CFTC Announces that Mandatory Clearing for Category 2 Entities Begins Today
The second phase of required clearing for certain credit default swaps (CDS) and interest rate swaps begins today. Commodity pools, private funds, and persons predominantly engaged in activities that are in the business of banking, or in activities that are financial in nature, are included within the definition of Category 2 Entities. These entities are required to begin clearing swaps executed on or after June 10, 2013.
The five swap classes that are required to be cleared subject to this timing include the swaps meeting the following specifications:
|
Specification |
Fixed-to-Floating Swap Class |
|||
|
1. Currency |
U.S. Dollar (USD) |
Euro (EUR) |
Sterling (GBP) |
Yen (JPY) |
|
2. Floating Rate Indexes |
LIBOR |
EURIBOR |
LIBOR |
LIBOR |
|
3. Stated Termination Date Range |
28 days to 50 years |
28 days to 50 years |
28 days to 50 years |
28 days to 30 years |
|
4. Optionality |
No |
No |
No |
No |
|
5. Dual Currencies |
No |
No |
No |
No |
|
6. Conditional Notional Amounts |
No |
No |
No |
No |
|
Specification |
Basis Swap Class |
|||
|
1. Currency |
U.S. Dollar (USD) |
Euro (EUR) |
Sterling (GBP) |
Yen (JPY) |
|
2. Floating Rate Indexes |
LIBOR |
EURIBOR |
LIBOR |
LIBOR |
|
3. Stated Termination Date Range |
28 days to 50 years |
28 days to 50 years |
28 days to 50 years |
28 days to 30 years |
|
4. Optionality |
No |
No |
No |
No |
|
5. Dual Currencies |
No |
No |
No |
No |
|
6. Conditional Notional Amounts |
No |
No |
No |
No |
|
Specification |
Forward Rate Agreement Class |
|||
|
1. Currency |
U.S. Dollar (USD) |
Euro (EUR) |
Sterling (GBP) |
Yen (JPY) |
|
2. Floating Rate Indexes |
LIBOR |
EURIBOR |
LIBOR |
LIBOR |
|
3. Stated Termination Date Range |
3 days to 3 years |
3 days to 3 years |
3 days to 3 years |
3 days to 3 years |
|
4. Optionality |
No |
No |
No |
No |
|
5. Dual Currencies |
No |
No |
No |
No |
|
6. Conditional Notional Amounts |
No |
No |
No |
No |
|
Specification |
Overnight Index Swap Class |
||
|
1. Currency |
U.S. Dollar (USD) |
Euro (EUR) |
Sterling (GBP) |
|
2. Floating Rate Indexes |
FedFunds |
EONIA |
SONIA |
|
3. Stated Termination Date Range |
7 days to 2 years |
7 days to 2 years |
7 days to 2 years |
|
4. Optionality |
No |
No |
No |
|
5. Dual Currencies |
No |
No |
No |
|
6. Conditional Notional Amounts |
No |
No |
No |
|
Specification |
North American Untranched CDS Indices Class |
|
1. Reference Entities |
Corporate |
|
2. Region |
North America |
|
3. Indices |
CDX.NA.IG CDX.NA.HY |
|
4. Tenor |
CDX.NA.IG: 3Y, 5Y, 7Y, 10Y CDX.NA.HY: 5Y |
|
5. Applicable Series |
CDX.NA.IG 3Y: Series 15 and all subsequent Series, up to and including the current Series CDX.NA.IG 5Y: Series 11 and all subsequent Series, up to and including the current Series CDX.NA.IG 7Y: Series 8 and all subsequent Series, up to and including the current Series CDX.NA.IG 10Y: Series 8 and all subsequent Series, up to and including the current Series CDX.NA.HY 5Y: Series 11 and all subsequent Series, up to and including the current Series |
|
6. Tranched |
No |
With regard to the iTraxx CDS indices on European corporate names, the following compliance dates apply: Category 1 entities began clearing April 26, 2013; Category 2 entities begin clearing July 25, 2013; and all other entities begin clearing October 23, 2013. The specifications for iTraxx include the following:
|
Specification |
European Untranched CDS Indices Class |
|
1. Reference Entities |
Corporate |
|
2. Region |
Europe |
|
3. Indices |
iTraxx Europe iTraxx Europe Crossover iTraxx Europe HiVol |
|
4. Tenor |
iTraxx Europe: 5Y, 10Y iTraxx Europe Crossover: 5Y iTraxx Europe HiVol: 5Y |
|
5. Applicable Series |
iTraxx Europe 5Y: Series 10 and all subsequent Series, up to and including the current Series iTraxx Europe 10Y: Series 7 and all subsequent Series, up to and including the current Series iTraxx Europe Crossover 5Y: Series 10 and all subsequent Series, up to and including the current Series iTraxx Europe HiVol 5Y: Series 10 and all subsequent Series, up to and including the current Series |
|
6. Tranched |
No |
Click hereto view CFTC Press Release in full (links externally to CFTC website).Related News: "CFTC's Division of Clearing and Risk Issues Time-Limited No-Action Relief to Banks Having Assets of Less Than $10 Billion from the Board Approval Requirement of the CEA and the End-User Exception to the Clearing Requirement (Letter 13-26)" (June 10, 2013).