Registration Date for Swap Dealers

Various individuals at the CFTC have indicated that the CFTC will officially confirm that no swap dealer will be required to register as such until two months after the end of the month in which it crosses the relevant de minimis threshold (i.e., no earlier than December 31, 2012). See CFTC Rule 1.3(ggg)(4)(iii). This interpretation would clarify an ambiguity in the swap dealer registration rule, Rule 3.10(a)(iv)(C), which suggested that firms would be required to register by October 12 if they knew that they intended to engage in business as a swap dealer, even if they were not required to register by virtue of the volume of their transactions.

The relevant rule which seems to indicate that registration may be based on intent rather than numbers is quoted below.

Rule 3.10(a)(iv)(C)(1) At any time prior to the latest effective date of the Swap Definitional Regulations, defined in § 3.1(g) (i.e., October 12), any person may apply to be registered as a swap dealer or major swap participant.

(2) By no later than the latest effective date of the Swap Definitional Regulations, each person who is a swap dealer or major swap participant on that date must apply to be registered as a swap dealer or major swap participant, as the case may be.

(3) From and after the latest effective date of the Swap Definitional Regulations, each person who intends to engage in business as a swap dealer or major swap participant must apply to be registered as a swap dealer or major swap participant, as the case may be.

Lofchie Comment: Given the magnitude of the infrastructure required to be built, it would certainly seem prudent to push back the registration date. I also wonder if, given the repeated stop and go at the CFTC and this last delay, the CFTC should take a breath and perhaps get all of its rules in order before going forward and, even better, to coordinate effectiveness with the SEC. I also note the unified opposition of numerous non-US regulators to the application of Dodd-Frank, as reported in the news of two days prior. There seems to me to be very substantial risk in driving forward the effective date of the registration requirements in light of such substantial opposition from non-US regulators.