Dodd-Frank 30 Day Countdown: Day 8
Insight Robin Powers · July 08, 2011
SEC and CFTC Differ in their Approach to Temporary Relief
Title VII of the Dodd-Frank Act gives authority to the Securities Exchange Commission (SEC) to regulate security-based swaps, while the Commodities Futures Trading Commission (CFTC) will generally be responsible for swaps markets. Both the SEC and CFTC have recently announced temporary relief will be available for some of the provisions under Title VII that are scheduled to go into effect July 16, 2011, though the agencies are not working in unison to create a comprehensive relief order for market participants.
The CFTC has categorized their relief order into four sections, ranging from those provisions that will automatically go into effect July 16, to those that cannot go into effect until express rule-making comes from the CFTC. The CTFC Order will expire December 31, 2011, absent further action from the CFTC.
The SEC, on the other hand, has taken a different approach to granting relief to market participants come July 16, one which is arguably more detailed. Instead of grouping provisions into one of four categories, the SEC has looked at each security-based swaps provision under Title VII, line-by-line, and defined it as (1) having to comply with the July 16 deadline, (2) not having to comply until SEC rulemaking has taken effect, or (3) having to comply only after a specific SEC action has occurred.
While each agency has tried to downplay the importance of July 16 on the OTC derivatives market, it is difficult to ignore the reality that certain substantive provisions of Dodd-Frank impacting the OTC derivatives markets will go into effect on July 16 notwithstanding the orders. Market participants should carefully review the orders in the context of their own businesses and plan accordingly.
-Stephanie Kane co-authored this post