On July 18, MFA submitted a letter to the Commodity Futures Trading Commission (CFTC) on its notice of proposed rulemaking on “Clearing Requirement Determination Under Section 2(h) of the CEA for Interest Rate Swaps”. In the rules, the CFTC proposes to expand the classes of interest rate swaps (IRS) that are subject to mandatory clearing to make the CFTC’s clearing requirement consistent with the rules proposed or finalized in Australia, Canada, the European Union, Hong Kong, Mexico, and Singapore. In our letter, MFA applauded the CFTC’s efforts to ensure international convergence of the various mandatory clearing regimes by aligning the scope of IRS subject to its clearing requirement with the requirements of other jurisdictions. Specifically, MFA supported the clearing of IRS denominated in the nine proposed currencies (i.e., Australian dollar, Canadian dollar, Hong Kong dollar, Mexican peso, Norwegian krone, Polish zloty, Singapore dollar, Swedish krona, and Swiss franc). In addition, MFA expressed a preference that the CFTC proceed with proposed implementation scenario I, which would have all market participants begin to clear the proposed IRS at the same time commencing 60 days after publication in the Federal Register. However, we also indicated that we would not object to the CFTC proceeding with implementation scenario II, if it deemed it more advisable and judicious, which would have all market participants begin to clear the IRS on the earlier of: (1) 60 days after the effective date of an analogous clearing requirement adopted in a non-U.S. jurisdiction, and (2) the date that is two years after publication of the CFTC’s final rule in the Federal Register.
