Dodd-Frank Developments

On February 5, the Prudential Regulators—the five federal banking regulators for swap dealers that are banks—proposed technical amendments to their margin rules for uncleared swaps. The amendments aim to harmonize the definition of Eligible Master Netting Agreement (EMNA) in the margin rules with recent changes made to the definition of “Qualifying Master Netting Agreement” (QMNA) in the capital and liquidity rules applicable to banks.
Continue Reading Conforming Amendments Proposed for Bank Swap Margin Rules

On October 13, the Commodity Futures Trading Commission and the European Commission (EC) made three announcements that are significant for cross-border swap activity between the United States and Europe.

  1. CFTC Margin Rule Comparability Determination.

The CFTC has made a determination that the margin rules for uncleared swaps that apply in the European Union are comparable to the CFTC’s margin rules. This determination activates the substituted compliance provisions found in Section 23.160(b)(2)(iii) of the CFTC margin rules that until now have not been available to EU entities registered as swap dealers.
Continue Reading Three Developments Concerning EU-US Cross-Border Swaps

On September 5, the regular settlement cycle for most securities transactions in the United States will change from three days (T+3) to two days (T+2). In order to assist derivative market participants that have existing equity derivative transactions with payment dates based on T+3, the International Swaps and Derivatives Association (ISDA) has developed the 2017 OTC Equity Derivatives T+2 Settlement Cycle Protocol (“T+2 Protocol”).
Continue Reading ISDA To Publish T+2 Protocol

On May 10, the Consumer Financial Protection Bureau (CFPB) held a field hearing and issued a notice and request for information related to the small business lending market. Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Equal Credit Opportunity Act to require “financial institutions” (as defined in Section 1071) to compile, maintain and report information concerning credit applications made by women-owned, minority-owned and small businesses. The purpose of the data collection is to facilitate enforcement of fair lending laws and to enable communities, governmental entities and creditors to identify business and community development needs and opportunities of women-owned, minority-owned and small businesses.
Continue Reading CFPB Requests Information Regarding the Small Business Lending Market

Lacking the ability to issue formal no-action relief from strict compliance with the variation margin rules for uncleared swaps coming into effect on March 1, the Board of Governors of the Federal Reserve System, the Office of Comptroller of the Currency (OCC) and the European Supervisory Authorities (ESA) have each issued statements suggesting that they

On February 6, the acting Securities and Exchange Commission Chairman, Michael Piwowar, issued a statement soliciting public comment on “unexpected challenges” that issuers have experienced in anticipation of complying with the pay ratio disclosure rule and directing the SEC staff to reconsider the implementation of the rule. The pay ratio disclosure rule, adopted to implement Section 953(b) of the Dodd–Frank Wall Street Reform and Consumer Protection Act, will require each issuer to disclose the ratio of the compensation of its chief executive officer to the median compensation of all of its employees, as discussed in the August 7, 2015 edition of the Corporate & Financial Weekly Digest. As currently adopted, this rule will first apply with respect to compensation for the company’s first fiscal year beginning on or after January 1, 2017 (for most companies, their proxy statements for their 2018 annual shareholder meetings). Comments are being solicited for 45 days following the announcement.
Continue Reading Acting SEC Chair Directs Staff to Reconsider Pay Ratio Disclosure Rule

On December 19, 2016, the Division of Market Oversight (Division) of the Commodity Futures Trading Commission provided time-limited no-action relief from the swap data recordkeeping and reporting requirements for cleared swaps (cleared swaps rule) to which derivatives clearing organizations (DCOs) and reporting entities would otherwise have been subject on December 27, 2016. Subject to certain conditions, DCOs are now relieved from obligations to report original swap terminations under the cleared swaps rule. This relief will expire on the earlier of 12:01 a.m. on June 27, 2017, or the date that all DCOs that will be reporting original swap termination messages to a swap data repository (SDR) have successfully tested the termination message reporting systems.
Continue Reading CFTC Staff Issues Time-Limited No-Action Relief for Derivatives Clearing Organizations and Other Reporting Entities From Certain Obligations on Cleared Swap Reporting

On December 19, 2016, the Division of Market Oversight of the Commodity Futures Trading Commission announced time-limited no-action relief for entities submitting swaps for clearing by derivatives clearing organizations (DCOs) relying on a CFTC exemption order or no-action relief (Relief DCOs). Entities submitting such swaps for clearing are now relieved of the obligation to terminate the original “alpha” swap and the obligation to report any swaps between the Relief DCO counterparties and the Relief DCO. This relief expires on the earlier of (1) January 31, 2018; (2) the effective date of any CFTC regulation altering the reporting obligations of any entities with respect to the reporting of such swaps; (3) the revocation or expiration of any exemptive order issued to that Relief DCO; or (4) the revocation or expiration of any no-action letter issued to that Relief DCO.
Continue Reading CFTC Staff Issues Time-Limited No-Action Relief for Entities Submitting Swaps for Clearing With Derivatives Clearing Organizations Acting Under Exemptive Orders or No-Action Relief

On December 15, the Commodity Futures Trading Commission Division of Clearing and Risk granted US swap participants temporary no-action relief from the required clearing rule with respect to swaps entered into with eligible affiliate counterparties located in Australia and Mexico. The no-action relief will expire on December 31, 2017.
Continue Reading CFTC Grants No-Action Relief From Certain Swap Clearing Requirements for Swaps With Eligible Affiliate Counterparties in Australia or Mexico