CFTC Proposes Simplifying Swap Counterparty Notification Requirements

In a unanimous vote, the Commodity Futures Trading Commission today proposed a rule that would simplify complex rules for counterparty notification by swap dealers. Inspired by the CFTC’s “Project KISS” regulatory simplification initiative, the proposal would simplify rules that implement a Dodd-Frank Act mandate for swap dealers to notify counterparties that the counterparties have the right to require their funds to be kept segregated in independent third-party accounts.

“This proposal looks to reduce the burdens, costs and confusion that have proved counterproductive and discouraged the election of segregation,” said CFTC Chairman Christopher Giancarlo. “This proposal will also make it more efficient for counterparties, such as pension funds, insurance companies and community banks, to be able to elect segregation and receive those protections while hedging their risk in the swaps markets.” Comments are due 60 days after the rule is published in the Federal Register. For more information, contact ABA’s Ananda Radhakrishnan.