Ready to Report? Swap Dealers May Need to Report to SDRs as Early as July 2012

The CFTC has passed the three rules that make up the requirements for reporting swaps to Swap Data Repositories (SDRs) under Dodd-Frank. One cause for concern is the effective date for reporting could be as early as July 16, 2012. Although it should not be too surprising that the effective date was set to the second year anniversary of Dodd-Frank, Swap Dealers were certainly hoping for more time and more phasing in of the data reporting vs. the real time reporting requirement, which also has the same effective dates.

Many Swap Dealers have not invested too much time in preparing as the Swap Dealer and Swap definitions have not be finalized. Understanding this, the rules allow for an extension to be later than July if those definitions have not been issued in time. They have also allowed a phasing in of commodities, Fx and equity derivatives 90 days later, with credit and interest rates going in at the effective date, and another 90 days thereafter for any non-Swap Dealer or non-MSP to report.

The rules also drive reporting to come from Swap Execution Facilities (SEFs) and Derivative Clearing Organizations (DCOs), which is key for real time reporting and which most likely will be driven from these types of market participants. However, rules for SEFs and DCOs have also not been issued, and these entities will have their hands full registering and complying for their own rules, let alone figuring out how to report to SDRs.

Finally the biggest challenge is that no SDR has been given any provisional approvals today. It is hard to see how Swap Dealers, MSPs, SEFs and DCOs can realistically and properly plan and implement a technology undertaking of this magnitude without having SDRs approved, let alone ready to go themselves. Anything less than six months would be challenging, to say the least, for a Reporting Entity to be ready, and the clock is ticking fast.