Three takeaways on compliance

deadlines for derivatives rules under the

Dodd-Frank Act
In July 2012, the Commodity Futures Trading Commission
(CFTC) and the Securities and Exchange Commission (SEC)
approved final rules defining what kind of derivatives
products will be regulated under the 2010 Dodd-Frank
WallStreet Reform and Consumer Protection Act
(Dodd-Frank). Under Title VII of the Dodd-Frank Act,
these regulatory agencies are charged with overseeing
the over-the-counter derivatives market. Their intent is
to provide greater transparency, centralization of clearing
to reduce risk between counterparties, and subjecting
swap dealers and major swap participants to capital and
marginrequirements.

and major swap participants, including foreign branches

of U.S.-based firms, will be allowed to apply so-called
substituted compliance. However, covered entities
should be aware that some complexity and confusion
may ensue in complying with foreign rules and potentially
open them up to more risk. The entities themselves will
need to assess whether the local requirements are equal
to the U.S. rules and then craft a plan to comply with
them within a year of registering. Down the road, firms
may encounter challenges as U.S. regulators determine
whether compliance with foreign regulations is equal to
U.S. standards.

The final rules define the terms swap, security-based

swap, and other derivative products, triggering a
countdown for compliance dates that swap dealers and
major swap participants will have to observe. Since the
swap definition was published in the Federal Register
on August 13 2012, swap entities will have 60 days to
provisionally register and comply with certain requirements.
They will have until the end of 2012 to comply with several
more requirements and then up to two-and-a-half years
to meet a handful of others. These requirements cover
areas such as, recordkeeping and reporting, position limits,
business conduct, central clearing, whistleblower and
anti-manipulation, and trade execution.

Swap entities need to prepare for U.S. regulatory

examinations a year after registering
One year after firms register with the CFTC and SEC, they
will need to prepare for an examination by regulatory
agencies, including the National Futures Association, to
verify how well swap entities have complied with the new
rules. Under this new comprehensive program, entities will
have to demonstrate compliance through their policies
and procedures and related controls, such as monitoring
external and internal business conduct and ability to
manage risk, among other activities.

For swap dealers and major swap participants working to

understand what the compliance deadlines for derivatives
mean for them, here are three important observations.
Expect more complexity and confusion as CFTC
assesses substitute foreign regulations
The CFTC will recognize some foreign regulations as a
substitute for its own rules as long as the rules are
equally stringent. This means that non-U.S. swap dealers

With the compliance countdown started, swap

entities should start planning for deadlines
Swap dealers and major swap participants now have 60
days by October 12, 2012 to comply with several
of the major requirements. Some of these requirements
include registration, reporting of credit and risk products
to Swaps Data Repositories (SDRs), phase one of the risk
management program, conflicts of interest, position limits,
and end user exception to mandatory clearing of swaps.

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Deloitte has created a timeline that shows selected

deadlines for when specific requirements must be met.
Some deadlines are set in stone, while other requirements
have assumed dates because regulators are still hashing
out certain issues.
***
Deloittes high-level takeaways offer some valuable
context and insight that financial institutions can use to
better understand and prepare for complex rules and
reforms whether theyre about derivatives, capital
and liquidity standards, or tax obligations. As rulemaking
and other financial reform activities evolve and develop,
Deloitte will continue to provide in-depth observations
to help institutions better respond to this new regulatory
environment. For more information, please visit us at
Financial Regulatory.

To learn more, please contact:

Mike Jamroz
Partner
Deloitte & Touche LLP
+1 202 897 5310
mjamroz@deloitte.com

Edward Tracy
Principal
Deloitte Consulting LLP
+1 973 602 5361
etracy@deloitte.com

Ricardo Martinez
Principal
Deloitte & Touche LLP
+1 212 436 2086
rimartinez@deloitte.com

Robert Walley
Principal
Deloitte & Touche LLP
+1 212 436 3212
rwalley@deloitte.com

John Norden
Sr. Manager
Deloitte & Touche LLP
+ 1 512 226 4167
jnorden@deloitte.com

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