With the passing of the Swap Definition rule on Tuesday, July 10th the clock really starts ticking as some key rules are going into effect this fall. Any rational person would assume that before you write rules governing Swaps, you start with the simple task of defining the Swap. Unfortunately life in the derivative world is not that simple as it took 585 pages to define a Swap.
As a result of the passing of the Swap Definition, the start date of when approximately 200 Swap Dealers have to register as a Swap Dealer with the National Futures Association (NFA) is this fall. There is a 40 page on-line form to fill out to receive provisional approval which would allow the Swap Dealer to continue acting as a Swap Dealer. For Swap Dealers above the $8bn threshold, registration presumably is a no brainer. For those on the cusp, it’s a big decision to register without knowing the capital, margining, Volker rule and other key requirements. Some may feel the need to register below $8bn just to be in the league of registered Swap Dealers and some end-users may not end up writing policy to not deal with a non-registered Swap Dealer.
Those that register to become Swap Dealers will also have to begin reporting CDS and Rate swaps to Swap Data Repositories (SDR) by the same Swap Dealer registration date this fall. 90 days thereafter, FX and commodity Swaps will have to be reported as well. Most Swap Dealers are not ready to report trade data to SDRs and more SDRs still need to be approved. Public real-time reporting is also expected by this time. Hard to see how all of this will happen by September!
Despite the challenges ahead to meet these fall deadlines, it is clear now the Dodd-Frank train has left the station and anybody that was hoping for a repeal should be preparing in earnest for the new world order for derivatives.