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CFTC Issues Clearing Determination for Certain Interest Rate and Credit Default Swaps

December 26, 2012 Read the memo

On December 13, 2012, the Commodity Futures Trading Commission issued a determination that certain interest rate and credit default swaps are required to be cleared, the first clearing determinations under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.  The CFTC has adopted a phase-in approach to clearing, with compliance dates staggered by counterparty type to allow for time to address anticipated technological challenges and build familiarity with the process.  Negotiation and execution of documentation designed for the clearing of swaps will need to be completed prior to the applicable compliance date.  Corporate end-users and other non-financial entities may elect the end-user exception to the clearing requirement if the swaps are being used to hedge or mitigate commercial risk and they report to the CFTC how they generally meet their financial obligations under non-cleared swaps.

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