When the Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted by Congress in July 2010, it was hailed by its proponents as the most comprehensive financial reform since the 1930s. Others viewed it as a needlessly complex and convoluted morass that would disproportionally complicate hedging in markets or industries that were functioning well without expansive regulation like the energy sector. Broad in scope, the Dodd-Frank Act gave particular attention to regulating the previously unregulated over-the-counter market in derivatives trading a market in swaps that is now estimated to be worth $650 trillion in notional value.
The time is upon us for implementation of the CFTC's comprehensive regulation of previously unregulated OTC Swaps under the Dodd-Frank Act. As recently as October 12, 2012, we saw that even the CFTCs final rules are vulnerable to change and comment. The challenge to entities to stay informed and understand the scope and timing of compliance obligations is no small feat. And, the preparation and compliance process itself takes time, coordination and focus across each company. The presentation is intended to provide an overview of issues to analyze, with checklists, formulae and exhibits to guide your discussions about what compliance with the Dodd-Frank Act means for you. In this fast-paced session, we will answer your most pressing Dodd-Frank Act questions, such as: (1) how do I determine whether a transaction is a swap (or is it merely an exempt physical forward with acceptable levels of embedded optionality), (2) who am I in the CFTC's regulatory scheme and do I have to register, (3) how can I continue hedging commercial risks of my energy business with swap transactions, (4) what are my swap documentation, recordkeeping and reporting responsibilities, (5) what margin and capital requirements will I have to bear, and (6) when do my regulatory compliance obligations begin?
The presentation focuses on answering the most pressing questions faced by clients trading in OTC derivatives as they prepare for compliance with the legal, operational and financial requirements imposed upon them by the CFTC rulemaking under the Dodd-Frank Act, including:
What is regulated under the Dodd-Frank Act? When is a swap subject to regulation and mandatory clearing, and what types of transactions are exempt? What is an exempt physical forward contract? What constitutes embedded optionality and what tests do you apply to determine whether the optionality embedded in a forward contract will transform an exempt forward transaction into a regulated swap?
Who will be regulated and who has to register? How to determine if an entity is a Swap Dealer, a Major Swap Participant, or an End-User? What are the requirements for trading with special entities, including utility special entities? What is an Eligible Contract Participant? How far is the extraterritorial reach of the Dodd-Frank Act?
Is my entity eligible for the end-user exception? How can my entity continue to use swaps to hedge or mitigate commercial risk? What special requirements are there for public companies?
What are the new recordkeeping, reporting and swap documentation requirements? When must compliance begin? How to prepare?
What are the new business conduct rules? What are the external and
internal conduct rules?
What margin and capital requirements will be imposed?
What will happen to position limits?
When do the rules become effective? Did the CFTCs no action letters
on October 12, 2012, affect my deadlines or compliance obligations? What
identifiers or documentation protocols do I need to address? What do I need
to do now? What do I need to do on or after December 31, 2012?
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