swap.