CFTC Issues Clearing Determination for Certain Credit Default Swaps and Interest Rate Swaps

The CFTC issued its first rule specifying the types of swaps required to be cleared.  The swaps that will be subject to mandatory clearing are two classes of untranched index credit default swaps (CDS) and four classes of interest rate swaps relating to four currencies (U.S. dollars, British pounds, euros and Japanese yen).  The clearing requirement determination applies to swaps currently cleared by four DCOs: CME, ICE Clear Credit, ICE Clear Europe, and LCH.Clearnet Ltd.  The attached press release provides a fuller description of the swaps that will be subject to mandatory clearing.

According to the attached FAQ, the earliest date by which clearing requirements will be effective for any entities is March 11, 2013 for so-called Category 1 entities.  (Category 2 Entities will be subject to clearing on June 10, 2013, and everyone else on September 9, 2013.)  Clearing requirements will not be applied retroactively for swaps entered into before any of such dates.

The open CFTC meeting — originally planned for Thursday, November 29 to consider clearing requirement determination under CEA Section 2(h) — has been canceled.

Note: the CFTC also issued two no-action letters as to these clearing requirements (news item following).

View press release here (links externally to CFTC website).
See also: Q&A Clearing Requirement Determination under CEA Section 2(h); Chairman Gensler’s statement of support.