Commodity Futures Trading Commission 

 Office of Public Affairs 

 Three Lafayette Centre 

 1155 21st Street, NW 

 Washington, DC 20581 

 www.cftc.gov

Final Rule on Process for Review of Swaps for Mandatory Clearing 

The Commodity Futures Trading Commission (Commission) is considering adopting a rule that establishes 

procedures for: (1) determining the eligibility of derivatives clearing organizations (DCOs) to clear swaps; (2) the 

submission of swaps by DCOs to the Commission for a determination on a clearing requirement; (3) Commissioninitiated reviews of swaps; and (4) staying a clearing requirement while the clearing of a swap is reviewed.

Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) 

Section 723(a)(3) of the Dodd-Frank Act amended the Commodity Exchange Act (CEA) to provide that “it shall be 

unlawful for any person to engage in a swap unless that person submits such swap for clearing to a [DCO] that is 

registered under [the CEA] or a [DCO] that is exempt from registration under [the CEA] if the swap is required to 

be cleared.” Section 723(a)(3) also requires the Commission to adopt rules for the review of a swap, or group, 

category, type, or class of swaps (collectively, “swaps”) to make a determination as to whether the swaps should be 

required to be cleared. 

Section 745(b) of the Dodd-Frank Act directs the Commission to prescribe criteria, conditions, or rules under 

which the Commission will determine the initial eligibility or the continuing qualification of a DCO to clear swaps. 

Eligibility of a DCO to Clear Swaps 

Under the rule, a DCO would be presumed eligible to accept for clearing any swap that is within a group, category, 

type, or class of swaps that the DCO already clears. A DCO that plans to accept for clearing any swap that is not 

within a group, category, type, or class of swaps that the DCO already clears also would be required to request a 

determination by the Commission of its eligibility to clear the swap. 

To receive a determination of eligibility to clear a swap, a DCO would have to file a written request with the 

Commission that addresses its ability to maintain compliance with the DCO core principles if it accepts the swap 

for clearing, specifically: 1) the sufficiency of its financial resources; and 2) its ability to manage the risks associated 

with clearing the swap, especially if the Commission determines that the swap is required to be cleared.

Submission of Swaps to the Commission for Review 

The Dodd-Frank Act requires a DCO that plans to accept swaps for clearing to submit the swaps to the 

Commission for a determination as to whether the swaps are required to be cleared. The rule sets out the process 

for DCOs to follow when submitting swaps to the Commission. 

The DCO would have to provide a statement that includes information that will assist the Commission in making 

an assessment of five specific factors that the Dodd-Frank Act requires the Commission to take into account when 

reviewing a swap submission: 

• The existence of significant outstanding notional exposures, trading liquidity, and adequate pricing data; 

Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 
Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

• The availability of rule framework, capacity, operational expertise and resources, and credit support 

infrastructure to clear the contract on terms that are consistent with the material terms and trading 

conventions on which the contract is then traded; 

• The effect on the mitigation of systemic risk, taking into account the size of the market for such contract 

and the resources of the DCO available to clear the contract; 

• The effect on competition, including appropriate fees and charges applied to clearing; and 

• The existence of reasonable legal certainty in the event of the insolvency of the relevant DCO or one or 

more of its clearing members with regard to the treatment of customer and swap counterparty positions, 

funds, and property. 

The DCO would also be required to provide specific information relating to product specifications; participant 

eligibility standards; pricing sources, models, and procedures; risk management procedures; applicable rules, 

manuals, policies, or procedures; terms and trading conventions on which the swap is currently traded; and a 

description of the manner in which the DCO has provided notice of the submission to its members and a summary 

of any views on the submission expressed by members. 

Commission-initiated Reviews of Swaps 

The Dodd-Frank Act requires the Commission on an ongoing basis to review swaps that have not been accepted 

for clearing by a DCO to make a determination as to whether the swaps should be required to be cleared. If no 

DCO has accepted for clearing swaps that the Commission finds would otherwise be subject to a clearing 

requirement, the Commission would investigate the relevant facts and circumstances and, within 30 days of the 

completion of its investigation, issue a public report containing the results of the investigation. The Commission 

would take such actions as it determines to be necessary and in the public interest, which may include establishing 

margin or capital requirements for parties to the swaps. 

Stay of Clearing Requirement 

After making a determination that a swap (or group, category, type, or class of swaps) is required to be cleared, the 

Commission, on application of a counterparty to a swap or on its own initiative, may stay the clearing requirement 

until it completes a review of the terms of the swap and the clearing arrangement. 

The rule would require a counterparty to a swap that wants to apply for a stay of the clearing requirement to submit 

a written request that includes: the identity and contact information of the counterparty; the terms of the swap 

subject to the clearing requirement; the name of the DCO that clears the swap; a description of the clearing 

arrangement; and a statement explaining why the swap should not be subject to a clearing requirement. 

The Commission would complete its review of the clearing of the swap not later than 90 days after issuance of the 

stay, unless the DCO that clears the swap agrees to an extension. Upon completion of its review, the Commission 

could determine, subject to any terms and conditions as the Commission determines to be appropriate, that the 

swap must be cleared, or that the clearing requirement will not apply but clearing may continue on a non-mandatory 

basis.