CFTC Proposes Expansion of Interest Rate Swap Clearing Requirements | Practical Law

CFTC Proposes Expansion of Interest Rate Swap Clearing Requirements | Practical Law

The CFTC proposed amending CFTC Regulation 50.4(a) to require certain additional interest rate swaps to be cleared.

CFTC Proposes Expansion of Interest Rate Swap Clearing Requirements

Practical Law Legal Update w-002-6429 (Approx. 8 pages)

CFTC Proposes Expansion of Interest Rate Swap Clearing Requirements

by Practical Law Finance
Published on 14 Jun 2016 • USA (National/Federal)
The CFTC proposed amending CFTC Regulation 50.4(a) to require certain additional interest rate swaps to be cleared.
On June 9, 2016, the CFTC proposed a clearing determination which amends CFTC Regulation 50.4(a) to require certain additional interest rate swaps to be cleared by market participants through either a:
This change would create consistency between the CFTC's clearing requirements and those proposed or finalized in 2015 or 2016 by the CFTC's counterparts in Australia, Canada, the European Union, Hong Kong, Mexico, and Singapore. The proposed rule will be open for public comment until July 18, 2016.
The clearing requirement for interest rate swaps, which are non-security-based swaps under Title VII of the Dodd-Frank Act, is found in CEA Section 2(h) and Part 50 of the CFTC's regulations (17 CFR Part 50). Existing rules already require clearing of interest rate swaps which are pegged to the LIBOR or EURIBOR floating rate indexes or denominated in any of the following currencies:
  • British pound.
  • Japanese yen.
  • Euro.
The proposal would widen clearing requirements to include interest rate swaps denominated in:
  • The Australian Dollar.
  • The Canadian Dollar.
  • The Hong Kong Dollar.
  • The Singapore Dollar.
  • The Mexican Peso.
  • The Swiss Franc.
  • The Polish Zloty.
  • The Swedish Krona.
  • The Norwegian Krona.
The CFTC provides the following chart in which the swaps in italics represent new interest rate swaps that would be required to be cleared under the proposal, and items not in italics are already subject to CFTC clearing requirements:
Specification
Fixed-to-Floating Swap Class
Currency
Australian Dollar (AUD)
Canadian Dollar (CAD)
Euro (EUR)
Hong Kong Dollar (HKD)
Mexican Peso (MXN)
Norwegian Krone (NOK)
Floating Rate Indexes
BBSW
CDOR
EURIBOR
HIBOR
TIIE
NIBOR
Stated Termination Date Range
28 days to 30 years
28 days to 30 years
28 days to 50 years
28 days to 10 years
28 days to 21 years
28 days to 10 years
Optionality
No
No
No 
No
No
No
Dual Currencies
No
No
No
No
No
No
Conditional Notional Amounts
No
No
No
No
No
No
Specification
Fixed-to-Floating Swap Class
Currency
Polish Zloty (PLN)
Singapore Dollar (SGD)
Swedish Krona (SEK)
Swiss Franc (CHF)
Sterling (GBP)
US Dollar (USD)
Yen (JPY)
Floating Rate Indexes
WIBOR
SOR-VWAP
STIBOR
LIBOR
LIBOR
LIBOR
LIBOR
Stated Termination Date Range
28 days to 10 years
28 days to 10 years
28 days to 15 years
28 days to 30 years
28 days to 50 years
28 days to 50 years
28 days to 30 years
Optionality
No
No
No 
No
No
No
No
Dual Currencies
No
No
No
No
No
No
No
Conditional Notional Amounts
No
No
No
No
No
No
No
Specification
Basis Swap Class
Currency
Australian Dollar (AUD)
Euro (EUR)
Sterling (GBP)
US Dollar (USD)
Yen (JPY)
Floating Rate Indexes
BBSW
EURIBOR
LIBOR
LIBOR
LIBOR
Stated Termination Date Range
28 days to 30 years
28 days to 50 years
28 days to 50 years
28 days to 50 years
28 days to 30 years
Optionality
No
No
No 
No
No
Dual Currencies
No
No
No
No
No
Conditional Notional Amounts
No
No
No
No
No
Specification
Forward Rate Agreement Class
Currency
Australian Dollar (AUD)
Euro (EUR)
Polish Zloty (PLN)
Norwegian Krone (NOK)
Floating Rate Indexes
BBSW
EURIBOR
WIBOR
NIBOR
Stated Termination Date Range
3 days to 3 years
3 days to 3 years
3 days to 2 years
3 days to 2 years
Optionality
No
No
No 
No
Dual Currencies
No
No
No
No
Conditional Notional Amounts
No
No
No
No
Specification
Forward Rate Agreement Class
Currency
Swedish Krona (SEK)
Sterling (GBP)
US Dollar (USD)
Yen (JPY)
Floating Rate Indexes
STIBOR
LIBOR
LIBOR
LIBOR
Stated Termination Date Range
3 days to 3 years
3 days to 3 years
3 days to 3 years
3 days to 3 years
Optionality
No
No
No 
No
Dual Currencies
No
No
No
No
Conditional Notional Amounts
No
No
No
No
Specification
Overnight Index Swap Class
Currency
Australian Dollar (AUD)
Canadian Dollar (CAD)
Euro (EUR)
Sterling (GBP)
US Dollar (USD)
Floating Rate Indexes
AONIA-OIS
CORRA-OIS
EONIA
SONIA
FedFunds
Stated Termination Date Range
7 days to 2 years
7 days to 2 years
7 days to 3 years
7 days to 3 years
7 days to 3 years
Optionality
No
No
No 
No
No
Dual Currencies
No
No
No
No
No
Conditional Notional Amounts
No
No
No
No
No